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GAO_GAO-15-238	{ "title": [ "Background", "Several Major CMS Systems Support Enrollment-Related Activities", "Healthcare.gov Website", "Enterprise Identity Management System", "Federally Facilitated Marketplace System", "Federal Data Services Hub", "Many External Partners Connect with the FFM and DSH", "Federal Agencies and a Private Entity", "States", "Issuers of Qualified Health Plans", "Agents and Brokers", "GAO Has Previously Highlighted Improvements Needed in the IT Management of Healthcare.gov and Related Systems", "Initial Development and Deployment of Healthcare.gov and Its Supporting Systems Faced Problems with System Capacity, Software Code Issues, and Limited Functionality, but CMS Has Taken Steps to Address Them", "Healthcare.gov and Its Supporting Systems Were Hindered by Inadequate Capacity, Software Code Errors, and Limited Functionality", "Software Coding Errors", "Limited System Functionality", "CMS Has Taken Steps to Address Identified System Problems", "CMS Inadequately Applied Best Practices in Developing Systems Supporting Healthcare.gov, and Needs to Build on Recent Progress", "Weaknesses in Requirements Management Limited CMS’s Ability to Ensure That System Functionality Was Implemented as Intended", "Requirements Lacked Traceability Prior to Initial Launch", "Systems Supporting Healthcare.gov Were Not Fully Tested, and Test Documentation Was Missing Key Elements", "System Test Plans Lacked Recommended Elements", "System Test Cases Included Most, but Not All, Key Information", "CMS, HHS, and OMB Did Not Adequately Oversee Healthcare.gov Initiative System Development", "Healthcare.gov Schedules Were Not Well-Constructed", "Level of Effort Was Not Consistently Estimated", "CMS Lacked Effective Data Management Monitoring Practices", "CMS Does Not Always Conduct Progress and Milestone Reviews", "HHS Had a Limited Role in Overseeing the Development and Implementation of Healthcare.gov and Its Supporting Systems", "OMB Had a Limited Role in Overseeing the Development and Implementation of Healthcare.gov and Its Supporting Systems", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Health and Human Services", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "PPACA directed the federal government to establish and operate a health insurance marketplace, referred to as the federally facilitated marketplace, on behalf of states electing not to establish and operate a marketplace by January 1, 2014. CMS operated a federally facilitated marketplace or partnership marketplace for 34 states for plan years2014 and 2015.\nMarketplaces, both federal and state, were intended to provide a seamless, single point of access for individuals to enroll in qualified health plans, apply for income-based financial assistance established under the law, and, as applicable, obtain an eligibility determination for other health coverage programs, such as Medicaid or the State Children’s Health Insurance Program (CHIP).\nPPACA required federal and state marketplaces to be operational on or before January 1, 2014. Healthcare.gov, the public interface for the federally facilitated marketplace, began facilitating enrollments on October 1, 2013, at the beginning of the first annual open enrollment period established by CMS.\nSince that time, CMS has reported that over 8 million individuals selected a qualified health plan through the federally facilitated marketplace or a state-based marketplace from October 1, 2013, through March 31, 2014. As of October 15, 2014, 6.7 million individuals were enrolled and paying for 2014 health coverage through the marketplaces. HHS estimated up to 9.9 million enrollees for the 2015 enrollment period, which began on According to November 15, 2014, and ended on February 22, 2015.HHS, over 8.4 million people had submitted applications for coverage through the federally facilitated marketplace for the 2015 enrollment period as of January 2, 2015.\nHHS established the Office of Consumer Information and Insurance Oversight in April 2010 as part of the HHS Office of the Secretary. In January 2011, the office moved to CMS and was renamed the Center for Consumer Information and Insurance Oversight. This office has overall responsibility for providing guidance and oversight for the federal and state systems supporting the establishment and operation of health insurance marketplaces. The Office of Information Services, headed by the CMS Chief Information Officer (CIO), is responsible for oversight of the development and implementation of federal systems supporting the establishment and operation of the federally facilitated marketplace, including review, selection, implementation, and continual evaluation of these systems.", "The federally facilitated marketplace relies on the Healthcare.gov website and several supporting systems to accomplish enrollment-related activities. To do so, these systems interconnect multiple other systems from a broad range of federal agencies, states, and other entities, such as contractors and issuers of qualified health plans, creating a complex system of systems. The CMS Consumer Information and Insurance Systems Group within the Office of Information Services is tasked with technical oversight of the development and implementation of these systems. A description of each of the major systems for which CMS is responsible for implementing follows.", "Healthcare.gov is the federal website that serves as the user interface for individuals who wish to obtain coverage through the federal marketplace. Individuals can use the website to obtain information about health coverage, set up a user account, select a health plan, and apply for coverage by the selected health plan. The site supports two major functions: (1) providing information about PPACA health insurance reforms and health insurance options (the “Learn” web page), and (2) facilitating enrollment in coverage (the “Get Insurance” web page). The “Learn” page provides basic information on how the marketplace works, available health plans, and how to apply for coverage. It also contains information on plan costs, ways to reduce out-of-pocket costs, and how individuals can protect themselves from fraud. Individuals do not have to provide personal information to access this section of the website. In contrast to the information-oriented “Learn” page, the “Get Insurance” page allows an individual to take steps to apply for health insurance and other associated benefits.", "Before an individual can apply for health care coverage or other benefits, CMS must verify his or her identity to help prevent unauthorized disclosure of personal information. The process of verifying an applicant’s identity and establishing a login account is facilitated by CMS’s Enterprise Identity Management system. This system is intended to provide identity and access management services to protect CMS data while ensuring that users’ identities are confirmed, as only authorized users are allowed and capable of accessing CMS resources.", "The main system, the Federally Facilitated Marketplace (FFM) system, contains several modules that perform key functions related to obtaining health care coverage. The core of the FFM system is a transactional database that was developed to facilitate the eligibility verification process, enrollment process, plan management, financial management services, and other functions, such as quality control and oversight. From a technical perspective, the FFM leverages data processing and storage resources that are available from private sector vendors over the Internet, a type of capability known as cloud-based services. It consists of three major modules: eligibility and enrollment, plan management, and financial management.\nEligibility and enrollment module. Individuals seeking to apply for health care coverage through the federally facilitated marketplace use the eligibility and enrollment module to guide them through a step-by- step process to determine their eligibility for coverage and financial assistance. Once eligibility is determined, the applicant is then shown applicable coverage options and has the opportunity to enroll.\nThroughout the eligibility and enrollment process, the applicant’s information, such as name, address, Social Security number, citizenship status, and employer name, is collected and stored in the FFM system’s database. This information is compared with records maintained by other federal agencies and a private entity to determine whether the applicant is eligible to enroll in a qualified health plan and, if so, to receive the advance payment of the premium tax credit and cost-sharing reductionscost of this coverage. established through PPACA to defray the The module further allows an applicant to view, compare, select, and enroll in a qualified health plan. Options are displayed to the applicant on the Healthcare.gov webpage, and applicants can use the “Plan Compare” function to view and compare plan details. The applicant can customize and filter the plans according to various factors such as plan type, maximum out-of-pocket expenses, deductible, availability of cost-sharing reductions, or insurance company, among others. Once an applicant has signed up for a qualified health plan on Healthcare.gov, information about the enrollment is sent to the chosen health plan issuer.\nPlan management module. The plan management module is intended to interact with and is primarily used by state agencies and issuers of qualified health plans. The module is intended to provide a suite of services used for submitting, certifying, monitoring, and renewing qualified health plans, as well as managing the withdrawal of these health plans. Specifically, using this module, states and issuers submit “bids” detailing proposed health plans to be offered on Healthcare.gov, including rate and benefits information. CMS then uses the module to review, monitor, and certify or decertify the bids submitted by issuers. Once a bid has been certified and approved for inclusion in the marketplace, it is made available for applicants to enroll through Healthcare.gov.\nFinancial management module. This module is intended to facilitate payments to issuers through electronic transactions. Like plan management, the financial management module is used primarily by issuers of qualified health plans. This module also provides issuers additional services, including payment calculation for reinsurance, risk adjustment analysis, and the data collection required to support these services. Transactions to be supported by the module include payments of premiums and cost-sharing reductions subsidies for individual enrollments, reinsurance, and risk adjustments.", "The federal Data Services Hub (DSH) acts as a single portal for exchanging information between the FFM and CMS’s external partners, including other federal agencies and state-based marketplaces, for purposes such as facilitating eligibility determinations and transferring plan enrollment information. The DSH was designed as a “private cloud” service supporting various functions such as real-time eligibility queries, transfer of application information, and exchange of enrollment information with issuers of qualified health plans.", "In conducting Healthcare.gov-related activities, various entities, including federal agencies, a private-sector credit agency, states, issuers of qualified health plans, and agents and brokers connect to and exchange information with the systems supporting the federally facilitated marketplace.", "Federal agencies such as the Social Security Administration (SSA), Department of Homeland Security (DHS), and Internal Revenue Service (IRS), along with Equifax, Inc. (a private-sector credit agency that CMS contracts with) provide or verify information used in making determinations of a person’s eligibility for coverage and financial assistance.\nSocial Security Administration. This agency’s primary role is to assist CMS in confirming applicant-supplied information by comparing it with information in SSA’s records related to individuals’ citizenship, Social Security number, incarceration status, and death. SSA also provides CMS information on monthly and annual Social Security benefits paid to individuals under the Old Age, Survivors, and Disability Insurance program, if necessary to determine eligibility.\nDepartment of Homeland Security. The department assists CMS by verifying the naturalized, acquired, or derivedimmigration status of applicants seeking eligibility to enroll in a qualified health plan or participate in Medicaid, CHIP, or a state-based health plan using information supplied by each applicant through the website. DHS generally undertakes this role only if CMS is unable to verify an applicant’s status with SSA using a Social Security number or if the applicant indicates on the application that he or she is not a U.S. citizen. DHS also assists CMS by verifying the status of noncitizens who are lawfully present in the United States and seeking eligibility to enroll in a qualified health plan or participate in Medicaid, CHIP, or a state-based health plan, as well as current beneficiaries who have had a change in immigration status or whose status may have expired.\nInternal Revenue Service. IRS provides federal tax information to be used by CMS in determining or assessing income and family size and determining an applicant’s eligibility for insurance affordability programs, including the advance payment of the premium tax credit, cost-sharing reductions, Medicaid, and CHIP.\nEquifax, Inc. This entity verifies information about an applicant’s current income and employment to assist CMS in making a determination about an applicant’s qualification for insurance affordability programs, such as the advance payment of the premium tax credit and cost-sharing reductions.\nIn addition, several other federal agencies—the Departments of Defense and Veterans Affairs, the Office of Personnel Management, and the Peace Corps—support CMS in determining whether a potential applicant is eligible for or enrolled in minimum essential coverage and therefore may not be eligible to receive the advance payment of the premium tax credit and cost-sharing reductions. For example, applicants that are enrolled in or eligible for coverage under certain government programs such as Medicare or Medicaid, or certain employer-sponsored programs, such as the Federal Employees Health Benefits program, are ineligible for these subsidies.", "In most states, multiple government systems may need to connect to the FFM system and DSH to carry out a variety of functions related to health care enrollment. For example, most states need to connect their state Medicaid and CHIP agencies to either the FFM system (through the DSH) or their state-based marketplace to exchange data with CMS about enrollment in these programs. In addition, states may need to connect with the IRS (also through the DSH) in order to calculate the maximum amount of advance payments of the premium tax credit. Finally, state- based marketplaces are to send enrollment confirmations to the FFM system so that CMS can administer advance payments of the premium tax credit and cost-sharing reductions and track overall marketplace enrollment.\nFurther, in certain cases, known as partnership marketplaces, states may elect to perform one or both of the plan management and consumer assistance functions while the FFM system performs the rest. The specific functions performed by each partner vary from state to state.", "Issuers of qualified health plans receive enrollment information from the FFM system using CMS’s Health Insurance Oversight System when an individual completes the application process. In this case, the FFM system transmits the enrollment information to the DSH, which forwards it to the issuer of qualified health plans. The issuer then replies with a confirmation message. Plan issuers also interact with the FFM through the plan management and financial management modules, as previously described.", "In addition to applicants themselves, agents and brokers may access the Healthcare.gov website to perform enrollment-related activities on behalf of applicants. It is up to individual states to determine whether to allow agents and brokers to carry out these activities, which can include enrolling in health care plans and applying for the advance payment of the premium tax credit and cost-sharing reductions.\nFigure 1 illustrates the systems that make up the federally facilitated marketplace and their connections with each other, as well as with external partners.", "In 2014, we reported on challenges CMS and its contractor faced in developing, implementing, and overseeing the Healthcare.gov initiative.\nWe reported on CMS’s efforts to plan and oversee Healthcare.gov- related development contracts, as well as the agency’s efforts in addressing contractor performance, in July 2014. We determined that the agency undertook the development of Healthcare.gov and its related systems without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for effective oversight. In addition, CMS incurred significant cost increases, schedule slips, and delayed system functionality for the FFM and DSH systems due primarily to changing requirements that were exacerbated by oversight gaps. Lastly, CMS identified major performance issues with the FFM contractor but took only limited steps to hold the contractor accountable. Specifically, CMS declined to pay about $267,000 in requested fees to the FFM contractor, which was about 2 percent of the $12.5 million in fees paid. We recommended that CMS take actions to assess increasing contract costs and ensure that acquisition strategies are completed and oversight tools are used as required, among other actions. CMS concurred with most of the recommendations.\nIn September 2014 we reported on the planned exchanges of information between the Healthcare.gov website and other organizations, as well as the effectiveness of the programs and controls implemented by CMS to protect the security and privacy of the information and IT systems used to support Healthcare.gov. We described how many systems and entities exchange information to carry out functions that support individuals’ ability to use Healthcare.gov to compare, select, and enroll in private health insurance plans participating in the federal marketplace, as required by the Patient Protection and Affordable Care Act. In addition, we determined that CMS took many steps to protect security and privacy, including developing required security program policies and procedures, establishing interconnection security agreements with its federal and commercial partners, and instituting required privacy protections.\nHowever, Healthcare.gov had weaknesses when it was first deployed, including incomplete security plans, lack of a privacy risk analysis, incomplete security tests, and the lack of an alternate processing site to avoid major service disruptions. Further, we identified weaknesses in the technical controls protecting the confidentiality, integrity, and availability of the FFM. Specifically, CMS had not always required or enforced strong password controls, adequately restricted access to the Internet, consistently implemented software patches, and properly configured an administrative network. We made 28 recommendations to HHS to enhance the protection of systems and information related to Healthcare.gov as well as to resolve technical weaknesses in security controls. HHS partially agreed with 3 of the 28 recommendations, agreed with 25, and described plans to implement our technical recommendations.", "Several problems occurred in the development and deployment of Healthcare.gov and its supporting systems, which affected their performance. These problems included inadequate system capacity, numerous errors in software code, and limited system functionality. Although CMS was aware of these problems prior to initial launch in October 2013, it proceeded with deployment in order to meet this deadline. Consequently, consumers attempting to enroll in health plans were met with confusing error messages, slow load times for forms and pages, and, in some cases, website outages. Since the initial launch of Healthcare.gov and its supporting systems, CMS has taken a number of steps to address these problems, to include increasing system capacity, outlining a new approach for ensuring the quality of software code, and further developing required system functionality. As a result of these efforts, the performance of Heathcare.gov and its supporting systems has improved significantly.", "Systems supporting Healthcare.gov were initially launched without adequate capacity to accommodate the number of visitors to the website. In particular, when the system was launched on October 1, 2013, the Enterprise Identity Management system was overwhelmed by the number of users attempting to create accounts—nearly half a million in the first 2- and-a-half weeks of open enrollment—preventing the system from functioning as intended.\nCMS officials within the Office of Information Services stated that they had incorrectly estimated the number of users that would visit the site during the initial launch of the 2014 enrollment period. As a result, CMS had not planned to provide a level of capacity that would ensure uninterrupted service to users in a cost-effective manner.\nIndependent assessments conducted in December 2012 and June 2013 also identified weaknesses in CMS’s capacity planning in the months prior to launch. Examples of these weaknesses included the following:\nCapacity requirements for hardware for the FFM system were not developed.\nA plan for capacity for the cloud computing environment had not been developed, and thus there were uncertainties as to whether new and existing system hardware configurations and their performance were adequate to meet existing and proposed system requirements.\nExisting capacity in the cloud environment was not adequate, and did not include an adequate number of virtual machinesprocessors.\nFurther, in a November 2013 testimony, the CMS Administrator acknowledged that although CMS tried to project demand for the website, the agency underestimated that demand. As a result, consumers attempting to enroll in health plans were met with confusing error messages, slow load times for forms and pages, and in some cases website outages. In particular, due to inadequate system capacity, many consumers experienced difficulty creating accounts, and those that were able to create accounts had difficulty logging into them.", "Software code for systems supporting Healthcare.gov contained numerous errors, resulting in difficulties in accessing and using the site. For example, in September 2013 (less than 1 month before launch), an IV&V assessment ordered by CMS identified 45 critical and 324 serious code errors across the plan management, financial management, and eligibility and enrollment FFM system modules, with services relating to the eligibility and enrollment module having the highest numbers of errors. Further, the IV&V assessment team reported that there was no evidence that software coding errors were being addressed.\nOther IV&V assessments of the FFM and DSH systems also noted problems in coding practices used by systems development contractors that indicated concerns about system code. For example, in March 2013, the IV&V assessment team reviewing the FFM and DSH systems noted multiple issues with application coding, including undesirable coding practices that were known to potentially cause errors and the inability of the assessment team to locate CMS or contractor coding standards.\nCMS also identified concerns with system coding prior to launch. In March 2013, a Director within the Consumer Information and Insurance Systems Group, charged with overseeing the development effort, expressed concerns about the quality of FFM system code during a monthly status meeting. In addition, CMS conducted an assessment of FFM system documentation and development processes in August 2013 and noted that late-stage coding conducted by the FFM system development contractor did not follow expected standards and best practices, resulting in code conflicts between FFM system modules. The assessment further stated that system technical changes and development were being conducted on an ad-hoc basis to resolve production issues rather than being coordinated across development teams.\nIn September 2013, the FFM system development contractor attributed certain coding errors to the urgency of implementing system fixes as quickly as possible. To mitigate these issues, the contractor stated that it was revisiting its code review process to help identify coding errors.\nHowever, this action was not timely, as open enrollment began shortly thereafter. Further, in November 2013, the FFM system development contractor, in response to a CMS contracting officer’s concerns about defects and errors in the FFM system code, stated that it was not possible to ensure that each code release addressed all defects because there was not sufficient time to fix the code and retest it to confirm that issues were resolved. CMS officials agreed that some defects were not addressed prior to system launch due to the urgency in meeting the October 1, 2013, deadline.\nAs with the capacity problems, these software code errors also contributed to the problems applicants faced in attempting to enroll in health care plans. For example, according to an HHS report summarizing findings from an Obama administration assessment, for some weeks in the month of October 2013, the Healthcare.gov website was down an estimated 60 percent of the time. In the report, HHS noted that the assessment team determined that hundreds of errors in software code contributed to that downtime.", "As of initial launch, the functionality provided by the FFM system was limited compared to what was planned, thus hindering users from performing actions needed to compare health plans and small businesses from purchasing plans, as well as requiring the use of a manual process for paying issuers.\nIn September 2011, CMS issued the first FFM system statement of work, which stated that the federal marketplace would provide all exchange capability in states electing not to establish a state-based marketplace. The statement of work identified system modules that were to encompass all federal exchange requirements, including the eligibility and enrollment, plan management, and financial management modules.\nHowever, at the time of initial open enrollment in 2013, while parts of the eligibility and enrollment module were completed, others were not. Specifically, after creating an account through the website, consumers could apply for health coverage, compare and select a plan for enrollment, and receive an advance payment of the premium tax credit and Medicaid/CHIP eligibility determination through the eligibility and enrollment module. Nonetheless, consumers were not able to perform other intended eligibility and enrollment functions such as (1) “window shopping” (i.e., comparing different plans) for health plans prior to providing personal information to CMS and signing up for coverage, or (2) designating authorized representatives to apply for coverage on their behalf or change their advance payment of the premium tax credit election. Further, small businesses were unable to purchase health coverage for their employees through the FFM eligibility and enrollment module.\nOther planned modules, including the plan management and financial management modules, were also not complete and thus did not provide intended functionality. For example, CMS could not use the system to acquire, certify, and manage issuers offering qualified health plans through the exchange’s plan management module. Additionally, the system did not allow payments to be made to health issuers and did not calculate payments for reinsurance through the financial management module.", "Since the troublesome launch of Healthcare.gov, CMS has taken various actions to address the problems that impeded the initial use of the website and its supporting systems. For example, beginning in October 2013, the agency initiated steps to mitigate the lack of adequate system capacity. Specifically, among other things, it doubled the number of servers for systems supporting Healthcare.gov, added virtual machines for the Enterprise Identity Management and FFM systems, and replaced a virtual database with a high-capacity physical database for the Enterprise Identity Management system, allowing more efficient system processing for both the identity management and FFM systems.\nBy taking these actions, CMS increased overall system capacity to support Internet users—going from 25 to 400 Terabytes of monthly capacity. According to an HHS website, by December 2013, the increased system capacity allowed the system to accommodate more than 1.8 million visits a day from consumers to the website and its supporting systems. According to an HHS progress report issued in December 2013 and other data provided by CMS, Healthcare.gov system availability went from 42.9 percent to just over 93 percent during November 2013, and the FFM system response time went from 8 seconds in late October 2013 to less than 1 second by December 2013.\nIn addition, in October 2013 CMS took steps to mitigate system coding issues. For example, the agency directed its development contractors to, among other things, modify system software to increase the efficiency in system interactions and implement software fixes to address issues with users logging into their accounts. In December 2013, HHS reported that the number of errors encountered by individuals using the system decreased by over 5 percent by the end of November 2013, going from a 6 percent error rate to under 1 percent.\nAlso, CMS documented data quality plans for the Enterprise Identity Management system in March 2014 and the FFM system in June 2014 that outline an approach for improving the quality of the systems’ code. The Enterprise Identity Management system plan calls for peer reviews to ensure that contract requirements are met and product reviews are performed on all deliverables. The FFM plan identifies three types of quality reviews—Peer Reviews, Process and Product Quality Assurance Reviews, and Quality Assessment Reviews—that are to be used to ensure work products conform to documented processes and standards.\nPeer Reviews. As the primary verification activity, peer reviews are to be conducted to help facilitate early detection of problems, and thus reduce the number of problems discovered in later stages of development, which helps to minimize the cost associated with rework. Peer reviews are to include a review of requirements, design, code, and test planning work products. Peer reviews can be conducted by peer members of the project team or team leads, managers, and design review boards.\nProcess and Product Quality Assurance Reviews. These reviews are intended to ensure that work products, project management processes, high-level development processes, and day-to-day practices adhere to documented CMS processes and standards. These reviews are to be conducted by contractors not directly responsible for the work product or process being reviewed.\nQuality Assurance Review. The primary purpose of the quality assurance review is to verify that the FFM IT program is progressing based on expectations and is providing business value, and that appropriate risks are identified and managed so that solutions can be delivered on time and within budget. This review is conducted by a contractor Managing Director who is also referred to as a quality assurance Director. These directors are external to the FFM system project, with technical and functional expertise in line with the program.\nNonetheless, even with these efforts, IV&V assessments continued to identify issues with software coding practices. For example, in July 2014 the assessment team identified over 11,000 critical code violations in the eligibility and enrollment module of the FFM system which could cause major issues in production or difficulties in maintaining the code. The assessment team highlighted the need for CMS to ensure the FFM system code is reviewed and that critical and major violations are remediated.\nCMS has also taken steps to develop additional system functionality for the FFM system. In order to complete FFM system development and to improve system functionality already provided by the original contractor tasked with developing this system, the agency awarded a new contract in January 2014. According to the statement of work, this new FFM system development contract represents almost exclusively new development and major fixes to software already developed. The contract called for the new contractor to design, develop, test, and implement services supporting the FFM system. This includes the financial management module, the plan management module, and certain eligibility and enrollment module functions that include eligibility verification and determination.\nSome FFM system development activities are still in progress, such as the payment service to issuers for subsidy payments to issuers through the financial management module, among others. However, CMS made progress in developing and implementing services related to the FFM eligibility and enrollment and plan management modules. For example, consumers can now “window shop” using the eligibility and enrollment module, and CMS can now use the plan management module to validate plan application information and route the validated information to the appropriate system supporting Healthcare.gov.", "In developing Healthcare.gov and its supporting systems, CMS did not adhere to best practices for managing IT development projects, which contributed to problems with the launch of Healthcare.gov and its supporting systems. Such best practices include managing requirements to ensure that delivered functionality meets the needs of users, conducting adequate system testing to validate that systems function as intended, and providing oversight to ensure that a project is progressing as planned and that corrective actions are taken as needed. Specifically, CMS did not effectively manage requirements of key systems supporting Healthcare.gov, nor did it adequately test the system, or include key information in system test plans and test cases. In addition, CMS’s oversight of the initiative was limited by an unreliable schedule, lack of estimates of work needed to complete the project, unorganized and outdated project documentation, and inconsistent reviews of project progress.\nCMS program and contracting officials attributed weaknesses in these IT management areas to the complexity of developing a first-of-its-kind federal marketplace, which was exacerbated by changing requirements and compressed time frames for completing and deploying the systems. CMS has taken action to address deficiencies in applying systems development best practices for the FFM system. However, deficiencies in requirements management, systems testing, and oversight remain. By not engaging in effective systems development practices, CMS lacks essential mechanisms to ensure the successful delivery of IT systems such as Healthcare.gov and its supporting systems. In addition, HHS has not provided adequate oversight of the Healthcare.gov initiative through its office of the CIO, while OMB’s oversight role was limited to facilitating discussions with federal partners, providing federal policy guidance, and overseeing the project’s budget.", "Best practices developed by the Software Engineering Institute call for, among other things, ensuring that requirements are understood and approved by system stakeholders, including system owners and system developers. Thus, as a project matures and requirements are derived, the requirements should be clearly defined, agreed upon, and approved by the system stakeholders, including system owners and system developers. Consistent with best practices, CMS guidance also requires this approval. Specifically, the CMS Requirements Management Plan documented specifically for the FFM and DSH systems called for functional requirements to be approved by a CMS official—the Center for Consumer Information and Insurance Oversight business owner— before being sent to the development team. The plan further stated that an agency official within the Office of Information Services was to document this approval in the Collaborative Application Lifecycle Tool (CALT), the agency’s project management system and requirements repository. The system records the name of the approver and the date and time at which the requirement was approved.\nHowever, in many instances, functional requirements that had been identified for the FFM and DSH systems were included in the development effort prior to or without clear evidence of required CMS approval. Specifically,\nOf the 37 FFM eligibility and enrollment functional requirements that\n9 were designated as having been approved prior to development,\n8 were approved after the requirements were sent to\n20 were never approved by CMS.\nOf the 67 DSH functional requirements we selected,approved by a CMS official.\nCMS officials within the Office of Information Services acknowledged that approvals were not always obtained for functional requirements prior to the development of the FFM and DSH systems. The officials stated that they were unable to enforce consistent application of life-cycle processes because they were trying to develop the system in an expedited fashion to meet the October 2013 deadline.\nBy allowing functional requirements to move to development without approval, CMS did not position itself to ensure that there was a common understanding of requirements between CMS Center for Consumer Information and Insurance Oversight business owners and the contractors tasked with developing these systems, or that expected functionality would be provided.\nSince Systems Launch, CMS Has Developed a New Requirements Approval Process, but It Is Not Fully Implemented After the initial system launch, CMS documented and began implementing a new IT governance process in June 2014 that calls for business requirementsCMS business owner, the CMS approving authority, and the contract organization’s approving authority—instead of one CMS official (the business owner). In addition, CMS officials within the Office of Information Services stated that functional and technical requirements also require the same three stakeholders’ approval and that these stakeholders’ signatures be included on all requirements documentation, indicating their approval. to be approved by three key stakeholders—the Even with its new requirements approval process, however, CMS has not consistently and appropriately approved requirements. In particular, 1 of 18 FFM system requirements documents that we examined under the new process contained all the necessary approvals for business, functional, and technical requirements that had been documented as part of the effort to improve and expand system functionality. Specifically:\nOf the 13 business requirements documents, 1 had been fully approved by all three stakeholders. On the other hand, 4 business requirements documents included the signature of the FFM contractor, but did not include the CMS approving authority and business owner signatures; 2 documents were approved by the CMS business owner, but were not approved by the CMS approving authority and the FFM contractor; and the remaining 6 were approved by the CMS approving authority and business owner, but were not approved by the FFM contractor.\nOf the four functional design documents, none were fully approved by the required stakeholders. Two of the four were not approved by the CMS approving authority and the FFM contractor. One was approved by the CMS business owner and the CMS approving authority, but was missing the approval of the FFM contractor. The remaining functional design document was approved by CMS’s approving authority, but was missing the approval of the FFM contractor and CMS business owner.\nThe one technical design document included the signature of the CMS approving authority, but was missing the signatures of the CMS business owner and FFM contractor.\nIn addition, it was not always clear what requirements were being approved. Specifically, while pages with approval signatures were scanned and uploaded to CALT, 10 of the 18 signature pages were not electronically attached or linked to documents specifying the requirements being approved, making it difficult to determine what requirements were actually approved. These conditions present uncertainty as to whether CMS and its contractors can readily and always determine if the requirements being developed had received the appropriate approval.\nCMS officials in the Office of Information Services acknowledged the lack of approvals and stated that as of mid-October 2014 they had not yet fully implemented the new IT governance process, which is to include the complete documentation of requirements approvals. Specifically, while CMS has documented the approval procedures for business requirements, it has not yet documented procedures for approving functional and technical requirements.\nWhile acknowledging these weaknesses, officials within the Office of Information Services added that CMS is currently tracking approvals through a weekly management report. However, this is inconsistent with the agency’s newly developed procedures, which require stakeholders’ signatures on requirements documentation to indicate approval. The officials further noted that they intend to review all required documentation to identify any signatures that may be missing after 2015 open enrollment is complete. However, this review would take place after the requirements were developed and would not ensure that they were clearly defined, agreed upon, and approved before development began. Until it fully documents and implements its new requirements approval process, CMS may not establish a shared understanding of requirements with its contractors, potentially resulting in critical system functionally not providing needed capabilities.", "Best practices developed by the Software Engineering Institute call for, among other things, effectively managing requirements by maintaining bidirectional traceability from the high-level original source, such as the business and program requirements, to the lower-level more detailed system and technical requirements, and from those lower-level requirements back to their original source. Such bidirectional traceability allows stakeholders to (1) understand any system-wide effects as a result of changes to requirements, (2) determine whether all high-level requirements have been completely addressed and whether all lower- level more detailed requirements can be traced to a valid source (i.e., maintain requirement dependencies to ensure that higher-level requirements are being addressed by lower-level more detailed requirements), and (3) update requirements documentation as necessary for approved changes.\nBusiness processes illustrate the interactions and information exchanges among functional activities and stakeholders (e.g., states, federal agencies, insurers, and employers) performing those activities. These associations provide information for stakeholder relationships and information exchanges to facilitate coordination and agreement among stakeholders concerning their respective roles, responsibilities, and information exchange needs.\nFFM eligibility and enrollment business process associations were not documented in CALT as required by the Requirements Management Plan. According to CMS officials within the Office of Information Services, these associations were documented in a separate spreadsheet. However, the spreadsheet only included 1,137 of the 3,779 eligibility and enrollment functional requirements. We reviewed all of the 1,137 functional requirements.\nHowever, by not maintaining bidirectional traceability among requirements, CMS could not ensure that key stakeholders had a clear understanding of system-wide effects as a result of changes to requirements, determine whether all source requirements had been completely addressed and whether all lower-level requirements could be traced to a valid source, and appropriately update requirements documentation for approved changes.\nCMS Has Taken Steps to Establish Bidirectional Traceability for Requirements Developed After Initial System Launch To help improve the bidirectional traceability of requirements, CMS documented and began implementing a new FFM requirements management process in June 2014. This process includes guidance on documenting traceability in a new requirements management system— the Quality Center Application Lifecycle Management tool.\nSince the fall of 2014, CMS and its FFM contractors have made a concerted effort to provide bidirectional traceability within the life-cycle management tool for approved business, functional, and technical requirements for development efforts. In November 2014, FFM contractors, along with CMS officials within the Office of Information Services and Office of Legislation, demonstrated to us how the current process is providing bidirectional traceability. Specifically, contractors provided examples of business requirements and their associated functional requirements using the tool. The contractors also provided examples of how functional requirements and their associated business requirements were linked. According to the FFM contractor, as of November 2014, requirements for three increments within the financial management module and nine increments within the eligibility and enrollment module were fully traceable within the life-cycle management tool.\nGoing forward, effective use of this life-cycle management tool should assist CMS in maintaining bidirectional traceability and, thus, (1) facilitate the understanding of system-wide effects as a result of changes to requirements, (2) help determine whether all source requirements have been completely addressed, and (3) help determine whether all lower- level requirements can be traced to a valid source.", "Testing an IT system is essential to validate that the system will satisfy the requirements for its intended use and user needs. Effective testing facilitates early detection and correction of software and system anomalies; provides an early assessment of software and system performance; and provides factual information to key stakeholders for determining the business risk of releasing the product in its current state. Best practices developed by the Institute of Electrical and Electronics Engineers (IEEE) suggest that systems testing should be conducted early and often in the life cycle of a systems development project to allow for the modification of products in a timely manner, thereby reducing the overall project and schedule impacts.\nIn May 2011, CMS documented a testing framework that was to establish a consistent, repeatable CMS testing life-cycle process for business application and infrastructure testing. In statements of work, CMS required its FFM and DSH system development contractors to use this framework and perform testing and validation of all software releases prior to implementation. This was to include integration and end-to-end of both the FFM and DSH systems, which would test how, for testing example, various modules of the FFM system work together. This testing would also assess whether the individual systems that support the federally facilitated marketplace work together as intended. Further, CMS testing documentation stated that any critical defects discovered through the testing process were to be corrected or mitigated before the system was put into production.\nIntegration testing is preliminary testing performed by the system developer to assess the interfaces, data, and interoperability of modules and systems within a single business application. End-to-end testing is a type of integration testing that tests all of the business application’s access or touch points, and data, across multiple business applications and systems, front to back (horizontal) and top to bottom (vertical), to ensure business processes are successfully completed. Testing is conducted on a complete, integrated set of business applications and systems to evaluate their compliance with specified requirements, and to evaluate whether the business applications and systems interoperate correctly, pass data and control correctly to one another, and store data correctly. prior to system launch—integration testing with plan issuers that were expected to connect to the DSH to send health plan information to the FFM plan management module had not been completed, with outstanding defects remaining unaddressed for the FFM system eligibility and enrollment module. In addition, end-to-end testing of Healthcare.gov and its supporting systems did not occur prior to system launch as required. Further, CMS did not always ensure that system defects found during the testing were corrected prior to system launch; thus, many defective system components were placed into production.\nCMS staff within the Office of Information Services, including a Deputy Director, as well as representatives of development contractors for the DSH and FFM systems, stated that there was insufficient time to conduct all the needed testing prior to system launch. This was, in part, because requirements were still being defined in mid-2013 and there were delays in developing software that was ready for testing.\nWithout complete integration and end-to-end testing of the system, CMS lacked a basis for knowing if all Healthcare.gov interconnected systems could operate correctly, pass data correctly to one another, and store data correctly prior to system launch. In addition, without ensuring that defects were corrected prior to placing the system into production, CMS jeopardized its assurance that the system would function as intended.\nCMS Has Begun Taking Steps to Improve Systems Testing, but Has Not Documented Its New Processes According to officials in the Office of Information Services, CMS has taken steps aimed at improving its testing processes since the highly problematic launch of Healthcare.gov. For example, it has implemented a new tool that integrates systems development and systems testing, which is intended to provide the agency and its contractors greater visibility into the development and testing process. In addition, according to CMS officials in the Office of Information Services, business owners and other stakeholders are now to review key testing documentation to ensure proper test coverage and to validate the results.\nAt the time of our review the agency had not documented this new testing process. Going forward, without a clearly defined and documented process for how CMS will implement the testing tool as well as requirements for stakeholder reviews, CMS may not be able to ensure testing processes are carried out as intended.", "A key document needed to ensure that testing is carried out effectively is a test plan. Test plans describe the technical and management approach to be followed for testing a system or a component of a system. Best practices, such as those identified by IEEE, call for test plans to identify the test items (software or system) that are the object of testing; provide a description of the overall approach for testing; identify the set of tasks necessary to prepare for and perform testing; identify how testing anomalies will be tracked and resolved; identify roles and responsibilities for individuals or groups responsible for testing; identify the risk issues that may adversely impact successful completion of the planned testing activities; identify the means by which the quality of testing processes will be assured; specify the necessary test environment and test data, such as hardware, software, and test support tools; and specify the criteria to be used to determine whether each test item has passed or failed testing.\nTest plans we examined for the DSH and FFM systems included most, but not all of the recommended key elements. For example, all 19 DSH and 14 FFM system test plans documented prior to the systems launch in October 2013 identified the test items that were the object of testing; the overall approach for testing; the set of tasks necessary to prepare for and perform the testing; how testing anomalies were to be tracked and resolved; and the roles for individuals or groups responsible for testing.\nHowever, a number of these test plans did not address key elements called for by best practices, relating to the quality of testing and the pass/fail testing criteria. Specifically:\nNone of the 19 DSH and 14 FFM system test plans included the means by which quality of testing processes would be assured.\nEleven of the 19 DSH and all 14 FFM system test plans were missing detailed criteria to be used to determine whether each test item has passed or failed testing.\nIn addition, these plans varied in the extent to which they addressed risk issues and the test environment information. Specifically:\nWhile all 14 FFM system test plans identified risk issues that may adversely impact successful completion of the planned testing activities, 8 of 19 DSH test plans included this information.\nWhile all 14 FFM test plans specified the necessary test environment and test data, such as hardware, software, and test support tools, 8 of the 19 DSH test plans included all of the information recommended by best practices.\nThese weaknesses existed, in part, because CMS lacked key elements in its framework. For example, the framework did not require test plans to include the risk issues that may adversely impact successful completion of the planned testing activities; the means by which the quality of testing processes will be assured; or the necessary test environment and test data, such as hardware, software, and test support tools.\nFurther, CMS officials in the Office of Information Services acknowledged the lack of certain key elements in the test plans that existed for systems supporting Healthcare.gov, and attributed this, in part, to an incomplete test plan template. Without including key information in the test plans, CMS had less assurance that testing carried out prior to initial launch was consistently executed and of sufficient quality to validate that systems supporting Healthcare.gov satisfied requirements.\nSince the initial system launch, CMS has continued to develop test plans for additional FFM system functionality, and these included most, but not all, key elements. Specifically, all 11 post-October 2013 FFM system test plans included test items that are the object of testing; the overall approach for testing; the set of tasks necessary to prepare for and perform testing; how testing anomalies will be tracked and resolved; risk issues that may adversely impact successful completion of the planned testing activities; and, for the most part, specified the necessary test environment and test data, such as hardware, software, and test support tools.\nNonetheless, similar to the pre-October 2013 test plans, FFM test plans had not identified all key elements called for by best practices. Specifically, none of the 11 FFM post-October 2013 test plans specified the means by which the quality of testing processes would be assured, and 9 of the 11 test plans lacked criteria to be used to determine whether each test item has passed or failed testing.\nIn addition, these plans varied in the extent to which they discussed roles and responsibilities of individuals or groups responsible for testing. Specifically, while all 11 FFM test plans included the identification of roles for individuals or groups responsible for testing, 5 of these plans did not include the details regarding what tasks these individuals or groups would perform.\nAccording to an Information Technology Specialist within the Office of Information Services, the test plan template that was used for test plan development was updated in November 2014 to include the missing key elements we identified. While updating the test plan template with missing elements is a positive step, this will not necessarily ensure key information is included in the test plan. Specifically, although the test plans we reviewed for FFM and DSH included a section for roles and responsibilities, for example, the information included was not always comprehensive and did not provide needed information. As a result, CMS may continue to lack assurance that testing is consistently executed and of sufficient quality to ensure that Healtcare.gov-related systems function as intended.", "As another key type of testing documentation, test cases describe scenarios that the system must perform to meet intended requirements. Testing teams use these test cases to determine whether an application, system, or a particular system feature is working as intended. Best practices identified by IEEE call for each test case to include a unique identifier so that each test case can be distinguished from all other test cases; specify all outputs and the expected behavior required of the test items; identify dependencies (i.e., other test cases that must be executed before the current test case); identify and describe the objective for the test case (e.g., what feature is being tested); specify the ordered description of the steps to be taken by each participant for the execution of the test procedure; and specify the inputs required to execute each test case (i.e., values, files, databases, etc.).\nBest practices also state that test cases should be linked to requirements in order to help stakeholders ensure that there is a valid relationship between a system’s requirements and the plans and procedures for testing to ensure they are met.\nTest cases for components of systems supporting Healthcare.gov included some, but not all key elements. Specifically, all of the selected test cases (42 DSH and 83 FFM) that were documented prior to system launch in October 2013 included a unique identifier. However, these test cases did not always identify two other key elements called for by best practices—outputs and the expected behavior and test case dependencies. Specifically:\nOne of 42 DSH test cases specified outputs and the expected behavior required of the test items.\nWhile all 83 of the FFM test cases included expected behavior required of the test items, 12 of the 83 included outputs.\nOne of 42 DSH test cases and 4 of 83 FFM test cases included dependencies.\nIn addition, among the test cases, results were mixed regarding the extent to which they included the objective, the description of steps, and the inputs required. Specifically:\nWhile all FFM test cases included the identification and description of the testing objective, 29 of 42 DSH test cases included that information.\nAll the FFM test cases specified the ordered description of the steps to be taken by each participant for the execution of the procedure, but one of the DSH test cases included this information.\nAmong the FFM test cases, 58 of 83 specified all of the inputs required to execute each test case, while none of the DSH test cases did so.\nIn addition, many of the test cases did not include enough information to allow the project team to determine whether the testing contractor had performed the test and whether or not the system passed testing. Specifically, while all 42 DSH test cases included information about whether or not the test passed or failed, 58 of the 83 FFM system test cases were missing pass/fail information.\nFurther, although CMS provided documents that were intended to link requirements to their corresponding test cases, in many instances these documents did not correspond to the test cases we reviewed. Specifically, for 24 of 42 DSH system test cases and 50 of 83 FFM system test cases, the documents did not include enough information to link the requirements being tested and the corresponding test cases. For example, certain documents included a list of test case unique identifiers, but did not include any information about the requirements related to those test cases. In other instances, the documents included test case identifiers that did not use the same naming convention as the test cases we received, so it was unclear as to what test cases those documents were related to.\nCMS officials in the Office of Information Services acknowledged that test case documentation for systems supporting the initial rollout of Healthcare.gov had been lacking and that there were gaps in the documentation linking the requirements being tested to the corresponding test cases. They attributed these weaknesses to not having always followed required procedures for appropriately documenting test cases. These officials added that the procedures were being followed for the contract awarded in January 2014 for the implementation of additional and enhanced functionality for the FFM system. However, we determined that test cases documented under the new development contract also lacked key elements (as described below). Without key information included in test cases, CMS was limited in its ability to ensure that documented scenarios were performed and thus that applications, systems, or features supporting Healthcare.gov activities were working as intended.\nImprovements Were Made to Test Cases Developed After Initial System Launch, but Many Still Lacked Key Elements CMS took steps to improve the quality and content of its test cases subsequent to the launch of Healthcare.gov. In particular, all 83 post- October 2013 test cases included a unique identifier, the objective for the test case, the ordered description of steps to be taken by each participant for the execution of the procedure, and expected behavior required of the test items.\nHowever, similar to the pre-October 2013 documentation, these test cases did not always include outputs and exact values; test case dependencies; and required inputs. Specifically:\n61 of 83 FFM test cases lacked information on outputs and exact\n77 of 83 FFM test cases did not include dependencies; and\n37 of 83 FFM test cases did not specify all the inputs required to execute each test case.\nFurther, although the newly developed test case documentation did not contain all recommended information, the majority of the documentation did include information to allow the project team to determine whether the testing contractor had executed the test and whether or not the system passed testing, which is a considerable improvement over the previous process. Specifically, the test procedures for 56 of the 70 newly developed test cases that we review were executed and included information about whether the test case passed or failed, compared with 25 of 83 of the pre-launch test cases.\nIn addition, in November 2014 CMS officials in the Office of Information Services and the Office of Legislation, along with representatives from the FFM system development contractor, demonstrated that they were documenting the linkage of requirements to their corresponding test cases within the Quality Center Application Lifecycle Management tool. Going forward, use of this tool should assist CMS in ensuring that there is a valid relationship between test plans, test design, test cases, and test procedures. Nonetheless, until CMS begins to standardize and require all key elements in test case documentation, as recommended by best practices, it may continue lack information needed to determine whether an application, system, or one of its features is working as intended.", "Best practices that we and the Software Engineering Instituteidentified emphasize the importance of project oversight as a means of ensuring project progress and that appropriate corrective actions can be taken when project performance deviates significantly from the plan. A deviation is significant if, when left unresolved, it precludes the project from meeting its objectives. Best practices call for, among other things, (1) establishing well-constructed schedules that include the entire scope of work activities; (2) estimating the level of effort to be expended by the project team on each task to assist in monitoring the progress of the project; (3) documenting and monitoring activities for managing project documentation; and (4) conducting project progress and milestone have reviews to address performance shortfalls and understand how well requirements are being met.\nHowever, CMS did not always (1) ensure project schedules for Healthcare.gov and its supporting systems were well-constructed; (2) estimate level of effort for DSH and FFM functional requirements; (3) implement data management and monitoring processes; and (4) conduct all recommended and required project progress and milestone reviews. CMS officials within the Center for Consumer Information and Insurance Oversight and the Office of Information Services attributed these weaknesses, in part, to challenges with enforcing consistent application of life-cycle processes while trying to develop the system in an expedited fashion to meet the October 2013 deadline. As a result, without adequate and comprehensive information that would be key for understanding the project’s progress, CMS and other oversight agencies may not have the data necessary to appropriately evaluate the project and take corrective actions.", "A project schedule is a fundamental management tool that specifies when work will be performed in the future and allows for measuring project performance against an approved plan. To this end, our Schedule Assessment Guide states that a project should be guided by an integrated master schedule that reflects the entire scope of work activities. An integrated master schedule may be made up of several or several hundred individual schedules that represent portions of work within a program. These individual schedules are “subprojects” within the larger program.\nCMS did not always have a comprehensive integrated master schedule prior to system launch in October 2013. For example, IV&V assessment reports issued in December 2012, February 2013, and May 2013 identified weaknesses in project scheduling throughout the Healthcare.gov development process. For example:\nActivities related to FFM and DSH system implementation and the timeline for the design of the DSH database were not included in the integrated master schedule.\nCertain key development activities were not included in the FFM integrated project schedule.\nThe FFM testing schedule and the DSH planning schedule did not contain resource assignments needed to complete the work as planned.\nTherefore, management’s ability to monitor productivity or make effective decisions on the allocation of resources was severely limited.\nCMS Took Steps to Improve Project Schedules after Initial Launch, but Schedules Were Not Always Well-Constructed After awarding the new FFM development contract in January 2014, CMS re-evaluated project schedules for systems supporting Healthcare.gov. However, project schedules developed since then were not always well- constructed.\nBest practices identified by usschedules include the following:\nLogically sequencing all work activities. The schedule should be planned so that critical project dates can be met. To do this, activities need to be logically sequenced—that is, listed in the order in which they are to be carried out. In particular, activities that must be completed before other activities can begin (predecessor work activities), as well as activities that cannot begin until other activities are completed (successor work activities), should be identified. Date constraints and lags should be minimized and justified to help ensure that the interdependence of activities that collectively lead to the completion of events or milestones can be established and used to guide work and measure progress.\nConfirming that the critical path is valid. The schedule should identify the program critical paththrough the sequence of work activities. Establishing a valid critical path is necessary for examining the effects of any activity’s slipping along this path. The program critical path determines its earliest completion date and focuses the project team’s energy and management’s attention on the activities that will lead to the project’s success. Because a critical path defines a project’s earliest completion date, it must be a continuous sequence of activities from the schedule’s status date to the finish milestone. —the path of longest duration\nEnsuring reasonable total float. The schedule should identify reasonable total floatdetermined. Large total float on a work activity indicates that the work activity can be delayed without jeopardizing the finish date. The length of delay that can be accommodated without the finish date’s slipping depends on a variety of factors, including the number of date constraints within the schedule and the amount of uncertainty in the duration estimates, but the work activity’s total float provides a reasonable estimate of this value. As a general rule, activities along the critical path have the least total float. so that the schedule’s flexibility can be CMS has made an effort to tie all subprojects into an integrated master schedule and to capture all of the required effort for the Healthcare.gov initiative. Specifically, the agency had documented at least 26 subproject schedules within the integrated master schedule. However, our review of schedules for 4 of 17 FFM subprojects determined that these schedules did not always include key characteristics of a well-constructed schedule.\nThe FFM integrated master schedule contained 17 subproject schedules. We selected 4 schedules that relate to the Plan Management, Small Business Health Options Program, Financial Management, and Eligibility and Enrollment modules of the Federally Facilitated Marketplace System. predecessor activities for 9 percent of its remaining activities. In addition, a significant number of date constraints were reflected in the project schedules, and for the majority of them the agency did not provide a justification. For example, we identified date constraints on 26 percent of the remaining work activities in both the Financial Management and Small Business Health Options Program schedules.\nCMS did not always ensure that project schedules had a valid critical path. For example, two of the four selected schedules—for the Eligibility Business Operations and the Financial Management projects—did not have valid critical paths because there were several gaps of time where no critical activities were scheduled. Specifically, the critical path for the Eligibility Business Operations schedule had four gaps, ranging from 8 to 15 days, where no critical activities were scheduled. The Financial Management schedule had a gap of nearly 6 months with no critical activities scheduled.\nIn addition, the other two schedules—for the Small Business Health Options Program and Plan Management projects—did not have valid critical paths because the paths were determined by long-duration support and management activities rather than discrete, well-defined work. For example, the Small Business Health Options Program schedule includes management activities such as “Operations Management” and “Deployments Management” that appear in the schedule as critical activities. However, a critical path cannot include these types of activities because, by their very nature, they do not represent discrete effort.\nCMS did not always ensure reasonable total float. Each of the four project schedules we reviewed appeared to be overly flexible, allowing for many activities to slip a significant number of days before impacting the dates of key events. For example, the Plan Management schedule allowed 50 percent of its remaining activities to slip more than 98 working days before impacting the key finish milestone. Additionally, according to the schedules, remaining activities in the Small Business Health Options Program, Financial Management, and Eligibility Business Operations schedules could be delayed an average of 49 to 50 days before causing the project finish dates to be delayed. Inaccurate values of total float falsely depict true project status, which could lead to decisions that may jeopardize the project.\nTable 1 below summarizes how well the current subprojects’ schedules met best practices.\nBecause these project schedules did not fully meet key practices for ensuring that they are well-constructed, they are limited as tools for gauging progress and providing reliable estimates of project timelines. In addition, because the reliability of an integrated master schedule depends in part on the reliability of its subordinate schedules, the weaknesses in these schedules will be reflected in the overall schedule for the Healthcare.gov effort.", "Level-of-effort estimates are used to estimate the amount of time a project will take to develop. According to the Software Engineering Institute, this involves estimating the amount of time and resources to be spent on each work item, such as developing functional requirements for a system. These estimates can then be compared to the actual time and resources expended on each work item. This allows the project’s stakeholders to determine how well the project is progressing and whether schedules should be adjusted or additional resources need to be applied.\nConsistent with best practices, the CMS Requirements Management Plan documented specifically for the FFM and DSH systems required system development teams to estimate the level of effort for each functional requirement and those estimates to be recorded in CALT. The level-of- effort estimates, according to the plan, were to be used to inform velocity—that is, how quickly the project was being developed.\nHowever, CMS and its contractors rarely documented levels of effort for the FFM and DSH functional requirements prior to initial system launch in October 2013. Specifically, nearly 100 percent of the FFM eligibility and enrollment functional requirements and nearly 84 percent of the DSH functional requirements documented prior to initial launch were missing the estimated levels of effort.\nAccording to agency officials in the Office of Information Services, contractor earned value management and other financial reports were used in the place of level of effort estimates to track contractor progress. However, the officials agreed that, while these reports would allow them to track the progress made on total project cost estimates, these reports would likely not provide the full insight necessary on how project development was progressing as could be provided with level-of-effort estimates.\nDue to the lack of level-of-effort estimation, all subsequent monitoring mechanisms that depended on these estimates, including velocity reports, would have provided minimal guidance to CMS and its contractors in monitoring work status and the remaining time needed to complete projects.\nCMS Has Taken Steps to Estimate Level of Effort for Major System Modules and Supporting Projects, but Has Not Developed or Documented This Policy or Procedures As part of CMS’s efforts to improve project management processes after initial launch of Healthcare.gov and its supporting systems, agency officials stated in August 2014 that they had begun the process of estimating levels of effort and including that information in a system that they historically used to track software defects. They stated that CMS planned to use this system to track further FFM software development efforts, in order to provide more visibility into progress being made by the systems’ development contractors. In addition, the agency provided documentation to demonstrate its progress in estimating level of effort for the FFM system. Specifically, the documentation showed that FFM contractors had begun estimating levels of effort for major system modules and supporting projects.\nHowever, current CMS policy does not address estimating level of effort, including how it should be calculated and applied. Specifically, neither CMS’s eXpedited Life Cycle (XLC) process nor its newly developed Requirements Management Guide addresses estimating level of effort at any level. As a result, it will be difficult for agency officials to have reasonable assurance that level-of-effort estimates are developed and calculated and applied in a consistent manner and, therefore, it may be limited as a tool for accurately monitoring progress.", "state that Best practices identified by the Software Engineering Instituteexplicit specifications should be made concerning what, how, where, and when data should be collected and stored to ensure their validity and to support later use for analysis and documentation purposes. In this case, data are forms of documentation required to support a project in various areas (e.g., administration, configuration management, and quality). These documents, among other things, are then used by project stakeholders to conduct project oversight. Best practices further call for activities for managing these data to be documented and monitored to ensure that data management requirements are being satisfied. Depending on the results of monitoring and changes in project requirements, situation, or status, it may be necessary to re-plan the project’s data management activities.\nTo facilitate a consistent process for managing documents, including those that define requirements, CMS developed a guide in April 2012 for internal and external stakeholders (e.g., other federal agencies providing eligibility determination information). This guide requires the use of CALTSpecifically, the guide calls for updates to the status of each requirement as development progresses to help facilitate project oversight. In addition, the guide provides and defines specific status designations, such as “system requirement approved” and “ready for development.” Further, the agency’s Requirements Management Plan documented specifically for the FFM and DSH systems required that CALT be used for storing various project management documentation, including requirements; source code; network, hardware, and infrastructure descriptions; test cases; test results; and system defects. for managing project data and functional requirements.\nHowever, CMS and its contractors did not effectively implement data management processes. For example, they used status designations that were not standardized or defined, which would have hindered CMS’s ability to analyze project progress and effectively oversee the development for the FFM and DSH systems. Specifically: seven undefined status designations, such as “grooming in progress,” were used for the DSH functional requirements; and two undefined status designations, “artifact confirmed” and “planned development completed,” were used for the FFM eligibility and enrollment module functional requirements.\nFurther, key project management documentation was not always stored in CALT as required, which impeded reviews of the development effort. For example, documents needed for reviews by the IV&V assessment team in September 2012 and December 2012, such as quality assurance testing results and hardware and software requirements documents, were located on a contractor’s SharePoint site and were not uploaded to CALT. This would have made it difficult for the assessment team to conduct their review.\nCMS officials in the Office of Information Services stated that project owners of each individual effort, to include the DSH and the FFM systems, were given autonomy in managing the status of functional requirements within CALT. Consequently, it was difficult for CMS officials responsible for overseeing the entire project to ensure consistency in managing project documentation across each individual project team, of which there were over 200 during the initial development of Healthcare.gov and its supporting systems. The CMS Deputy Chief Information Officer added that because project teams were receiving new requirements well into the development process, required documentation was not always a high priority.\nThis lack of a consistent process for managing project data prior to initial system launch increased the risk that CMS would not have been able to appropriately and effectively (1) monitor the progress of functional requirements as they were being developed, (2) ensure all key documentation needed for overseeing project development activities was documented and updated, and (3) monitor data management.\nWeaknesses in Data Management Practices Continued after Initial Launch, but CMS Has Plans to Address Them Subsequent to initial system launch, problems in CMS’s data management practices persisted. For example, contractor staff stated that several documents we requested for our review had not yet been uploaded to CALT. Instead, these documents were stored on contractor systems, and thus were not readily available for project oversight. In addition, folders within CALT were not always well-organized, making locating relevant documentation difficult and time consuming. For example, many of the folders were similarly named, or the names of the folders were too vague to determine what documents were included within them. To illustrate, three sub-folders within the same folder were named “UAT.” In addition, while certain software release folders were named by software release number, others were named using a calendar date, making it difficult to know what documentation was relevant to each release.\nTo help mitigate weaknesses in data management monitoring, CMS developed a document management reference guide for the FFM system in July 2014 to establish a process for managing documents created by the FFM development contractor. The guide specified necessary steps for uploading and tracking documents in CALT. In addition, CMS has revised its procedures for tracking the status of requirements through design and testing, and no longer uses undefined status designations.\nCMS officials in the Office of Information Services stated that, once open enrollment for 2015 has ended, they intend to perform a review of all required CALT documentation, identify missing documents, and locate and upload those documents into CALT. The officials said they expect this effort to be completed by April 2015.", "According to best practices outlined by the Software Engineering Institute, the purpose of a progress review is to provide relevant stakeholders the results and impacts of a project’s activities and to determine whether there are significant issues or performance shortfalls to be addressed. Milestone reviews are pre-planned events or points in time at which a thorough review of status is conducted to understand how well stakeholder requirements are being met. These reviews are important to ensure that a project is progressing as planned and to identify corrective actions needed.\nConsistent with best practices, CMS requires progress and milestone reviews for each newly developed system. According to the CMS XLC— its system development life-cycle process—the purpose of these reviews is to provide management and stakeholders with the opportunity to assess project work to date and identify any potential issues. The CMS XLC calls for a project process agreement, which is to serve as an agreement between CMS and its development contractors on the progress and milestone reviews and artifacts (i.e., documentation) required for a project. The agency has identified 11 different progress and milestone reviews which vary depending on the complexity of the project. These reviews are to be conducted by CMS governance boards, which are to approve the project to continue with the next phase of the systems development life cycle. Table 2 describes the progress and milestone reviews documented in the CMS XLC.\nThe FFM, DSH, and Enterprise Identity Management systems were all deemed highly complex by CMS; as such, CMS guidance recommends, but does not require, that they undergo all of the reviews discussed above. However, the three systems did not undergo all the recommended reviews. CMS documented a project process agreement for the Enterprise Identity Management system in January 2012 which stated that it should undergo 10 of the 11 progress and milestone reviews (all but the Investment Selection Review) and specified the required artifacts for each review. However, the agency could not demonstrate that 5 of these reviews were held. CMS officials stated that 4 of these 5 reviews had been performed, but they could not provide any evidence to show this performance. For the DSH and FFM systems, the agency did not document project process agreements, and it provided evidence that some, but not all, of the recommended reviews were held for each. Table 3 shows the recommended reviews for a highly complex system and whether or not those reviews were held for each system. reviews was compromised due to slippages in scheduled deliverables. However, it is unclear whether or not the contractors were aware of the required reviews since the FFM and DSH systems both lacked project process agreements.\nRegarding the missing review artifacts, the officials further stated that all critical artifacts for each gate review were developed and that the missing artifacts were non-critical. However, the CMS life-cycle framework does not designate artifacts as critical or non-critical, nor does it define these terms. By not ensuring that required progress and milestone reviews took place and that all required artifacts were developed, CMS stakeholders lacked full awareness of the results and impacts of the project’s activities and significant issues or performance shortfalls to be addressed.\nCMS Has Taken Steps to Improve Processes for Project and Milestone Reviews, but All Required Reviews Have Not Been Held In January 2014, CMS began taking steps to improve its oversight processes for conducting progress and milestone reviews. These improvements, according to officials in the Office of Information Services, included requiring greater collaboration between CMS and its contractors; increasing the number and frequency of contract deliverables, which would include key artifacts provided during the reviews; and placing greater emphasis on progress and milestone reviews as well as formal signoffs prior to the next life-cycle phase. Additionally, in May 2014 and June 2014, CMS documented project process agreements for the portions of the FFM system that were to be developed under the new contract.\nDespite these efforts, CMS had not documented a project process agreement for DSH as of December 2014. In addition, although Office of Information Services officials stated that they had held all the required reviews for the portions of the FFM system that had been placed into production at the time of our review, they were unable to provide evidence for 5 of 20 required reviews. Table 4 below shows the required reviews for the FFM system and whether or not those reviews were held for newly developed portions of the FFM system that were in production as of July 2014.\nIn addition, CMS was not always following the FFM project process agreement. For example, Office of Information Services officials stated that production readiness reviews and operational readiness reviews were combined for certain increments. However, these reviews have different purposes, and the project process agreements stated that they should occur separately.\nThis approach to conducting reviews puts CMS at continued risk that stakeholders may not be provided sufficient information on the results and impacts of Healthcare.gov-related activities, identify significant issues or performance shortfalls that need to be addressed, and understand how well requirements are being met. In addition, inconsistent application of the project process agreements may lead to key reviews continuing to be missed and approvals not being obtained.\nWe previously reported the lack of certain progress and milestone We reviews in a report on Healthcare.gov contract management.recommended that HHS direct CMS to ensure that information technology projects adhere to requirements for governance board approvals before proceeding with the next phase of the systems development life cycle. HHS agreed with and had begun to take actions to address our recommendation.", "The Secretary of HHS is required by law and OMB guidance to designate a CIO to be responsible for the management of agency information and information technology. and other assistance to agency heads and other senior management personnel on IT acquisition and management, monitoring the performance of IT programs (including whether to continue, modify, or terminate a program or project), and ensuring compliance with information security requirements. More recently, Congress has reaffirmed the importance of CIOs having a strong role in overseeing IT at executive branch agencies. Specifically, in December 2014, new federal information technology acquisition reform requirements were included in the National Defense Authorization Act, to ensure that the CIO has a significant role in the management, governance, and oversight processes related to their agency’s IT investments.\n44 U.S.C. § 3506(a), as amended by Pub. L. No. 104-106, § 5125 (Feb. 10, 1996), and 40 U.S.C. § 11315 (Paperwork Reduction Act of 1995 and the Clinger-Cohen Act of 1996); 44 U.S.C. 3501 note (E-Government Act of 2002, Pub. L. No. 107-347, § 202), and 44 U.S.C. § 3544(a)(3) (Federal Information Security Management Act of 2002), which as of Dec. 18, 2014, was superseded by 44 U.S.C. § 3554(a)(3) (Federal Information Security Modernization Act of 2014, Pub. L. No. 113-283); and OMB, Memorandum for Heads of Executive Departments and Agencies, M-11-29 (Washington, D.C.: Aug. 8, 2011).\nIn March 1996, the Secretary of HHS delegated the Secretary’s IT-related authorities under the Clinger-Cohen Act to the HHS CIO. The CIO in turn requested that operating division heads designate a CIO for their respective divisions, and that the operating division CIOs serve as members of the department’s IT Investment Review Board. This board, which is chaired by the HHS CIO, is to review, validate, and approve selected IT investments in the department’s portfolio. An IT investment may be selected for review at any time during its life cycle if it is high risk and high value, is a high-visibility initiative, or is performing poorly, among other criteria. This is consistent with key practices outlined in our IT investment management guide, which call for the establishment of an enterprise-wide investment review board to be composed of senior executives from IT and business units, who are to be given the responsibility for defining and implementing the organization’s IT investment governance process.\nBeyond the actions taken by CMS, in August 2011, OMB issued a memorandum to all agency heads, stating that the role of the CIO should be moved away from just policymaking and infrastructure maintenance to true portfolio management for all IT. The memo was intended to clarify the primary responsibility for agency CIOs, to include responsibility over the entire IT portfolio for the agency and for terminating or turning around underperforming investments.\nAlthough the Secretary of HHS appointed a CIO, this official had a limited role in overseeing the development and implementation of Healthcare.gov and its supporting systems. The HHS CIO stated that his office did not conduct oversight of the initial design and development for Healthcare.gov and its supporting systems. The CIO further stated that the status of the Healthcare.gov development project was occasionally discussed at regular monthly meetings with senior leadership from each operating division. However, the CIO stated that no issues with Healthcare.gov and its supporting systems were raised in these meetings prior to initial system launch.\nIn addition, although HHS established a process through its IT Investment Review Board that may have revealed technical issues with Healthcare.gov and its supporting systems, the CIO stated that the board has not been active for 2 to 3 years. The CIO also stated that the department is large and federated and his office’s ability to oversee its operating divisions, such as CMS, is limited. He added that oversight reviews are conducted within the operating divisions by their own investment review boards.\nBy not effectively monitoring the performance of the Healthcare.gov initiative prior to the initial launch in October 2013, the HHS CIO was not appropriately positioned to advise the Secretary on actions that should be taken to improve the program.\nThe Office of the CIO Expanded Its Oversight Role after Initial Launch, but a Key Review Board Is Still Not Active The HHS Office of the CIO (OCIO) has expanded its oversight role for the Healthcare.gov initiative since initial launch by convening regular meetings and briefings discussing the Healthcare.gov initiative with officials at various levels. The CIO stated that CMS now regularly shares project documentation with OCIO, which allows them to have better insight as to the status of the project and its development activities.\nThe HHS CIO also stated that although he now has greater insight into the project’s development progress, he does not believe he has the authority to manage IT investments at the operating division level, which includes the Healthcare.gov initiative. However, as previously noted, federal law and OMB guidance place responsibility for overseeing and managing the department’s IT investments with the CIO. Thus, the CIO should be positioned within the department to successfully exercise his authority.\nFurther, the department-wide investment review board called for by HHS policy would provide a mechanism for carrying out these responsibilities, although it has not met for the past 2 to 3 years, according to the CIO. Until the department-wide investment review board carries out its assigned duties, the oversight that HHS provides for Heathcare.gov- related projects may continue to be limited, potentially resulting in missed opportunities to take timely corrective actions on poorly performing projects.", "By law, OMB oversees the management by federal agencies of information and information technology. OMB’s responsibilities include establishing processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by executive agencies, as well as issuing guidance on processes for selecting and overseeing agency privacy and security protections for information and information systems. OMB’s guidance under these authorities has included directions to agencies on the roles and responsibilities of CIOs and the establishment of IT investment management processes.\nIn June 2009, OMB launched the Federal IT Dashboard as a public website that reports performance and supporting data for major IT investments. The dashboard is to provide transparency for these investments in order to facilitate public monitoring of government operations and accountability for investment performance by the federal CIOs who oversee them. According to OMB, it began using the dashboard to identify at-risk investments with its launch in June 2009. These investments became the focus of joint OMB-agency TechStat Accountability Sessions (TechStats)—evidence-based reviews intended to increase accountability and transparency and to improve investment performance through concrete actions.\nIn January 2010, OMB began conducting TechStat sessions to enable the federal government to intervene by turning around, halting, or terminating IT projects that are failing or are not producing results. OMB has identified factors that may result in an investment being selected for a TechStat session, such as—but not limited to— evidence of (1) poor performance, (2) unmitigated risks, and (3) misalignment with policies and best practices. Although OMB called for agencies to work with their CIOs to conduct TechStat sessions at the agency level beginning in December 2010, OMB may still select investments for review. Agency CIOs or OMB select these high-risk projects for evaluation, and conduct a review of the proposed improvement plans, revised schedules, and potential changes to budget requests.\nAlthough OMB plays a key role in overseeing the implementation and management of federal IT investments, its involvement in overseeing the development efforts of Healthcare.gov and its supporting systems was limited prior to the initial launch in October 2013. According to officials within OMB’s Office of E-Government and Information Technology, headed by the Federal CIO, OMB’s role in overseeing the development of Healthcare.gov and its supporting systems was limited to bringing CMS and its federal partners together to work across technical teams, clarifying federal policy guidance, and overseeing the project’s budget.\nIn particular, OMB facilitated monthly meetings of an IT steering committee consisting of CMS and other key stakeholders (e.g., other federal agencies providing eligibility determination information) that were held to coordinate inter-agency efforts on broader federal marketplace IT work. The meetings, which began in March 2012 and ended in September 2013, primarily focused on addressing key federal marketplace information-sharing policies and identifying barriers to implementation as well as working with federal departments and agencies as necessary on the implementation and execution of the Patient Protection and Affordable Care Act.\nHowever, although the Healthcare.gov initiative was considered a high- risk project and independent evaluations and the IT Dashboard identified problems well before its deployment, OMB officials did not select this investment for a TechStat review. Specifically, the dashboard indicated a high-risk evaluation status of Healthcare.gov in March 2013. Officials in the Office of E-Government and Information Technology stated that it was HHS’s responsibility to select the investment for TechStat, but agreed that they retained the right to select investments themselves for review.However, in the case of the Healthcare.gov initiative, OMB did not do so although the IT Dashboard indicated problems 7 months prior to the initial launch of Healthcare.gov and its supporting systems.\nWe reported in 2011 that the Federal IT Dashboard has enhanced OMB’s oversight of federal IT investments. Among other things, we noted that performance data from the dashboard were being used to identify poorly performing investments for executive leadership review sessions. However, in taking steps to oversee the management of the Healthcare.gov IT investment, OMB did not effectively use information provided by this mechanism to analyze, track, and evaluate the risks of this major investment.\nOMB Took Additional Steps to Provide Oversight by Establishing the U.S. Digital Service Shortly after initial system launch on October 1, 2013, OMB, along with the Federal CIO, assisted HHS and CMS with addressing the technical issues that existed with Healthcare.gov and its supporting systems. Officials in the Office of E-Government and Information Technology stated that after technical issues were reported during initial launch of the system, the role of the Federal CIO was primarily to explore ways to improve the customer experience with the website.\nIn addition, in August 2014, the administration established the U.S. Digital Service, in part to respond to issues with Healthcare.gov and its supporting systems. This service is to collaborate with federal agencies to identify and correct problems with government websites, among other things. OMB’s Deputy Federal CIO serves as the Administrator of the U.S. Digital Service. The mission of this service is to improve and simplify the online experience that people and businesses have with the federal government by establishing standards to bring the government’s digital services in line with the best private sector services; identifying common technology patterns that will help effectively scale services; collaborating with federal agencies to identify and address gaps in their capacity to design, develop, deploy and operate public-facing services; and providing accountability to ensure agencies see results.\nAccording to OMB officials in the Office of E-Government and Information Technology, the service is working closely with the CMS systems team charged with developing systems supporting Healthcare.gov. For example, in August 2014, the administration, in conjunction with the U.S. Digital Service, released a set of best practices for effective digital service delivery that are intended to serve as a guide for CMS in further improving systems supporting Healthcare.gov. CMS is working with the service to implement these practices.\nIn addition to its role in assisting CMS with improving the Healthcare.gov initiative through the U.S. Digital Service, OMB’s Office of E-Government and Information Technology continues its role in working with HHS and CMS to oversee the project’s budget. Additionally, the Consolidated and Further Continuing Appropriations Act, 2015 provides for funding to support the Digital Service’s enhanced oversight and guidance for major IT investments.", "Problems related to insufficient capacity planning, coding errors, and incomplete implementation of planned functionality resulted in numerous performance issues with Healthcare.gov and its supporting systems upon initial launch in October 2013. Consequently, individuals faced significant challenges when attempting to enroll for health insurance coverage. CMS has addressed many of the initial problems by increasing capacity and taking steps to reduce software code errors. Moreover, the agency has been developing additional functionality for the FFM system.\nNevertheless, many of the issues arose from the inadequate implementation of key practices for managing IT projects, and these weaknesses had not yet been fully corrected. Specifically, by not managing requirements to ensure that they addressed all needed functionality and not fully documenting and executing key testing activities, CMS did not have reasonable assurance that Healthcare.gov and its supporting systems would perform as intended. In addition, because it did not develop reliable project schedules, measure levels of effort, effectively manage project data, and conduct progress and milestone reviews, CMS had diminished visibility into the project’s status and may have missed opportunities to take corrective actions and avoid problems that occurred upon launch.\nWith the issuance of a new development contract for the FFM system, CMS has taken the opportunity to make improvements in several of these areas. However, until it ensures that it is fully implementing these best practices for managing the development of Healthcare.gov and its supporting systems, it increases the risk that future development will experience additional problems.\nFurther, opportunities exist for HHS to strengthen the involvement of the department’s CIO in conducting oversight of the management of Healthcare.gov and its supporting systems. Until HHS does so it cannot be assured that the implementation and ongoing operation of this high- risk IT investment will continue to provide adequate and sufficient support to millions of Americans seeking to enroll in health care plans through the federally facilitated marketplace.\nWhile we previously made recommendations to OMB addressing the use of dashboard ratings for overseeing IT projects’ performance, we found that OMB had a limited role in overseeing the management of the Healthcare.gov IT investment, along with investments in the website’s supporting systems.", "To improve requirements management for future development covering systems supporting Healthcare.gov, we recommend that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services to direct the Chief Information Officer to take the following two actions: 1. Document the approval process for functional and technical design requirements documentation. 2. Implement the CMS procedure to obtain signatures from the three key stakeholders—the CMS business owner, the CMS approval authority, and the contractor organization approving authority—to ensure that stakeholders have a shared understanding of all business, functional, and technical requirements for systems supporting Healthcare.gov prior to developing them.\nTo improve systems testing processes for future development covering systems supporting Healthcare.gov, we recommend that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services to direct the Chief Information Officer to take the following three actions: 3. Document and approve systems testing policy and procedures, including (1) the use of the system testing tool designed to integrate systems development and systems testing and (2) requirements for stakeholder review of systems test documentation that is intended to ensure proper test coverage and to validate the results. 4. Require key information in system test plans, as recommended by best practices, including the means by which the quality of testing processes will be assured, and the identification of responsibilities for individuals or groups carrying out testing. 5. Require and ensure key information is included in test cases, as recommended by best practices, such as all outputs and exact values; test case dependencies; inputs required to execute each test case; and information about whether each test item has passed or failed testing.\nTo improve oversight processes for systems development activities related to systems supporting Healthcare.gov, we recommend that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services to direct the Chief Information Officer to take the following two actions: 6. Ensure schedules for the Healthcare.gov effort are well constructed by, among other things, (1) logically sequencing activities, (2) confirming the critical paths are valid, and (3) identifying reasonable total float. 7. Develop and implement policy and procedures for estimating level of effort to ensure effort is estimated at the appropriate level (requirements or program area), and define how levels of effort will be used to monitor system development progress.\nTo improve oversight for Healthcare.gov and its supporting systems, we recommend that the Secretary of Health and Human Services direct the HHS Chief Information Officer to carry out authorized oversight responsibilities. Specifically, the Chief Information Officer should ensure the department-wide investment review board is active and carrying out responsibilities for overseeing the performance of high-risk IT investments such as those related to Healthcare.gov.", "In written comments on a draft of our report (reprinted in appendix II), HHS stated that it concurred with all of the recommendations and identified actions being taken or planned to implement them. Among others, these actions include instituting a process to ensure functional and technical requirements are approved, developing and implementing a unified standard set of approved system testing documents and policies, and providing oversight for Healthcare.gov and its supporting systems through the department-wide investment review board. If the department ensures that these and other actions it identified are effectively implemented, then CMS should be better positioned to more effectively manage current and future systems development efforts for Healthcare.gov and its supporting systems.\nIn addition, the HHS audit liaison provided technical comments from CMS via e-mail. In the comments, CMS disagreed with our characterization of the 11,000 FFM critical code violations that were identified by the IV&V assessment team in July 2014. CMS stated that these code violations were identified very early on in the development phase of building the eligibility and enrollment module and that most of the risk represented by these code violations is to the cost of maintaining the code over time, rather than to its successful functionality. The agency added that any defects which could cause problems with the functionality of the Healthcare.gov system would have been identified and addressed during subsequent testing. However, the IV&V assessment stated that the review was based on a “snapshot of the production code” and not code that was in development. In addition, while the assessment team noted that 328 of the code violations may result in maintainability issues, the team stated that the remaining violations could cause issues in production if not corrected. Other technical comments provided by HHS were incorporated as appropriate.\nThe Chief of Policy, Budget, and Communications within OMB’s Office of E-Government & Information Technology also provided technical comments via e-mail. In the comments, OMB took issue with our statement that it did not conduct a TechStat review when the IT Dashboard indicated problems 7 months prior to the initial launch of Healthcare.gov and its supporting systems. According to the OMB official, a brief dip in the risk rating, such as the one experienced in March 2013, did not necessitate a formal TechStat. The official further stated that the tech surge that OMB instituted shortly after the launch of the system, which included an assessment of its problems, effectively represented a large-scale and comprehensive TechStat session and replaced the need for a separate OMB- or agency-led review. Nevertheless, had such an assessment or a TechStat been conducted earlier in the system development process, the results could have been used to identify and correct deficiencies prior to system launch.\nWe are sending copies of this report to the Secretary of Health and Human Services, the Director of the Office of Management and Budget, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nShould you or your staffs have questions on matters discussed in this report, please contact me at (202) 512-6304. I can also be reached by e- mail at melvinv@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.", "The objectives of this study were to (1) describe the problems encountered in developing and deploying Healthcare.gov and its supporting systems, and determine the status in addressing these deficiencies; and (2) determine the extent to which the Centers for Medicare & Medicaid Services (CMS) oversaw the development effort and applied disciplined systems development practices to manage requirements and conduct systems testing, as well as the extent to which the Department of Health and Human Services (HHS) and the Office of Management and Budget (OMB) provided oversight of the effort.\nTechnical direction letters provide supplementary guidance to contractors regarding tasks contained in their statements of work or change requests.\nSoftware Engineering Institute, CMMI for Development, Version 1.3, CMU/SEI-2010-TR- 033 (November 2010, Hanscom AFB, MA). The Software Engineering Institute is a federally funded research and development center operated by Carnegie Mellon University. Its mission is to advance software engineering and related disciplines to ensure the development and operation of systems with predictable and improved cost, schedule, and quality.\nCALT is CMS’s project management system and requirements repository.\nThe Requirements Management Plan states that requirements should be approved by an official within the Office of Information Services, but that this function can be delegated to other CMS responsible officials.\nTo determine whether requirements maintained bidirectional traceability, we analyzed data extracts of all DSH and eligibility and enrollment module functional requirements from CALT and interdependencies between higher-level and lower-level requirements. We also analyzed requirements documentation developed under the new systems development contract to identify CMS’s current process for maintaining bidirectional traceability. In addition, we interviewed CMS officials as well as DSH system development contractors to obtain an understanding of the requirements management processes, including a live demonstration.\nWith respect to systems testing, we reviewed the CMS testing framework, contract statements of work for the DSH and FFM systems, independent verification and validation reports from September 2012 to July 2014, and system test documentation for these systems. We focused our review on the extent to which CMS applied selected key best practices for software and system (1) test plans and (2) test cases.\nWe assessed all 14 FFM and 19 DSH system test plans documented prior to system launch in October 2013 against best practices identified by the Institute of Electrical and Electronics Engineers that describe key elements that should be included in test plans. In addition, we assessed the 11 FFM system test plans CMS had documented after the new development contract to determine the extent to which these test plans included the key elements identified in best practices.\nWe also assessed DSH and FFM system test cases against best practices identified by the Institute of Electrical and Electronics Engineers that describe key elements that should be included in test cases. In doing so, we analyzed and evaluated all DSH system test cases provided from CMS and documented prior to system launch in October 2013. In addition, we reviewed a non-generalizable random sample of 83 test cases for the FFM system from a population of 585 test cases provided from CMS and documented prior to system launch in October 2013. To determine the extent to which CMS included key elements in test cases developed after the new FFM systems development contract, we reviewed a non-generalizable random sample of 83 test cases from a population of 388. Lastly, we interviewed CMS officials, as well as DSH and FFM system testing contractors, to obtain an understanding of the system testing process.\nTo determine the extent to which CMS, HHS, and OMB oversaw the systems development effort, we obtained and analyzed documentation, such as project schedules, the CMS eXpedited Life Cycle policy, the HHS Enterprise Performance Life Cycle, as well as technical review board presentations and summary letters. We also reviewed project management documentation in CMS’s CALT system. Lastly, we reviewed pertinent oversight laws such as the Clinger-Cohen Act of 1996 and key practices for providing investment oversight that are outlined in GAO’s IT investment management framework.\nIn evaluating the effectiveness of oversight, we focused on (1) project schedules, (2) level-of-effort estimates, (3) data management, and (4) progress and milestone reviews.\nTo determine whether reliable schedules were available to assist with project oversight, we reviewed and analyzed four key subproject schedules for the FFM system, since these subprojects were a major focus of 2014 systems development efforts. Three of the schedules relate to the Plan Management, Small Business Health Options Program, and Financial Management modules of the FFM system, which were planned for initial open enrollment, but had been postponed in August 2013. The fourth schedule related to the eligibility and enrollment module of the FFM system, which is for enrolling individuals for health care coverage. We evaluated the extent to which these schedules were well-constructed as defined in our Schedule Assessment Guide. Our methodology to determine the extent to which project schedules were well-constructed included five levels of compliance. “Fully met” means the program office provided complete evidence that satisfied the elements of the best practice. “Substantially met” means the program office provided evidence that satisfied a large portion of the elements of the best practice. “Partially met” means the program office provided evidence that satisfied about half of the elements of the best practice. “Minimally met” means the program office provided evidence that satisfied a small portion of the elements of the best practice. “Not met” means the program office provided no evidence that satisfied any of the elements of the best practice.\nTo determine the extent to which CMS monitored the project against levels of effort, we reviewed the CMS Requirements Management Plan dated August 2012, and analyzed and evaluated, against the plan, levels of effort documented in the CALT system for all DSH and FFM eligibility and enrollment module functional requirements. For functional requirements developed after the new FFM contract was awarded, we interviewed CMS officials and obtained documentation regarding their efforts in estimating levels of effort for new development.\nTo determine the extent to which CMS monitored data management activities, we reviewed CMS plans and procedures, such as Project Management Plans and the Requirements Management Plan, for managing key project files and functional requirements, and evaluated the extent to which they adhered to CMS plans and procedures within the CALT system. In addition, we reviewed all DSH and FFM eligibility and enrollment module functional requirements contained in CALT to determine the extent to which CMS and its contractor documented key information used for overseeing development progress, such as requirements status fields.\nTo determine whether progress and milestone reviews were conducted in accordance with CMS and HHS policy, we reviewed the eXpedited Life Cycle Process and available project process agreements, and analyzed and evaluated all documentation pertaining to CMS’s progress and milestone reviews for its DSH, FFM, and Enterprise Identity Management systems prior to the October 2013 enrollment. In addition, we reviewed and analyzed progress and milestone reviews held for FFM software releases that were in production as of July 2014 and conducted after the new FFM systems development contract was awarded.\nFinally, to determine the extent to which CMS, HHS, and OMB provided oversight in the development and implementation of Healthcare.gov and its supporting systems, we interviewed knowledgeable officials, including the CMS Deputy Chief Information Officer, the HHS Chief Information Officer, and officials from OMB’s Office of e-Government and Information Technology.\nWe also obtained documentation and interviewed officials at the Department of Defense, the Department of Homeland Security, the Internal Revenue Service, the Office of Personnel Management, the Peace Corps, the Social Security Administration, and the Department of Veterans Affairs to determine the extent of their role in developing and implementing Healthcare.gov and its supporting systems.\nTo determine the reliability of the data provided from CMS information systems, we performed basic steps to ensure the data provided were valid, and we reviewed relevant information describing these systems. Specifically, we interviewed knowledgeable agency officials within the CMS Office of Information Services about these systems and asked specific questions to understand the controls in place for ensuring the integrity and reliability of the data contained within them. We did not assess the reliability of the systems used to maintain these data or the processes used in extracting the data for our engagement purposed. Based on the results of these efforts, we found the data to be sufficiently reliable for our work.\nWe conducted this performance audit from December 2013 to March 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Christie Motley (assistant director), Teresa Tucker (assistant director), James Ashley, Christopher Businsky, Juana Collymore, Nicole Jarvis, Kendrick Johnson, Jason Lee, Jennifer Leotta, Lee McCracken, Thomas Murphy, Constantine Papanastasiou, Andrew Stavisky, and Christy Tyson made key contributions to this report." ], "depth": [ 1, 2, 3, 3, 3, 3, 2, 3, 3, 3, 3, 2, 1, 2, 3, 3, 2, 1, 2, 3, 2, 3, 3, 2, 3, 3, 3, 3, 3, 3, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h1_title", "h1_full", "h1_full", "", "", "", "", "", "", "", "", "h1_full", "", "", "", "", "", "h0_title", "", "", "h0_title", "h0_full", "", "h0_title", "", "", "h0_full", "", "", "", "", "h0_full", "h0_full", "h2_full", "", "", "", "" ] }	{ "question": [ "How has CMS made improvements?", "What weaknesses remain despite such improvements?", "How has the HHS's role negatively impacted Healthcare.gov?", "Why did GAO recommend OMB improve oversight of IT projects?", "What did the Patient Protection and Affordable Care Act require?", "What responsibility did CMS have?", "How was this marketplace to function?", "How did Healthcare.gov connect to this marketplace?", "What was GAO asked to do in regards to CMS?", "What were GAO's objectives in reviewing CMS?", "How did GAO fulfill these objectives?" ], "summary": [ "As it has undertaken further development, CMS has made improvements in some of these areas, by, for example, establishing new requirements management processes and improving test documentation.", "However, weaknesses remain in its application of requirements, testing, and oversight practices.", "In addition, the Department of Health and Human Services (HHS) has not provided adequate oversight of the Healthcare.gov initiative through its Office of the Chief Information Officer.", "The Office of Management and Budget's (OMB) oversight role was limited, and GAO has previously recommended that it improve oversight of IT projects' performance.", "The Patient Protection and Affordable Care Act required the establishment of health insurance marketplaces to assist individuals in obtaining health insurance coverage.", "CMS, a component of HHS, was responsible for establishing a federally facilitated marketplace for states that elected not to establish their own.", "This marketplace is supported by an array of IT systems, which are to facilitate enrollment in qualifying health plans.", "These include Healthcare.gov, the website that serves as the consumer portal to the marketplace, as well as systems for establishing user accounts, verifying eligibility, and facilitating enrollment.", "GAO was asked to review CMS's management of the development of IT systems supporting the federal marketplace.", "Its objectives were to (1) describe problems encountered in developing and deploying systems supporting Healthcare.gov and determine the status of efforts to address deficiencies and (2) determine the extent to which CMS applied disciplined practices for managing and overseeing the development effort, and the extent to which HHS and OMB provided oversight.", "To do this, GAO reviewed program documentation and interviewed relevant CMS and other officials." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 1, 2, -1, 0, 1 ], "summary_paragraph_index": [ 11, 11, 11, 11, 0, 0, 0, 0, 1, 1, 1 ] }
CRS_R43177	{ "title": [ "", "Introduction", "Organization of This Report", "Overview of Title VII", "Detailed Description of Title VII Programs and Activities", "Part A: Student Loans (§§701-728)", "Subpart I—Insured Health Education Assistance Loans to Graduate Students (§§701-720)", "Subpart II—Federally-Supported Student Loan Funds (§§721-728 and §735)14", "Part B: Health Professions Training for Diversity (§§736-741)", "Centers of Excellence (COE) (§736)", "Scholarships for Disadvantaged Students (§737)", "Loan Repayments and Fellowships Regarding Faculty Positions (§738)", "Educational Assistance in the Health Professions Regarding Individuals from Disadvantaged Backgrounds27 (§739)", "Authorization of Appropriations (§740)", "Grants for Health Professions Education (§741)", "Part C: Training in Family Medicine, General Internal Medicine, General Pediatrics, Physician Assistants, General Dentistry, and Pediatric Dentistry (§§747-749B)", "Subpart I: Medical Training Generally (§§747-749A)", "Primary Care Training and Enhancement (§747)", "Training Opportunities for Direct Care Workers (§747A)", "Training in General, Pediatric, and Public Health Dentistry (§748)", "Advisory Committee on Training in Primary Care Medicine and Dentistry (§749)", "Teaching Health Centers Development Grants (§749A)", "Subpart II: Training in Underserved Communities (§749B)", "Rural Physician Training Grants (§749B)", "Part D: Interdisciplinary, Community-Based Linkages40 (§§750-759)", "General Provisions (§750)", "Area Health Education Centers (§751)", "Continuing Educational Support for Health Professionals Serving in Underserved Communities (§752)", "Education and Training Relating to Geriatrics (§753)", "Quentin N. Burdick Program for Rural Interdisciplinary Training (§754)51", "Allied Health and Other Disciplines (§755)", "Mental and Behavioral Health Education and Training Grants (§756)", "Advisory Committee on Interdisciplinary, Community-Based Linkages (§757)", "Interdisciplinary Training and Education on Domestic Violence and Other Types of Violence and Abuse (§758)", "Program for Education and Training in Pain Care (§759)", "Part E: Health Professions and Public Health Workforce (§§761-768)", "Subpart 1: Health Professions Workforce Information and Analysis (§§761-763)", "Health Professions Workforce Information and Analysis (§761)", "Advisory Council on Graduate Medical Education (§762)", "Pediatric Rheumatology (§763)", "Subpart 2: Public Health Workforce (§§765-770)", "General Provisions (§765)", "Public Health Training Centers (§766)", "Public Health Traineeships (§767)", "Preventive Medicine and Public Health Training Grant Program (§768)", "Health Administration Traineeships and Special Projects (§769)", "Authorization of Appropriations (§770)", "Subpart 3: Recruitment and Retention Programs (§§775-778)", "Investment in Tomorrow's Pediatric Health Care Workforce (§775)", "Public Health Workforce Loan Repayment Program (§776)", "Training for Mid-Career Public and Allied Health Professionals (§777)", "Fellowship Training in Applied Public Health Epidemiology, Public Health Laboratory Science, Public Health Informatics, and Expansion of the Epidemic Intelligence Service (§778)", "Part F: General Provisions (§§791-799B)", "Preferences and Required Information in Certain Programs (§791)", "Health Professions Data (§792)", "Prohibition Against Discrimination on Basis of Sex (§794)", "Application (§796)", "Use of Funds (§797)", "Matching Requirement (§798)", "Generally Applicable Provisions (§799)", "Technical Assistance (§799A)", "Definitions (§799B)", "Appendix. Health Workforce Related Authorizations in the Affordable Care Act (ACA) (§§5101-5102)" ], "paragraphs": [ "", "The Public Health Service Act (PHSA) establishes authority for a wide range of activities that directly or indirectly affect the health of the U.S. population. In Title VII, Health Professions Education, the PHSA supports an education and training pipeline for professionals and pre-professionals to work in the medical, dental, public health, and allied health professions. Title VII provides support to both institutions and individuals. It supports institutions to expand the capacity to build and sustain the health workforce through training programs, mainly through grant awards and contractual agreements. For example, institutions may receive Title VII grants to implement residency programs at medical and dental schools; recruitment and retention initiatives in community-based educational settings; and health workforce data collection activities within state health departments. It supports individuals by providing them with direct assistance to support academic preparation in the health professions through scholarships, loans, loan repayments, and fellowships.\nMany Title VII programs and activities were reauthorized in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended). The ACA also created the National Health Care Workforce Commission for federal health workforce planning, and State Health Care Workforce Development Grants. The ACA also made sweeping changes to health care financing and delivery by restructuring the private health insurance market and setting minimum standards for health insurance coverage.\nBeginning in 2014, the ACA mandates that most U.S. citizens obtain health insurance or pay a penalty. Health policy experts expect this mandate combined with additional changes will increase health insurance coverage to be accompanied by a likely increased demand for health services and health care providers.\nTitle VII represents one among several federal efforts to support the development of the health workforce. These authorities, enacted in various statutes, are established to achieve different purposes and consequently receive different levels of support. For example, in FY2012, the Medicare Graduate Medical Education (GME) payments contribute approximately $8.9 billion annually to residents' salaries, teaching compensation, and other direct costs. The Medicare direct GME program is the largest source of federal support for health workforce development, followed by the Medicaid GME payments (both state and federal), which were $1.1 billion in FY2011. Medicare and Medicaid GME payments support education and training mainly for physicians. By comparison, Title VII programs contributed approximately $266 million in FY2012 (the President's FY2014 request is for approximately $212 million) to education and training activities for physicians, physician assistants, dentists, therapists, and other health professionals. The text box below highlights other examples of federal support to develop or sustain the health workforce.", "This report describes programs and activities authorized in Title VII of the PHSA. It is divided into two major sections. The first section summarizes the intents and purposes of Title VII, as well as eligibility requirements for institutions interested in applying for Title VII grants, contracts, and agreements, and for individuals applying for direct assistance. The second part of the report provides details on each section within the title, including statutory requirements and preferences. References to \"the Secretary\" mean the Secretary of Health and Human Services (HHS) unless otherwise specified. Appendix A summarizes two ACA provisions that are Title VII-related.", "Title VII consists of six parts that authorize grants, contracts, and agreements to institutions, or direct assistance to individuals. Grants and contracts to institutions support education and training activities for individuals in the medical, dental, public health, and allied health workforce, and support health workforce data collection and analysis. Direct assistance to individuals provides scholarships, loans, and loan repayments to those pursuing health professions education and training. Also, this title authorizes health workforce advisory groups and councils to monitor and assess related programs and activities.\nPart A specifies requirements for agreements between the Secretary of HHS and eligible institutions that establish and operate federally-supported school loan funds. School loan funds are created to support students pursuing a full-time course of study in health professions schools. In providing for school loan funds, Part A establishes preferences for primary care medical students and individuals from disadvantaged backgrounds. Part B authorizes programs to increase the diversity of the health workforce. Part C authorizes grants to establish capacity-building programs in primary care medicine and dentistry, and it establishes an advisory committee to report on those activities. Part D authorizes programs to support recruitment and retention activities; community-based interdisciplinary groups; and capacity building within geriatrics and the allied health professions; and authorizes an advisory committee on interdisciplinary collaboration. Part E establishes the National Center for Health Workforce Analysis and authorizes the Council on Graduate Medical Education. It authorizes grants and contracts to institutions to support health workforce data collection, reporting, and analysis. Also, Part E authorizes programs and funds to support education and training in the public health professions. Part F specifies requirements that Title VII participants must adhere to, including preferences, prohibitions against sex discrimination, permissible use of funds, and matching fund requirements.\nVarious entities are eligible to receive Title VII grants and contracts. Those entities include health professions schools, academic health centers, states, local governments, and other public or private nonprofit and for-profit groups. They must meet general eligibility requirements and, in some cases, specific requirements to qualify for a grant or contract. An example of a general eligibility requirement is that an institution must be accredited by an association that is recognized by the Secretary. An example of a specific eligibility requirement is that a program must collaborate with the Secretary to develop curricula and research and demonstration projects developed under another title.\nIndividuals who are employed or studying in the health professions may be eligible for Title VII support, either directly or indirectly. Undergraduate or graduate students, medical residents, and professional school faculty are examples of individuals who may be eligible to participate in a program that receives institutional support. Also, individuals may qualify to receive direct assistance in the form of scholarships, loans, or loan repayments if they are studying or have studied in an eligible Title VII profession. Some Title VII programs establish preferences for certain individuals, such as those belonging to an underrepresented minority group.\nTable 1 summarizes Title VII by part. Parts are presented in the order that they appear in the PHSA.", "Title VII authorizes a broad range of programs and activities to develop and sustain the education and training pipeline for the health care workforce. The next section of this report describes each part of Title VII, Part A through Part F.", "Part A consists of two subparts. Subpart I establishes the Health Education Assistance Loan (HEAL) program, which from 1978 to 1998 provided federally insured loans to health professions students to pay for their education costs. Subpart II authorizes requirements for school-administered student loan funds, which provide direct assistance to health professions students to pay for their education costs. Each subpart establishes requirements for the borrowing and lending process. The text box below briefly explains selected terms and concepts related to that process.", "Subpart I establishes the Health Education Assistance Loans (HEAL) program. From 1978 through 1998, the HEAL program insured loans to health professions students. It enabled students in medicine, dentistry, osteopathy, veterinary medicine, optometry, and podiatry to borrow amounts up to $80,000 over the course of study. Students enrolled in health professions programs, including pharmacy and chiropractic medicine, were allowed to borrow up to $50,000 over a course of study.\nRefinancing of HEAL program loans continued through FY2004. Currently, congressionally appropriated funds support the administration of outstanding loans. According to HRSA, the HEAL program maintains oversight for an outstanding loan portfolio valued at $609 million some of which may not be fully repaid until 2037.", "Subpart II establishes requirements for health professions institutions that operate Title VII student loan funds.\nSection 721 authorizes the Secretary to enter into agreements with health professions schools to establish and operate student loan funds. A student loan fund must provide for deposit into the fund of federal capital contributions, and other collections and earnings such as interest payments. The federal capital contribution must be used to establish a direct account that provides loans to students. Student borrowers replenish the loan fund when they repay loans with interest.\nSection 722 specifies provisions for administering the federally supported loan programs. It provides terms and conditions for the loan, including maximum loan amounts, repayment, interest rates, collections, and prohibitions. Maximum loan amounts for a school year may not exceed the cost of attendance (which includes tuition and other reasonable educational and living expenses). An exception is that third- and fourth-year medical school students may borrow additional loan amounts that are needed to pay off additional qualified loan balances related to medical school attendance.\nBorrowers may repay loans in equal or graduated periodic installments over a payment period that is between 10 and 25 years. Liability to repay the unpaid loan balances and accrued interest is cancelled if the borrower dies, or if the borrower has become permanently and totally disabled. Loans must bear an interest rate of 5% per year on the unpaid balance of the loan, and computed only for periods for which the loan is repayable. Loans are not transferable to another school except if the borrower transfers to another school participating in a Title VII loan program.\nThe Secretary is authorized to collect any student loan that is in default. Collected amounts must be deposited into the school's student loan fund. Civil actions regarding student loans must be referred to the Attorney General. The period for which the Secretary may file a suit, or take other action to collect loan repayment, is exempt from statutory limits.\nSection 723 requires a medical student who is a borrower to complete a residency training program in primary health care within four years after graduating from the health professions school. The borrower must practice in primary health care for 10 years (including a primary care residency) or through the date on which the loan is fully repaid. However, some students may be exempt from these requirements, depending on the date of their first loan, or the type of the federal capital contribution supporting the loan. If borrowers fail to comply with these obligations, an interest rate of 2% per year above the base interest rate must be applied to their loan. There are two conditions under which the Secretary may waive a student's obligation: (1) the student terminates before graduation from the school, whether voluntarily or involuntarily, and (2) the individual does not, after such termination, resume attendance at the school or begin attendance at any other school of medicine or osteopathic medicine.\nSection 724 specifies requirements for loan funds for students from disadvantaged backgrounds. Participating schools must be carrying out recruitment and retention programs for students from disadvantaged backgrounds, and for minority faculty. The Secretary is required to define the term \"disadvantaged,\" and to give special consideration to health professions schools that have enrollments of underrepresented minorities above the national average for health professions schools.\nA health professions school that receives a federal capital contribution for disadvantaged students must agree to (1) ensure instruction on minority health issues in its curricula; (2) establish a mentor program for assisting disadvantaged students, including minority students, to complete health professions degrees; (3) enter into arrangements with one or more health clinics to provide students with experience in serving disadvantaged populations; and (4) enter into arrangements with educational institutions to carry out programs to prepare disadvantaged students, including minority students, to enter the health professions. Health professions schools must carry out the above activities no later than one year after the date on which the first federal capital contribution is made to the school, and continue those activities throughout the period that the student loan fund is operational. Schools that enter into agreements to establish student loan funds are required to provide that any federal capital contribution will be used to make loans to individuals from disadvantaged backgrounds, and to cover collection costs and interest on the loan.", "Part B establishes grant support for health workforce \"pipeline\" programs, including interventions that target underrepresented minorities and individuals from socioeconomically disadvantaged backgrounds. Part B authorizes programs for (1) Centers of Excellence (COE); (2) scholarships for disadvantaged students; (3) loan repayments and fellowships for faculty positions; (4) educational assistance in the health professions for individuals from disadvantaged backgrounds; and (5) grants to institutions to support individuals who are entering the health professions pipeline.", "This section specifies conditions for designating a COE, and it defines grant requirements. In general, the Secretary is required to make grants to, and enter into contracts with, health professions schools to establish or support programs of excellence in health professions education for underrepresented minority individuals.\nTo be designated as a COE, health professions schools must generally meet the following conditions. A COE must (1) have a significant number of underrepresented minority individuals enrolled or accepted for enrollment in the school; (2) be effective in assisting underrepresented minority students at the school to complete the program for the health professions degree; (3) be effective in recruiting underrepresented minority individuals to enroll in and graduate from the school; and (4) make significant recruitment efforts to increase the number of underrepresented minority individuals serving in faculty or administrative positions at the school. The law provides exceptions for some COEs. A school may be designated as a Center of Excellence in Under-Represented Minority Health Professions Education; a Hispanic Center of Excellence in Health Professions Education; or a Native American Center of Excellence in Health Professions Education.\nHealth professions schools that are COEs are required to fulfill a broad range of requirements, including (1) develop large competitive applicant pools through linkages with community-based entities and establish an education pipeline for health professions careers; (2) establish, strengthen, or expand programs to enhance the academic performance of underrepresented minority students attending the school; and (3) improve the capacity of the school to train, recruit, and retain underrepresented minority faculty. Additional requirements may apply depending on the type of COE designation.\nGrant periods may not exceed five years. Payments are subject to annual approval by the Secretary and the available appropriations. Funds are allocated to the various types of COEs according to a formula, which is based on whether the amount appropriated for a given fiscal year is (1) less than $24 million, (2) more than $24 million but less than $30 million, (3) more than $30 million but less than $40 million, or (4) more than $40 million. Health professions schools that receive a COE grant must maintain non-federal spending at the same levels expended before receiving the COE grant. An appropriation of $50 million is authorized for each of FY2010 through FY2015, and such sums as may be necessary (SSAN) for each subsequent fiscal year.", "This section authorizes the Secretary to make grants to eligible entities to award scholarships to eligible students. An eligible entity is a school of medicine, osteopathic medicine, dentistry, nursing, pharmacy, podiatric medicine, optometry, veterinary medicine, public health, chiropractic, or allied health; a school offering a graduate program in behavioral and mental health practice; or, an entity providing programs to train physician assistants. Also, an eligible entity must carry out a recruitment and retention program for students from disadvantaged backgrounds, including those who are members of racial and ethnic minority groups. An eligible student (1) is from a disadvantaged background, (2) has a financial need for a scholarship, and (3) is enrolled (or accepted for enrollment) at an eligible health professions or nursing school as a full-time student in a program leading to a degree in a health profession or nursing.\nThe Secretary is prohibited from making a grant to an eligible entity unless it agrees that it will give scholarship preference to students who face severe financial hardship and to recipients of certain previous scholarships. The Secretary must establish priority for grant amounts based on the proportions of graduating students going into primary care, underrepresented minority students, and graduates working in medically underserved communities. (See Section 740, which authorizes funds for this section.)", "This section requires the Secretary to establish a loan repayment program for individuals who agree to serve as members of the faculty at eligible health professions schools. Individuals must have a contract with an eligible health professions school where the individual agrees to serve as a faculty member or fellow for two or more years. In return for each year of service, the federal government pays up to $30,000 of the principal and interest of the individual's educational loans.\nEligible individuals must be from disadvantaged backgrounds and have a degree in medicine, osteopathic medicine, dentistry, nursing, or other health profession. Alternatively, they may be in an approved graduate program or they may be enrolled full-time in an eligible health professions school and be in the final year of study in a degree program. Eligible health professions schools are schools of medicine, nursing, osteopathic medicine, dentistry, pharmacy, allied health, podiatric medicine, optometry, veterinary medicine, or public health; schools offering physician assistant education programs; and schools offering graduate programs in behavioral and mental health.\nThe employing institution must make payments of the principal and interest amount equal to the amount provided by the HHS Secretary for each year that the faculty member serves. In addition, the payments that the school makes on behalf of the individual must be in addition to the pay that the individual would otherwise receive for serving as a faculty member. However, the Secretary may waive these requirements if the requirement will impose an undue financial hardship on the school involved. Selected requirements for the National Health Service Corps program, such as obligated service requirements, apply to the loan repayment features of this program.\nThis section also authorizes the Secretary to make grants to and enter into contracts with eligible institutions to assist them in increasing the number of underrepresented minority faculty members. To be eligible to receive institutional grants for the faculty fellowships program, health professions schools must demonstrate the ability to identify, recruit, and select underrepresented minority individuals who have the potential for teaching, administration, or research at a health professions institution. In addition, they must provide individuals with the skills needed to secure a tenured faculty position at the institution, must provide services designed to assist individuals in preparing for an academic career, and must provide health services to rural or medically underserved populations. Further, an institution must assure the Secretary that it will (1) make matching funds available for the fellowship, directly through cash donations; (2) provide institutional support for the fellow for the second and third years at a level that is equal to the total amount of funds that the institution provided prior to receiving the award; (3) place the fellow on the school faculty; and (4) provide the fellow with advanced preparation and special skills that are needed to teach and practice. Each fellowship must include a stipend and an allowance. (See Section 740, which authorizes funds for this section.)", "This section authorizes grants and contracts to assist eligible entities to support health professions training for individuals from disadvantaged backgrounds. Eligible entities are schools of medicine, osteopathic medicine, public health, dentistry, veterinary medicine, optometry, pharmacy, allied health, chiropractic medicine, and podiatric medicine. In addition, eligible entities include programs to train physician assistants; public and nonprofit private schools that offer graduate programs in behavioral and mental health; and other public or private nonprofit health or educational entities. Grant support is intended to assist institutions with meeting the cost of a variety of activities, which include (1) identifying, recruiting, and selecting individuals from disadvantaged backgrounds for education and training in a health profession; (2) facilitating the entry of selected individuals into a health professions school; and (3) providing counseling, mentoring, or other services designed to assist selected individuals to complete successfully their education at a health professions school.\nThe Secretary must give preference to projects that involve a comprehensive partnership approach that will result in a competitive pool of individuals from disadvantaged backgrounds who want to enter the health professions. The Secretary also is required to ensure that services and activities are adequately allocated among various racial and ethnic populations who are economically disadvantaged. The Secretary may require that an entity provide non-federal matching funds to ensure institutional commitment to the funded project. (See Section 740, which authorizes funds for this section.)", "For Section 737, Scholarships for Disadvantaged Students, this section authorizes $51 million for FY2010 and SSAN for each of FY2011 through FY2014. For Section 738, Loan Repayments and Fellowships Regarding Faculty, this section authorizes $5 million for each of FY2010 through FY2014. For Section 739(a)(1), Educational Assistance in the Health Professions Regarding Individuals from Disadvantaged Backgrounds (grants), this section authorizes $60 million for FY2010 and SSAN for each of FY2011 through 2014.\nThis section also required the Secretary to submit a report to Congress on the efforts taken to address the need of a representative mix of individuals from historically minority health professions schools, or other institutions.", "The Secretary is authorized to award grants, contracts, or cooperative agreements to eligible entities to develop, evaluate, and disseminate research, demonstration projects, and model curricula on cultural competency, prevention, reducing health disparities, and other public health issues. Eligible entities are health professions schools, academic health centers, state or local governments, other appropriate public or private nonprofit entities, or (as deemed appropriate by the Secretary) for-profit entities.\nIn making grants, the Secretary is required to collaborate with entities, including health professions schools, health professional societies, licensing and accreditation entities, and experts in minority health and cultural competency. In addition, the Secretary is required to coordinate model projects developed under this section with those developed under Section 807. Model curricula developed under this section must be disseminated through the Internet Clearinghouse established under Section 270 and by other means as the Secretary requires. The Secretary is required to evaluate the adoption and implementation of cultural competency, prevention, public health, and training curricula for working with individuals with a disability; and to facilitate efforts to include competency measures in quality measurement systems. This section authorizes SSAN to be appropriated for each of FY2010 through FY2015.", "Part C consists of two subparts. In general, Subpart I authorizes grants to increase access to education and training opportunities for primary care professionals who specialize in primary care medicine (which includes the specialties of family medicine, general internal medicine, and general pediatrics) and dentistry (which includes general, pediatric, and public health specialties). Specifically, it authorizes support to (1) develop capacity-building programs in primary care medicine; (2) provide new training opportunities for direct care workers who are employed in long-term care settings; (3) develop dental training programs in the fields of general dentistry, pediatric dentistry, or public health dentistry; and (4) establish or expand primary care residency training programs at teaching health centers. Finally, Subpart I establishes the Advisory Committee on Training in Primary Care Medicine and Dentistry. Subpart II authorizes a single grant program, which assists institutions in recruiting students who are most likely to practice medicine in underserved rural communities.", "", "Section 747(a) authorizes the Secretary to make grants to, and contracts with, eligible entities to support or develop primary care training programs. Eligible entities are accredited public or nonprofit private hospitals, schools of medicine or osteopathic medicine, academically affiliated training programs for physician assistants, or public or private nonprofit entities as the Secretary may determine. Funds are to be used for various activities, including to (1) plan, develop, operate, or participate in an accredited professional training program, including an accredited residency or internship program in the field of family medicine, general internal medicine, or general pediatrics for medical students, interns, residents, or practicing physicians; (2) plan, develop and operate a program for the training of physicians who plan to teach in family medicine, general internal medicine, or general pediatrics training programs; and (3) plan, develop and operate a program for the training of physicians teaching in community-based settings. The award period for a grant or contract is five years.\nSection 747(b) authorizes grants for primary care capacity-building. The Secretary may award grants or contracts to medical schools (allopathic or osteopathic) to establish, maintain, or improve academic units or programs for clinical teaching and research in primary medical care (which includes family medicine, general internal medicine, or general pediatrics). In addition, this section authorizes support for programs that integrate academic administrative units in primary medical fields for the purpose of enhancing interdisciplinary recruitment, training, and faculty development.\nThis section establishes award preference for applicants who agree to use the award to (1) establish academic units, or (2) substantially expand such units or projects. Also, this section establishes priority for projects that propose to carry out a variety of specified activities in primary care.\nThe section authorizes an appropriation of $125 million for FY2010 and SSAN for each of FY2011 through FY2014, and requires that 15% of the amount appropriated in each fiscal year be allocated to physician assistant training programs that prepare students to practice in primary care. For purposes of carrying out programs that integrate academic administrative units in the various primary care specialties, the section authorizes an appropriation of $750,000 for each of FY2010 through FY2014.", "This section requires the Secretary to award grants to eligible entities to provide new training opportunities for direct care workers who are employed in long-term care settings such as nursing homes, assisted living facilities, skilled nursing facilities, community-based settings, and other settings as determined appropriate by the Secretary. An eligible entity is an institution of higher education that (1) is accredited by a nationally recognized accrediting agency or association, and (2) has established a public-private educational partnership with a nursing home or skilled nursing facility, agency, or entity that provides home- and community-based services to individuals with disabilities, or other long-term care provider.\nAn institution must use the grant to assist eligible individuals to offset the cost of tuition and required fees for enrolling in academic programs supported by the award. An eligible individual must be enrolled in courses provided by the institution and maintain satisfactory academic progress. As a condition of receiving assistance, an individual must agree to work in the field of geriatrics, disability services, long-term services, or chronic care management for a minimum of two years. This section authorizes an appropriation of $10 million for the period of fiscal years 2011 through 2013.", "This section authorizes programs to support and develop education and training programs in general, pediatric, and public health dentistry. Section 748(a)(1) authorizes the Secretary to award grants and contracts to eligible entities. An eligible entity is a school of dentistry, public or nonprofit private hospital, or a public or private nonprofit entity. Also eligible are entities with programs in dental or dental hygiene schools; or residency or advanced education programs in the practice of general, pediatric, or public health dentistry. Eligible entities also may partner with schools of public health to educate dental students, residents, and dental hygiene students. Authorized activities and functions include programs for student financial assistance, traineeships, faculty development, and pre- and post-doctoral training.\nSection 748(a)(2) authorizes the Secretary to award grants or contracts to a general, pediatric, or public health dentistry program to establish or operate a faculty loan repayment program. Individuals must agree to serve as full-time faculty members in exchange for participation in the loan repayment program, which pays the principal and interest on their outstanding student loans.\nThis section establishes priority in the awarding of training grants to qualified applicants who demonstrate (1) a proposal for collaborative projects between departments of primary care medicine and departments of general, pediatric, or public health dentistry; (2) a record of training the greatest percentage of providers, or significant improvements in the percentage of providers, who enter and remain in qualified fields of dentistry; (3) a record of training individuals who are from a rural or disadvantaged background, or from an underrepresented minority population; (4) formal relationships with federally qualified health centers, rural health clinics, or other authorized entities that conduct training for students, residents, fellows, or faculty; (5) a record of teaching programs that target vulnerable populations such as older adults, homeless individuals, victims of abuse or trauma, individuals with mental health or substance-related disorders, individuals with disabilities, and individuals with HIV/AIDS; (6) educational activities in cultural competency and health literacy; (7) a high rate of placing graduates in practice settings that serve underserved areas or health disparity populations, or a significant increase in the rate of graduate placements in such settings; (8) intentions to establish a special populations oral health care education center or training program for the didactic and clinical dental education for dental professionals who plan to teach oral health care for special populations, including the vulnerable elderly and people with developmental disabilities.\nThe award period is five years for a grant or contract for dental support or training programs (excluding faculty loan payment programs). An entity that receives an award may carry over funds from one fiscal year to another for up to three years. This section authorizes an appropriation of $30 million for FY2010 and SSAN for each of FY2011 through FY2015.", "This section requires the Secretary to establish an Advisory Committee on Training in Primary Care Medicine and Dentistry (the Advisory Committee), and it authorizes requirements for the Advisory Committee's composition, duties, terms, meetings, documents, expenses, and compensation.\nThe duties of the Advisory Committee are to (1) provide advice and recommendations to the Secretary on policy and program development and other matters of significance concerning the activities under Section 747; (2) develop, publish, and implement performance measures for programs under this part; (3) develop and publish guidelines for longitudinal evaluations under this part; and (4) recommend appropriation levels for programs under this part.\nThe Secretary is required to determine the appropriate number and appoint health professionals who will serve on the Advisory Committee. In appointing members, the Secretary is required to ensure a fair balance of expertise, and that at least 75% of the members of the Advisory Committee are health professionals. In addition, the Secretary must ensure a broad geographic representation of members and a balance between urban and rural members. Members shall be appointed based on their competence, interest, and knowledge of the mission of the profession involved. Officers or employees of the federal government are not allowed to participate on the Advisory Committee.", "This section authorizes grants to cover the costs of establishing or expanding primary care residency training programs at teaching health centers. Grants may cover costs associated with items including (1) curriculum development; (2) recruitment, training, and retention of residents and faculty; (3) accreditation; (4) faculty salaries during the development phase and (5) technical assistance. This section establishes preference for applicants who have an existing affiliation agreement with an Area Health Education Center (AHEC). A discussion of AHECs appears later in the report under Section 751.\nThis section defines a \"teaching health center\" as an entity that is a community-based, ambulatory patient care center; and operates a primary care residency program. It may include (1) a federally qualified health center; (2) a community mental health center; (3) a rural health clinic; (4) a health center operated by the Indian Health Service, Indian tribe, or tribal organization, or urban Indian organization; and (5) an entity receiving funds under Title X of the PHSA. Grants may be awarded for up to three years, and grant amounts must not exceed $500,000.\nFor the purpose of carrying out this section, the following amounts are authorized to be appropriated: $25 million for FY2010, $50 million for FY2011, $50 million for FY2012, and SSAN for each subsequent fiscal year. No more than $5 million annually may be used for technical assistance grants.", "This subpart consists of one section that authorizes grants to institutions to train physicians to work in rural communities.", "This section requires the Secretary to establish a grant program to assist eligible entities in recruiting students who are most likely to practice medicine in underserved rural communities. Eligible entities are nationally accredited or Secretary-approved schools of allopathic or osteopathic medicine, or any combination or consortium of such schools.\nThis section establishes basic requirements for the rural-focused program. The program must enroll a minimum of 10 students per class per year, and must prioritize admission for students who have either lived or served in an underserved rural community for two or more years and express a commitment to practice medicine in such an area. The curriculum must provide didactic coursework and clinical experience particularly applicable to medical practice in underserved rural communities, including clinical rotations in underserved rural communities, or other coursework or clinical experience deemed appropriate by the Secretary. All students must receive assistance in obtaining clinical training experiences in locations with postgraduate residency training opportunities in underserved rural communities, or in local residency training programs that support and train physicians to practice in underserved rural communities. The Secretary is required to define by regulation \"underserved rural community.\" The entity that receives the grant must submit an annual report to the Secretary.\nThis section establishes priority for entities that demonstrate (1) rural community institutional partnerships; (2) a record of successfully training students who practice medicine in underserved rural communities; and (3) a record of having a high percentage of graduates from an existing program, who practice medicine in underserved rural communities. Applicants must submit a long-term plan to track graduate placements.\nAwards must supplement, not supplant, any other federal, state, and local funds that an entity would otherwise expend to carry out the activities described in this section. Additionally, an eligible entity must agree to maintain expenditures of non-federal amounts for grant activities at a level that is no less than the level that the entity maintained for the fiscal year before the entity received the grant. This section authorizes an appropriation of $4 million for each of FY2010 through FY2013.", "Title VII, Part D authorizes grants and contracts to institutions to collaborate on education and training development that will result in health care delivery to underserved and vulnerable populations in non-hospital, community-based health care settings. For example, Area Health Education Centers (Section 751) support institutions in developing collaborative education and training programs for rural populations, geriatrics professionals, mental and behavioral health professionals, and other groups. In addition to providing funds for community-based training, Part D authorizes programs to develop the geriatric, allied health, and mental/behavioral health workforce to serve in community-based settings. Finally, Part D establishes an advisory committee to make recommendations to the Secretary and Congress concerning policy and program development to develop the community-based linkages.", "This section contains requirements for eligible entities to receive grants for interdisciplinary, community-based linkages. Eligible academic institutions must use grants collaboratively with two or more disciplines. Eligible entities must use funds to carry out innovative demonstration projects to meet national goals for interdisciplinary, community-based linkages. Authorized activities include support for, and the development of (1) workforce training programs, (2) faculty development, and (3) other activities that will produce outcomes consistent with the purposes this part.", "This section establishes two types of grant awards for academic institutions to be used in collaboration with two or more disciplines. Awards must be used to carry out innovative demonstration projects for workforce supplementation. It establishes provisions for grants to Area Health Education Center (AHEC) Programs and Area Health Education Centers (AHECs), which support workforce development and training for medical, public, and allied health professionals in rural areas.\nFirst, the infrastructure development award enables eligible entities to initiate an AHEC program, or to continue a comparable program that is already operating. Eligible entities are schools of medicine or osteopathic medicine, an incorporated consortium of such schools, or the parent institutions of such a school. In a state with no AHEC program, the Secretary may award a grant or contract to a school of nursing.\nSecond, the point of service maintenance and enhancement award supports an existing AHEC program, to maintain and improve its effectiveness and capabilities, and to make other modifications to the program. Eligible entities include AHEC programs that have AHEC centers that are no longer eligible for infrastructure development grants.\nRequired activities are the same for each type of award. To receive a grant, an entity must agree to carry out several activities, including but not limited to the following: (1) develop and implement strategies, in coordination with the applicable one-stop delivery system under Section 134(c) of the Workforce Investment Act of 1998, to recruit individuals from underrepresented minority populations or from disadvantaged or rural backgrounds into the health professions; (2) prepare individuals to more effectively provide health services to underserved areas and health disparity populations through field placements or preceptorships in conjunction with community-based organizations; and (3) propose and implement effective evaluation strategies for program and outcomes measurement. Funds may also be used to support innovative activities such as curriculum development in collaboration with community-based organizations to increase the number of primary care physicians and other primary care providers prepared to serve in underserved areas and health disparity populations.\nThe Secretary must provide assurances for each type of grant depending on the type of institution and any previous grants that have been awarded under this section. AHEC programs must ensure that they conduct at least 10% of clinical education for medical students in community settings that are removed from the primary teaching facility of the contracting institution for grantees that operate a school of medicine or osteopathic medicine. For a nursing school or its parent institution, which receives an award under this section, the Secretary must ensure that the nursing school conducts at least 10% of clinical education required for nursing students in community settings that are remote from the primary teaching facility of the school; and that the entity maintains an agreement with a medical school to place its medical students in training sites within the local area health education center program.\nThe Secretary must ensure that AHEC programs include AHEC centers that are public or private organizations whose structure, governance, and operation are independent from the awardee and the parent institution of the awardee, and are not medical schools, or the parent institution or branch of a medical school.\nAn entity must provide non-federal matching funds or in-kind contributions to receive a grant, totaling at least 50% of total operating costs. At least 25% of the total required non-federal contributions must be made in cash. An entity may apply to the Secretary for a waiver of up to 75% of the matching requirement for each of the first three years the entity is funded through an infrastructure award development grant.\nAt least 75% of the total funds provided for the two types of AHEC awards must be allocated to participating AHEC centers. To provide needed flexibility to newly funded AHEC programs, the Secretary may waive this requirement for the first two years that a new AHEC program is funded through an infrastructure development award.\nAwards must provide at least $250,000 annually per AHEC center. If appropriated amounts to carry out this section are not sufficient to provide this minimum award amount, the Secretary may reduce the per center amount. Generally, infrastructure development awards may not exceed 12 years for an AHEC program, and six years for an AHEC, but exceptions are allowed.\nThis section authorizes an appropriation of $125 million for each of FY2010 through FY2014. Of the amounts appropriated for a fiscal year, no less than 35% are for infrastructure development awards; no less than 60% are for point of service maintenance and enhancement awards; no more than 1% is to be used for grants and contracts to implement outcomes evaluation for the area health education centers; and no more than 4% is for technical assistance. Appropriated funds may be carried over from one fiscal year to another without obtaining approval from the Secretary. However, funds may not be carried over for more than three years.", "This section requires the Secretary to make grants to, and enter into contracts with, eligible entities to improve health care, increase health worker retention, increase the representation of minority faculty members, enhance the practice environment, and provide information dissemination and educational support to reduce professional isolation. Eligible entities are defined by reference to Section 799(b); examples include health professions schools, academic health centers, state or local governments, and public or private nonprofit entities participating in health professions and nursing training activities. Eligible entities are required to use grants or contract awards to enhance education through distance learning, continuing educational activities, collaborative conferences, and electronic and distance learning activities. This section gives priority to primary care. This section authorizes $5 million for each of FY2010 through FY2014, and SSAN for each subsequent fiscal year.", "This section includes subsections that authorize programs for geriatric education centers, geriatric training for physicians and dentists, geriatric faculty training, and other incentives to develop the geriatric health workforce.\nSection 753(a) requires the Secretary to award grants or contracts to various health professions schools and entities to establish or operate a Geriatric Education Center. A Geriatric Education Center is required to (1) improve the geriatric health professions training through residencies, traineeships, or fellowships; (2) develop and disseminate curricula for geriatric health and medicine; (3) support faculty training and retraining to provide instruction in geriatrics; (4) support continuing education for geriatric professionals; and (5) provide students with clinical training in geriatric settings, including nursing homes and ambulatory care centers.\nSection 753(b) authorizes the Secretary to make grants to, and enter into contracts with, entities to provide support (including residencies, traineeships, and fellowships) for geriatric workforce training projects. Entities must be medical schools, teaching hospitals, and graduate medical education programs. Physicians, dentists, and behavioral and mental health professionals who plan to teach geriatric medicine, geriatric behavioral or mental health, or geriatric dentistry are qualified to study in programs funded under this subsection. Institutional applicants must meet specific training requirements. For example, geriatric training projects must be staffed by qualified physicians, dentists, or behavioral mental health professionals who have experience or training in geriatrics, and programs must provide training in geriatrics and exposure to the physical and mental disabilities of elderly individuals through a variety of service rotations. The program must provide training options consisting of a one-year retraining program in geriatrics for physicians, dentists, or mental and behavioral health professionals, and a two-year fellowship program designed to provide training in clinical geriatrics and geriatrics research.\nSubsection 753(c) requires the Secretary to establish a program for geriatric faculty fellowships for individuals. An eligible individual must (1) be board-certified or board-eligible in internal medicine, family practice, psychiatry, or licensed dentistry, or have completed any required training in a discipline, and be employed in an accredited health professions school that is approved by the Secretary; (2) have completed an approved fellowship program in geriatrics or have completed specialty training in geriatrics, and any additional geriatrics training as required by the Secretary; and (3) have a junior (non-tenured) faculty appointment at an accredited school of medicine, osteopathic medicine, nursing, social work, psychology, dentistry, pharmacy, or other allied health discipline in an accredited health professions school. Eligible individuals must commit to meet service requirements and spend 75% of total time providing training in clinical geriatrics, including training of interdisciplinary teams of health professionals. The amount awarded to physicians must be equal to $50,000, which is the 1998 base amount, plus an adjustment based on the Consumer Price Index. The maximum award term is five years.\nSection 753(d) requires the Secretary to award Geriatric Workforce Development grants or contracts to entities that operate a geriatric education center. A geriatric education center that receives an award is required to use funds to offer short-term intensive courses, or fellowships, which focus on geriatrics, chronic care management, and long-term care. Fellowships must provide supplemental training for faculty members in medical schools and other qualified health professions schools. Fellowships are open to current faculty, credentialed volunteer faculty, and practitioners who have no formal geriatric training. A fellowship program must be located either at the geriatric education center sponsoring it, or at an eligible health professions school.\nIn addition, this section requires a geriatric education center that receives a fellowship award to apply funds to one of two options: Family Caregiver and Direct Care Provider Training or Incorporation of Best Practices . The option for Family Caregiver and Direct Care Provider Training requires the geriatric education center to offer at least two courses each year to family caregivers and direct care providers who support frail elders and individuals with disabilities. The Incorporation of Best Practices option requires a geriatric education center to develop and include material on depression and other mental disorders common among older adults. This section requires awards in the amount of $150,000. Up to 24 geriatric education centers may receive an award. A geriatric education center must assure the Secretary that awards will be used only to supplement, not to supplant, the amount of federal, state, and local funds otherwise expended by the geriatric education center. In addition to any other funding available to carry out this section, this section authorizes $10.8 million for FY2011 through FY2014, to carry out Geriatric Workforce Development (including awards, contracts, fellowship programs, and other required activities).\nSection 753(e) requires the Secretary to award grants or contracts, in the form of Geriatric Career Incentive Awards, to foster the interest of individuals entering the field of geriatrics, long-term care, and chronic care management. An advanced practice nurse, clinical social worker, pharmacist, or student of psychology who is pursuing a doctorate or other advanced degree in geriatrics or other qualified health profession is eligible to receive an award. As a condition of receiving an award, an individual is required to teach or practice in the field of geriatrics, long-term care, or chronic care management for a minimum of five years. This section authorizes $10 million for FY2011 through FY2013.", "This section authorizes the Secretary to make grants or contracts to help entities to fund interdisciplinary training projects designed to (1) train health care practitioners to provide services in rural areas; (2) demonstrate and evaluate innovative interdisciplinary methods designed to provide access to cost-effective comprehensive health care; (3) deliver health care services to individuals residing in rural areas; (4) enhance the quantity of research on health care issues in rural areas; and (5) increase the recruitment and retention of health care practitioners from rural areas.", "This section authorizes the Secretary to award grants or contracts to help entities fund activities that may (1) assist institutions with meeting the costs of expanding or establishing allied health professions; (2) involve planning and implementing projects in preventive and primary care training for podiatric physicians in approved or provisionally approved residency programs; and (3) carry out demonstration projects for chiropractors and physicians to collaborate on identifying and providing effective treatment for spinal and lower-back conditions. Activities may include projects that expand education and training opportunities for a broad range of health professionals. Examples are projects that provide rapid transition training programs for allied health professionals in health-related sciences; establish community-based allied health training programs that link academic centers to rural clinical settings; and develop curricula in the areas of prevention and health promotion, geriatrics, long-term care, among other allied health fields.", "The Secretary is authorized to award grants to eligible higher education institutions to support student recruitment, education, and clinical experiences in mental and behavioral health. An eligible institution must demonstrate that it (1) participates in programs that recognize individuals and groups from diverse racial, ethnic, cultural, geographic, religious, linguistic, and class backgrounds, and different genders and sexual orientations; (2) has knowledge and understanding of the concerns of individuals and groups from diverse backgrounds; (3) will prioritize cultural and linguistic competency for any programs assisted under the grant; (4) will provide the Secretary with data and information as required; and (5) will pay liquidated damages for any violation of the agreement.\nThe following programs and entities qualify for support (1) programs of social work, which are offered at the baccalaureate, master's, and doctoral degree levels of study; (2) accredited psychology programs for developing and implementing interdisciplinary training for psychology graduate students, including substance abuse prevention and treatment services (which may be offered at the master's, doctoral, internship, and post-doctoral residency levels of study); (3) accredited institutions of higher education or accredited professional training programs that are establishing or expanding internships or other field placement programs in child and adolescent mental health in psychiatry, psychology, school psychology, behavioral pediatrics, psychiatric nursing, social work, school social work, substance abuse prevention and treatment, marriage and family therapy, school counseling, or professional counseling; and (4) state-licensed mental health nonprofit and for-profit organizations that pay for training programs for paraprofessional child and adolescent mental health workers.\nAlso, this section establishes institutional requirements for grant awards to support students and/or faculty in social work. It requires that at least four of the grant recipients be historically black colleges or universities or other minority-serving institutions. In selecting grants for social work, priority is established for applicants that (1) are accredited by the Council on Social Work Education; (2) have a graduation rate of not less than 80% for social work students; and (3) exhibit an ability to recruit social workers from and place social workers in areas with a high-need and high-demand population.\nIn selecting grant recipients in graduate psychology, priority is established for institutions that focus training needs on vulnerable groups such as individuals with mental health or substance-related disorders. In selecting the grant recipients in training programs for child and adolescent mental health, the Secretary is required to give priority to applicants that (1) have demonstrated the ability to collect data on the number of students trained in child and adolescent mental health and the populations served by such students after they have graduated or completed service training; (2) have demonstrated familiarity with evidence-based methods in child and adolescent mental health services (including substance abuse prevention and treatment services); (3) have programs designed to increase the number of professionals and paraprofessionals serving high-priority populations and to applicants who come from high-priority communities and plan to serve medically underserved populations in health professional shortage areas or in medically underserved areas; (4) offer a curriculum taught collaboratively on the importance of family-professional or family-paraprofessional partnerships; and (5) provide services through a community mental health program described in the Block Grants for Prevention and Treatment of Substance Abuse.\nFor FY2010 through FY2013, this section authorizes the following: (1) $8 million for training in social work; (2) $12 million for training in graduate psychology, of which not less than $10 million is to be allocated for doctoral, postdoctoral, and internship level training; (3) $10 million for training in professional child and adolescent mental health; and (4) $5 million for training in paraprofessional child and adolescent work.", "This section requires the Secretary to establish the Advisory Committee on Interdisciplinary, Community-Based Linkages (in this section referred to as the ''Advisory Committee''). It also requires the Secretary to determine the appropriate number of individuals to serve on the Advisory Committee. In establishing the Advisory Committee, the Secretary is required to ensure that at least 75% of its members are health professionals, representing a broad geographic representation of members and a balance between urban and rural members; in addition, women and minorities must be adequately represented. Finally, the Secretary is required to appoint health professionals who are from a school of medicine or osteopathic medicine; an incorporated consortium of such schools, or the parent institutions of such a school, possibly a nursing school that receives an AHEC award; teaching hospitals and graduate medical education programs; and programs that support the allied health professions.\nThe Advisory Committee is required to (1) provide advice and recommendations to the Secretary concerning policy and program development and other matters of significance concerning the activities under this part; (2) submit to Congress and the Secretary a report describing the activities of the committee, including findings and recommendations made by the committee concerning the activities under this part; (3) develop, publish, and implement performance measures for programs under this part; (4) develop and publish guidelines for longitudinal evaluations for programs under this part; and (5) recommend appropriation levels for programs under this part.\nThe section requires the Advisory Committee to (1) meet at least three times yearly; (2) hold meetings jointly with other related entities established under this title, where appropriate; and (3) carry out preparations for meetings, including agenda preparation and material distribution. In addition to specifying requirements for membership appointments, terms, and vacancies, this section specifies requirements for Advisory Committee meetings, documents, compensation, and expenses.", "This section requires the Secretary, acting through the Director of HRSA, to award grants to eligible entities to develop interdisciplinary training and education programs. The programs are to provide undergraduate, graduate, post-graduate medical, nursing, and other health professions students with an understanding of, and clinical skills pertinent to, domestic violence, sexual assault, stalking, and dating violence.\nAn eligible entity is an accredited school of allopathic or osteopathic medicine. An entity must demonstrate that the project includes (1) participation by a school of nursing and at least one other school of health professions or graduate program in public health, dentistry, social work, midwifery, or behavioral and mental health; (2) strategies for disseminating and sharing curricula and other educational materials that the project will develop on domestic violence and abuse; and (3) a plan for consulting with community-based coalitions or individuals who have experience and expertise in issues related to domestic violence, sexual assault, dating violence, and stalking.\nThis section specifies required uses and permissive uses for the grant. Required uses are to (1) fund interdisciplinary training and education projects designed to train health professions students and residents to identify and provide health care services to individuals who are experiencing or who have experienced domestic violence, sexual assault, and related abuse and violence; and (2) plan and develop culturally competent clinical components that may be integrated into residency training programs that address domestic violence, sexual assault, and related abuse and violence. Permissive uses are to offer community-based training opportunities in rural areas for health professional students and residents on domestic violence, sexual assault, and related abuse and violence; or provide stipends to students who are underrepresented in the health professions to promote and enable their participation in offsite training experiences designed to develop health care clinical skills related to domestic violence, sexual assault, and related abuse and violence.\nGrantees must ensure that programs address issues of confidentiality and patient safety, and that faculty and staff are fully trained in procedures that will protect the immediate and ongoing security for patients, patient records, and staff. Not more than 10% of the amount of the grant is to be used for administrative expenses. A grantee that receives assistance for training and education must contribute non-federal funds, either directly or through in-kind contributions, in an amount that is not less than 25% of the total cost of such activities. This section authorizes $3 million for each of FY2007 through FY2011.", "The Secretary is authorized to award grants, contracts and cooperative agreements to health professions schools, hospices, and other public and private entities to develop and implement programs to provide education and training to health care professionals in pain care.\nThe grant applicant must agree that the program will include information and education on (1) the means for pain assessment, diagnosis, treatment, and management, and the medically appropriate use of controlled substances; (2) applicable laws, regulations, rules, and policies on controlled substances; (3) interdisciplinary approaches to pain care delivery; (4) barriers to care—including cultural, linguistic, literacy, geographic—in underserved populations; and (5) recent findings, developments, and improvements in providing pain care.\nThe Secretary must provide for an evaluation to determine the effect of the grant program(s) on the knowledge and practice of pain care. This section authorizes SSAN for each of FY2010 through FY2102. Amounts appropriated under this subsection must remain available until expended.", "Part E authorizes grants for the public health workforce within three subparts. Subpart 1 establishes a national center for health workforce analysis, authorizes grants to state and regional centers for health workforce analysis and longitudinal analysis, and establishes an advisory council on medical education. Subpart 2 authorizes grants to institutions to develop the public health and preventive health workforce, and provides for training centers, traineeships, and special projects. Subpart 3 establishes recruitment and retention programs for the public health, pediatric, and allied health workforce, including a fellowship program for the development of public health specialists in epidemiology, laboratory science, and informatics.", "This subpart establishes a center to encourage states, health professions organizations, and other public and private groups to collect and analyze health workforce data; and establishes an advisory council to make recommendations to the Secretary and Congress on graduate medical education.", "The purpose of this section is to provide for (1) the development of information describing the health professions workforce, and the analysis of related issues; (2) and information needed to make strategic decisions for health professions and nursing workforce programs.\nThis section requires the Secretary to establish the National Center for Health Workforce Analysis (referred to as the National Center). The National Center, in coordination with the National Health Care Workforce Commission and relevant regional and state centers and agencies, is required to (1) provide for the development of information that describes and analyzes the health care workforce and related issues; (2) carry out activities under Section 792(a); (3) annually evaluate programs under this title; (4) develop and publish performance measures and benchmarks for programs under this title; and (5) establish, maintain, and publicize a national Internet registry of each grant awarded under this title, and a database to collect data from longitudinal evaluations and performance measures. In addition, the National Center is required to collaborate and share data with federal agencies and relevant professional and educational organizations to link data regarding grants awarded under this title.\nThis section also requires the Secretary to award grants to, or enter into contracts with, eligible entities to (1) collect, analyze, and report data regarding programs under this title to the National Center, and (2) provide technical assistance to local and regional entities on the collection, analysis and reporting of data. An eligible entity is a state, a state workforce investment board, a public health or health professions school, an academic health center, or an appropriate public or private nonprofit group.\nThe Secretary is required to increase the amount awarded to an eligible entity for a longitudinal evaluation to study practice patterns and to count, collect, and report data on performance measures. An eligible entity is one that has received a grant or contract under this title.\nThis section authorizes funds for the National Center, state and regional centers, and longitudinal evaluations. It authorizes the following appropriations: $7.5 million for each of FY2010 through FY2014 to establish the National Center; $4.5 million for each of FY2010 through FY2014 to provide awards and grants to state and regional centers; and SSAN for the period FY2010 through FY2014 to provide an increase in grants for longitudinal evaluations.\nOf the amounts appropriated for this section, the Secretary is required to reserve no less than $600,000 for conducting health professions research and for carrying out data collection and analysis in accordance with Section 792. Amounts otherwise appropriated for programs or activities under PHSA Title VII may be used for activities related to the National Center.", "This section establishes the Council on Graduate Medical Education (COGME), which is required to make recommendations to Congress and the Secretary of HHS about related matters including (1) the physician supply and distribution in the United States; (2) current and future shortages or excesses of physicians in medical specialties and subspecialties; and (3) foreign medical school graduates, among other topics.\nIn addition, this section requires COGME to (1) encourage entities providing graduate medical education to conduct activities to voluntarily achieve COGME's recommendations; (2) develop, publish, and implement performance measures for relevant programs under this title; (3) develop and publish guidelines for longitudinal evaluations for relevant programs under this title; and (4) recommend appropriation levels for relevant programs under this title.\nThis section specifies requirements for COGME including membership, membership terms, quorum, and compensation. COGME membership must include administrators from the following agencies and offices: (1) HHS, Office of the Assistant Secretary; (2) HHS, Centers for Medicare and Medicaid Services; and (3) Department of Veterans Affairs. In addition, membership must include appointments by the Secretary that represent practicing primary care physicians, national and specialty physician organizations, foreign medical graduates, medical student and house staff associations, medical schools, public and private teaching hospitals, and health insurers, business, and labor. The term of office for appointed members is four years, and it follows a schedule of staggered rotation as the Secretary designates. Non-federal employees who are COGME members must receive a compensation rate equal to the daily rate for GS-18 employees; and federal employees must serve without additional compensation.\nDuties and authorities for COGME include information collection, attendance at hearings, records and document production, correspondence, and assistance from and cooperation with federal departments and agencies. This section requires COGME to coordinate its activities with the Secretary, and the Secretary to take steps to eliminate deficiencies in its health professions data program(s). The Secretary may use amounts otherwise appropriated under this title to support COGME'S activities.\nAlthough the statute required the COGME to terminate on September 30, 2003, annual appropriation acts have extended COGME. Currently, COGME meets periodically throughout the year.", "This section required the Secretary to submit a report to Congress, by October 2001, on the number of pediatric rheumatologists and the level of sufficiency needed to address the health care needs of children with arthritis and related conditions. In 2007, the Secretary submitted a report to Congress on The Pediatric Rheumatology Workforce: A Study of the Supply and Demand for Pediatric Rheumatologists . SSAN were authorized to be appropriated for each of FY2001 through FY2005.", "This subpart authorizes grants, contracts, and cooperative agreements to provide training and education programs and activities to develop the public health workforce. It authorizes programs and activities to establish or sustain training centers, traineeships, and special projects, and it makes a requirement for grants or contracts to train graduate medical residents in preventive medicine. Eligible institutions include health professions schools, academic health centers, state or local governments, and public or private nonprofit entities.", "This section authorizes the Secretary to award grants or contracts to eligible entities to increase the number of individuals in the public health workforce; enhance the quality of the workforce; and enhance the ability of the workforce to meet national, state, and local health care needs. Eligible entities include health professions schools, academic health centers, state or local governments, and other public or private nonprofit entities. A grant or contract may cover the costs of a broad range of activities, including planning, development, or operations for demonstration training programs; faculty development; trainee support; and technical assistance. Traineeships must be designed to increase access to public health education; increase the relevance of public health academic preparation to public health practice; provide education or training for students from traditional on-campus programs in practice-based sites; or develop educational methods and distance technology to address adult learning requirements and increase diversity awareness in public health. Grants or contracts may be used to operate programs that serve students who are in accredited schools of public health and who are studying to enter in fields where there is a severe shortage of public health professionals. These fields include epidemiology, biostatistics, and environmental health, among others.\nThe Secretary may grant preference to entities that serve individuals who are from disadvantaged backgrounds (including underrepresented racial and ethnic minorities), and graduate large proportions of individuals who serve in underserved communities.", "This section authorizes the Secretary to award grants or contracts to eligible entities to operate public health training centers. Eligible entities are accredited schools of public health and public or nonprofit private institutions that provide graduate or specialized training in public health. An operator of a public health training center must establish or strengthen field placements for students in public or nonprofit private health agencies or organizations; involve faculty members and students in collaborative projects to enhance public health services to medically underserved communities; and specifically designate a geographic area or medically underserved population to be served by the center. The public health training center must be remotely located from the main location of the teaching facility for the school that is participating in the program. In addition, an operator of a public health training center must assess the health personnel needs of the area that the center will serve, and assist in planning and developing training programs to address those needs. The Secretary is required to give preference to accredited schools of public health.", "This section establishes general and specific requirements for public health traineeships. In general, the Secretary is authorized to award grants or contracts to accredited schools of public health, and other accredited public or nonprofit private institutions, to provide graduate or specialized public health traineeships. Grants must provide tuition, fees, stipends, and allowances as the Secretary determines. Eligible individuals are those pursuing a course of study in a public health field where there is a severe shortage of health professionals. The Secretary is required to determine the amount of a grant for a public health traineeship.", "This section requires the Secretary of HHS, acting through the Administrator of HRSA, in consultation with the Director of the Centers for Disease Control and Prevention (CDC), to award grants or contracts to eligible entities for the purpose of providing training to graduate medical residents in preventive medicine and public health. Eligible entities are an accredited school of public health or school of medicine or osteopathic medicine; an accredited public or private nonprofit hospital; a state, local, or tribal health department; or a consortium of two or more eligible entities.\nFunds must be used to (1) plan, develop, operate, or participate in an accredited residency or internship program in preventive medicine or public health; (2) defray the costs of practicum experiences; and (3) establish, maintain, or improve academic administrative units in preventive medicine and public health. The Secretary is required to submit to Congress an annual report on the programs carried out under this section.", "The Secretary is authorized to make grants to state or local governments (that have preventive medical and dental public health residency programs) or public or nonprofit private educational entities (including graduate schools of social work and business schools that have health management programs). Grants may be used to provide student traineeships, and to assist accredited health administration programs in developing or improving programs to prepare students for employment with public or nonprofit private entities. Programs must be accredited in teaching health administration, hospital administration, or health policy analysis and planning, or must meet other quality standards as the Secretary may require. Traineeships must provide tuition, fees, and stipends for trainees, at the Secretary's discretion.\nPreference is established for eligible entities that (1) produce classes of graduates in which no less than 25% are engaged in full-time practice settings in medically underserved communities; (2) recruit and admit students from medically underserved communities; (3) have established relationships with public and nonprofit health care providers in the community involved; and (4) emphasize employment with public or nonprofit private entities. Traineeship grant applicants must assure the Secretary that they will give priority to trainees who demonstrate a commitment to being employed with public or nonprofit private entities.", "This section authorizes $43 million for Subpart 2 for FY2011 and SSAN for each of FY2012 through FY2015. The Secretary may not obligate more than 30% of the total appropriation for Section 767, Public Health Traineeships.", "This subpart authorizes programs for loan repayments, scholarships, and fellowships to increase education and training support to build the public health workforce. Its programs target individuals, including pediatric medical specialists and public health professionals.", "This section requires the Secretary to establish and carry out a program for pediatric specialty loan repayment for eligible individuals. Qualified health professionals must agree to provide full-time services for a minimum of two years in one of the following specialty areas: pediatric medicine, pediatric surgery, or child and adolescent mental and behavioral health care, including substance abuse prevention and treatment.\nThe Secretary must enter into a contract with eligible individuals and agree to make payments on the principal and interest of qualified undergraduate, graduate, or graduate medical education loans. Payments may not exceed more than $35,000 a year for each year of service for a maximum of three years.\nFor pediatric medical or surgical specialists, the term \"qualified health professional\" means a licensed physician who is entering or receiving training in an accredited pediatric medical subspecialty, or entering a residency or receiving a fellowship for a pediatric surgical specialty, or who has completed training for child and adolescent mental and behavioral health.\nWith respect to child and adolescent mental and behavioral health, the term \"qualified health professional\" includes a health care professional who received specialized training or clinical experience in child and adolescent mental health in psychiatry, psychology, school psychology, behavioral pediatrics, psychiatric nursing, social work, school social work, substance abuse disorder prevention and treatment, marriage and family therapy, school counseling, or professional counseling; has a license or certification in a state to practice allopathic medicine, osteopathic medicine, psychology, school psychology, psychiatric nursing, social work, school social work, marriage and family therapy, school counseling, or professional counseling; or is a mental health service professional who completed specialized training or clinical experience in child and adolescent mental health.\nAdditionally, an individual must agree to work either within, or for a provider who is serving within, a health professional shortage area or medically underserved area. The individual must be enrolled in an accredited graduate program at an acceptable level of academic standing. The Secretary must give priority to applicants who (1) are working or will work in an academic setting for children or adolescents; (2) have familiarity with evidence-based methods and cultural and linguistic competence health care services; and (3) demonstrate financial need.\nThis section authorizes the following appropriations: (1) $30 million for each of FY2010 through FY2014 to carry out the loan repayment program for pediatric specialists; and (2) $20 million for each of FY2010 through FY2013 to carry out the loan repayment program for child and adolescent mental and behavioral health.", "This section requires the Secretary to establish the Public Health Workforce Loan Repayment Program for direct assistance to individuals. It specifies requirements for eligibility, contracts, payments, obligated service, and breach of contract.\nAn eligible individual must be accepted for enrollment, or be enrolled, as a student in an accredited academic educational institution in a state or territory. The individual must be in the final year of a course of study or program leading to a public health or health professions degree or certificate; and have accepted employment with a federal, state, local, or tribal public health agency, or a related training fellowship to begin upon graduation. Alternatively, an individual may be eligible to participate in the loan repayment program if he or she has graduated from an accredited educational institution in a state or territory during the 10-year period preceding application to the program. In addition, an individual must not have received a loan reduction for the same service from selected programs under the Higher Education Act of 1965.\nThis section specifies requirements for the contract between the Secretary and an individual. The contract must specify terms for loan repayments, obligated service, service locations (including areas for priority of service), federal financial obligations, and rights and responsibilities of the individual and the Secretary.\nA loan repayment must consist of the principal, interest, and related expenses on government and commercial loans that an individual has received to pay tuition costs for undergraduate or graduate education. For each year of obligated service, the Secretary may pay up to $35,000 for qualified loans. For eligible loans that are less than $105,000, the Secretary is required to pay an amount that does not exceed one-third of the eligible loan balance for each year of obligated service of the individual. The Secretary is authorized to approve or postpone the date when an individual begins a period of obligated service. An individual who fails to comply with the loan repayment contract is subject to the same financial penalties as under the federal loan repayment program established in PHSA, Section 338B. This section authorizes $195 million for FY2010 and SSAN for each of FY2011 through FY2015.", "This section authorizes the Secretary to award grants or contracts to eligible entities to provide scholarships to eligible individuals to enroll in public health or allied health degree-granting or professional training programs.\nAn eligible entity is an accredited educational institution that offers a course of study, a certificate program, or professional training program in public health or allied health. An eligible individual must be employed in a public health or allied health position at the federal, state, tribal, or local level.\nAn appropriation of $60 million is authorized for FY2010 and SSAN for each of FY2011 through FY2015. Of the total appropriation, 50% must be allotted to public health mid-career professionals and 50% must be allotted to allied health mid-career professionals.", "This section establishes requirements for public health fellowships in specialized areas. It authorizes the Secretary to carry out activities to address workforce shortages in state and local health departments within the critical areas of applied public health epidemiology and public health laboratory science and informatics. It establishes fellowships within specialized areas of public health. It requires the Secretary to provide for the expansion of existing fellowship programs, including the Epidemic Intelligence Service operated through the CDC, and the Secretary may also expand other relevant applied epidemiology training programs. Funds may be used to expand the Public Health Informatics Program at the CDC. Participation in fellowship training programs under this section may satisfy work obligations required in contracts under Section 338I(j).\nThis section authorizes an appropriation of $39.5 million, for each of FY2010 through FY2013, which must be applied as follows: $5 million for epidemiology fellowship training program activities; $5 million for laboratory fellowship training programs; $5 million for the Public Health Informatics Fellowship Program; and $24.5 million to expand the Epidemic Intelligence Service.", "This part specifies general provisions for Title VII programs and activities, including preferences and prohibitions.", "In awarding grants or contracts under Section 747 and Section 750, the Secretary is required to give preference to any qualified applicant that (1) has a high rate of placing graduates in practice settings where the principal focus is to serve medically underserved communities; (2) has significantly increased the rate of graduate placements in medically underserved communities during the two-year period before the prospective grant period; and (3) uses a longitudinal evaluation and submits it to the national workforce database. The Secretary may not give an applicant preference if the peer review group ranks the applicant's proposal at or below the 20 th percentile of proposals that have been recommended.\nThis section provides an exception for new programs to be funded under this section, if those programs meet specific criteria. The term ''new program'' means any program that has graduated less than three classes. To receive preference for grants, a new program must meet at least four of the following criteria: (1) have a mission to prepare health professionals to serve underserved populations; (2) include curriculum content that will help prepare practitioners to serve underserved populations; (3) provide substantial clinical training experience in medically underserved communities; (4) have a minimum of 20% of the clinical faculty of the program spend at least 50% of their time providing or supervising care in medically underserved communities; (5) have its entire program or a substantial portion of the program physically located in a medically underserved community; (6) provide student assistance that is linked to service in medically underserved communities following graduation; and (7) provide a placement mechanism to deploy graduates to medically underserved communities.", "This section requires the Secretary to establish a program, including a uniform health professions data reporting system, to collect, compile, and analyze data on health professions personnel. The program must initially include data on all physicians and dentists in the states. The Secretary is authorized to expand the program to include data collection, compilation, and analysis on a broad range of health professionals, including pharmacists, optometrists, and podiatrists. Data sets for health professionals must include the following: the training, licensure status, places of practice, professional specialty, practice characteristics, place and date of birth, sex, and socioeconomic background. The Secretary is authorized to require other demographic information.\nThe Secretary is required to collect information from local, state, and federal agencies and other appropriate sources for the health professions data reporting system. In addition, the Secretary must conduct or enter into contracts to conduct analytic and descriptive studies of health professions. Studies must include methods to determine by specialty and geographic location the number of health professionals who are members of minority groups, including Hispanics. In addition, they must provide, by specialty and geographic location, evaluations and projections of the demand for and supply of health professionals to serve minority groups, including Hispanics. Studies may include evaluations and projections of the supply of, and requirements for, the health professions by specialty and geographic location.\nThis section authorizes the Secretary to make grants and to enter into contracts with states (or an appropriate nonprofit private entity in any state) to participate in the health professions data program. (The Secretary had been required to report to Congress on October 1, 1993, and biennially thereafter, on the status of health personnel by profession. The report was to include analytic and descriptive studies conducted under this section, and provide information about applicants who take part in Title VII programs. However P.L. 104-66 , enacted on December 21, 1995, terminated this reporting requirement.)\nRegarding personal data, the Secretary and each program entity must inform individuals of the right to refuse to supply personal data, and any specific consequences related to surrendering or withholding personal data. At the request of an individual, the Secretary and each program entity must inform an individual if he or she is the subject of a request for personal data. The Secretary and program entity must make the data available to the individual in a comprehensible form. The Secretary and program entity are required to ensure that personal data are not used in a matter that is inconsistent with the purposes of this section unless the individual has provided informed consent for doing so. Finally, upon request, the Secretary and program entity are required to inform any individual of how the data will be used, and who will use the data, relative to the programs under this section.\nPersonal data collected by the Secretary or any program entity under this section may not be made available or disclosed by the Secretary or any program entity to any person other than the individual who is the subject of the data, unless the person requires such data for purposes of this section, or the disclosure is in response to a demand through the compulsory legal process.\nIn carrying out the health professions data program, the Secretary may make grants to, or enter into contracts and cooperative agreements with, and provide technical assistance to, any nonprofit entity in order to establish a uniform allied health professions data reporting system. With respect to required reports in this section, each report made on or after October 1, 1991 must include a description and analysis of data on allied health professions personnel.", "The Secretary is prohibited from making a grant, loan guarantee, or interest subsidy payment under this title to any eligible entity unless the application contains assurances that the school or training center will not discriminate on the basis of sex. The Secretary may not enter into a contract under this title with any such school or training center unless the entity assures the Secretary that it will not discriminate on the basis of sex in admissions to its training programs.", "To be eligible to receive a grant or contract under this title, an entity must prepare and submit an application to the Secretary. An application must specify the plan for carrying out a project with amounts received under this title and the plan must be consistent with relevant federal, state, or regional health professions program plans. The application must specify performance outcome standards that will measure the project, and contain a description of the linkages with relevant educational and health care entities. To the extent practicable, grantees must establish linkages with health care providers who provide care for underserved communities and populations.", "Grants or contracts may be used to develop and support training programs for faculty and trainees (including tuition, books, program fees, and reasonable living expenses incurred during the period of training). Grants or contracts may also support technical assistance, workforce analysis, information dissemination, and policy planning. An entity is required to maintain non-federal expenditures for activities at a level that is equal to or greater than the level maintained preceding the fiscal year for which the grant was received.", "The Secretary may require that an entity provide non-federal matching funds to ensure that the entity is committed to the project funded under the grant. The source of such funds may be direct or indirect and may include donations from public or private entities, and be in cash or in-kind, including plant, equipment, or services.", "The Secretary is required to ensure that grants and contracts are awarded on a competitive basis to carry out innovative demonstration projects or provide for strategic workforce supplementation activities. Unless otherwise required, the Secretary must accept applications for grants or contracts from health professions schools, academic health centers, state or local governments, or other appropriate public or private nonprofit entities for funding and participation in health professions and nursing training activities. The Secretary may also accept applications from for-profit private entities.\nThe Secretary is required to establish procedures to ensure that, with respect to any data collection required under this title, such data must account for age, sex, race, and ethnicity. The Secretary is required to establish procedures to allow the use of appropriations for data collection purposes, and to ensure that grants, contracts, programs and projects are evaluated annually. Funding periods for grants and contracts may not exceed five years.\nThe Secretary, acting through HRSA, must carry out peer review functions. For certain programs, each grant application must be submitted to a peer review group. Each peer review group must be composed principally of individuals who are not officers or employees of the federal government. In providing for peer review groups and procedures, the Secretary is required to ensure gender, racial, ethnic, and geographic balance among members of the peer review group.\nThe Secretary is required to ensure that cross-cutting workforce analytical activities are carried out under Section 761, and that discipline-specific workforce information and analytical activities are carried out as part of the community-based linkage program and the health workforce development program. Any reference to medical schools and medical students must include osteopathic medical schools and osteopathic medical students, respectively.", "The Secretary may use appropriated to provide technical assistance to any authorities included in this title.", "This section defines a variety of terms that are used throughout Title VII.", "The Patient Protection and Affordable Care Act (ACA) authorizes health workforce-related provisions in Sections 5101 and 5102, described below. In addition, ACA created Section 5103, which was enacted as Section 761, Health Professions Workforce Information and Analysis, within the Public Health Service Act (PHSA) and is described in the body of this report.\nNational Health Care Workforce Commission (§5101)\nThis provision authorizes a National Health Care Workforce Commission (Commission) to serve as a national resource for Congress, the President, state and local governments on health workforce issues; to coordinate among relevant federal agencies; to determine whether the demand for health care workers is being met; and to identify and address any barriers to coordination at the federal, state or local level. The Commission is directed to encourage innovation to address needs of different populations, changes in technology, and other environmental factors.\nThe Comptroller General is directed to appoint Commission members (numbering 15), who must be national experts in their fields but a majority of whom may not be health care educators or practitioners. Certain sectors must be represented, including the health care workforce, employers, third-party payers, researchers, consumers, labor unions, state or local workforce investment boards, and educational institutions. Members will serve three-year terms, and the expiration date of their terms will be staggered.\nThe Commission is directed to undertake a wide range of studies and make recommendations to Congress and the Administration annually. Among the specific topics to be reviewed are: the current health care workforce supply and demand, and projections for the next 10 and 25 years; the current health care workforce education and training capacity, and projected demands for such education and training over the next 10 and 25 years; education loan and grant programs authorized in Titles VII and VIII of the PHSA and whether they should be authorized under the Higher Education Act; the implications of new and existing federal policies on the health care workforce; the health care workforce needs of special populations; and recommendations for creating or revising loan repayment and scholarship programs to require low-income minority medical students to serve in their home communities, if designated as a medically underserved community.\nThe Commission also must make recommendations on at least one \"high priority\" topic each year. Such topics include integrated health care workforce planning that maximizes skill sets across disciplines; an analysis of health care workers in enhanced information technology and management workplace; recommendations for alignment of Medicare and Medicaid graduate medical education policies with national workforce goals; and education and training capacity, projected demands, and integration with the health care delivery system for specific types of health care providers. The Commission may designate additional future high priority topics. The Commission also is charged with reviewing implementation of the State Health Care Workforce Development Grant program, also created by ACA (see description of this grant program, below).\nSuch sums as necessary are authorized to be appropriated for the Commission. In September 2010, the Government Accountability Office announced the appointment of 15 members to the new National Health Care Workforce Commission. However, the Commission has not received funding, and has not met.\nState Health Care Workforce Development Grants (§5102)\nThis provision establishes a competitive grant program to enable state partnerships to complete comprehensive planning and to carry out activities leading to strategies for health care workforce development at the state and local levels. It authorizes grants for planning and implementation.\nHRSA is authorized to carry out the program in consultation with the National Health Care Workforce Commission (described above), which is charged with reviewing reports on the development, implementation, and evaluation activities of the grant program.\nPlanning G rants\nPlanning grants may be awarded for up to one year, with a maximum award of $150,000. An eligible entity must be an eligible partnership, which is a state workforce investment board with adequate representation from a health care employer, labor organization, public two-year institution of higher education, public four-year institution of higher education, recognized state federation of labor, or other specific entity.\nA state partnership must perform several required activities, including but not limited to (1) analyzing state labor market information in order to create health care career pathways for students and adults, including dislocated workers; (2) identifying current and projected high demand state or regional health care sectors for purposes of planning career pathways; and (3) identifying existing federal, state, and private resources to recruit, educate or train, and retain a skilled health care workforce and strengthen partnerships.\nBefore the state partnership receives a planning grant, the partnership and HRSA must jointly determine the performance benchmarks that will be established for the planning grant. Matching grant requirements direct each state partnership to provide an amount of no less that 15% of the total grant amount.\nWithin a year of receiving a grant, a state partnership must submit a report to HRSA on the state's performance of the activities under the grant, including the use of funds and matching funds, and a description of the progress that the state workforce investment board has made in meeting the performance benchmarks. In addition, HRSA must submit a report to Congress analyzing the planning activities, performance, and fund utilization of each state grant recipient, including an identification of promising practices and a profile of the activities of each state grant recipient. The section authorizes $8 million for planning grants in FY2010 and SSAN for each subsequent fiscal year.\nImplementation G rants\nThis provision requires HRSA to competitively award implementation grants to state partnerships to enable them to carry out activities that result in a comprehensive plan for health workforce development within the state. An implementation grant is awarded for a period of no more than two years, with some exceptions.\nTo be eligible for an implementation grant, the state partnership must have received a planning grant and completed all requirements for that grant. Alternatively, the state partnership must have completed an application, including a plan to coordinate with required partners and complete required activities during the two-year period of the implementation grant. A state partnership may reserve no less than 60% of total funds to make competitive grant awards to regional partnerships.\nA state partnership receiving an implementation grant must perform specific duties, among them: (1) identify and convene regional leadership to discuss opportunities to engage in statewide health care workforce development planning; (2) in consultation with key stakeholders and regional leaders, take appropriate steps to reduce federal, state, or local barriers to a comprehensive and coherent strategy, including changes in state or local policies to foster coherent and comprehensive health care workforce development activities; (3) develop, disseminate, and review with key stakeholders a preliminary statewide strategy that addresses short- and long-term health care workforce development supply versus demand.\nBefore the state partnership receives an implementation grant, the state and HRSA must jointly establish performance benchmarks. Each state partnership receiving a grant must provide a minimum of 25% of the implementation grant amount to meet matching requirements.\nFor each year of the implementation grant, the state partnership must submit a report to HRSA. Also, HRSA must submit a report to Congress analyzing implementation activities, performance, and fund utilization of the state grantees. The section authorizes $150 million for implementation grants in FY2010 and SSAN for each subsequent fiscal year." ], "depth": [ 0, 1, 1, 1, 1, 2, 3, 3, 2, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 4 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h0_full", "h0_full h2_full", "h2_title h1_title", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h2_title h1_title", "", "", "", "", "", "", "", "", "h2_title h1_title", "h2_full h1_full" ] }	{ "question": [ "What does Title VII of the PSHA do?", "For what would institutions receive Title VII support for?", "How do individuals receive assistance through Title VII?", "What does Title VII authorize advisory groups to do?", "Why is the health care workforce so important?", "What did Congress reauthorize in the Patient Protection and Affordable Care Act?", "What changed in the reauthorization of ACA?", "What has Congress done to address the health care workforce?", "What factors are causing concern about workforce adequacy?", "What could ACA provisions lead to?", "What might future legislation or action for Title VII focus on?" ], "summary": [ "Title VII of the Public Health Service Act (PHSA) supports health professions education and training through grants to and contractual agreements with institutions, and direct assistance to individuals.", "Institutions may receive Title VII support for such activities as residency programs at medical and dental schools, recruitment and retention initiatives in community-based educational settings, and health workforce data collection and analysis within state health departments.", "Individuals typically receive direct assistance through scholarships, loans, loan repayments, or fellowships.", "Title VII authorizes several advisory groups to make recommendations to the Secretary of Health and Human Services and Congress on various health workforce programs and Title VII functions.", "The health care workforce—the backbone of the health care delivery system—includes physicians, nurses, dentists, therapists, and others who deliver health services to individuals in physicians' offices, health centers, clinics, and other community-based health care settings.", "In 2010, Congress reauthorized Title VII health workforce programs and activities in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended).", "The ACA also added several new authorities that aim to build and sustain the health care workforce alongside other provisions for health reform, including health insurance expansion.", "The 113th Congress has held hearings and introduced legislation to address the adequacy of the health care workforce.", "Other factors causing concern about the adequacy of the health workforce include uneven provider distribution, attrition and retirement, and demands of the aging population.", "Health policy experts anticipate that ACA provisions for health insurance expansion could lead to an increased demand for health service utilization, and they expect that this increased demand for services could prompt increased demand for health providers, including physicians and nurses.", "Legislative interest or action may focus on the impact of Title VII programs on education and training in the health professions." ], "parent_pair_index": [ -1, 0, 0, -1, -1, -1, 1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2 ] }
CRS_RS22380	{ "title": [ "", "Background", "Program Elements", "Parent Location", "Paternity Establishment", "Establishment of Child Support Orders", "Review and Modification of Support Orders", "Enforcement", "Financing28", "Collection and Disbursement", "Distribution of Support", "Visitation Grants and Responsible Fatherhood Programs", "Access and Visitation Grants", "Responsible Fatherhood Programs" ], "paragraphs": [ "", "In general, child support is the cash payment that noncustodial parents are obligated to pay for the financial support of their children. These payments enable parents who do not live with their children to fu lfill their financial responsibility to their children by contributing to the payment of childrearing costs. Child support orders generally are established when parents divorce or separate, or when the custodial parent applies for cash benefits through the Temporary Assistance for Needy Families (TANF) program (Title IV-A of the Social Security Act).\nThe Child Support Enforcement (CSE) program, Part D of Title IV of the Social Security Act, was enacted on January 4, 1975 ( P.L. 93-647 ). The CSE program is administered by the Office of Child Support Enforcement (OCSE) in the Department of Health and Human Services (HHS), and receives mandatory funding each fiscal year in the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act. All 50 states, the District of Columbia, Guam, Puerto Rico, the Virgin Islands, and 62 tribal nations operate CSE programs and are entitled to federal matching funds. The CSE program is estimated to handle 50%-60% of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between the parents.\nFamilies receiving TANF benefits, foster care payments (Title IV-E of the Social Security Act), or Medicaid coverage (Title XIX of the Social Security Act) automatically qualify for CSE services free of charge. Collections on behalf of families receiving cash TANF benefits are used, in part, to reimburse state and federal governments for the TANF payments made to the family. Other families must apply for CSE services, and states must charge an annual user fee that cannot exceed $25. Child support collected on behalf of non-TANF families goes to the family, usually through the state disbursement unit.\nChild support payments collected by CSE agencies increased from $1 billion in FY1978 to $28.6 billion in FY2015. Over the same period, the number of children whose paternity was established or acknowledged increased from 111,000 to 1.484 million. However, the program still collects only 20% of child support obligations for which it has responsibility if payments on past-due child support (i.e., \"arrearages\") are taken into account (otherwise, 65%) and collects payments for only 61% of its caseload. OCSE data indicate that in FY2015, paternity had been established or acknowledged for 96% of the 10.6 million children on the CSE caseload without legally identified fathers. In FY2015, total CSE expenditures amounted to $5.7 billion. On average, in FY2015 the CSE program collected $5.26 in child support payments for each $1 spent on the program.\nTable 1 , below, provides FY2015 data on the CSE program, including total collections and expenditures, caseload numbers, and the number of paternities and child support orders established. The balance of this report describes each of the major program elements of the CSE program. It also includes a discussion of the related programs: Access and Visitation Grants and the Responsible Fatherhood Program.", "The CSE program provides seven major services on behalf of children: (1) parent location, (2) paternity establishment, (3) establishment of child support orders, (4) review and modification of child support orders, (5) collection of child support payments, (6) distribution of child support payments, and (7) establishment and enforcement of medical support.", "If a state's CSE program cannot locate the noncustodial parent with the information provided by the custodial parent, it must try to locate the noncustodial parent through the State Parent Locator Service (SPLS), which is an assembly of systems that includes the State Child Support Case Registry and the State Directory of New Hires. The automated State Child Support Case Registry, as required by federal law, contains records of each case in which CSE services are being provided and all new or modified child support orders. The registry includes information on the case, the child or children in the case, and both parents, as listed in Table 2 .\nStates also must establish an automated State Directory of New Hires that includes information from employers, including federal, state, and local governments and labor organizations. For each newly hired employee, this directory must include the name, address, and Social Security number of the employee, and the employer's name, address, and tax identification number. This information generally is supplied to the directory within 20 days after the employee is hired.\nThe SPLS also may use other information sources, such as telephone directories, motor vehicle registries, tax files, and employment and unemployment records.\nIn addition to the resources discussed above, a state can ask that the Federal Parent Locator Service (FPLS), which is an assembly of systems operated by the Office of Child Support Enforcement (OCSE), be used for any of the following purposes:\nparent location; establishing parentage; establishing, setting the amount of, modifying, or enforcing child support obligations; or enforcing child custody or visitation orders.\nThe FPLS assists federal and state agencies in identifying overpayments and fraud, and assists with assessing benefits. These systems can access data from the Social Security Administration, the Internal Revenue Service, the Department of Defense, the U.S. Department of Veteran Affairs, the National Security Agency, the Federal Bureau of Investigation, and State Employment Security Agencies. Moreover, the FPLS also can search its federal case registry of child support orders and the national directory of new hires (NDNH), which are federal directories consisting of information from the state directories and federal agencies\nAutomation is critical to the operation and success of the CSE program so that records in the various parent location systems can be cross-checked to aid in the location of noncustodial parents. Federal law requires that a designated state agency (directly or by contract) conduct automated comparisons of the Social Security numbers reported by employers to the state directory of new hires and those associated with CSE cases that appear in the State Child Support Case Registry. It also requires the HHS Secretary to conduct similar comparisons of the federal directories.", "Legally identifying the father is a prerequisite for obtaining a child support order. For any children born into a marriage, the husband is generally deemed to be the father; therefore, in divorce cases paternity generally does not need to be affirmatively established. In nonmarital birth cases, however, paternity must be established prior to when a child support order is obtained.\nFederal law requires states to have procedures that permit the establishment of paternity for all children under the age of 18. TANF applicants and recipients are legally required to cooperate in establishing paternity or obtaining support payments, and may be penalized for noncooperation. If it is determined that an individual is not cooperating and that individual does not qualify for any good cause or other exception, the state must reduce the family's TANF benefit by at least 25%, and may eliminate it entirely. Additional federal requirements associated with paternity establishment include the following:\n1. state CSE programs must establish paternity for at least 90% of the CSE cases needing such a determination; 2. each state must implement a simple civil process for establishing paternity; 3. an affidavit must be available that can be completed by men voluntarily acknowledging paternity and that the affidavit be entitled to full faith and credit in any state; 4. a signed acknowledgment of paternity must be considered a legal finding of paternity unless it is rescinded within 60 days, and thereafter may be challenged in court only on the basis of fraud, duress, or material mistake of fact; and 5. no judicial or administrative action will be needed to ratify an acknowledgment that is not challenged.\nFor contested paternity cases, federal law further requires that all parties submit to genetic testing.", "A child support order is a legal document that obligates a noncustodial parent to provide financial support for his or her children, and stipulates the amount of the obligation and how it is to be paid. It is usually established at the time of divorce or when an unmarried couple dissolves their relationship. It also may be established when a TANF case is initiated.\nThe child support order is established administratively by a state/county CSE agency or through the state courts. Federal law requires states to use their state-established guidelines in establishing child support orders. These guidelines are a set of rules and tables that are used to determine the amount of the child support order. Child support guidelines are designed to protect the best interests of the child or children in question by trying to ensure that they continue to benefit from the financial resources of both parents in situations in which the parents go their separate ways. They are also intended to make the calculation of child support fair, objective, consistent, and predictable (which in many instances can have the added benefit of reducing conflict and tension between the parents).\nStates decide child support amounts based on the noncustodial parent's income or based on both parents' incomes. Other factors that may be considered include the age of child, whether a stepparent is in the home, whether the child is disabled, and the number of siblings. States currently use one of three basic types of guidelines to determine child support award amounts (i.e., the child support order):\n1. \"Income shares,\" which is based on the combined incomes of both parents (39 states, Guam, and the Virgin Islands); 2. \"Percentage of income,\" in which the number of eligible children is used to determine a percentage of the noncustodial parents' income to be paid in child support (8 states); and 3. \"Melson-Delaware,\" which provides a minimum self-support reserve for parents before the cost of rearing the children is prorated between the parents to determine the award amount (3 states).", "The circumstances of both the noncustodial parent and custodial family can change with time. As these changes occur, child support obligations can become inadequate or inequitable. Effective review and modification of child support orders are important steps in ensuring that noncustodial parents continue to comply with realistic orders based on an actual ability to pay them.\nFederal law requires that states review and, if appropriate, adjust child support orders for TANF family cases at least once every three years. For non-TANF family cases, either one of the parents can request that the order be reviewed every three years. If a request for review and modification is made prior to when that three-year cycle has been completed, the requesting party must demonstrate that there was a substantial change in circumstances. Child support adjustments and modifications must be in accordance with a state's child support guidelines.\nCSE programs usually rely on one of the parents to request a modification of the child support order. It is important for parents facing job loss, incarceration, or other substantial changes in circumstances to seek a modification to their order quickly so that they do not fall behind in their payments and thereby have to contend with past-due child support payments. Pursuant to federal law, the court cannot retroactively reduce the arrearages that a noncustodial parent owes.", "The CSE program has a vast array of enforcement methods at its disposal to help ensure that child support payments are made on time and in the full amount that is owed. Most payments are collected from noncustodial parents through income withholding. In FY2015, 75% of collections were obtained through income withholding. Other methods of enforcement include\nintercepting federal and state income tax refunds; intercepting unemployment compensation; filing liens against property; subjecting insurance settlements to withholding; intercepting lottery winnings, judgments, or settlements; seizing debtor parent assets held by public or private retirement funds and financial institutions; withholding, suspending, or restricting driver's licenses, professional or occupational licenses, and recreational or sporting licenses; and denying, revoking, or restricting passports.\nPast-due child support may accumulate if the noncustodial parent is unable or unwilling to pay the child support that is owed. In addition to collecting child support arrearages through the enforcement methods above, all jurisdictions have civil or criminal contempt-of-court procedures and criminal nonsupport laws. Federal criminal penalties also may be imposed in certain cases. Federal law requires states to enact and implement the Uniform Interstate Family Support Act (UIFSA), and expand full faith and credit procedures for child support orders issued by other states.\nFederal law also provides for international enforcement of child support. The Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) contained provisions that are designed to improve child support collections in cases where the custodial parent and child live in one country and the noncustodial parent lives in another country. It ensured that the United States is compliant with any multilateral child support enforcement treaties and, as part of this, required states to update their UIFSA law to incorporate verbatim any amendments adopted as of September 30, 2008, by the National Conference of Commissioners on Uniform State Laws. Additionally, the act facilitated greater access to the FPLS by foreign countries and tribal governments as part of improving child support collections. The act also amended federal law so that the federal income tax refund offset program is available for use by a state to handle CSE requests from foreign reciprocating countries and foreign treaty countries.", "The CSE program is funded with both state and federal dollars. There are five funding streams associated with the CSE program.\nFirst, states spend their own money to operate a CSE program; the level of funding allocated by the state and/or localities determines the amount of resources available to CSE agencies.\nSecond, the federal government reimburses each state 66% of all allowable expenditures on CSE activities. The federal government's funding is \"open-ended\" in that it pays its percentage of expenditures by matching the amounts spent by state and local governments with no upper limit or ceiling. For the purposes of the federal budget process, this funding is considered to be mandatory spending, and is appropriated each fiscal year in the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act.\nThird, states collect child support on behalf of families receiving TANF assistance to reimburse themselves (and the federal government) for the cost of TANF cash payments to the family. (See \" Distribution of Support \" section, below).\nFourth, the federal government provides states with an incentive payment to encourage them to operate effective programs. Federal law requires states to reinvest CSE incentive payments back into the CSE program or related activities.\nFifth, annual user fees and costs recovered may help finance the CSE program. Families receiving TANF, foster care payments, or Medicaid coverage, as well as families required by their state Supplemental Nutrition Assistance Program (SNAP) to cooperate with the CSE agency, automatically qualify for CSE services free of charge. The CSE agency must charge all other families an annual user fee, not to exceed $25, when child support enforcement efforts on their behalf are successful (i.e., at least $500 annually is collected on their behalf). The CSE agency may charge this fee to the custodial or noncustodial parent, or pay the fee out of state funds. Moreover, a state may at its option recover costs in excess of the application fee, either from the custodial parent or the noncustodial parent. Such fees and costs recovered from non-TANF cases must be subtracted from the state's total administrative costs before calculating the federal reimbursement amount (i.e., the 66% matching rate).", "In order to make the processing of child support payments more efficient and economical, all states are required to have a centralized automated State Collection and Disbursement Unit (SDU) to which child support payments are paid and from which they are distributed. SDUs assist the income withholding process by providing employers with a single location in each state to send the withheld child support payments. In addition to collecting and promptly distributing money to custodial parents or other states, SDUs\ngenerate orders and notices of withholding to employers, create and maintain records associated with each payment, and furnish parents with a record of the current status of child support payments.\nThe SDU must use automated procedures, electronic processes, and computer-driven technology to the maximum extent that is feasible, efficient, and economical.\nThe SDU must be operated directly by the state CSE agency, by two or more state CSE agencies under a regional cooperative agreement, or by a contractor responsible directly to the state CSE agency. Alternatively, instead of a single state system, a SDU may be established by linking local disbursement units through an automated information network. In such cases, the Secretary of HHS must first agree that the system will not cost more, take more time to establish, or take more time to operate than a single state system. Like single state systems, linked systems must give employers only one location for submitting withheld income.\nFederal law generally requires employers to remit to the SDU income withheld within seven business days after the employee's payday. Then, the SDU is required to send child support payments to custodial parents within two business days of when they are received.", "When there is more than one claim of child support that is owed by a noncustodial parent, distribution rules determine which claim is paid first when a collection occurs. The order of payment of the child support collection is important when a payment is not enough to cover the current support, or if any arrearages are due for those claims.\nTo reimburse the states and federal government for the cost of TANF cash benefits, TANF families are required by federal law to assign their child support rights to the state. While the family receives TANF, the states and federal government generally retain any current support and any assigned arrearages collected up to the cumulative amount of TANF benefits paid to the family. While states may opt to \"pass-through\" (i.e., pay) to the family some or all of the state share of the child support (thereby forgoing its share of those collections), they generally still must pay the federal government its share of child support collected on behalf of TANF families.\nHowever, in order to help states pay for the cost of their CSE pass-through policies, federal law waives the federal government's share of child support collections that are passed through by states, up to $100 per month for one child or up to $200 per month for two or more children. (The state also must disregard the passed-through payments as income for the purposes of determining TANF eligibility in order for the federal government to waive its share.) Based on September 2016 data, 23 states, the District of Columbia and Puerto Rico have a CSE pass-through and disregard policy; 27 states, Guam, and the Virgin Islands do not.\nStates must distribute to former TANF families the following child support collections before the state and the federal government are reimbursed (the \"family-first\" policy):\n1. all current child support, 2. any child support arrearages that accrue after the family leaves TANF (these arrearages are called never-assigned arrearages), and 3. any arrearages that accrued before the family began receiving TANF benefits. (Any child support arrearages that accrue during the time the family is on TANF belong to the state and federal government. )", "", "A noncustodial parent's right to visit with his or her children is commonly referred to as visitation or child access (and more recently as voluntary parenting time arrangements). State domestic relations or family laws almost universally treat child support and visitation as completely separate issues. Historically, the federal government has agreed that visitation and child support should be legally separate issues, and that only child support should be under the purview of the CSE program. Both federal and state policymakers have maintained that denial of visitation rights should not be considered a reason for stopping child support payments. However, in recognition of the negative long-term consequences for children associated with the absence of their noncustodial parent, as well as evidence that contact between the child and noncustodial parent can make it more likely that child support responsibilities will be met, federal and state policymakers have increasingly promoted efforts that address child support and access and visitation in the same forum.\nIn order to promote visitation and better relations between custodial and noncustodial parents, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) provided mandatory spending in the amount of $10 million each fiscal year from the federal CSE budget account for grants to states for access and visitation programs. Eligible activities include but are not limited to mediation, counseling, education, development of parenting plans, visitation enforcement, and development of guidelines for visitation and alternative custody arrangements.\nThe Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) included a Sense of the Congress statement specifying that\n1. establishing parenting time arrangements (also known as visitation) when obtaining child support orders is an important goal that should be accompanied by strong family violence safeguards; and 2. states should use existing funding sources to support the establishment of parenting time arrangements, including child support incentives, Access and Visitation Grants, and Healthy Marriage Promotion and Responsible Fatherhood Grants.", "The federal government has also sought to engage noncustodial parents in the lives of their children through what are known as \"responsible fatherhood programs.\" Based on the premise that committed, involved, and responsible fathers are important in the lives of their children, these programs seek to promote the financial and personal responsibility of noncustodial parents for their children, and increase the participation of fathers in their children's lives. Some responsible fatherhood programs help noncustodial parents strengthen their parenting skills. Other programs try to discourage young men from becoming fathers until they are married and ready for the responsibility.\nThe Deficit Reduction Act of 2005 ( P.L. 109-171 ) included a provision that provided mandatory funding for a Healthy Marriage Promotion and Responsible Fatherhood grants program (in Title IV-A of the Social Security Act). For FY2006-FY2010, that program was provided up to $50 million per year for competitive responsible fatherhood grants. For FY2011, funding for those fatherhood grants was increased to $75 million. Since that time, $75 million in mandatory funding for this program each year has been provided through provisions in appropriations acts. Most recently, for FY2017, the authority and funding for the responsible fatherhood grants program has been provided through two continuing resolutions. These continuing appropriations are scheduled to expire on April 28, 2017.\nMost responsible fatherhood programs include parenting education; training in responsible decisionmaking, conflict resolution, and coping with stress; mediation services for both parents; problem-solving skills; peer support; and job-training opportunities. Grantees include states, territories, Indian tribes and tribal organizations, and public and nonprofit community groups (including religious organizations)." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h2_full", "h0_title h1_title", "", "", "", "", "h0_full", "h1_full", "", "", "", "", "" ] }	{ "question": [ "How are most child support payments collected from noncustodial parents?", "What are other means of collecting payments?", "How is the CSE program funded?", "How are grants given?", "How is the government reimbursed for CSE spending?", "How does the government receive federal funding?", "How else are states involved in the child support process?", "How expansive is the CSE program?", "How successful is the CSE in collecting payments?", "How cost effective is the program in terms of spending versus payments collected?" ], "summary": [ "Most child support payments are collected from noncustodial parents through income withholding.", "Other methods of enforcement include intercepting federal and state income tax refunds; intercepting unemployment compensation; filing liens against property; sending insurance settlement information to CSE agencies; intercepting lottery winnings, judgments, or settlements; seizing debtor parent assets held by public or private retirement funds and financial institutions; withholding, suspending, or restricting driver's licenses, professional or occupational licenses, recreational or sporting licenses; and denying, revoking, or restricting passports.", "The CSE program is funded via a number of sources.", "The program is a federal-state matching grant program under which states must spend money in order to receive federal funding.", "For every dollar a state spends on CSE expenditures, it generally is reimbursed 66 cents from the federal government. This reimbursement requirement is \"open ended,\" in that there is no upper limit or ceiling on the federal government's match of those expenditures.", "In addition to matching funds, states receive CSE incentive payments from the federal government.", "States also collect child support on behalf of families receiving TANF assistance to reimburse themselves (and the federal government) for the cost of that assistance to the family.", "In FY2015, the CSE program distributed $28.6 billion in child support collections and served nearly 14.7 million child support cases.", "However, the program still collects only 65% of current child support obligations for which it has responsibility (20% if payments on past-due child support are taken into account), and collects payments for only 61% of its caseload.", "In FY2015, total CSE expenditures amounted to $5.7 billion. On average, in FY2015 the CSE program collected $5.26 in child support payments for each $1 spent on the program." ], "parent_pair_index": [ -1, 0, -1, 0, -1, -1, 3, -1, -1, -1 ], "summary_paragraph_index": [ 2, 2, 3, 3, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-12-768	{ "title": [ "Background", "Microsimulation Models Predicted Little Near-Term Change in Employer- Sponsored Coverage, but Other Studies and Employer Surveys Varied More Widely", "Microsimulation Studies Predicted Small Near-Term Changes to Employer- Sponsored Coverage", "Estimates from Studies Using Other Analytic Approaches Varied More Widely", "Employer Surveys Varied Widely in Their Estimates of PPACA’s Effect on Employer-Sponsored Coverage", "Estimates of Longer-Term Effects of PPACA on Employer-Sponsored Coverage Were Fewer and Less Certain", "Studies Predicted Larger Decreases in Employer- Sponsored Coverage without the Individual Mandate", "Differences in Key Assumptions and Consideration of PPACA Provisions Likely Contributed to Variation in Estimates among Studies Using Similar Techniques", "Differences in Assumptions, Time Frames of Projections, and Assessment of the Individual Mandate Likely Contributed to Small Variation in Estimates from Microsimulation Studies", "Differences in Study Methodologies and Consideration of PPACA Provisions Likely Led to Wider Variation in Estimates from Studies Using Other Analytic Approaches", "Variation in Estimates from Employer Surveys Was Likely Due to Differences in Survey Methods and Assumptions about Respondent Knowledge of PPACA Provisions", "Employer Surveys Suggest That PPACA May Have a Larger Effect on Small Employers and Certain Employee Populations and Prompt Some Employers to Change Benefit Designs", "PPACA May Affect Small Employers and Certain Types of Employees More Than Others", "PPACA May Also Prompt Employers to Change Health Plan Benefit Design", "External Comments", "Appendix I: Studies Reviewed by GAO", "Microsimulation Models", "Other Analytic Approaches", "Employer Surveys", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Employer-sponsored health coverage is the leading source of health coverage in the United States. In 2010, 59 percent of Americans under age 65 received health coverage through employer-sponsored group health plans, and an additional 7 percent received coverage through health coverage purchased directly from health insurers in the individual market. Employers may provide coverage either by purchasing coverage from a health insurer (fully insured plans) or by funding their own health coverage (self-insured plans). Small employers typically offer fully insured plans, while large employers are more likely to be self- insured. Small employers are also less likely to offer their employees health coverage compared to large employers, citing the cost of coverage as a key reason. Additionally, firms with more high-wage workers are more likely to offer coverage to their employees than those with more low- wage workers. Rates of employer-sponsored health coverage have declined in the last decade—from 68 percent in 2001 to 60 percent in 2011. Most of this decline occurred by 2005 and was driven primarily by a decline in the number of very small employers with three to nine employees offering health coverage. In addition, employee participation in employer-sponsored coverage has also decreased—from 70 percent in 2001 to 65 percent in 2011, in part because of a decline in employee eligibility for the coverage. Further, employees’ share of the cost of coverage is increasing faster than employers’ share—the employee contribution to the average annual premium for family coverage increased 131 percent from 2001 to 2011 compared to a 108 percent increase in the employer contribution for the same time period.\nPPACA contains a number of provisions that may affect whether employers offer health coverage. These provisions include an “individual mandate,” or the requirement that individuals—subject to certain exceptions—obtain minimum essential health coverage or pay a tax penalty starting in 2014; the establishment of health insurance exchanges in 2014— essentially, health insurance marketplaces in which individuals and small businesses can compare, select, and purchase health coverage from among participating carriers; health insurance market reforms including a requirement that prevents health plans and insurers in the individual and small group markets from denying coverage or charging higher premiums because of pre- existing conditions or medical history, and that limits the extent to which premiums may vary; premium subsidies—which provide sliding scale tax credits starting in 2014 to limit premium costs for individuals and families with incomes up to 400 percent of the federal poverty level—for purchasing individual coverage through an exchange; penalties for certain large employers that do not offer qualified health coverage and have at least one full-time employee receiving a subsidy (in the form of a premium tax credit or cost-sharing reduction) in a plan offered through an exchange starting in 2014, or for certain large employers that provide access to coverage but do not meet certain requirements for affordability; tax credits for certain small businesses toward a share of their employee health coverage beginning in 2010; a 40 percent excise tax on certain employer-sponsored health plans whose costs exceed a certain threshold in 2018; a state Medicaid expansion effective in 2014 for individuals who are under 65 years old, have incomes at or below 133 percent of the federal poverty level, and meet other specified criteria.\nResearchers have used various types of studies to predict the effect of PPACA on employer-sponsored health insurance, including microsimulation models, other analytic approaches, and employer surveys. Microsimulation models—commonly used statistical models— generally use published survey data to construct a base data set of individuals, families, and employers, and then attempt to predict responses to public policy changes by drawing from the best available evidence in health economics literature and, in some cases, existing empirical evidence from related or smaller-scale policy changes (such as prior changes in Medicaid eligibility and state insurance reform efforts). The models systematically estimate the combined effect of multiple provisions in legislation, such as PPACA, based on this previous research and empirical data. For example, with respect to PPACA, models can provide an estimate of employer-sponsored coverage that considers both the number of employers that may discontinue offering coverage and the number that may begin to offer coverage. Models can also incorporate into their analyses estimates of the number of employees who may take up or refuse offers of such coverage. Model limitations include their dependence upon multiple types of data from multiple sources of varying quality and that they must rely on many assumptions. The impact of past policy changes also may not necessarily be predictive of the impact of future changes, and there is little information available with which to assess the validity of their projections.analytic approaches to model behavior in response to policy changes Studies we reviewed using other varied in their methods, ranging from a cost-benefit comparison to an analysis that used survey data and economic theory to predict behavior.\nEmployer surveys have also been cited to illustrate the potential impact of PPACA on employer health benefits. Unlike microsimulation models, surveys have the advantage of reflecting the actual, current perspectives of employers, and they can also assess how employers’ behavior may be affected by the actions of other employers of similar size and industry. However, they have limitations as a predictive tool. For example, most surveys relating to PPACA asked respondents about employers’ likelihood of dropping coverage, rather than the likelihood of newly offering coverage as a result of PPACA or the number of employees that may take up or refuse such coverage. Thus, they may not illustrate the net effect of PPACA on employer-sponsored coverage. Further, the validity of their results may be limited by the knowledge of survey respondents. Experts have noted that employer surveys tend to be answered by human resource officials with varying levels of knowledge about PPACA. In addition, researchers note that survey responses do not require careful analysis or extensive deliberation and have no consequences for the responders. Therefore, surveys are more limited in their ability to systematically assess the combined effect of multiple PPACA provisions—that is, they cannot ensure that respondents consider (or have the ability to consider) all of the relevant provisions when deciding how to respond. Moreover, the results of the sample of employers surveyed may not always be generalizable to all employers, depending on the number of respondents and other aspects of the survey methodology.", "Microsimulation studies generally predicted little change in employer- sponsored health coverage in the near term, but results of studies using other analytic approaches and employer surveys varied more widely. Few studies provided longer-term predictions of the prevalence of employer- sponsored coverage, and those that did so expressed uncertainty about their estimates. Microsimulation studies that examined the effect of the individual mandate estimated that more people would have employer- sponsored coverage with the mandate in place compared to without the mandate.", "Among the five microsimulation studies we reviewed, estimates of PPACA’s net effect on changes in the rates of employer-sponsored coverage ranged in the near term from a decrease of 2.5 percent to an In increase of 2.7 percent in the number of individuals with coverage.particular, three projected an increase in the number of individuals with coverage. The Centers for Medicare & Medicaid (CMS) estimated a net increase of about 0.1 percent (200,000 individuals), and the studies by the RAND Corporation (RAND) and the Urban Institute/Robert Wood Johnson Foundation (RWJF) each projected a net increase of 2.7 percent affecting about 4 million individuals. The remaining two studies projected a decrease: the Congressional Budget Office (CBO) projected a 2.5 percent net decrease affecting about 4 million individuals, while The Lewin Group projected a net decrease of 1.6 percent affecting about 2 million individuals. (See fig. 1.)\nTwo of the studies also indicated that the majority of individuals who lose employer-sponsored coverage would transition to other sources of coverage. For example, the RAND study indicated that out of the 6.5 million individuals it projected to lose employer-sponsored coverage after implementation of PPACA, 1.9 million would enroll in individual coverage through an exchange and 3.5 million would enroll in Medicaid. The remaining 1.1 million individuals would become uninsured.", "Estimates from the three studies we reviewed that used other analytic approaches varied more widely than those from the microsimulation models. Two of the three studies predicted small near-term changes in the number of individuals with employer-sponsored coverage. One of the studies, published by the Employment Policies Institute (EPI), used a modeling approach that predicted behavioral responses of all workers in a nationally representative sample to three main provisions of PPACA. This study projected a net increase of about 6 percent, or 4 million, in the number of individuals with employer-sponsored coverage. Another study by Booz & Company Inc. that used a combination of surveys, interviews, focus groups, and modeling projected a net decrease of 2 to 3 percent, or from 3 million to 4 million individuals. The third study, conducted by the American Action Forum, used a decision-making model based on cost-benefit comparisons to project a larger decrease of up to 35 million in the number of people with employer-sponsored coverage.\nHowever, this study did not consider whether employers may newly offer coverage or estimate the number of individuals that would be newly covered as a result.", "Employer surveys varied widely in their estimates of employers’ responses to PPACA. Sixteen of the 19 surveys we reviewed reported estimates of employers dropping coverage for employees in general (rather than only for certain types of employees). Among these 16 surveys, 11 indicated that 10 percent or fewer of employers were likely to drop coverage in the near term, and 5 indicated that from 11 to 20 percent were likely to drop coverage in the near term. The estimates ranged from 2 to 20 percent across these 16 surveys. (See table 1.) Because these surveys were typically of employers currently offering coverage, most did not reflect the number of employers that may be likely to begin offering coverage under PPACA.\nA higher proportion of employers indicated that they were “somewhat likely” to drop coverage, among the 6 surveys that also provided this response option. Among these surveys, 2 (the National Federation of Independent Businesses (NFIB) and Towers Watson) indicated that 10 percent or fewer of employers were “somewhat likely” to drop coverage, 2 surveys (Willis and Mercer) indicated that 11 to 20 percent of employers had such plans, and the remaining 2 surveys (McKinsey & Co. (McKinsey) and PricewaterhouseCoopers) indicated that over 20 percent had such plans. In addition, two surveys asked respondents how their decisions to drop or offer coverage may be affected by other employers’ actions. In one survey 78 percent of employers indicated that they were planning to follow the lead of other employers. In the other survey 25 percent of employers indicated that it would have a “major impact” on their decision if “one or a few large, bellwether employers” or one of their major competitors dropped coverage for a majority or all of their employees.\nThree of the 16 surveys that also examined employer plans to newly offer coverage as a result of PPACA indicated that from 1 and 28 percent of employers were likely to do so. The NFIB survey indicated that about 1 percent of the employers surveyed were likely to begin offering coverage as a result of PPACA; the McKinsey survey indicated that 13 percent of employers with 2 to 49 employees, and 14 percent of employers with 50 to 499 employees, were likely to begin offering coverage. In addition, the Kaiser Family Foundation/Health Research & Educational Trust survey that examined employer plans to only newly offer (but not drop) coverage indicated that 15 percent of small employers (fewer than 50 employees) that did not offer health coverage and were aware of the small business tax credit were planning to add coverage as a result of it; and the Market Strategies International survey indicated that 28 percent of employers not offering health coverage would begin to do so.", "Among the studies we reviewed, only two microsimulation studies examined the longer-term effects of PPACA on employer-sponsored coverage. CMS projected that the number of individuals with employer- sponsored coverage would decrease by approximately 1 percent relative to estimates without PPACA in each year from 2017 through 2019, and that this annual gap would accelerate after that as a result of the high- cost plan excise tax. CBO projected a drop of about 3 percent, slightly larger than its near-term estimate, in employer-sponsored coverage in each year from 2017 through 2019, relative to estimates without PPACA in each year, and projected that this annual gap would decrease thereafter. The studies also noted that there is a large amount of uncertainty regarding how employers and employees will respond to policy changes as sweeping and complex as those included in PPACA, and some researchers indicated that long-term predictions of the effects of PPACA are particularly uncertain.", "Four of the five microsimulation studies examined the effect of the individual mandate and predicted that fewer individuals would have employer-sponsored coverage without the mandate as compared to with the mandate. These studies separately estimated the effect of PPACA both with and without the individual mandate. The estimates ranged from about 2 million to 6 million fewer people covered without the mandate compared to with the mandate. (See fig. 2.)", "Certain differences in key assumptions may have contributed to some variation in the estimates from the microsimulation studies we reviewed. Variation in estimates from the studies that used other analytic approaches was likely caused in part by differences in their methodologies and the extent of their incorporation of PPACA provisions into their analyses. Variation in estimates from the employer surveys was likely due in part to differences in survey methods, respondents, and the manner in which PPACA provisions were referenced throughout the survey.", "Certain differences in factors, such as underlying assumptions about employer and employee decision making, may have contributed to some variation in the estimates, although the five microsimulation studies we reviewed shared methodological similarities and therefore generated relatively similar estimates of changes to employer-sponsored coverage. The studies generally used similar modeling techniques and many of the same data sets to calculate their estimates. Specifically, to construct baseline distributions of coverage in the United States and “synthetic” firms intended to reflect the demographics of employees in actual firms, the studies relied on data sets such as the Medical Expenditure Panel Survey (MEPS), the Current Population Survey (CPS), and the Survey of Income and Program Participation (SIPP). The studies also made certain common assumptions. For instance, most assumed, as illustrated by evidence in the literature, that employers electing to drop coverage for their employees would increase wages in order to compensate for the loss of health benefits, and certain studies noted that the increased wages would factor in the tax exclusion of health benefits.\nHowever, another researcher has noted that employers’ decisions to increase employees’ wages in lieu of offering health coverage will depend on a number of factors—most important the strength of the economy and the labor market. Further, most studies assumed that employers generally make decisions about health coverage based on their entire workforce and would not offer health benefits to some, but not all, employees. For example, CBO noted that there are legal and economic obstacles to offering health benefits to only certain employees, including a prohibition on discrimination in favor of highly compensated individuals. Such similar assumptions likely contributed to the consistency of the studies’ estimates, which suggested that PPACA would result in relatively small changes to employer-sponsored coverage in the near term.\nHowever, differences in underlying assumptions about employer and employee responses to PPACA, the time frames of projections, and assessment of the effectiveness of PPACA’s individual mandate likely contributed to some variation in the estimates.\nModeling employer and employee responses to PPACA: The studies generally used one of two different approaches to model employer and employee responses to PPACA. The CBO study drew from available evidence in health economics literature about historical responses to premium changes in order to model the future decisions of employers and employees in response to PPACA. The RAND and Urban Institute/RWJF studies assumed that employers and employees would make optimal choices by weighing the financial costs and benefits of available options, taking into account factors such as the PPACA-imposed individual and employer penalties for not obtaining or offering coverage. The Lewin Group study used a combination of the two approaches.\nTime frames of the estimates: While each microsimulation model estimated the effects of PPACA in a certain year as compared to coverage without PPACA in a given year, the models varied in their time frame of focus. The Lewin Group and Urban Institute/RWJF studies we reviewed simulated the effects of PPACA in 2011 (assuming implementation of key PPACA provisions). However, the RAND study simulated the effects of PPACA in 2016, and the CBO and CMS studies simulated the effects of PPACA over a range of years (2012 through 2022 and 2010 through 2019, respectively).\nCompliance with the individual mandate: Models varied in their assessment of the degree of compliance with PPACA’s individual mandate. The CMS and Urban Institute/RWJF studies assumed compliance would be driven by both the financial incentive of a penalty as well as the desire to obey a statutory mandate. Similarly, the CBO study assumed that compliance with the mandate would be high, even among individuals exempt from penalties, because of a natural preference for complying with the law. CBO also assumed that the penalties for noncompliance may be imperfectly enforced. However, the RAND study assumed that penalties for noncompliance would be perfectly enforced, but did not assume that the mandate would increase compliance among individuals exempt from penalties. Similarly The Lewin Group also assumed a lower compliance with the individual mandate than CBO, in part because there are no legal consequences to going without coverage beyond the penalty.", "Estimates from the three studies that used other analytic approaches varied more widely likely in part because of differences in the studies’ methodologies as well as their consideration of PPACA provisions. For example, the EPI study, which predicted a net increase of 4 million in the number of individuals with employer-sponsored coverage, incorporated some of the statistical modeling techniques and underlying theory of employer and employee behavior used by the microsimulation models, and was therefore able to more systematically examine the combined effects of PPACA’s provisions. The American Action Forum study, which predicted that up to 35 million individuals may lose employer- sponsored coverage, used a cost-benefit comparison, examining individual employers’ financial trade-offs between offering coverage and dropping coverage for employees of different income levels and paying the employer penalties and increasing employees’ wages to compensate. The study suggested that PPACA provides strong financial incentives for employers to drop coverage for many of their low-income employees, but that there are few incentives to drop coverage for higher-income employees. Certain researchers have noted key limitations of the study, including that it did not take into account the impact of PPACA’s individual mandate, the nonfederal tax advantage of employer-sponsored coverage, the cost of single health coverage plans, and the nondiscrimination rules that may prevent employers from dropping coverage for some, but not all, employees.measure the net effect of PPACA on employer health coverage, thus Additionally, unlike the other two studies, this study did not addressing only those that may drop coverage but not those that may newly offer it. Finally, the Booz and Company Inc. study, which predicted a net decrease of 3 to 4 million in the number of individuals with employer-sponsored coverage, used a combination of interviews, focus groups, surveys, and statistical modeling to derive its estimates. The study estimated the change in employer-sponsored coverage between 2 years—2009 and 2016—but did not separate the effects of PPACA from any changes to employer-sponsored coverage that may occur between these years because of factors unrelated to PPACA, such as a continuation of the overall declining rates of employer-sponsored coverage since the last decade.", "Varying estimates from the 16 employer surveys of the extent to which employers were likely to drop health coverage may have stemmed from differences in sampling techniques, the response rates and number of respondents, the types of employers surveyed, the framing of survey questions, and the manner in which PPACA provisions were referenced throughout the survey.\nSampling techniques and number of respondents: Surveys varied in the methodology used to draw their sample of respondents. Some, such as the Mercer survey, sampled randomly within the national employer population, which helped ensure that results were generalizable to all nonsurveyed employers with similar characteristics. Others, such as the International Foundation of Employee Benefit Plans (IFEBP) survey, used nonrandom sampling techniques, which limited the generalizability of their results. In addition, the number of survey respondents ranged widely, from 104 in the Benfield Research survey to about 2,840 in the Mercer survey, which also could have implications for the generalizability of results.The surveys generally did not publicly disclose their response rates.\nEmployer respondent type: Surveys varied in the type of employers surveyed. Some, such as those conducted by trade groups, were limited to members of the surveying organization. Others were limited to only small or only large employers, or employers within a particular industry, or included a broader mix of small, midsize, and large employers across all types of industries. For example, the NFIB survey included only small employers with 50 or fewer employees, while the majority of respondents to the HighRoads survey were from hospitals and other health care systems. The Mercer and Willis surveys included a wider range of employer sizes and industries. Some surveys, such as the Benfield Research survey, included only self-insured employers, and others, such as the McKinsey survey, included only private sector employers.\nFraming of the survey questions: Surveys varied in the manner in which they asked whether employers were planning to drop health coverage in response to PPACA. For example, the Fidelity Investments (Fidelity) survey reported whether respondents were “seriously thinking about no longer offering health care coverage,” the HR Policy Association survey asked if respondents were giving “serious consideration to discontinuing providing health benefits,” and the NFIB survey asked if employers were “not at all likely” or “not too likely” to “have an employee insurance plan 12 months from now.” In addition, some surveys reported specifically about active employee health plans, while others did not distinguish between active employees and retirees. For example, the Towers Watson survey reported whether respondents planned to “replace health care plans for active employees working 30+ hours per week with a financial subsidy” while the GfK Custom Research North America survey reported whether employers were “very or somewhat likely to drop coverage” without specifying whether this was for active employees or retirees.\nReferencing of PPACA provisions: Surveys varied in their assumptions of respondent knowledge of PPACA provisions. For example, 11 surveys assumed a certain level of respondent awareness of key PPACA provisions and did not specifically refer to the provisions in the phrasing of their questions about plans to drop coverage. However, other surveys phrased their questions in the context of specific PPACA provisions or explicitly asked respondents about their knowledge of the provisions. For example, the PricewaterhouseCoopers survey asked how likely respondents were to “cover employees through state-run health insurance exchange pools,” and the Willis survey asked how likely respondents were to “drop coverage to trigger migration of employees to state-based exchanges.” The McKinsey survey also phrased its questions about discontinuing health coverage in the context of select PPACA provisions and provided additional information to respondents to inform them about the provisions.", "PPACA may affect certain types of employers or employers with certain employee populations more than all employers or employees. Some employers were considering benefit design changes.", "Four of five surveys that examined changes in the prevalence of employer-sponsored coverage by employer size indicated that a greater share of small employers (from 5 to 22 percent) were considering dropping coverage compared to large employers (from 2 to 14 percent) in these surveys. These surveys included Fidelity (22 percent and 14 percent for small and large employers, respectively), McKinsey (9 percent and 5 percent for small and large employers, respectively), and Mercer (5 percent and 2 percent for small and large employers, respectively). One survey (Willis) did not indicate any differences between small and large employers.\nSurveys that examined changes in the prevalence of employer-sponsored coverage for certain types of beneficiaries indicated that these individuals could be more affected than others. Five of the nine surveys that considered the effect on retirees indicated that a higher proportion of employers were considering dropping coverage for retirees compared to all employees in these surveys—between 9 and 20 percent compared to 4 percent and 9 percent, respectively. For example, Mercer indicated that 17 percent and 5 percent of employers were considering dropping coverage for new retirees and all employees, respectively, and Willis indicated that 9 percent and 5 percent of employers were considering dropping coverage for retirees and all employees, respectively. Two of the four remaining surveys (PricewaterhouseCoopers and IFEBP) indicated no differences between rates of employers dropping coverage for retirees and for all employees, and the remaining two only examined the effect of PPACA on subsets of employees, but not all employees. In addition, two surveys that examined the effect of PPACA on spouses and dependents indicated that between 12 and 15 percent of employers were considering dropping health coverage for spouses and dependents compared to a lower proportion for all employees. For example, McKinsey indicated that 15 percent and 9 percent of employers were definitely considering dropping coverage for spouses/dependents and all employees, respectively.", "Several of the 19 employer surveys that we reviewed also indicated that PPACA may prompt employers to consider key changes to benefit designs that will generally result in greater employee cost for health insurance.\nIncreased employee cost sharing: The 9 surveys that examined benefit design changes indicated that from 16 to 73 percent of employers were considering increasing employees’ share of the cost of coverage, for example, through increased premiums, deductibles, or co-payments. For example, the IFEBP survey indicated that about 40 percent of employers had increased or were planning to increase employee premium sharing, and about 29 percent had increased or planned on increasing in-network deductibles. Similarly, the PricewaterhouseCoopers survey indicated that 61 percent planned to increase employee premium sharing, and 57 percent planned to increase employee cost sharing through other benefit design changes.\nIn addition, the 7 surveys that examined employer responses to the high-cost excise tax effective under PPACA in 2018 indicated that from 11 to 88 percent of employers had plans to take steps to avoid paying the tax; in 5 of these surveys, employers planned to redesign benefits and in 2 surveys employers had not identified specific strategies but planned to take steps. For example, the Aon-Hewitt survey indicated that 25 percent of employers anticipated changing their benefits to reduce plan cost, while the Willis survey indicated that 22 percent planned to increase deductibles or co-payments to avoid the tax.\nUse of account-based plans: The 9 surveys that examined employer plans to offer account based plans, such as high-deductible health plans (HDHP), consumer-directed health plans (CDHP), or health savings accounts indicated that from 17 to 73 percent of employers either had plans to offer such plans or saw the plans as attractive options for providing health coverage. For example, the Benfield Research survey indicated that about two-thirds of employers planned to offer a CDHP by 2015, and the Towers Watson survey indicated that 17 percent planned to start offering HDHPs in 2013 or 2014, bringing the total share of employers with HDHPs up to 74 percent.\nMove to self-insurance: Two of the 3 surveys that examined employers potentially becoming self-insured in response to PPACA indicated that from 12 to 52 percent were considering doing so, and the remaining survey indicated that 13 percent of employers reported increasing their consideration of such a move in response to PPACA. For example, the IFEBP survey indicated that about 52 percent of employers were considering such a move, compared to only about 6 percent in a prior year’s survey.", "We provided a draft of this report to two researchers with expertise in employee health benefits issues. They agreed with our report and provided suggestions and technical comments, which we incorporated as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send a copy to the Secretary of Health and Human Services. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "We reviewed the 27 studies listed below that contained original numerical estimates of the effect of the Patient Protection and Affordable Care Act (PPACA) on the prevalence of employer-sponsored coverage—5 based on microsimulation models, 3 based on other analytic approaches, and 19 based on employer surveys.", "1. Centers for Medicare & Medicaid Services.\nFoster, R. S., Centers for Medicare & Medicaid Services Office of the Actuary. Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended. Baltimore, Md.: April 2010. 2. Congressional Budget Office (CBO).\nCBO and JCT’s Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance. Washington, D.C.: March 2012.\nUpdated Estimates for the Insurance Coverage Provisions of the Affordable Care Act. Washington, D.C.: March 2012.\nBanthin, J. Effects of Eliminating the Individual Mandate to Obtain Health Insurance. Presentation at Bloomberg Government/Rand Corporation event. Washington, D.C.: March 2012.\nElmendorf, D. W. CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010. Testimony before the Subcommittee on Health, Committee on Energy and Commerce, House of Representatives. Washington, D.C.: March 2011.\nH.R. 4872, Reconciliation Act of 2010 (Final Health Care Legislation). Washington, D.C.: March 2010. 3. The Lewin Group.\nSheils, J. F. and R. Haught. “Without the Individual Mandate, the Affordable Care Act Would Still Cover 23 Million; Premiums Would Rise Less Than Predicted.” Health Affairs, vol. 30, no. 11 (2011).\nPatient Protection and Affordable Care Act (PPACA): Long Term Costs for Governments, Employers, Families and Providers. Staff Working Paper # 11. Falls Church, Va.: 2010. 4. RAND Corporation.\nEibner, C. and C. C. Price. The Effect of the Affordable Care Act on Enrollment and Premiums, With and Without the Individual Mandate. Santa Monica, Calif.: 2012.\nEibner, C. et al. Establishing State Health Insurance Exchanges: Implications for Health Insurance Enrollment, Spending, and Small Business. Santa Monica, Calif.: 2010. 5. The Urban Institute/Robert Wood Johnson Foundation.\nBuettgens, M. and C. Carroll. Eliminating the Individual Mandate: Effects on Premiums Coverage, and Uncompensated Care. Washington, D.C., and Princeton, N.J.: January 2012.\nGarrett, B. and M. Buettgens. Employer-Sponsored Insurance under Health Reform: Reports of Its Demise Are Premature. Washington, D.C., and Princeton, N.J.: January 2011.", "6. Ahlquist, G. D., P. F. Borromeo, and S. B. Saxena. The Future of Health Insurance: Demise of Employer-Sponsored Coverage Greatly Exaggerated. Booz & Company Inc. 2011. 7. Burkhauser, R. V., S. Lyons, and K. Simon. An Offer You Can’t Refuse: Estimating the Coverage Efffects of the 2010 Affordable Care Act. Washington, D.C.: Employment Policies Institute, July 2011.\nBurkhauser, R. V., S. Lyons, and K. Simon. The Importance of the Meaning and Measurement of “Affordable” in the Affordable Care Act. Working Paper # 17279, National Bureau of Economic Research. Cambridge, Mass.: August 2011. 8. Holtz-Eakin, D. and C. Smith. Labor Markets and Health Care Reform: New Results. American Action Forum. Washington, D.C.: May 2010.", "9. Aon Hewitt. Employer Reaction to Health Care Reform: Retiree Strategy Survey. Lincolnshire, Ill.: 2011. 10. Benfield Research. Special Report: Employer Market Healthcare Reform Research Summary. St. Louis, Mo.: 2011. 11. Ceridian Health Care Compass. “Health Care Reform Presents New Challenges, Choices to U.S. Employers.” Issue 21. Cites findings from Ceridian’s Health Care Compass reader poll, July 2011. Accessed February 1, 2012. http://www.ceridian.com/employee_benefits_article/1,6266,15766- 79463,00.html. 12. Fidelity Investments. Fidelity Investments Survey Finds Majority of Employers Rethinking Health Care Strategy Post Health Care Reform. Boston, Mass.: July 2010. Accessed March 6, 2012. http://www.fidelity.com/inside-fidelity/employer-services/fidelity- survey-finds-majority-of-employers-rethinking-health-care-strategy- post-health-care-reform. 13. GfK Custom Research North America. Employers Skeptical of Health Reform, But Few Project Dropping Health Insurance Coverage.” New York, N.Y.: December 2011. Accessed March 29, 2012. http://www.gfkamerica.com/newsroom/press_releases/single_sites/00 9103/index.en.html. 14. HighRoads. “HighRoads Study Shows Employers Will Not Eliminate Benefits Coverage Due to Health Care Reform.” December 2011. Accessed February 1, 2012. http://newsroom.highroads.com/hr- compliance-connection/highroads-study-shows-employers-will-not- eliminate-benefits-coverage-due-to-health-care-reform. 15. HR Policy Association. 2011 Annual Chief Human Resource Officer Survey. Washington, D.C. 2010 Summer Chief Human Resource Officer Survey: Questions on the New Health Care Law. Washington, D.C. 16. International Foundation of Employee Benefit Plans.\nHealth Care Reform: Employer Actions One Year Later; Survey Results: May 2011. Brookfield, Wis.: 2011.\nHealth Care Reform: What Employers Are Considering; Survey Results: May 2010. Brookfield, Wis.: 2010. 17. Kaiser Family Foundation and Health Research & Education Trust. Employer Health Benefits 2011 Annual Survey. Menlo Park, Calif., and Chicago, Ill.: September 2011. 18. Lockton Companies, LLC. Employer Health Reform Survey Results, June 2011. Kansas City, Mo.: 2011. 19. Market Strategies International. Many Companies Intend to Drop Employer Coverage in 2014 as Health Care Reform Takes Full Effect. Livonia, Mich.: January 2011. Accessed May 1, 2012. http://www.marketstrategies.com/news/1902/1/Many-Companies- Intend-to-Drop-Employee-Coverage-in-2014-as-Health-Care-Reform- Takes-Full-Effect.aspx. 20. McKinsey & Company. How US Health Care Reform Will Affect Employee Benefits. 2011.\n21. Mercer, LLC.\nNational Survey of Employer-Sponsored Health Plans: 2011 Survey Report. New York, N.Y.: 2012.\nNational Survey of Employer-Sponsored Health Plans: 2010 Survey Report. New York, N.Y.: 2011. 22. Midwest Business Group on Health. Financial Impact of Health Reform on Employer Benefits Not as Significant as Anticipated. Chicago, Ill.: March 2012. Accessed March 29, 2012. http://www.mbgh.org/mbgh/news/2012pressreleases/go.aspx?navigati onkey=a4956928-cca2-495a-94fc-ed56ce991fcd. 23. National Business Group on Health.\nLarge Employers’ 2011 Health Plan Design Changes. Washington, D.C.: 2010.\nMajority of Employers Revamping Health Benefit Programs for 2012, National Business Group on Health Survey Finds. Washington, D.C.: August 2011. Accessed January 1, 2012. http://www.wbgh.org/pressrelease.cfm?ID=179. 24. National Federation of Independent Business. Small Business and Health Insurance: One Year After Enactment of PPACA. Washington, D.C.: 2011. 25. PricewaterhouseCoopers LLP. Health and Well-Being Touchstone Survey Results, May 2011. New York, N.Y.: May 2011. 26. Towers Watson.\nHealth Care Changes Ahead: Survey Report. New York, N.Y.: October 2011.\nHealth Care Reform: Looming Fears Mask Unprecedented Employer Opportunities To Mitigate Costs, Risk, and Reset Total Rewards. New York, N.Y.: May 2010. 27. Willis Group Holdings plc.\nWillis. The Health Care Reform Survey, 2011-2012. New York, N.Y.: 2011-2012.\nDiamond Management Technology Consultants and Willis North America. The Health Care Reform Survey, 2010. New York, N.Y.: 2010.", "", "", "In addition to the contact named above, Randy DiRosa (Assistant Director), Iola D’Souza, Yesook Merrill, Laurie Pachter, and Priyanka Sethi made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 1, 1, 2, 2, 2, 1, 2, 2 ], "alignment": [ "h0_full h3_full h4_full", "h0_title", "h0_full", "", "h0_full", "", "h0_full", "h4_title h3_title h1_full", "h1_full", "h3_full h4_full", "h1_full", "h2_title", "h2_full", "h2_full", "h4_full", "h0_full h4_full", "", "", "", "", "", "" ] }	{ "question": [ "What did the GAO conclude from their studies of the PPACA?", "What estimates did the study provide about people being impacted by employee sponsored coverage?", "Based on the studies, what is the expected drop of coverage by employers?", "What did two of the studies indicate regarding individuals who lose employer-sponsored coverage?", "What long term predictions of prevalence of employer sponsored coverage was made?", "How are the employer surveys different in their results from the microsimulation studies?", "What likely causes variation in estimations from the five different studies?", "What caused the variations in the studies?", "What caused the variations in the surveys?", "How did references to PPACA cause variation?", "What did the surveys indicate about the effect of small employers?", "How were small employers likely to react to PPACA?", "What other changes were predicted?", "How has employer health coverage changed in the past decade?", "How will PPACA influence employers willingness to offer coverage?", "What research is being done to assess this?", "What did GAO review?", "How did the GAO conduct these reviews?", "What is the use of microsimulation models?", "What information is being drawn from surveys?" ], "summary": [ "The five studies GAO reviewed that used microsimulation models to estimate the effects of the Patient Protection and Affordable Care Act (PPACA) on employer-sponsored coverage generally predicted little change in prevalence in the near term, while results of employer surveys varied more widely.", "The five microsimulation study estimates ranged from a net decrease of 2.5 percent to a net increase of 2.7 percent in the total number of individuals with employer-sponsored coverage within the first 2 years of implementation of key PPACA provisions, affecting up to about 4 million individuals.", "Among the 19 surveys, 16 reported estimates of employers dropping coverage for all employee types. Among these 16, 11 indicated that 10 percent or fewer employers were likely to drop coverage in the near term, but estimates ranged from 2 to 20 percent.", "Two of these studies also indicated that the majority of individuals losing employer-sponsored coverage would transition to other sources of coverage.", "Longer-term predictions of prevalence of employer-sponsored coverage were fewer and more uncertain, and four microsimulation studies estimated that from about 2 million to 6 million fewer individuals would have employer-sponsored coverage in the absence of the individual mandate compared to with the mandate.", "In contrast to the microsimulation studies, which estimate the net effect on individuals, most employer surveys measure the percentage of employers that may drop coverage in response to PPACA.", "Differences in key assumptions and consideration of PPACA provisions likely contributed to some variation among estimates from the five microsimulation studies and the 16 employer surveys.", "Variation among the microsimulation studies may have stemmed from differences in assumptions about employer and employee decision making, the time frames of the estimates, and assessments of potential compliance with the individual mandate.", "Variation among the employer surveys may be related to differences in survey sampling techniques, the number and types of employer respondents, and the framing of survey questions.", "Also, some referred to specific PPACA provisions or provided specific information about provisions to respondents, while others did not.", "Some of the 19 employer surveys indicated that PPACA may have a larger effect on small employers and certain populations and may prompt some employers to change benefit designs.", "For example, 4 surveys found that smaller employers were more likely than other employers to stop offering health coverage in response to PPACA, and 5 found that employers in general were more likely to drop coverage for retirees than for all employees.", "Nine surveys also indicated that employers are considering key changes to benefit design, some of which may result in greater employee cost for health coverage.", "The share of employers offering health coverage has generally declined in the last decade.", "Researchers believe that certain provisions of PPACA could affect employers’ future willingness to offer health coverage, such as the availability of subsidized coverage through new health insurance marketplaces called “exchanges” and an “individual mandate,” which will require most people to obtain health coverage or pay a tax penalty.", "Researchers have provided various estimates of the effect PPACA may have on employer-sponsored coverage.", "GAO examined (1) estimates of the effect of PPACA on the extent of employer-sponsored coverage; (2) factors that may contribute to the variation in estimates; and (3) how estimates of coverage vary by the types of employers and employees that may be affected, as well as other changes employers may be considering to the health benefits they offer.", "GAO reviewed studies published from January 1, 2009, through March 30, 2012 containing an original numerical estimate of the prevalence of employer-sponsored coverage at the national level.", "Microsimulation models can systematically estimate the combined effects of multiple PPACA provisions in terms of both gains and losses of coverage; their results are based on multiple data sets and assumptions.", "Surveys reflect employer perspectives; they have limits as a predictive tool in part based on varied survey methodologies and respondent knowledge of PPACA." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, -1, 0, 0, 2, -1, 0, 1, -1, -1, 1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 0, 0, 0, 1, 1, 1, 1 ] }
GAO_GAO-14-310	{ "title": [ "Background", "DOL Oversight", "Managed Accounts as Qualified Default Investment Alternatives and Opt-in Services", "Disclosure Regulations", "Roles and Fiduciary Obligations Under ERISA", "Providers Structure Managed Accounts Differently, which Can Harm Participants", "Managed Account Providers Vary Their Services", "Investment Options", "Asset Allocation Strategies", "Rebalancing Approaches and Time Frames", "Providers Vary Their Fiduciary Roles and Some May Offer Less Liability Protection for Sponsors", "Some Providers Offer Additional Services That Could Lead to Conflicts of Interest, which DOL Has Not Addressed", "Managed Accounts Offer Advantages for Some Participants, But Fees and Lack of Standardized Reporting Requirements from DOL Can Offset These Advantages", "Various Industry Representatives Report that Managed Accounts Can Provide a Number of Advantages for Participants", "Increase Diversification", "Encourage Larger Contributions", "Improve Access to Retirement Planning Information", "Fees for Managed Accounts Can Be a Disadvantage for Participants", "Lack of a Requirement for Performance and Benchmarking Information Inhibits Participant Evaluation of Managed Accounts", "Absent Guidance, Sponsors Face Challenges in Selecting and Overseeing Managed Account Providers", "DOL Has Not Addressed Sponsor Access to Managed Account Provider Options", "Sponsors Lack Sufficient Guidance from DOL to Inform Their Selection and Oversight of Managed Account Providers", "Inconsistent Performance Information Allowed by DOL Hinders Sponsor Evaluation of Managed Accounts", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Case Studies of Managed Account Providers", "Illustrations of Fee and Return Data Over Time", "Semi-Structured Interviews with Plan Sponsors", "Sponsor Selection", "Participant Survey", "Appendix II: Methodology and Additional Results from Hypothetical Scenarios", "Participant and Plan Scenarios", "Provider Responses", "Additional Results", "Appendix III: Additional Performance Information from One Record Keeper’s Report", "Appendix IV: Comments from the Department of Labor", "Appendix V: GAO Contact and Staff Acknowledgments", "Contact", "Staff Acknowledgments" ], "paragraphs": [ "Managed Accounts in Other Workplace Defined Contribution Plans and Individual Retirement Accounts (IRAs) As managed accounts have gained popularity in 401(k) plans, there are indications that they may also be gaining popularity in government and non-profit workplace retirement savings plans, commonly referred to as 457 or 403(b) plans. Many of the providers we spoke to that offer managed accounts to 401(k) plans also offer services to other plans like these. In addition, some providers are starting to offer managed accounts in IRAs, and in particular rollover IRAs—when participants separate from their employer they may decide to roll their funds into an IRA. One of these providers noted that it is easier to engage participants who use managed accounts through products such as IRAs, and there is more flexibility with investment options, even though the provider’s marketing costs may be higher.\nUnder Title I of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, employers are permitted to sponsor defined contribution plans in which an employee’s retirement savings are based on contributions and the performance of the investments in individual accounts. Typically, 401(k) plans—the predominant type of defined contribution plan in the United States—allow employees who participate in the plan to specify the size of their contributions and direct their assets to one or more investments among the options offered within the plan. Investment options generally include mutual funds, stable value funds, company stock, and money market funds. To help participants make optimal investment choices, an increasing number of plans are offering professionally managed allocations—including managed accounts—in their 401(k) plan lineups.\nManaged accounts are investment services under which providers make investment decisions for specific participants to allocate their retirement savings among a mix of assets they have determined to be appropriate for the participant based on their personal information. As shown in figure 1, managed accounts were first offered to 401(k) plans around 1990, but most providers did not start offering them until after 2000.\nManaged accounts differ from other professionally managed allocations, such as target date funds and balanced funds, in several key ways. Target date funds (also known as life cycle funds) are products that determine an asset allocation that would be appropriate for a participant of a certain age or retirement date and adjust that allocation so it becomes more conservative as the fund approaches its intended target date. Target date funds do not place participants into an asset allocation; instead, participants generally self-select into a target date fund they feel is appropriate for them based on the fund’s predetermined glide path that governs asset allocation. Balanced funds are products that generally invest in a fixed mix of assets (e.g., 60 percent equity and 40 percent fixed income assets). While target date funds manage the fund to reach a target date, managed accounts may consider other, more personalized factors such as a participant’s stated risk tolerance, even though they are not required to do so. As shown in figure 2, managed accounts may offer higher levels of personalization than other types of professionally managed allocations.\nManaged accounts are generally considered to be an investment service—not one of the plan’s investment options—while target date funds are considered to be investment options. In the latter, participants can invest all or a portion of their 401(k) plan contributions in a target date fund, but generally cannot directly invest in a managed account. Instead, the role of the participant is to enroll in the managed account service, or be defaulted into it, generally relinquishing their ability to make investment decisions unless they disenroll from, or opt out of, the managed account. As shown in figure 3, managed account providers decide how to invest contributions, generally among the investment options available in a 401(k) plan, and then manage these investments over time to help participants reach their retirement savings goals. By comparison, participants not enrolled in a managed account have to make their own decisions about how to invest their 401(k) plan contributions.", "DOL’s Employee Benefits Security Administration (EBSA) is the primary agency through which Title I of ERISA is enforced to protect private pension plan participants and beneficiaries from the misuse or theft of their pension assets. To carry out its responsibilities, EBSA issues regulations and guidance; investigates plan sponsors, fiduciaries, and service providers; seeks appropriate remedies to correct violations of the law; and pursues litigation when it deems necessary. As part of its mission, DOL is also responsible for assisting and educating plan sponsors to help ensure the retirement security of workers and their families.", "In 2007, DOL designated certain managed accounts as one type of investment that may be eligible as a qualified default investment alternative (QDIA) into which 401(k) plan fiduciaries may default participants who do not provide investment directions with respect to their plan contributions. DOL designated three categories of investments that may be eligible as QDIAs if all requirements of the QDIA regulation have been satisfied—these categories generally include: (1) an investment product or model portfolio that is designed to become more conservative as the participant’s age increases (e.g., a target date or lifecycle fund); (2) an investment product or model portfolio that is designed with a mix of equity and fixed income exposures appropriate for the participants of the plan as a whole (e.g., a balanced fund); and (3) an investment management service that uses investment alternatives available in the plan and is designed to become more conservative as the participant’s age increases (e.g., a managed account). DOL regulations indicate that plan fiduciaries who comply with the QDIA regulation will not be liable for any loss to participants that occurs as a result of the investment of their assets in a QDIA, including investments made through managed account arrangements that satisfy the conditions of the QDIA regulation. However, plan fiduciaries remain responsible for the prudent selection and monitoring of any QDIA offered by the plan. To obtain relief, plan fiduciaries must provide participants with advance notice of the circumstances under which plan contributions or other assets will be invested on their behalf in a QDIA; a description of the QDIA’s investment objectives, risk and return characteristics, and fees and expenses; and the right of participants to opt out of the QDIA, among other things. A 2012 survey of defined contribution plan sponsors by PLANSPONSOR indicated that managed accounts were used as a QDIA less than 5 percent of the time.\nManaged accounts are also offered as opt-in services by over 30 percent of defined contribution plan sponsors. Managed accounts can be offered as both QDIA and opt-in services, allowing the plan sponsor to choose which services to offer their participants. Plan fiduciaries who offer managed account services only to participants who affirmatively elect to use the service (i.e., on an opt-in basis), rather than by default, are not required to comply with the QDIA regulation, although such fiduciaries still are subject to the general fiduciary obligations under ERISA with respect to the selection and monitoring of a managed account service for their plan.", "Plan sponsors, including those who offer managed account services in their 401(k) plans, are required to issue a variety of informational disclosures and notices to plan participants and beneficiaries at enrollment, on a quarterly and annual basis, and when certain triggering events occur. These disclosures—often referred to as participant-level disclosures—when made in accordance with regulatory requirements, help ensure that plan participants have access to the information they need to make informed decisions about their retirement investments. In addition, when a plan sponsor chooses to default participants into managed accounts as a QDIA, the sponsor must inform participants of this decision annually through a number of specific disclosures, based on the plan’s design. The QDIA disclosures, when made in accordance with regulatory requirements, provide relief from certain fiduciary responsibilities for sponsors of 401(k) plans.\nService providers that provide managed account services to a plan may be required to provide certain disclosures about the compensation they will receive to plan sponsors offering a managed account service under different DOL disclosure requirements. These disclosures—often referred to as service provider disclosures—are intended to provide information sufficient for sponsors to make informed decisions when selecting and monitoring service providers for their plans. DOL’s final rule on these disclosures requires service providers to furnish sponsors with information to help them assess the reasonableness of total compensation paid to providers, to identify potential conflicts of interest, and to satisfy other reporting and disclosure requirements under Title I of ERISA, including the regulation governing sponsor’s disclosure to participants.", "Managed account provider roles may differ from those of other plan service providers. As shown in figure 4, when a plan sponsor decides to offer participants a managed account service, other entities may contribute to its implementation and operation.\nSome record keepers and intermediary service providers refer to themselves as “managed account providers” because they make this service available to participants, but they do not ultimately decide how to invest participant contributions. Similarly, even though target date fund managers or collective investment trust managers may select an overall asset allocation strategy and investments to fit that strategy for the funds they offer to 401(k) plan participants, these managers also do not ultimately decide how to invest participant accounts.\nPlan sponsors are typically the named fiduciaries of the plan. Managed account providers and record keepers may also be fiduciaries, depending on their roles and the services they provide. Fiduciaries are required to carry out their responsibilities prudently and solely in the interest of the plan’s participants and beneficiaries. Plan service providers that have investment discretion or provide investment advice about how to invest participant accounts generally may be “3(38) Investment Manager” fiduciaries or “3(21) Investment Adviser” fiduciaries. A 3(38) Investment Manager fiduciary can only be a bank, an insurance company, or a Registered Investment Adviser (RIA). Under ERISA, 3(38) Investment Manager fiduciaries have the power to manage, acquire, or dispose of plan assets, and they acknowledge, in writing, that they are a fiduciary with respect to the plan. In contrast, a 3(21) Investment Adviser fiduciary usually does not have authority to manage, acquire, or dispose of plan assets, but is still a fiduciary because its investment recommendations may exercise some level of influence and control over the investments made by the plan. When managed account services are offered as QDIAs, the managed account provider is generally required to be a 3(38) Investment Manager fiduciary. There is no similar explicit requirement for managed account providers whose services are offered within a plan on an opt-in basis.", "", "Managed account providers vary how they provide services, even though they generally offer the same basic service—initial and ongoing investment management of a 401(k) plan participant’s account based on generally accepted industry methods. The eight providers in our case studies use different investment options, employ varying strategies to develop and adjust asset allocations for participants, incorporate varying types and amounts of participant information, and rebalance participant accounts at different intervals. As a result, participants with similar characteristics in different plans may have differing experiences.", "To develop participant asset allocations, most of the eight providers in our case studies use the investment options chosen by the plan sponsor. By contrast, other providers require plan sponsors that want to offer their managed account to accept a preselected list of investment options from which the provider will determine participant asset allocations, including exchange traded funds or asset classes not typically found in 401(k) plan lineups, such as commodities. Because they are atypical investment options, participants who do not sign up for managed accounts may not be able to access them. Compared to typical 401(k) plan investment options, these atypical investment options may provide broader exposure to certain markets and opportunities to diversify participant retirement assets.", "The eight managed account providers in our case studies generally reported making asset allocation decisions based on modern portfolio theory, which sets a goal of taking enough risk so that participants’ 401(k) account balances may earn large enough returns over time to meet their retirement savings goals, but not so much that their balances could earn lower or even negative returns. Managed account providers generally help participants by constructing portfolios that attempt to provide maximum expected returns with a given level of risk, but their strategies can range from formal to informal. The formal way of determining this type of portfolio is called “mean-variance optimization” (MVO), under which providers plot risk and return characteristics of all combinations of investment options in the plan and choose the portfolio that maximizes expected return for a given level of risk. There are a number of specific techniques that managed account providers can apply to improve the quality and sophistication of asset allocations, including Monte Carlo simulation. However, some providers incorporated less formal ways of achieving a diversified portfolio, such as active management and experience-based methods. The eight providers in our case studies use varying strategies and participant goals to develop and adjust asset allocations for participants, as shown in table 1. As a result, participants with similar characteristics may end up with different asset allocations.\nProviders’ use of different asset allocation strategies leads to variation in the asset allocations participants actually experience. As shown in figure 5, four of the eight providers in our case studies vary in their recommendations of specific investment options for a 30-year old participant.\nThe type and amount of information providers use can also affect the way participant account balances are allocated. For example, two of the eight providers in our case studies only offer a customized service—allocating a participant’s account based solely on age or other factors that can be easily obtained from the plan’s record keeper, such as gender, income, current account balance, and current savings rate. The other six providers also offer a personalized service that takes into account additional personal information to inform asset allocations, such as risk tolerance or spousal assets. Providers that offer a personalized service reported that personalization could lead to better asset allocation for participants, but they also reported that generally fewer than one-third, and sometimes fewer than 15 percent, of participants furnish this personalized information. As a result, some industry representatives felt that participants may not be getting the full value of the service for which they are paying. For example, participants who are defaulted into managed accounts that offer a highly personalized service run the risk of paying for services they are not using if they are disengaged from their retirement investments. As shown in table 2, we found that among five of the seven providers that furnished asset allocations for our hypothetical scenarios, there was little relationship between the level of personalization and the fee they charged to participants for the managed account service.\nSome managed account providers’ services may become more beneficial as participants age or as their situations become more complex because personalization seeks to create a tailored asset allocation for each participant. Such an individualized approach could even mean that older participants who are close to retirement and very young participants just starting their careers could be placed in equally risky allocations based on their personalized circumstances. However, industry representatives told us that participants who never supply additional, personalized information to managed account providers may be allocated similarly over time to those participants in target date funds.", "Providers differ in their approaches and time frames for rebalancing participant managed accounts—adjusting participant accounts to reflect any changes to their asset allocation strategies based on changing market conditions and participant information. Seven of the eight providers in our case studies use a “glide path” approach to systematically reduce participant risk over time but one does not set predetermined glide paths for participants. Similarly, two of the eight providers in our case studies rebalance participant accounts annually, while the other providers generally review and rebalance participant accounts at least quarterly. Despite these differences in approaches and timeframes, our analysis of provider hypothetical asset allocations indicated that providers generally allocated less to equity assets and more to fixed income or cash-like assets for the older hypothetical participants than for the younger hypothetical participant.", "Some managed account providers in our case studies offer their services under “direct” arrangements in which the plan sponsor directly contracts with a provider to offer these services, as shown in figure 6. According to the providers we spoke with, managed account providers in this type of arrangement are generally fiduciaries, but record keepers may not be fiduciaries with respect to the managed account service, as their role consists primarily of providing information to the managed account provider and implementing asset allocation changes to participant accounts.\nBy contrast, some managed account providers use “subadvised” arrangements to offer their services. According to the providers we spoke to, in these arrangements, the plan sponsor does not directly contract with the managed account provider, and the plan’s record keeper, or an affiliate, may take on some fiduciary responsibility with respect to the managed account, as shown in figure 7. The record keeper may fulfill some of the responsibilities the managed account provider would have in a direct arrangement. These responsibilities may include providing periodic rebalancing based on the provider’s strategy, marketing managed account services, or offering other ongoing support for participants.\nAll of the eight managed account providers in our case studies told us that they take on some level of fiduciary responsibility—regardless of whether their services are offered as QDIAs or on an opt-in basis—so they each offer some protections to sponsors and participants in managed accounts. Seven of the providers in our case studies told us that they willingly accept 3(38) Investment Manager fiduciary status for discretionary management over participant accounts, but one of the eight providers in our case studies noted that it never accepts 3(38) Investment Manager fiduciary status because it only has discretion over participants’ accounts once a year. This provider told us that it is only a 3(21) Investment Adviser fiduciary even though its managed account service is similar to that of the other providers in our case studies. Under ERISA, 3(21) Investment Adviser fiduciaries usually do not have authority over plan assets, but they may influence the operation of the plan by providing advice to sponsors and participants for a fee. As such, they are generally liable for the consequences when their advice is imprudent or disloyal. In contrast, a 3(38) Investment Manager fiduciary has authority to manage plan assets at their discretion and with prudent judgment, and is also liable for the consequences of imprudent or disloyal decisions. Because 3(38) Investment Manager fiduciaries have explicit discretionary authority and must have the qualifications of a bank, insurance company, or RIA, sponsors who use 3(38) Investment Manager fiduciaries may receive a broader level of liability protection from those providers as opposed to providers who offer managed account services as 3(21) Investment Adviser fiduciaries. In addition, when a 3(38) Investment Manager fiduciary is used, participants may have a broader level of assurance that they are receiving services from a qualified manager in light of the requirements related to qualifications of such fiduciaries.\nAs noted previously, when managed account services are offered as QDIAs, DOL requires the managed account provider to generally be a 3(38) Investment Manager fiduciary, but DOL has no similar explicit requirement for managed account providers whose services are offered on an opt-in basis. Absent explicit requirements or additional guidance from DOL, some managed account providers may choose to structure the services they provide to limit their fiduciary liability, which could ultimately provide less liability protection for sponsors for the consequences of provider investment management choices. Given the current lack of direction or guidance about appropriate fiduciary roles for providers that offer managed accounts on an opt-in basis, sponsors may not be aware of this potential concern. Industry representatives we spoke with expressed concern about managed account providers who do not accept full responsibility with respect to managed account services by acknowledging their role as a 3(38) Investment Manager fiduciary. Other representatives also noted that it was important for sponsors to understand providers’ fiduciary responsibilities given the important differences between 3(21) Investment Adviser and 3(38) Investment Manager fiduciaries with respect to the nature of liability protection they may provide for sponsors and the services they may provide for both sponsors and participants.", "Managed account providers may offer potentially valuable additional services to participants in or near retirement regarding how to spend down their accumulated retirement savings, but these services could lead to potential conflicts of interest. Most of the providers in our case studies allow participants to continue receiving account management services when they retire as long as they leave all or a portion of their retirement savings in the 401(k) plan. Some of those providers also provide potentially useful additional services to participants in or near retirement and do not typically charge additional fees for doing so. These services may include helping participants review the tax consequences of withdrawals from their 401(k) account and advising them about when and how to claim Social Security retirement benefits. However, these providers may have a financial disincentive to recommend an out-of-plan option, such as an annuity or rollover to other plans or IRAs, because it is advantageous for them to have participants’ continued enrollment in their managed account service offered through a 401(k) plan.\nProviders have developed ways to mitigate some of this potential conflict of interest by, for example, offering advice on alternate sources of income in retirement such as TIPS. Regardless, representatives from a participant advocacy group noted that managed account providers should have little involvement in a participant’s decision about whether to stay in the managed account. As part of its responsibilities to protect plan participants under ERISA, DOL has not specifically addressed whether conflicts of interest may exist with respect to managed accounts offering additional services to participants in or near retirement. As a result, participants can be easily persuaded to stay in the managed account given the additional services offered to them by managed account providers. Additionally, the ease that these services offer could discourage managed account participants from fully considering other options, which can ultimately put them at risk of making suboptimal spend-down decisions.", "", "", "Some managed account providers and plan sponsors have said that increased diversification of retirement portfolios is the main advantage of the managed account service for 401(k) plan participants. Increased diversification for participants enrolled in a managed account can result in better risk management and increased retirement income compared to those who self-direct their 401(k) investments. For example, one provider’s study of managed account performance found that the portfolios of all managed account participants were believed to have been appropriately allocated, but that 43 percent of those who self-directed their 401(k) investments had equity allocations that were believed to be inappropriate for their age, and nearly half of these participants’ portfolios were improperly diversified. The advantages of a diversified portfolio include reducing a participant’s risk of loss, reducing volatility within the participant’s account, and generating long-term positive retirement outcomes.\nAnother reported advantage of managed accounts is that they help to moderate volatility in 401(k) account performance, compared to accounts of those who self-direct their 401(k) investments. For example, in two recent reports on managed account performance, one record keeper concluded that the expanded use of professionally managed allocations, including managed accounts, is contributing to a reduction in extreme risk and return outcomes for participants, and is also gradually mitigating concerns about the quality of portfolio decision-making within defined contribution plans. Managed account providers in our eight case studies also claim that the increased personalization and more frequent rebalancing of managed accounts create an appropriately diversified portfolio that better meets a participant’s retirement goals than target date funds or balanced funds. According to these providers, periodic rebalancing combats participant inertia, one of the main problems with a self-directed 401(k) account, and the failure to update investment strategies when financial circumstances change over time.", "Several managed account providers told us that another advantage of managed accounts is the tendency for participants to save more for retirement compared to those who are not enrolled in the service. For example, in a study of managed accounts, a provider reported that participants in plans for which this provider offers the service contributed $2,070 more on average in 2012 than participants who self-directed investments in their 401(k) accounts (1.9 percent of salary more in contributions on average than participants who self-direct 401(k) investments). This provider noted that managed account participants are better at taking advantage of their plan’s matching contribution than participants who self-direct their 401(k) investments. For example, they found that 69 percent of managed account participants contributed at least to the level of the maximum employer matching contribution, while only 62 percent of participants who self-directed investments contributed to this level. This provider said that communication with managed account participants can lead to increased savings rates when they are encouraged to increase savings rates by at least 2 percentage points and to save at least to the point where they receive the full employer match, if such a match exists. Another service provider told us that it offers an online calculator that managed account participants can use to understand their retirement readiness. The provider also said that participants who use the calculator can see how increased savings can lead to improved retirement outcomes and will often increase their savings rate into their managed account.", "Retirement readiness statements received by participants who are enrolled in a managed account are another reported advantage of the service. Participants generally receive retirement readiness statements that can help them assess whether they are on track to reach their retirement goals, and the statements generally contain information about their retirement investments, savings rate, asset allocations, and projected retirement income. These statements help participants understand the likelihood of reaching their retirement goals given their current investment strategy and whether they should consider increasing their savings rates or changing risk tolerances for their investments. In some cases, these statements may provide participants with their first look in one document at the overall progress they are making toward their retirement goals. As shown in table 3, our review of three providers’ statements shows that they use different metrics on participant readiness statements to evaluate participants’ retirement prospects. For example, each statement provided participants with information on their retirement goals and risk tolerance, and a projection of their future retirement income to demonstrate the value of the service.\nSimilar advantages, however, can be achieved through other retirement investment vehicles outside of a managed account and without paying the additional managed account fee. For example, in one recent study, a record keeper that offers managed accounts through its platform showed that there are other ways to diversify using professionally managed allocations, such as target date funds, which can be less costly. Although managed account providers may encourage participants to save more and review their progress towards achieving a secure retirement, participants still have to pay attention to these features of the managed account for it to provide value. Even if 401(k) plan participants are not in managed accounts, we found that in some instances they can still receive advice and education from a provider in the form of retirement readiness statements.", "The additional fee a participant generally pays for a managed account was the primary disadvantage mentioned by many industry representatives, plan sponsors, and participant advocates. Because of these additional fees, 401(k) plan participants who do not receive higher investment returns from the managed account services risk losing money over time. Some managed account providers and record keepers have reported that managed account participants earn higher returns than participants who self-direct their 401(k) plan investments, which may help participants offset the additional fee charged. For example, one provider told us that participants enrolled in managed accounts saw about 1.82 percentage points better performance per year, net of fees, compared to participants without managed accounts. Given these higher returns, this provider projects that a 25-year-old enrolled in its managed account could potentially see up to 35 percent more income at retirement than a participant not enrolled in the service, according to this provider’s calculations. Another provider reported that the portfolios of participants who were defaulted into managed accounts were projected to receive returns of nearly 1 percentage point more annually, net of fees, after the provider made allocation changes to the participants’ portfolios.\nHowever, the higher rates of return projected by managed account providers may not always be achievable. For instance, we found limited data from one record keeper that published returns for managed account participants that were generally less than or equal to the returns of other professionally managed allocations (a single target date fund or balanced fund) as shown in figure 8.\nWe used these and other returns data published by this record keeper to illustrate the potential effect over 20 years of different rates of return on participant account balances. On the lower end, this record keeper reported that, over a recent 5-year period, 25 percent of its participants earned annualized returns of -0.1 percent or less, not even making up the cost of the additional fee for the service. On the higher end, the record keeper reported that, over a slightly different 5-year period, 25 percent of its participants earned annualized returns of 2.4 percent or higher for the service. These actual returns illustrate the substantial degree to which returns can vary. If such a 2.5 percentage point difference (between these higher and lower reported managed account rates of return of 2.4 percent and -0.1 percent, respectively) were to persist over 20 years, a participant earning the higher managed account rate of return could have nearly 26 percent more in their ending account balance at the end of 20 years than a participant earning the lower rate of return in their managed account. As shown in Figure 9, using these actual rates of return experienced by participants in managed accounts, such a variation in rates of return can substantially affect participant account balances over 20 years.\nFurther, this record keeper’s published data on managed account rates of return were net of fees—rates of return would be higher if participants did not pay the additional fee for the service. For example, using this record keeper’s average fee rate in our analysis, we estimate that a hypothetical managed account participant who earned a higher rate of return of 2.4 percent will pay $8,400 more in additional fees over 20 years than a participant who self-directs investments in their 401(k) account and does not pay the additional fee. To illustrate the potential effect that fees could have on a hypothetical participant’s account balance over 20 years, we used a higher fee of 1 percent reported to us by one provider to estimate that a participant would pay $14,000 in additional fees compared to a participant who self-directs investments in their 401(k) account over the same period. However, based on the reported performance data we found, there is no guarantee that participants will earn a higher rate of return with a managed account compared to the returns for other professionally managed allocations or self-directed 401(k) accounts. The limited performance data we reviewed show that in most cases, managed accounts underperformed these other professionally managed allocations and self-directed 401(k) accounts over a 5-year period. However, managed account participants with lower rates of return still pay substantial additional fees for the service. To further illustrate the effect of fees on account balances, a hypothetical participant who earns a lower managed account rate of return of -0.1 percent would pay $6,900 in additional fees using this record keeper’s average fee over 20 years compared to a participant who self-directed investments in their 401(k) account, and the additional fees would increase to $11,500 at the 1 percent fee level using the lower rate of return.\nThe additional managed account fees, which are charged to participants over and above investment management and administrative fees, can vary substantially, and as a result, some participants pay no fees, others pay a flat fee each year, and still others pay a comparatively large percentage of their account balance for generally similar services from managed account providers. In our case studies, we reviewed the additional fees charged to participants for the service. One managed account provider charges a flat rate and fees for the other seven providers ranged from 0.08 to 1 percent of the participant’s account balance annually, or $8 to $100 on every $10,000 in a participant’s account. Therefore, participants with similar balances but different providers can pay different fees. As shown in table 4, participants with an account balance of $10,000 whose provider charges the highest fee may pay 12.5 times as much as participants whose provider charges the lowest fee ($100 and $8, respectively). However, participants with an account balance of $500,000 may pay up to 250 times as much as other participants but one is subject to a provider who charges the highest fees while the other is at the lowest fee provider ($5,000 and $20, respectively).\nParticipants with large account balances whose managed account provider caps fees at a certain level benefit more than similar participants whose fees are not capped. Of the providers we reviewed who charge variable fees, one provider caps the fee at a certain amount per year. For example, this provider charges 0.25 percent or $25 for every $10,000 in a participant’s account, with a maximum of $250 per year, so participants who use this provider only pay fees on the first $100,000 in their accounts. As a result, the difference in fees paid by participants using this provider, or providers who charge flat rates, widens as participant account balances increase.\nPlan characteristics can affect fees participants pay to managed account providers. For example, at one managed account provider included in our review, a participant in a small plan may pay more for a managed account than a similar participant in a large plan. Similarly, a participant in a plan with high enrollment or that uses managed accounts as the default may pay less for a managed account than a participant with the same balance in a plan with low enrollment or that offers managed accounts as an opt-in service. We also found through our case studies that fees can vary based on factors beyond the plan’s characteristics, such as the types of providers involved in offering the managed account, the size of participant account balances, and the amount of revenue sharing received by the managed account provider. Fees calculated through revenue sharing can vary in accordance with the investment options the plan sponsor chooses to include in the plan and the amount of revenue the provider actually receives from these options. In these cases, initial fee estimates for the managed account may differ from actual fees they pay. In addition, some plan sponsors also pay fees to offer managed account services, but since these fees may be paid out of plan assets, participants in these plans may pay more than participants in plans that do not pay fees.\nAs shown above, paying higher additional fees to a provider for a managed account service offers no guarantee of higher rates of return compared to other providers or compared to the reported rates of return earned by participants who invest in other professionally managed allocations or who self-direct investments in their 401(k) accounts. Because the additional fee is charged to participants on a recurring basis, such as every quarter or year, the costs incurred over time by participants who use managed accounts can accumulate. We used fee data reported by managed account providers to illustrate the effect that different fees could have on a participant’s managed account balance over time. As shown in figure 10, a hypothetical participant in our illustration who is charged an additional annual fee of 1 percent of their account balance for their managed account may pay nearly $13,000 more over 20 years than they would have paid in any other investment without the managed account fee. This compares to about $1,100 in additional fees paid over 20 years by a participant who is charged an annual fee of 0.08 percent for a managed account, the lowest variable non-capped fee we found.", "The limited availability of returns-based performance data and lack of standard metrics can also offset the reported advantages of managed accounts. In its final rule on participant-level disclosures, DOL requires that sponsors disclose performance data to help participants make informed decisions about the management of their individual accounts and the investment of their retirement savings, and that sponsors provide appropriate benchmarks to help participants assess the various investment options available under their plan. By requiring sponsors to provide participants with performance data and benchmarking information for 401(k) investments, DOL intends to reduce the time required for participants to collect and organize fee and performance information and increase participants’ efficiency in choosing investment options that will provide the highest value.\nSince the applicability date of the participant-level disclosure regulation, for most plans in 2012, DOL has required plan sponsors to provide participants who invest in a “designated investment alternative” in their 401(k) account with an annual disclosure describing the fees, expenses, and performance of each of the investment funds available to them in the plan. DOL defines a designated investment alternative as “any investment alternative designated by the plan into which participants and beneficiaries may direct the investment of assets held in, or contributed to, their individual accounts.” For designated investment alternatives, plan sponsors are required to disclose to participants specific information identifying the funds available to them in the plan, results-based performance information over varying time periods, and performance benchmarks in a way that invites comparison with established benchmarks and market indexes, as shown in table 5.\nDespite DOL’s requirements for designated investment alternatives, with respect to managed accounts offered either as an opt-in or default service, plan sponsors are generally only required to disclose to 401(k) participants the identity of the managed account provider or investment manager and any fees and expenses associated with its management. Neither plan sponsors nor managed account providers are required to isolate within the participant-level disclosure investment-related information on the individual funds that comprise the participant’s managed account or present aggregate performance of the account for a given period. DOL generally does not consider most managed accounts to be “designated investment alternatives.” Instead, according to DOL, managed account providers are generally considered to be “designated investment managers” as they provide a service to participants rather than an investment option, such as a mutual fund. As a result, the investment–related information required in DOL’s participant-level disclosure regulation does not apply to investment services, such as many managed accounts.\nBecause DOL does not require plan sponsors to provide participants information on the performance of their managed accounts or to compare performance against a set of standard benchmarks, it is potentially difficult for participants to evaluate whether the additional fees for managed accounts are worth paying, considering the effect of fees on returns and retirement account balances. As a result, participants may be unable to effectively assess the overall value of the service and to compare performance against a set of standard benchmarks. Not all of the retirement readiness statements we reviewed included returns-based performance data or information on the amount of additional fees the participant had paid for the service. Some managed account providers did include projections of a participant’s future retirement income on these statements. Even though the projections may be based on sound methodologies, if standard returns-based performance data are absent from these statements, participants will have to rely primarily on these projections to gauge the overall value of the service. Without performance and benchmarking information presented in a format designed to help participants compare and evaluate their managed account, participants cannot make informed decisions about the managed account service.\nLikewise, with respect to QDIAs, DOL only requires plan sponsors to disclose to participants a description of each investment’s objectives, risk and return characteristics (if applicable), fees and expenses paid to providers, and the right of the participant to elect not to have such contributions made on their behalf, among other things. In 2010, DOL proposed amendments to its QDIA disclosure requirements that would, with respect to target date funds or similar investments, require sponsors to provide participants historical returns-based performance data (e.g., 1-, 5-, and 10-year returns). According to DOL officials, the proposed QDIA rule change may apply to managed accounts offered as a QDIA to participants. However, the proposed requirements as written may be difficult for plan sponsors to implement because they are not tailored specifically for managed accounts. One participant advocacy group noted that, without similar information, participants may not be able to effectively assess managed account performance over time and compare that performance to other professionally managed investment options available under the plan or across different managed account providers.\nAs mentioned above, DOL affirms in the participant-level disclosure regulation that performance data are required to help participants in 401(k) plans to make informed decisions about managing investments in their retirement accounts, and that appropriate benchmarks are helpful tools participants can use to assess the various investment options available under their plan. The benefits outlined in the participant-level disclosure regulation would also apply to the proposed changes to the QDIA regulation. Specifically, DOL expects that the enhanced disclosures required by the proposed regulation would benefit participants by providing them with critical information they need to evaluate the quality of investments offered as QDIAs, leading to improved investment results and retirement planning decisions by participants. DOL believes that the disclosures under the proposed regulation, combined with performance reporting requirement in the participant-level disclosure regulation, would allow participants to determine whether efficiencies gained through these investments are worth the price differential participants generally would pay for such funds. However, absent DOL requirements that plan sponsors use standard metrics to report on the performance of managed accounts for participants who are defaulted into the service as a QDIA, it would be potentially difficult for these participants to evaluate the effect that additional fees could have on the performance of their managed accounts, including how the additional fees could affect returns and retirement account balances, possibly eroding the value of the service over time for those participants.\nImproved performance reporting could help participants understand the risks associated with the additional fees and possible effects on their retirement account balances if the managed accounts underperform, which is critical information that participants could use to take action to mitigate those risks. Discussions with managed account providers suggest that returns-based performance reports and custom benchmarking can be provided to managed account participants. For example, as shown in figure 11, one managed account provider we spoke to already furnishes participants access to online reports that include returns-based performance data and custom benchmarks, which can allow them to compare performance for a given period with an established equity index and bond index. Some providers told us that it would be difficult to provide participants in managed accounts with performance information and benchmarks because their retirement portfolios contain highly personalized asset allocations. While it may be more challenging for providers to furnish performance information on personalized managed accounts compared to model portfolios, we identified one participant statement that included performance information from a provider who personalizes asset allocations for their participants’ retirement portfolios.\nThe provider told us that the blended custom benchmark described in figure 11 allows participants to more accurately evaluate and compare the aggregate performance of the different individual funds held in their managed account because the benchmark is linked to the participant’s risk tolerance. The online report also describes any positive or negative excess returns for the portfolio relative to the return of the custom benchmark, net of fees. The provider said that the excess return statistic is representative of the value that the provider or portfolio manager has added or subtracted from the participant’s portfolio return for a given period. Another managed account provider furnishes retirement readiness statements that include returns-based information for each of the funds in participants’ accounts. However, the statement did not include standard or custom benchmarks that would allow participants to compare the performance of their managed account with other market indexes.", "", "Some sponsors report that their choice of a managed account provider may be limited to those options—sometimes only one—offered by the plan’s record keeper. Although DOL’s general guidance on fiduciary responsibilities encourages sponsors to consider several potential providers before hiring one, six of the 10 sponsors we interviewed said that they selected a managed account provider offered by their record keeper without considering other options and two other sponsors said that their record keeper’s capabilities partially restricted their choice of a provider. Some record keepers voluntarily offered sponsors more managed account provider options when sponsors asked for them. In the absence of DOL requiring sponsors to request multiple provider options, sponsors said they were reluctant to pursue options not offered by their record keeper for a variety of reasons. These reasons included: (1) concern that their record keeper’s systems might be unable to support additional options; (2) familiarity with the current provider offered by their record keeper; and (3) belief that there was no need to consider other options—one sponsor said that its record keeper has consistently provided excellent service and support for a reasonable fee and, as a result, the sponsor felt comfortable accepting the record keeper’s recommendation of the provider offered on its recordkeeping system.\nWithout the ability to choose among multiple providers, sponsors have limited choices, which can result in selecting a provider who charges participants higher additional fees than other providers who use comparable strategies to manage participant investments, which are ultimately deducted from participant account balances. In addition, limited choices can result in sponsors selecting a provider whose strategy does not align with their preferred approach for investing participant contributions. For example, a sponsor who endorses a conservative investment philosophy for their plan could select a provider who uses a more aggressive method for managing participant investments.\nSeveral managed account providers and record keepers said that a limited number of providers are offered because, among other things, it is costly to integrate 401(k) recordkeeping systems with managed account provider systems. In addition, record keepers may offer a limited number of providers to avoid losing revenue and because they evaluate a provider before deciding to offer its managed account service. Such steps include reviewing the provider’s investment strategy and assessing how the provider interacts with participants. One managed account provider estimated that sponsors might have to spend $400,000 and wait more than a year before offering the provider’s managed account to plan participants if it is not already available on their record keeper’s system. Additionally, record keepers may lose target date fund revenue or forgo higher revenue opportunities by offering certain managed account providers and may believe that offering multiple options is unnecessary once they have identified a provider that is effective.\nAlthough sponsors may have access to a limited number of managed account providers on their record keepers’ systems, some providers have developed approaches that make it easier for record keepers to offer more than one managed account option to sponsors. For instance, one provider we interviewed, which acts as an intermediary and fiduciary, contracts with several other providers and makes all of these providers available to its record keepers, thus allowing the record keepers’ sponsors to choose among several managed account providers without incurring additional costs to integrate the record keeper with any of the providers. Another managed account provider has developed a process to transfer information to record keepers that does not require integration with the recordkeeping system, thus making it less difficult for any record keeper to work with them.", "Available evidence we reviewed suggests that sponsors lack sufficient guidance on how to select and oversee managed account providers. Several of the sponsors we interviewed said that they were unaware of any set list of standards for overseeing managed accounts, so they do not follow any standards, and even managed account providers felt that sponsors have insufficient knowledge and information to effectively select a provider. Because sponsors may not have sufficient knowledge and information, record keepers could play a larger role in the selection process. In addition, providers indicated that it is difficult for sponsors to compare providers and attributed this difficulty to the absence of any widely accepted benchmarks or other comparison tools for sponsors. Some industry representatives indicated that additional guidance could help sponsors better select and oversee managed account providers and highlighted specific areas in which guidance would be beneficial, such as: determining whether a managed account fee is reasonable; understanding managed accounts and how they function; and clarifying factors sponsors should consider when selecting a managed account provider.\nAlthough DOL is responsible for assisting and educating sponsors by providing them with guidance, it has not issued guidance specific to managed accounts, as it has done for target date funds, even though it has issued general guidance on fiduciary responsibilities, including regulations under ERISA 404(a) and 404(c), which explicitly state DOL’s long-standing position that nothing in either regulation serves to relieve a fiduciary from its duty to prudently select and monitor any service provider to the plan. DOL guidance on target date funds outlines the factors sponsors should consider when selecting and monitoring target date funds, such as performance and fees, among other things. The absence of similar guidance specific to managed accounts has led to inconsistency in sponsors’ procedures for selecting and overseeing providers and may inhibit their ability to select a provider who offers an effective service for a reasonable fee. Specifically, without assistance regarding what they should focus on, sponsors may not be considering factors that DOL considers relevant for making fiduciary decisions, such as performance information. For example, sponsors considered a range of factors when selecting a managed account provider, including record keeper views on the quality of the provider, the provider’s willingness to serve as a fiduciary, and the managed account provider’s investment strategy. In addition, as shown in table 6, while nearly all of the sponsors said that they considered fees when selecting a managed account provider, only 1 of the 10 sponsors we interviewed said that they considered performance information when selecting a managed account provider. In addition, only half of the sponsors we interviewed reported that they take steps to formally benchmark fees by, for example, comparing their participants’ fees to the amount of fees that participants in similarly-sized organizations pay.\nThe extent to which sponsors oversee managed account providers also varies. Nearly all of the 10 sponsors we interviewed said that they review reports from their managed account provider or record keeper as part of their oversight process, and the managed account providers we interviewed highlighted the role that these reports play in the oversight process. Several of these providers noted that the reports they provide help sponsors fulfill their fiduciary responsibility for oversight. Most sponsors said that they also take other steps to oversee managed account providers, such as regularly meeting with them. However, only one sponsor said that, as part of its oversight activities, it independently evaluates benchmarks, such as stock market performance indexes. In addition, even though participants generally pay an additional fee for managed account services, not all of the sponsors we interviewed said that they monitor fees.", "Some industry representatives indicated that consistent performance information could help sponsors more effectively compare prospective managed account providers and ultimately improve selection and oversight. Similar to the challenges participants face in evaluating managed accounts because of a lack of performance information, industry representatives said that sponsors need information as well, including: useful, comparative performance information and a standard set of metrics to select suitable providers; access to standard performance benchmarks to monitor them; and access to comparable managed account performance information to evaluate performance.\nSome providers highlighted challenges with providing performance information on managed accounts and, as a result, furnish sponsors with other types of information to demonstrate their value to participants. For example, providers may not furnish returns-based performance information to demonstrate how their offerings have affected participants because the personalized nature of managed accounts makes it difficult to measure performance. In lieu of providing returns-based performance information, providers furnish sponsors with changes in portfolio risk levels and diversification, changes in participant savings rates, and retirement readiness. One managed account provider said that it does not believe there is a way to measure the performance of managed accounts, noting that it develops 20 to 50 investment portfolios for any given plan based on the investment options available in the plan.\nNonetheless, a few providers voluntarily furnish sponsors with returns- based performance information. One provider that used broad-based market indexes and customized benchmarks noted that it would be difficult for a sponsor to select a managed account provider without being able to judge how the provider has performed in the past. In addition, this provider, unlike some other providers, noted that the personalized nature of some managed accounts does not preclude managed account providers from being able to generate returns-based performance information. For example, even though plans may differ, providers can collect information from record keepers for each of the plans that offer managed accounts and create aggregate returns data, which could then be disclosed to sponsors along with an explanation of how the data were generated. As shown in figure 12, the report that this provider distributes to sponsors contains an array of performance information for participant portfolios, including rates of return earned by the portfolios for multiple time periods and benchmarks. In addition, the report provides a description of the benchmarks—broad-based market indexes as well as customized benchmarks.\nDOL regulations require that service providers furnish sponsors with performance and benchmarking information for the investment options available in the plan. DOL maintains that sponsors need this information in order to make better decisions when selecting and monitoring providers for their plans. However, DOL regulations generally do not require managed account providers to furnish sponsors with performance and benchmarking information for managed accounts because, as previously noted, managed accounts are not considered to be designated investment alternatives. Without this information, sponsors cannot effectively compare different providers when making a selection or adequately determine whether their managed account offerings are having a positive effect on participant retirement savings, as they can currently determine with the designated investment alternatives available in the plan.", "Managed accounts can be useful services and may offer some advantages for 401(k) participants. They build diversified portfolios for participants, help them make investment decisions, select appropriate asset allocations, and estimate the amount they need to contribute to achieve a secure retirement. Given these potential advantages, it is no surprise that the number of managed account providers has grown and that plan sponsors, seeking to provide the best options for plan participants, have increasingly offered managed accounts. The extent to which managed accounts benefit participants may depend on the participant’s level of engagement and ability to increase their savings. Despite the potential advantages, better protections are needed to ensure that participants realize their retirement goals. These protections are especially important as additional fees for this service can slow or erode participants’ accumulated retirement savings over time.\nHelping plan sponsors understand and make appropriate decisions about managed accounts can better ensure that participants are able to reap the full advantages of managed accounts. Since plan sponsors select a managed account provider, participants who use these services are subject to that managed account provider’s structure and strategies for allocating participant assets, which can potentially affect participants’ ability to save for retirement, especially if they pay high fees. Some participants cannot be assured that they are receiving impartial managed account services or are able to rely on accountable investment professionals taking on appropriate fiduciary responsibilities. Clarifying fiduciary roles for providers who offer managed accounts to participants on an opt-in basis or for providers who offer additional services to participants in or near retirement could help ensure that sponsors have a clear understanding of provider responsibilities so they can offer the best services to their participants.\nDOL can also help sponsors gain clarity and confidence in selecting and monitoring managed account providers. This is particularly salient since managed accounts can be complicated service arrangements and there are considerable structural differences among the managed account options offered by providers. By requiring sponsors to request multiple provider options from their record keeper, DOL can help ensure that sponsors thoroughly evaluate managed account providers before they are offered to participants. In addition, providing sponsors with guidance that clarifies standards and suggests actions for prudently selecting and overseeing managed account providers, such as documenting their processes and understanding the strategies used in the managed account, positions sponsors to better navigate their fiduciary responsibilities. Additional guidance also positions sponsors to consider additional factors when choosing to default participants into managed accounts. Supplementing this guidance by requiring providers to furnish consistent performance information to sponsors so that they can more effectively compare providers can assist sponsors in their efforts to provide a beneficial service that could help preserve and potentially enhance participants’ retirement security.\nFinally, DOL can also help participants evaluate whether their managed account service is beneficial. Without standardized performance and benchmarking information, participants may not be able to effectively assess the performance of their managed account and determine whether the additional fee for the service is worth paying. For participants who opt into managed accounts, this information could help them more effectively assess the performance of their managed account and compare that performance to other professionally managed alternatives that may be less expensive, such as target date funds. Alternatively, for participants who are defaulted into managed accounts, this information could be valuable when they start to pay more attention to their retirement savings.", "To better protect plan sponsors and participants who use managed account services, we recommend that the Secretary of Labor direct the Assistant Secretary for the Employee Benefits Security Administration (EBSA) to: a) Review provider practices related to additional managed account services offered to participants in or near retirement, with the aim of determining whether conflicts of interest exist and, if it determines it is necessary, taking the appropriate action to remedy the issue. b) Consider the fiduciary status of managed account providers when they offer services on an opt-in basis and, if necessary, make regulatory changes or provide guidance to address any issues.\nTo help sponsors who offer managed account services or who are considering doing so better protect their 401(k) plan participants, we recommend that the Secretary of Labor direct the Assistant Secretary for EBSA to: c) Provide guidance to plan sponsors for selecting and overseeing managed account providers that addresses: (1) the importance of considering multiple providers when choosing a managed account provider, (2) factors to consider when offering managed accounts as a QDIA or on an opt-in basis, and (3) approaches for evaluating the services of managed account providers. d) Require plan sponsors to request from record keepers more than one managed account provider option, and notify the Department of Labor if record keepers fail to do so.\nTo help sponsors and participants more effectively assess the performance of managed accounts, we recommend that the Secretary of Labor direct the Assistant Secretary for EBSA to: e) Amend participant disclosure regulations to require that sponsors furnish standardized performance and benchmarking information to participants. To accomplish this, EBSA could promulgate regulations that would require sponsors who offer managed account services to provide their participants with standardized performance and benchmarking information on managed accounts. For example, sponsors could periodically furnish each managed account participant with the aggregate performance of participants’ managed account portfolios and returns for broad- based securities market indexes and applicable customized benchmarks, based on those benchmarks provided for the plan’s designated investment alternatives. f) Amend service provider disclosure regulations to require that providers furnish standardized performance and benchmarking information to sponsors. To accomplish this, EBSA could promulgate regulations that would require service providers to disclose to sponsors standardized performance and benchmarking information on managed accounts. For example, providers could, prior to selection and periodically thereafter, as applicable, furnish sponsors with aggregated returns for generalized conservative, moderate, and aggressive portfolios, actual managed account portfolio returns for each of the sponsor’s participants, and returns for broad-based securities market indexes and applicable customized benchmarks, based on those benchmarks provided for the plan’s designated investment alternatives.", "We provided a draft of this report to the Department of Labor, the Department of the Treasury, the Securities and Exchange Commission, and the Consumer Financial Protection Bureau for review and comment. The Department of the Treasury and the Consumer Financial Protection Bureau did not have any comments. DOL and SEC provided technical comments, which we have incorporated where appropriate. DOL also provided written comments, which are reproduced in appendix IV. As stated in its letter, DOL agreed with our recommendations and will consider each of them as it moves forward with a number of projects.\nIn response to our recommendation that DOL review provider practices related to additional managed account services offered to participants in or near retirement to determine whether conflicts of interest exist, DOL agreed to include these practices in its current review of investment advice conflicts of interest, noting that such conflicts continue to be a concern. Regarding our second recommendation, to consider the fiduciary status of managed account providers when they offer services on an opt-in basis, DOL agreed to review existing guidance and consider whether additional guidance is needed in light of the various business models we described. By considering managed account service provider practices and fiduciary roles in its current efforts and taking any necessary action to address potential issues, we believe DOL will help ensure that sponsors and participants receive unconflicted managed account services from qualified managers.\nDOL also agreed to consider our other recommendations in connection with its current regulatory project on standards for brokerage windows in participant-directed individual account plans. We believe that this project may be a good starting point for requesting additional information and considering adjustments to those managed account services participants obtain from advisers through brokerage windows. As we noted in our report, we did not include these types of managed accounts in our review because the plan sponsor is not usually involved in the selection and monitoring of these advisers. Since participants can obtain managed account services without using a brokerage window, we encourage DOL to also consider our third and fourth recommendations outside of the context of brokerage windows. Providing guidance to sponsors for selecting and overseeing managed account providers, as suggested by our third recommendation, may help sponsors understand their fiduciary responsibilities with respect to managed accounts. Similarly, requiring plan sponsors to ask for more than one choice of managed account provider, as suggested by our fourth recommendation, could encourage record keepers to offer additional choices. By taking the steps outlined in these recommendations, DOL can help ensure that participants are being offered effective managed account services for reasonable fees.\nWith respect to our recommendation requiring plan sponsors to ask for more than one choice of managed account provider, DOL noted that it needs to review the extent of its legal authority to effectively require plans to have more than one managed account service provider. We continue to believe that the action we suggest in our recommendation—that DOL simply require plan sponsors to ask for more than one choice of a provider, which is slightly different than how DOL has characterized it— may be an effective method of broadening plan sponsors’ choices of managed account providers. However, we agree that DOL should examine the scope of its existing authority in considering how it might implement this recommendation.\nFinally, DOL agreed to consider our recommendations on the disclosure of performance and benchmarking information on managed accounts to participants and sponsors in connection with its open proposed rulemaking project involving the qualified default investment alternative and participant-level disclosure regulations. We believe that DOL’s consideration of these recommendations in connection with this rulemaking project will be helpful for participants and sponsors, and encourage DOL to include managed accounts in this rulemaking. Although managed accounts are different than target date funds in multiple ways, as presented in our report, we believe that managed account providers can and should provide some level of performance and benchmarking information to sponsors—and sponsors to participants—to describe how managed accounts perform over time and the risks associated with the service. In addition, to the extent that managed accounts offered on an opt-in basis are not covered by DOL’s project, we encourage DOL to consider adopting similar changes to the participant- level disclosures for those managed accounts that are not governed by QDIA regulations.\nAs arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies of this report to appropriate congressional committees, the Secretary of Labor, the Secretary of the Treasury, the Chair of the Securities and Exchange Commission, the Director of the Consumer Financial Protection Bureau, and other interested parties. In addition, the report will be available at no charge on GAO’s website at www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512- 7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "Our objectives for this study were to determine (1) how service providers structure managed accounts, (2) the advantages and disadvantages of managed accounts for 401(k) participants, and (3) the challenges, if any, that plan sponsors face in selecting and overseeing managed account providers.\nTo answer our research objectives we undertook several different approaches. We reviewed relevant research and federal laws, regulations, and guidance on managed accounts in 401(k) plans. We reviewed available documentation on the structure of managed accounts in 401(k) plans and the role of service providers, including Securities and Exchange Commission (SEC) filings of the Form ADV by 30 record keepers, managed account providers, and other related service providers. We interviewed industry representatives and service providers involved with managed accounts—including record keepers, academics, industry research firms, and participant advocacy groups—and government officials from the Department of Labor’s Employee Benefits Security Administration (EBSA), SEC, the Department of the Treasury, and the Consumer Financial Protection Bureau.", "To examine key issues related to how managed accounts in 401(k) plans are structured, we conducted in-depth case studies of eight selected managed account providers. Since we were unable to identify a comprehensive list of managed account providers that provide services to 401(k) plans, to select providers for case studies we first developed a list of 14 managed account providers based on discussions with two industry research firms and our own analysis of information from record keeper websites and other publicly available documentation. To assess the reliability of these data, we interviewed the two industry research firms and compared their information with the results of our analysis for corroboration and reasonableness. We determined that the data we used were sufficiently reliable for selecting managed account providers for case studies. From the list of 14 providers, we selected 10 providers based on their size, location, and legal and fee structures, from which we used eight as the basis for our case studies. According to our estimates, the eight managed account providers we included in the case studies represented over 95 percent of the managed account industry in defined contribution plans, as measured by assets under management in 2013.\nIn conducting case studies of managed account providers, we interviewed representatives of the managed account provider and chose five providers for site visits based on their locations and size. We also reviewed publicly available documentation describing the nature of the managed account and sample reports furnished by providers, confirmed the type of information these providers consider when managing a participant’s account, and analyzed fee data furnished by managed account providers. To assess the reliability of the fee data furnished by managed account providers, we corroborated and assessed the completeness of reported fee data based on information in provider SEC filings and any other relevant documentary evidence, when possible. We determined that the data were sufficiently reliable for depicting the range and types of fees charged to sponsors and participants by providers. In addition, to further understand the different strategies and structures of managed accounts, we developed and submitted five hypothetical participant scenarios in one hypothetical plan to the eight service providers and asked them to provide example asset allocations, and advice if practical, for those participants. Seven of the eight managed account providers completed and returned asset allocations to us. See appendix II for additional detail on the development of hypothetical scenarios and results from this work.", "To illustrate potential performance outcomes for participants in managed accounts, we used available data on actual managed account rates of return and fees to show how managed accounts could affect 401(k) account balances over 20 years. We developed two scenarios, isolating the effects of variability in the following factors: 1. Managed account rates of return – We used annual average managed account rates of return ranging from -0.1 percent to 2.4 percent, based on published performance data. We compared the change in account balances for those managed account rates of return with the change in account balances for a 1.4 percent rate of return experienced by participants who directed their own 401(k) investments. 2. Managed account fees – We used different fee levels obtained from published reports and provider interviews ranging from a low additional annual fee of 0.08 percent to a 1 percent annual fee. We compared fee totals and ending account balances for varying fee levels with those of participants who did not pay the additional fee because they directed their own 401(k) investments.\nFor each scenario, we held all other factors constant by assuming that the participant’s starting account balance was $17,000 and starting salary was $40,000, the salary increased at a rate of 1.75 percent per year, and the participant saved 9.7 percent of their salary each year. To the extent possible, we developed scenarios using information provided to us during interviews with industry representatives or found in published reports on managed accounts or on other economic factors. To assess the reliability of these data, we considered the reliability and familiarity of the source of the data or information and, when necessary, interviewed representatives of those sources about their methods, internal controls, and results. Based on these interviews and our review of published data, we determined that the data we used were sufficiently reliable for use in these illustrations.\nBecause this work presents simplified illustrations of potential effects on participants over time, we used nominal dollar amounts over 20 years and did not take into account inflation or changes in interest rates. Similarly, to minimize effects of percentage growth/loss sequencing on account balances, we applied the same rates of return to each of the 20 years for each scenario. The rates of returns we used in both scenarios already incorporated different asset allocations for participants with a managed account or a self-directed 401(k) account. This work does not attempt to specify or adjust these specific asset allocations.", "To identify the advantages and disadvantages of managed accounts for 401(k) plan participants and any challenges sponsors face in selecting and overseeing managed account providers, we conducted semi- structured interviews with 12 plan sponsors. Our process for interviewing plan sponsors involved multiple steps, as outlined below.", "Since a comprehensive list of sponsors that managed accounts did not exist at the time of our review, to select sponsors for semi-structured interviews, we conducted a non-generalizable survey facilitated by PLANSPONSOR, a member organization. The survey included questions about sponsors’ 401(k) plans, such as the amount of assets included in the 401(k) plan and the number of participants in the plan, and the reasons why sponsors decided to offer, or not offer, managed accounts to 401(k) plan participants. To minimize errors arising from differences in how survey questions might be interpreted and to reduce variability in responses that should be qualitatively the same, we conducted pretests with industry representatives. Based on feedback from these pretests, we revised the survey in order to improve question clarity. PLANSPONSOR included a link to our survey in an e-mail that was sent to approximately 60,000 of its subscribers. In addition, PLANSPONSOR promoted the survey eight times over 4 weeks between June 3 and June 28, 2013. A record keeper and one industry association also agreed to forward a link to our survey to their clients and members, respectively.\nFifty-seven sponsors completed our survey, and 25 of them provided contact information, indicating they were willing to speak with us. Forty- eight sponsors indicated that they offer managed accounts to their 401(k) plan participants, and 20 of these sponsors provided us with their contact information. Nine sponsors indicated that they do not offer managed accounts to their 401(k) plan participants, and five of these sponsors provided us with their contact information.\nWe reviewed the survey responses of those sponsors willing to speak with us and selected sponsors to interview based on the following characteristics:\nPlan size (assets in the plan, number of participants)\nManaged account provider\nEnrollment method (Qualified Default Investment Alternative, or QDIA, vs. opt-in)\nLength of time sponsors have been offering managed accounts To obtain a variety of perspectives, we selected at least two sponsors with any given characteristic to the extent possible. For instance, we selected several (1) sponsors of varying sizes in terms of the amount of assets included in their 401(k) plans and the number of plan participants; (2) sponsors that use different managed account providers; and (3) sponsors that have been offering managed accounts for more than 5 years. Also, we selected one sponsor that offered managed accounts as a default option. In total, we selected 10 sponsors that offer managed accounts and 2 sponsors that do not offer managed accounts, as shown in table 7.\nWe developed semi-structured interview questions to capture information on how sponsors learn about and select managed accounts, how they oversee managed accounts, and the advantages and disadvantages of managed accounts for participants. We developed separate questions for sponsors offering managed accounts and those not offering managed accounts. We shared the interview questions with three sponsors before we began conducting the semi-structured interviews to ensure that the questions were appropriate and understandable. We made no substantive changes to the questions based on this effort. We interviewed 10 sponsors that offer managed accounts and 2 sponsors that do not offer managed accounts. As part of our interview process, we also requested and reviewed relevant documentation from plan sponsors such as quarterly managed account reports from managed account providers or record keepers.", "As part of our approach for determining the advantages and disadvantages of managed accounts for 401(k) plan participants, we developed a non-generalizable online survey to directly obtain participant perspectives on managed accounts, such as the advantages and disadvantages of managed accounts for 401(k) plan participants and participants’ level of satisfaction with their managed account offering. However, we did not receive any completed responses to our survey. The survey was conducted on a rolling basis from August 1, 2013 to February 25, 2014—a link to the survey was distributed at various points in time.\nWe conducted this performance audit from October 2012 through June 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "To understand the different strategies and structures of managed accounts, we developed and submitted five hypothetical participant scenarios in one hypothetical plan to the eight managed account providers chosen for our case studies. Table 8 shows basic information provided for the hypothetical participant scenarios 1, 2, and 3.\nTable 9 shows the additional personalized information provided to managed account providers for hypothetical participant scenarios 1 and 3.\nTable 10 shows some of the hypothetical plan level information we compiled for scenario development.\nIn addition, to generate hypothetical plan information, we selected 14 hypothetical plan investment options from various asset classes, as shown in table 11. We selected these mutual funds to represent a range of asset classes and based on available information from April 2013 about whether these funds could be found in 401(k) plans.\nWe developed the hypothetical scenarios based on data and information from industry representatives—including research firms, other industry groups, and providers—and a calculator and statistics provided by a number of government agencies. To assess the reliability of these data, we considered the reliability and familiarity of the source of the data or information and, when necessary, interviewed representatives of those sources about their methods, internal controls, and results. We determined that the data we used were sufficiently reliable for developing hypothetical participant- and plan-level scenarios.", "We asked all eight managed account providers chosen for our case studies to provide example asset allocations and advice, if practical, for all five hypothetical participant scenarios. Seven of the eight managed account providers completed and returned asset allocations to us for the hypothetical scenarios. Five of the seven providers who sent allocations furnished two allocations for each scenario, but each gave different reasons for doing so. One of the providers furnished two allocations for each scenario because they actively manage participant allocations given changes in market conditions and their allocations could generally range within the two extremes. Another provider furnished two allocations for each scenario assuming different initial holdings because, for that provider’s strategy, a person’s initial holdings of plan investment options influence the provider’s recommended allocations, even though both of these allocations have the same overall risk and return characteristics. In some of the figures presenting results of this work, we have included one or both of these two providers’ second allocations. For the other three providers we have chosen to only include one of their asset allocations in the figures presenting the results of this work because they did not pertain to managed account service by itself or they did not include the full services offered by the managed account. We did, however, incorporate the more general understanding we gained from these alternate asset allocations in our report findings.\nIn addition, a number of providers’ systems required that they make certain assumptions about participants outside of the hypothetical scenario information we provided. In these cases, the assumptions they made did differ, sometimes substantially, and this may have affected their asset allocation results. For example, to generate a participant’s goal, providers used varying assumptions of a participant’s annual salary growth—from 1.5 to 3.5 percent. We did not attempt to categorize or eliminate any inconsistencies in provider strategies, but instead report their results to show the variation that a participant may experience.", "As shown in figure 13, the median values of all providers’ allocations show a downward trend in asset allocations to equity assets and an upward trend in asset allocations to fixed income and or cash-like assets as participants age.\nFor each hypothetical participant, we found that providers varied widely in their recommendations of specific investment options, but participants could be similarly allocated to asset classes, such as cash and cash equivalents, equity, and fixed income. For the hypothetical 30-year-old participant, select asset allocations were presented in the report at figure 5, and all allocations to specific investment options are shown in figure 14.\nThe results were similar for the 45 and 57-year-old hypothetical participants. Starting from an initial asset allocation of 55 percent equity and 45 percent fixed income, providers reported varying asset allocations to investment options for the 45-year-old hypothetical participant, as shown in figure 16, and allocations at the asset class level shown in figure 17.\nStarting from initial asset allocation of 43 percent equity and 57 percent fixed income, figure 18 shows variation in allocations to investment options for the 57-year-old hypothetical participant and figure 19 shows variation in allocations at the asset class level.", "", "", "", "Charles A. Jeszeck, Director, (202) 512-7215 or jeszeckc@gao.gov.", "In addition to the individual above, Tamara Cross (Assistant Director), Jessica Gray (Analyst-in-Charge), Ted Burik, Sherwin Chapman, and Laura Hoffrey made significant contributions to this report. In addition, Cody Goebel, Sharon Hermes, Stuart Kaufman, Kathy Leslie, Thomas McCool, Sheila McCoy, Mimi Nguyen, Roger Thomas, Frank Todisco, Walter Vance, and Kathleen Van Gelder also contributed to this report." ], "depth": [ 1, 2, 3, 3, 2, 1, 2, 3, 3, 3, 2, 2, 1, 2, 3, 3, 3, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 2, 2, 2, 3, 2, 1, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "", "", "", "", "h0_title", "h0_full", "", "", "", "h0_full", "", "h1_title", "h1_title", "", "h1_full", "", "h1_full", "", "h2_title h1_title h3_title", "", "h2_full", "h3_full h2_full h1_full", "h3_full h1_full", "", "h0_full h4_full", "h4_full", "h4_full", "", "h4_full", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What did the GAO's review of eight managed account providers show?", "How did providers manage accounts?", "How did one provider differ substantially from the other seven?", "What requirements does the DOL have of managed account providers?", "How do these requirements differ for providers who offer services to participants?", "How do managed accounts compare to not managed accounts in terms of savings?", "How can this disparity be offset?", "According to the GAO, is having a managed account financially advantageous?", "Why is it difficult for participants with managed accounts to make a decision on keeping their account?", "How do 401(k) plan investments differ from manage accounts regarding information disclosure?", "What challenges do sponsors face?", "How is the DOL at fault for this?", "According to GAO why are plan sponsors unable to select a provider at a reasonable price?", "How are sponsors limited?", "What do 401(k) plan sponsors offer?", "Why was GAO asked to review these plans?", "What did GAO examine?", "How did GAO conduct this review?", "How did GAO use case studies to perform research?" ], "summary": [ "GAO's review of eight managed account providers who, in 2013, represented an estimated 95 percent of the industry involved in defined contribution plans, showed that they varied in how they structured managed accounts, including the services they offered and their reported fiduciary roles.", "Providers used varying strategies to manage participants' accounts and incorporated varying types and amounts of participant information. In addition, GAO found some variation in how providers reported their fiduciary roles.", "One of the eight providers GAO reviewed had a different fiduciary role than the other seven providers, which could ultimately provide less liability protection for sponsors for the consequences of the provider's choices.", "The Department of Labor (DOL) requires managed account providers who offer services to defaulted participants to generally have the type of fiduciary role that provides certain levels of fiduciary protection for sponsors and assurances to participants of the provider's qualifications.", "DOL does not have a similar explicit requirement for providers who offer services to participants on an opt-in basis. Absent explicit requirements from DOL, some providers may actively choose to structure their services to limit the fiduciary liability protection they offer.", "According to providers and sponsors, participants in managed accounts receive improved diversification and experience higher savings rates compared to those not enrolled in the service; however, these advantages can be offset by paying additional fees over time.", "Providers charge additional fees for managed accounts that range from $8 to $100 on every $10,000 in a participant's account. As a result, some participants pay a low fee each year while others pay a comparatively large fee on their account balance.", "Using the limited fee and performance data available, GAO found that the potential long-term effect of managed accounts could vary significantly, sometimes resulting in managed account participants paying substantial additional fees and experiencing lower account balances over time compared to other managed account participants.", "Further, participants generally do not receive performance and benchmarking information for their managed accounts. Without this information, participants cannot accurately evaluate the service and make effective decisions about their retirement investments.", "Even though DOL has required disclosure of similar information for 401(k) plan investments, it generally does not require sponsors to provide this type of information for managed accounts.", "Sponsors are challenged by insufficient guidance and inconsistent performance information when selecting and overseeing managed account providers.", "DOL has not issued guidance specific to managed accounts on how sponsors should select and oversee providers, as it has done for other funds. In addition, DOL generally does not require providers to furnish sponsors with performance and benchmarking information for managed accounts, as it does for investments available in a plan, although some providers do furnish similar information", "GAO found that the absence of guidance for managed accounts has led to inconsistency in sponsors' procedures for selecting and overseeing providers. Without better guidance, plan sponsors may be unable to select a provider who offers an effective service for a reasonable fee.", "Without this information, sponsors cannot effectively compare providers when making a selection or determine whether managed accounts are positively affecting participants' retirement savings.", "401(k) plan sponsors have increasingly offered participants managed accounts— services under which providers manage participants' 401(k) savings over time by making investment and portfolio decisions for them.", "These services differ from investment options offered within 401(k) plans. Because little is known about whether managed accounts are advantageous for participants and whether sponsors understand their own role and potential risks, GAO was asked to review these services.", "GAO examined (1) how providers structure managed accounts, (2) their advantages and disadvantages for participants, and (3) challenges sponsors face in selecting and overseeing providers.", "In conducting this work, GAO reviewed relevant federal laws and regulations and surveyed plan sponsors. GAO interviewed government officials, industry representatives, other service providers, and 12 plan sponsors of varying sizes and other characteristics.", "GAO also conducted case studies of eight managed account providers with varying characteristics by, in part, reviewing required government filings." ], "parent_pair_index": [ -1, 0, 1, -1, 3, -1, 0, -1, -1, -1, -1, 0, -1, 2, -1, 0, -1, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 1, 1, 1 ] }
GAO_GAO-13-67	{ "title": [ "Background", "Charter School Operations and Funding", "Federal Resources Available to Charter Schools on Military Bases", "Charter Schools on Military Bases Enrolled Military- Connected Students to Varying Degrees and Were Started in Response to Family, Military, and Private Interests", "Family and Military Needs and Private Interests Were Among Key Reasons for Establishing Charter Schools", "Charter Schools on Military Bases Faced Challenges with Enrollment Preferences, Civilian Access to Schools, and Facilities", "Enrollment Preferences for Military-Connected Students Posed Hurdles for School Planners", "Civilian Access to Schools Limited by Base Security Requirements", "Obtaining Facilities on Bases Can Be Challenging and Complex for Charter School Planners", "Conclusions", "Recommendations for Executive Action", "Education", "DOD and Education", "Agency Comments and Our Evaluation", "Appendix I: Charter School Profiles", "Charter Schools Program grant: No", "Total students SY 11-12: 942", "Total students SY 11-12: 265", "Charter Schools Program grant: Yes", "Total students SY 11-12: 164", "Charter Schools Program grant: No", "Title I: Yes", "Charter Schools Program grant: Yes", "Total students SY 11-12: 438", "Charter Schools Program grant: Yes", "Total students SY 11-12: 410", "Charter Schools Program grant: Yes", "Total students SY 11-12: 185", "Charter Schools Program grant: No", "Total students SY 11-12: 104", "Appendix III: Comments from the U.S. Department of Defense", "Appendix IV: Comments from the U.S. Department of Education", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "There are about 1.2 million school-age children of military-connected families, and the majority of students attend public and private schools located off military bases. In addition to these off-base options, several school options are available on military bases for military-connected children, including traditional public schools, DOD-operated schools, and, more recently, public charter schools. These options are described below.  Traditional public schools: Approximately 160 traditional public schools operated by local school districts are located on military bases in the United States. According to DOD, 94 percent of students attending public schools on military bases are military-connected children. Traditional public schools are generally open to all students in the geographic area they serve.  DOD-operated schools: Although the majority of DOD schools are located overseas, 64 DOD schools currently operate on military bases in the United States, and these domestic DOD schools enroll about 28,000 students. DOD schools—open only to eligible dependents of active duty military and DOD civilians who reside on military installations—constitute a separate school system administered by the Department of Defense Education Activity (DoDEA). Domestic DOD schools were established to educate military children in communities where the local schools were deemed unable to provide a suitable education, among other reasons. DOD school systems depend almost entirely on federal funds, unlike public schools, which are funded primarily with local and state taxes and for which federal funding constitutes a small portion of total resources. As we noted in an earlier study, questions have been raised periodically concerning the continuing need for DOD schools. DOD has commissioned various studies since the 1980s exploring the possibility of transferring DOD schools to local school districts, and over the years, DOD has transferred some DOD schools to local public school districts.  Charter schools: Charter schools are a relatively new option for students. These schools are public schools created to achieve a number of goals, including encouraging innovation in public education, providing an alternative to poor performing schools, and giving families an additional educational option to traditional public schools. Charter schools operate with more autonomy than traditional public schools in exchange for agreeing to improve student achievement, an agreement that is formalized in a contract or charter with the school’s authorizing body. A school’s charter defines the specific academic goals and outlines school finances and other aspects of operation. Charter schools provide students and parents with increased educational options. However, research has found considerable variability in charter school performance on student achievement.\nEnrollment and interest in charter schools has grown rapidly in the past few years. According to the National Center for Education Statistics, the number of students enrolled in public charter schools more than quadrupled, from 0.3 million to 1.6 million students between school years 1999-2000 and 2009-2010, while the percentage of all public schools that were public charter schools increased from 2 to 5 percent. In the 2009- 2010 school year, about 5,000 charter schools operated in 40 states and the District of Columbia. Meanwhile parental interest in this public school option has also grown. According to a survey conducted by one national charter school organization, nearly two-thirds of charter schools across the nation reported having children on their waiting list, with an average waiting list totaling 228 students.\nThe 2008 DOD report on military compensation recommended that military-connected parents be allowed to form charter schools on military bases. The 2008 DOD report indicated that offering a charter school option in areas with underperforming local public schools would give parents stationed in those locations another choice in addition to the private school or home schooling options that may currently exist. This recommendation was part of the report’s broader emphasis on the need to increase service members’ choices in order to enhance recruiting and retention efforts in the uniformed services and, ultimately, support military readiness.", "Charter schools are established according to individual state charter school laws, and these state laws determine how schools operate and are funded. Depending on the state, a range of groups and organizations can establish a charter school, including parents, educators, private nonprofit organizations, and universities. A significant portion of charter schools nationally are established or operated by private management organizations, such as charter management organizations (CMO). According to one research institute, in the 2010-2011 school year, 35 percent of all public charter schools were operated by such private management organizations, and these schools accounted for almost 42 percent of all students enrolled in charter schools. States also set requirements for how charter schools operate. For example, most state charter school laws generally require that charter schools be open to all students within a specified boundary (commonly referred to as “open enrollment” requirements). In addition, most state charter school laws generally require that charter schools that receive more student applications than have available classroom spaces must enroll students based upon a lottery or some other random selection process to ensure that enrollment to the school is fair and does not favor particular groups of students. States also specify which entities can authorize the establishment of a charter school, including state departments of education, state boards of education, school districts or local educational agencies (LEA), institutions of higher education, and municipal governments. Authorizers are responsible for monitoring school performance and have the authority to close schools or take other actions if academic goals and state financial requirements are not met. States also define how charter schools are structured. For example, unlike traditional public schools that are generally part of a larger LEA, some states establish charter schools as their own LEA while others allow schools to choose between being a distinct LEA or part of a larger LEA for certain purposes, such as special education. In general, schools that operate as separate LEAs may be able to directly obtain federal funds or apply for federal grants that would otherwise be distributed among schools in a larger LEA. It may, therefore, be financially advantageous for schools to be separate LEAs, although this advantage also comes with the added responsibility associated with LEAs. Finally, states determine how charter schools will be publicly funded. In most states, charter schools are largely funded according to the formula states use for traditional public schools, usually a per-pupil allocation based on student attendance. As public schools, charter schools are also eligible to receive formula funding from some federal programs, such as those authorized by the Individuals with Disabilities Education Act (IDEA) and Title I of the Elementary and Secondary Education Act.", "DOD and Education have had a formal memorandum of understanding (MOU) since 2008 to collaborate on addressing the educational needs and unique challenges faced by children of military families, including serving as a resource for communities exploring alternative school options, such as charter schools.\nIn addition, a number of federal resources are available that may be used to assist in starting and operating charter schools, some of which focus on schools serving military-connected students, among others: Impact Aid: Education and DOD administer Impact Aid programs that provide qualifying LEAs—encompassing both traditional public schools and charter schools—with funds to compensate LEAs for revenue losses resulting from federal activities and to help students connected with these federal activities—which may include military- connected students—meet state academic standards. Appropriations for Education’s Impact Aid program were almost $1.3 billion in fiscal year 2010, and Congress appropriated $40 million in additional funding for DOD Impact Aid in 2012. One type of Impact Aid grant is designed to support the construction and repair of school buildings and is awarded to LEAs on a competitive basis.  DOD provides discretionary grants—about $50 million in grants to 38 military-connected school districts for fiscal year 2012—for enhancing student learning opportunities, student achievement, and educator professional development at military-connected schools, as well as about $9 million for math, science, English, and foreign language programs affecting military-connected students.  DOD is authorized to provide up to $250 million to make grants, conclude cooperative agreements, or supplement other federal funds to construct, renovate, repair, or expand elementary and secondary public schools on military installations in order to address capacity or facility condition deficiencies at such schools. The Consolidated Appropriations Act, 2012, provided an additional $250 million for DOD to continue addressing capacity and condition issues of public schools on military installations.  Charter Schools Program resources: Education also provides supports and resources through its Charter Schools Program (CSP).  CSP provides funds—about $255 million in fiscal year 2012—to create high-quality charter schools, disseminate information about effective schools, and support the replication and expansion of successful schools, among other purposes. In applying for grants for state education agencies, state agencies must describe, among other things, how they will disseminate information about effective schools and how students in the community will be given an equal opportunity to attend the charter school. A 2011 White House report details an agency-wide effort to develop a coordinated approach to supporting military families. One specific administration commitment is for Education to make supporting military families one of its supplemental priorities for its discretionary grant programs. This priority, which has been implemented, favors grant applications to meet the needs of military-connected students.  CSP funds a number of organizations, including the National Charter School Resource Center and the National Resource Center on Charter School Finance and Governance, which provide a diverse range of information on charter schools.", "While most schools located on military bases were traditional public schools or DOD schools, eight were charter schools at the time of our review. The military base charter schools differed among themselves in their academic focuses and in the number of military-connected children they served. In addition to the eight schools, most of which were located on Air Force bases or on joint Air Force/Navy bases, another charter school was being developed on the Fort Bragg Army base at the time of our review (see fig. 1).\nMost military base charter schools opened after 2008, following DOD’s Quadrennial Review that recommended parents be allowed to form charter schools on bases to provide another educational option for military children in geographic areas with underperforming public schools, in addition to private schools or home schooling options (see fig.2).\nLike many charter schools located in public school districts across the country, many of the eight schools on military bases offered a program with a particular academic focus (see table 1). For example, Sonoran Science Academy, the only charter school currently on a military base that serves children from grade 6 through grade 10, offers a college preparatory program with a focus on science, technology, engineering, and mathematics subjects (STEM). In school year 2011-12, Sonoran Science Academy served 185 children in grades 6 through 10 and plans to expand through the 12th grade by adding a grade each year. Manzanita Public Charter School offered a program for children learning English in which classes are taught in both English and the children’s home language, known as a dual immersion language program. The program’s goal was to support bilingualism and bi-literacy. Located on Vandenberg Air Force Base, but outside the base’s security gate, Manzanita Public Charter School served 438 students in school year 2011-12. Sigsbee Charter School in Key West draws on the school’s location to offer an environmental education program with a focus on marine studies. The only one of the eight schools on a military base to offer a pre-kindergarten program, Sigsbee served 410 children through grade 7 in school year 2011-12. In Arkansas on the Little Rock Air Force Base, Flightline Upper Academy chose a curriculum in which the arts are used to teach all subjects. The school served 164 students in grades 5 through 8 in school year 2011-12. Both of these schools—Sigsbee and Flightline—are located behind the security gate on their respective military bases. Table 1 provides information on the characteristics of the eight charter schools.\nWhile the charter schools’ academic focuses differed considerably, most military base charter schools served predominantly children of military- connected families and some of these schools took various steps to attract these students. For example, the largest charter school operating on a base, the Belle Chasse Academy, serves more than 900 elementary and middle school children. To address the needs associated with high mobility and parental deployments that military-connected students experience, Belle Chasse Academy offers psychological and other counseling services, welcome clubs, and a buddy program to ease an incoming student’s transition to Belle Chasse Academy. With 90 percent of its students coming from military families, Belle Chase Academy has the largest percentage of military-connected children of the schools currently in operation. While the children of civilians can attend the school, which is located inside the security gate on the Naval Air Station Joint Reserve Base New Orleans, Belle Chase Academy officials told us they initially took several steps to attract children of military personnel. For example, they held multiple town meetings for military families, distributed flyers on the base, and posted notices on the school’s website encouraging military-connected families to enroll their children as soon as the service member receives his or her orders (see text box.) Belle Chasse Academy officials said the Academy is well-known now and they no longer have to conduct as much outreach.\nBelle Chasse Academy: Promoting Early Enrollment of Military- Connected Students The Belle Chasse Academy includes the following announcement on its website: … Active-duty personnel are enjoined to register their child(ren) to attend Belle Chasse Academy as soon as they are in receipt of orders. This enables the school to plan effectively and ensures that your student has a space in the appropriate grade and setting. BCA is space-limited, and we cannot ensure that every dependent of active-duty personnel has space unless you assist us in planning. We are an open-enrollment school, so unless we have reserved a spot for your student, we must admit students who apply if there is a vacancy. Thanks for your cooperation.\nImagine Andrews and Sigsbee charter schools also considered educating the children of military-connected families an integral component of their mission. Sigsbee Charter School officials described the children of military-connected families as “central to the school’s mission” and said they offered services geared to the needs of this transient population. For example, the school has a military life counselor available to children with an active-duty parent, who holds small group sessions that address family stress, deployment, and issues related to moving. Sigsbee officials also told us they work closely with a professional organization that provides services to educators working with military-connected children and send the school’s staff to professional development sponsored by this organization. Imagine Andrews, where two-thirds of its students come from military-connected families, offers a range of services for these children: for example, according to the school’s website, Imagine Andrews staff receives in-depth professional development on how to recognize the warning signs of the stressors faced by students in military- connected families and how to help those students deal effectively with the challenges they encounter. While Sonoran Science Academy does not specifically state that serving the children of military-connected families is part of its mission, it enrolled a high percentage of these children and provided services geared to their needs. For example, the school provides a full-time counselor and offers a buddy program for military-connected students transferring into the school, a self-esteem program, and a support group for students with a recently-deployed parent. Located inside the gate on the Davis-Monthan Air Force Base in Arizona, Sonoran Science Academy has a student body that includes 76 percent military-connected students. (See fig. 3).\nIn addition, three schools used enrollment preferences to ensure the children of military-connected families had a greater chance of securing a place in the school: Belle Chasse Academy, Imagine Andrews, and Sigsbee. These schools were among the five schools with the highest enrollment of students from military-connected families.", "While all of the charter schools on military bases serve a large percentage of military-connected students, they were started for various reasons, including family perceptions about the quality of education available for their children in local school districts and military officials’ need to attract and retain military families to bases. Moreover, in some instances the impetus for establishing a charter school on a military base originated with private housing developers on military bases and charter management organizations.\nAt Imagine Andrews and other schools, school officials told us some parents expressed reservations about enrolling their child in local public schools due to the perception that those schools were of poor quality. As a result, many military families chose to live off-base, which allowed their children access to other districts they believed had higher quality schools. For example, one Belle Chasse Academy parent we interviewed said his concerns about the quality of schooling available in New Orleans led him to consider refusing assignment to the base. Belle Chasse Academy officials also said that some personnel accept assignment to the base, but leave their families behind in communities they believe provide better educational opportunities for their children. In these cases, leaving family behind often negatively impacted service members’ job readiness and happiness, Belle Chasse Academy officials and others noted. Navy officials who helped develop LEARN 6 in North Chicago said quality is important because parents want assurance that their children will “keep up” in the school in which they are currently enrolled and will at least be on grade level when they have to transfer to a new school. Additional parental concerns included children’s safety and the schools’ convenience or proximity to home, according to school officials and others.\nMilitary interests were also significant in the creation of some of the charter schools we reviewed. Officials at several schools said that base commanders recognized the important role of quality schools in attracting and retaining service members on base and that commanders’ support was critical to charter school development on base. For example, at Sonoran Science Academy and Imagine Andrews, school officials credited the base commander with being a driving force behind the vision of creating a charter school. Furthermore, the military Base Realignment and Closure (BRAC) process may contribute to growth in the number of military-connected families living on certain bases and heighten demand for more schooling options on bases, including charter schools. At LEARN 6 in North Chicago, military and state interests both contributed to the creation of the charter school. Partly in response to declines in the military population at Naval Station Great Lakes, the state board of education, which approved the charter school application, noted that the district stood to lose millions of dollars in federal Impact Aid if it did not take immediate action to attract and retain military families. The state board further noted that a charter school could help ensure the district’s continued eligibility for federal Impact Aid funds while offering another public school option for the district’s students.\nHousing developers and charter management organizations (CMO) also led moves to establish some charter schools on military bases, according to some school officials we interviewed. For example, housing developers at Joint Base Andrews that were hired by the military to privatize on-base housing believed that having a charter school on base would attract more families to on-base living. The housing developers worked with Imagine Schools, the CMO, to develop a charter school that would make living on base more attractive. In another case, the CMO Lighthouse Academies decided to open a new charter school campus—Flightline Upper Academy—when demand for spaces in its existing charter school exceeded capacity. Although the new charter school was ultimately located on a nearby military base, the CMO’s original plan was to provide more options for children in the community, not to target the children of military-connected families for enrollment in the school.\nAt Manzanita Charter School, public school educators were the planners because they perceived a need for better educational options for the children of economically disadvantaged families and English language learners. The school’s planners told us they had not considered the children of military-connected families as a target population for enrollment. They said the decision to locate the school on a military base was one of necessity—it was the only facility the local authorizer offered the charter school organizers.", "", "While charter schools on military bases encountered some of the same challenges as other charter schools around the nation—such as acquiring facilities and startup funding—they also experienced challenges unique to starting up and operating a charter school on a military base. One of these challenges is maintaining slots for military students whose parents may move more frequently. Specifically, because the high turnover rate among military-connected students at military base charter schools could limit enrollment access of these students, three charter schools provided military-connected students with an enrollment preference (see table 2).\nPlanners for Imagine Andrews wanted all of the slots at the school to be reserved for military families, according to a CMO representative. However, Maryland law requires charter schools to be open to all students. In 2010 the Maryland legislature revised the law to provide an exemption to the open enrollment requirement for military base charter schools, as long as students with parents who are not assigned to the base constitute at least 35 percent of enrollment. However, children of military parents who are assigned to the base, but live off the base, are grouped with civilians because Imagine Andrews also requires residency on the base for enrollment preference. Despite the school’s military student enrollment preference, an Imagine Andrews official said that the school would likely encounter concerns about enrollment from military- connected parents whose children are not able to enroll in the school due to limited slots. Similarly, a representative of Belle Chasse Academy said the school also explored how they could maintain slots for military- connected children. In addition to a stated mission to educate military- connected children and its efforts to encourage military-connected parents to register their children as soon as they are assigned to the base, the school uses a hierarchy of admission preferences, with the top six tiers for military-connected students, the seventh tier for the children of staff, and the final and eighth tier for civilian students (see table 3). According to the official, these preferences were allowed as an admission standard under an interpretation of the law by the state Attorney General’s office, which determined that it was acceptable as long as the mission, academics, and programs of the school were targeted to military- connected students. The preferences have enabled the school to maintain high military student enrollment—approximately 90 percent in SY 2011-12. The official said the school does not generally conduct a lottery because it could lead to higher levels of civilian enrollment and undermine the school’s mission to educate military-connected children.\nSigsbee Charter School also encountered a challenge to ensuring enrollment slots for military-connected students. Created prior to recent changes in Florida state law that now permit charter schools to give enrollment preference to children of an active duty member of any branch of the United States Armed Forces, the school utilized a provision in state law that allows a charter school to give enrollment preference to children of workplace employees. A school official explained that the school considered the base a workplace but could not establish a formal business partnership with the base because the base does not provide the school with funds. As a result, school officials established a formal partnership with the base through a memorandum of understanding, which it considered a business partnership for the purposes of satisfying the state requirement for using the school’s enrollment preference.\nTwo other schools that wanted to focus on enrolling military-connected students, including one school currently in development, did not plan to use an enrollment preference because officials said they either believed or were told by state education officials it was not allowable under state charter school law. For example, a Navy official involved with establishing LEARN 6 in North Chicago at Naval Station Great Lakes explained that, while planners for the school wanted to focus on enrolling military- connected students, Illinois state law required the school to be open to all students. According to the official, this requirement could pose a long- term challenge to maintaining enrollment access for military-connected families. He indicated that school stakeholders are currently working to propose changes to Illinois state law that would enable the school to use a preference for military-connected students at a minimum of one-third of the school’s enrollment. Similarly, Fort Bragg military officials involved with establishing a charter high school on the base said that school planners wanted an enrollment preference for military-connected students but were told by state education officials that North Carolina’s charter law does not allow for such a preference. One official indicated the CMO planned to challenge the state’s interpretation of the law. However, even without such a preference, base officials noted that the school’s prospective location on the base would ensure high military-connected student enrollment. Officials said that the school did not plan to include transportation in its budget. However, they said the school may consider offering fee-based busing to students living on base—but not to students living off base. Doing so could also result in higher military-connected student enrollment.\nOf the three schools currently using an enrollment preference for military- connected students, Sigsbee Charter School and Imagine Andrews received CSP subgrants from their state departments of education. As previously noted, both schools used lottery-based preferences to enroll military-connected students at higher rates than civilian students. The statute authorizing CSP grants requires charter schools, as a condition of receiving funding, to admit students on the basis of a lottery if more students apply than can be accommodated, and to provide a description of how students in the community will be given an equal opportunity to attend the charter school. Education, in its non-regulatory guidance, states that a charter school receiving CSP funds must hold one lottery that provides qualified students with an equal opportunity to attend the school, but also provides for certain exemptions to the lottery requirement. For example, the guidance allows certain categories of applicants to be exempted, such as the siblings of students, children of a charter school’s founders, and children of employees in a work-site charter school. However, the guidance does not specifically address whether schools may exempt military-connected students from a lottery. Further, the guidance also states that schools may use weighted lotteries, which are lotteries that give preference to one set of students over another, but only when they are necessary to comply with certain federal laws, such as Title VI of the Civil Rights Act of 1964, or applicable state laws. CSP officials told us that there were limits to how lottery preferences can be used. For example, a CSP official said that the practice of holding separate lotteries for enrolling civilian and military- connected students is not consistent with CSP requirements. The official also stated concern about enrollment preferences that would significantly limit civilian enrollment access to a school. However, another CSP official stated that they would not necessarily be aware of the specific enrollment practices of Sigsbee Charter School and Imagine Andrews at the time the awards were made, in part because both were subgrantees of state educational agency (SEA) grants and, under federal regulations, the SEA, not Education, is primarily responsible for monitoring subgrant activities and ensuring that subgrantees comply with applicable federal program requirements. However, the official said that CSP does not require SEAs to describe the enrollment preferences of school subgrantees in their grant applications.", "When charter schools are located on military bases, base security requirements can limit access for civilians. Of the eight charter schools, six are currently located inside a protected security perimeter, which generally requires that civilians pass a background check and carry a base pass to access the school. The background check for one base school, Imagine Andrews, consists mainly of checking the validity of the applicant’s driver’s license and reviewing any recorded criminal history. For this base, passes take about two days to process, are valid for one year, and applicants who are denied access can appeal the decision. At another charter school, Flightline Upper Academy, some civilian parents did not pass the background checks required for base access, according to a school official. When this happens, however, the official said that school staff can escort children to the school.\nBase security requirements can also limit community participation in school events and activities. For example, an Imagine Andrews official stated that the base restricts each civilian family to three passes, which can create a challenge for them during school events, such as an honors breakfast or awards ceremony. He noted that military-connected families on the base have no such restriction. Further, the official noted that the base does not permit civilian access to the school on weekends, which would prevent the school from holding extracurricular activities, such as morning tutorials or enrichment programs, during this time. The official also explained that the school conducted certain community outreach events, such as open houses, off-base to give off-base civilian families an opportunity to learn about the school without requiring access to the base. Similarly, an official with Sonoran Science Academy Davis-Monthan said that base restrictions on civilian access on weekends prevented them from holding community events on the school grounds. As a result, the school rented off-base facilities, such as a YMCA. According to the official, the base’s limitations on public access was the school’s most significant challenge because it limits the school’s ability to establish relationships with the community and inform the public about the school.\nTwo base schools—Manzanita Public Charter School and LEARN 6 in North Chicago—were located outside the base security gate and therefore did not require base access for civilians. According to a military official who assisted with establishing LEARN 6 in North Chicago at Naval Station Great Lakes, school organizers and stakeholders considered the issue of civilian access to the school prior to its opening and were concerned about the possibility that parents of some civilian students given slots at the school through the lottery would not pass the background check and would not be allowed access to the school. As a result, the base command, the school’s charter management company, and the Illinois State Board of Education jointly agreed that the school should be located outside the base security perimeter in order for the school to operate on the base. Because the school was slated to occupy a former military hospital training facility inside the perimeter, the base command arranged to move a section of the perimeter so that the school would be located outside it and fully accessible to the public.\nSome schools, including Wheatland Charter Academy, Manzanita Public Charter School, and LEARN 6 in North Chicago, were located on bases that also hosted a traditional public school. While we did not examine these or other district-run public schools on bases, we believe civilian access to them may similarly be limited as a result of military base security requirements.", "Like charter schools generally, military base charter schools encountered difficulties obtaining facilities for school use, and they may face additional challenges because of their location on military bases (see table 4). As we previously found, securing adequate school facilities is one of the greatest challenges for new charter schools because they typically are not able to rely on the same resources for facility financing—such as local taxes and tax-exempt municipal bonds—as public schools that are operated by school districts. We also previously reported that charter schools’ access to other facility financing options, such as private lending, can also be limited. Charter schools are often considered credit risks because they may have limited credit histories, lack significant cash flows, and have short-term charters that can be revoked. As a result, private loans are not easily accessible to charter schools for facility financing, so they often rely on state or district per-pupil allocations to finance their facilities.\nTwo schools we examined encountered challenges initially securing financing for the construction of new facilities. According to a Belle Chasse Academy official, the school struggled to find a bank that could underwrite a long-term loan to build a facility on Naval Air Station Joint Reserve Base New Orleans. School planners were eventually able to secure a loan after receiving a loan guarantee through the U.S. Department of Agriculture Rural Development Community Facilities Guaranteed Loan Program. Similarly, construction of a school facility for Imagine Andrews was able to start on Joint Base Andrews after a loan for this work was secured by the Charter School Development Corporation (CSDC)—a non-profit group that helps finance charter schools. A representative for the CMO, Imagine Schools, indicated that CSDC secured the loan because the CMO had limited capacity to finance the construction. CSDC cosigned the loan with the CMO, and a private real estate developer guaranteed the loan.\nSecuring financing to renovate facilities for charter schools on bases was another obstacle for some schools. For example, Sigsbee Charter School moved into a former public school facility on Naval Air Station Key West that required significant renovation. The local district provided funds to defray the renovation cost, but these did not fully cover the needed repairs. Because none of the grant funds the school received could be used to renovate its facility, the school relied extensively on local volunteers, including military personnel and parents of students who would attend the school, to make many of the essential repairs to the facility. According to a school official, there are no funds to complete the remaining renovation work. For Flightline Upper Academy on Little Rock Air Force Base, school planners converted a base facility previously used as a conference center and that was slated for demolition. Renovations included removing asbestos, replacing old pipes, and repairing the roof. The cost of the renovations was paid for primarily through donations from a private housing developer and foundations—with no financial contributions from the Air Force. A school official noted that the school was able to address its main financing needs for facility repair prior to opening. However, he stated that the school’s significant investment in renovating a building it leases from the base comes with risk because the Air Force could decide not to renew the 5-year lease and take back the building.\nSome school representatives said they also had to navigate complex facility and land lease arrangements. With Imagine Andrews, the non-profit CSDC will own the completed facility and lease it to Imagine Schools. The Air Force leased the property to a nonprofit joint venture between the Air Force and a private housing developer, which in turn leased it to CSDC. Imagine Andrews stakeholders also received assistance in structuring the facility financing and land-lease agreements from an agency that oversees the housing privatization program for the Air Force. A Navy official involved with establishing LEARN 6 in North Chicago stated that the real estate arrangements, such as the lease for the school site and facility, were complex and required the involvement of multiple stakeholders, including the CMO, the Navy, and the local municipality. In particular, the official said understanding the appropriate support role for the Navy was a significant challenge to acquiring the facility for the school. For example, the official said it was unclear whether the Navy could provide funds for the school site, such as paying for its utilities. He noted that guidance on developing a lease agreement for charter schools on military bases would be beneficial and could potentially have saved school planners significant resources during startup.\nSimilarly, other military and school officials cited the need for federal guidance and information sharing on starting and operating a charter school on a military base. For example, base officials at Fort Bragg said that they unsuccessfully sought information from the Army that would have helped guide their efforts to establish a charter high school on the base, such as liability issues related to operating a charter school on federal property. North Carolina state education officials denied the school’s application because school planners revised it after the deadline in order to replace most of the founding members on the school’s governing board with new members. According to state education officials, school planners told them they removed these members because a military regulation made them ineligible to serve on the school’s board. As a result of the application denial, the school will not open in 2013 as planned. We also found that currently, little guidance and information sharing exist for guiding the development of military base charter schools and addressing their startup and operational challenges and the guidance that does exist is not DOD-wide. While the Air Force produced guidance to support community efforts to develop charter schools on its bases, it does not apply to other military service bases. Army officials said they are currently developing charter school guidance for bases, which they plan to distribute in January 2013. Further, while Education and DOD have taken initial steps to support information sharing on developing charter schools on military bases—such as Education conducting outreach efforts with school planners and stakeholders at Naval Station Great Lakes and DOD and Education providing online information—some school officials suggested more information sharing could be helpful. For example, according to an official at Sigsbee Charter School, which opened 2 years ago, school planners found the information Belle Chasse Academy representatives provided on establishing on school on a base to be valuable for their own efforts. The official noted that more information sharing in this area would be useful.", "Against the backdrop of a growing and diverse charter school landscape, charter schools on military bases have emerged as one additional option for military-connected parents. How rapidly charter schools will spread to other military bases is difficult to predict, but demand among military families and base communities for more military base charter schools will likely increase, especially in light of residential growth on bases affected by military Base Realignment and Closure. While the number of charter schools operating on military bases is currently small, they present a novel set of challenges for charter school founders and operators as well as an opportunity for Education and DOD to be in the forefront of emergent issues for these charter schools. One issue that the various stakeholders may well confront is the tension between preserving the public mission of charter schools of being open to all students and the desire in military base communities to ensure enrollment of military- connected students. This tension is already emerging as some charter schools use enrollment preferences to ensure continued enrollment access for highly mobile military-connected students. Using such enrollment preferences could have implications for whether or not a charter school is eligible for federal CSP grant funding. Although Education officials have expressed concern to us over some charter schools’ enrollment preferences and practices, CSP guidance does not specifically address the issue of enrollment preference for military- connected students. Moreover, in two cases, CSP subgrants were awarded by states to charter schools about which Education expressed concerns because of the nature of their enrollment preferences. However, Education does not require SEA applicants for CSP grants to indicate whether schools use enrollment preferences and, if so, to describe those preferences. Such a requirement would allow Education and the states to better determine if an applicant is eligible to receive CSP funds.\nFinally, as charter school planners, authorizers, and military base commands consider adding schools on bases, they could benefit from having information to help them better weigh the tradeoffs of locating charter schools on bases, including the need for community outreach and civilian access to schools. The 2008 MOU between DOD and Education was intended, in part, to facilitate this kind of information development. Such information would also help them address the types of challenges current schools have encountered. As existing charter schools have discovered, determining DOD requirements and allowable practices— such as the role of base command—was often difficult. Having guidance from DOD on appropriate ways to establish and operate charter schools on military bases may help mitigate these common challenges and smooth school startups and operations. Military base charter schools that have experienced some of these stumbling blocks could share useful information with planners of charter schools in other military base communities—such as information about making facilities and lease arrangements, and building effective working relationships between school administrators and base command.", "", "To ensure that Charter Schools Program grants are provided only to schools that meet eligibility criteria, we recommend that the Secretary of Education direct the Charter Schools Program office to revise the Charter Schools Program guidance to  Clarify CSP grant requirements regarding charter school enrollment preferences, including preferences for military-connected students, such as whether schools can hold separate lotteries for military- connected and civilian students and the extent to which schools can enroll military-connected students under work-site exemptions, and  Require applicants for CSP grants and subgrants to describe any enrollment preferences in their applications.\nTo address the specific needs of military communities that charter schools on bases serve while preserving the public mission of charter schools, we recommend that the Secretary of Defense develop and set standards for operating charter schools on military bases and require the appropriate military services to create guidance based on those standards. The guidance should describe the requirements and allowable practices for establishing and operating charter schools on military bases. At a minimum, this guidance should address the following areas:  The appropriate role of military base command and other DOD offices and agencies in supporting the creation and operation of charter schools;  Reasonable base access and security arrangements for civilian children, parents, and others involved in a military base charter school; and  Military lease arrangements and other property-related issues for a charter school on a base.", "To serve as a resource for military base communities exploring educational options, as stated in their 2008 Memorandum of Understanding, we also recommend that the Secretaries of DOD and Education facilitate the sharing of information among interested parties— such as base commanders and school planners and officials—on how military base charter schools have addressed startup and operational challenges.", "We provided a draft copy of this report to DOD and Education for review and comment. DOD’s comments are reproduced in appendix III and Education’s comments are in appendix IV. The agencies generally agreed with our recommendations, and Education described its plans for implementing them. Specifically, in response to our recommendation to clarify CSP grant guidance, Education stated that it will review its current non-regulatory guidance to determine how it can clarify admissions and lottery requirements for military-base charter schools that receive CSP funds. With respect to the two charter schools noted in our report that had enrollment preferences but received CSP grants from their states, Education said that the schools’ receipt of these grants raises compliance questions. Education has asked the states to conduct reviews of these instances and report back to the Department. Education also agreed with our recommendation to require CSP applicants to describe enrollment preferences in their applications. Education said it intends to revise its CSP grant application notices to require descriptions of any enrollment preferences. Furthermore, Education plans to request that SEA grantees require CSP subgrant applicants to describe recruitment and admissions policies and practices, including any enrollment preferences they plan to employ.\nEducation acknowledged the importance of working together with DOD to enhance awareness of the unique challenges involved in locating charter schools on bases and indicated steps they would take to continue this work. For example, Education stated that the Working Group established under the DOD and Education Memorandum of Understanding will continue to facilitate the sharing of information on challenges through shared newsletters, outreach, conference participation, panel discussions, and websites.\nThe agencies also provided technical comments that were incorporated, as appropriate.\nWe are sending copies of this report to the Secretaries of DOD and Education, relevant congressional committees, and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or scottg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs can be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "Mission statement The mission of Belle Chasse Academy is to educate our military- dependent children, no matter what their background or previous school experience, to fully achieve their personal and academic potential through the acquisition of core knowledge and the skills of analysis, problem- solving, communication, and global responsibility.", "", "Military-connected student enrollment SY 11-12: 845 (90%)\nMission statement Imagine Andrews Public Charter School (PCS) was established … to provide outstanding educational opportunities for military and community students. Our mission is to serve our nation by providing the students of the Andrews Community with a “world class” education, while meeting the needs of military families. Our vision is to create a school environment that prepares students for high school and beyond, develops their strong moral character, and provides them with the skills necessary to lead and advance our nation.", "on the military base.\nMission statement We prepare our students for college through a rigorous arts-infused program.", "", "Military-connected student enrollment SY 11-12: 82 (50%)\nMission statement To provide children with the academic foundation and ambition to earn a college degree.", "", "Free-reduced lunch eligible: 66% School Year 2011-12 student demographics School was not open in SY 2011- 12 .\nMission statement We are dedicated to advancing academic excellence in Lompoc by providing students in kindergarten through sixth grade with the intellectual capacity to participate and work productively in a multi-cultural society.", "", "Military-connected student enrollment SY 11-12: 184 (42%)", "", "Mission statement The mission of Sonoran Schools is to provide a rigorous college prep, STEM-focused education through a challenging and comprehensive curriculum, continuous assessment, and dedicated teachers who inspire their students to become the leaders of tomorrow.", "", "Military-connected student enrollment SY 11-12: 140 (76%)\nPreference for military-connected: No Adequate Yearly Progress for SY 10-11: Met Free-reduced lunch eligible: 21% School Year 2011-12 student demographics White: 55% Asian/Pacific Islander: 1% American Indian/Alaskan: 1% Two or more races: 1% .", "", "Military-connected student enrollment SY 11-12: 74 (71%)\nPreference for military-connected: No Adequate Yearly Progress for SY 10-11: Did not meet Free-reduced lunch eligible: 38% School Year 2011-12 student demographics Did not receive complete demographic data, but school is predominantly White.", "", "", "", "", "In addition to the contact named above, Sherri K. Doughty, Assistant Director; Sandra L. Baxter; Edward F. Bodine; and Deborah A. Signer made significant contributions to this report. Also contributing to this report were James Bennett, Deborah Bland, Jessica A. Botsford, Ying Long, James M. Rebbe, Terry L. Richardson, Laura L. Talbott, and Kathleen L. van Gelder." ], "depth": [ 1, 2, 2, 1, 2, 1, 2, 2, 2, 1, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "", "", "h0_full h2_title", "h0_full h2_full", "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h1_full", "h1_full", "", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "How is each charter school on a military base different?", "How does enrollment at these schools vary?", "Why were these schools established?", "What prompted the development of these schools?", "How do these schools shape perspectives of life on military bases?", "What challenges are there to operating a charter school on a military base?", "How do state regulations change the requirements for charter schools operating on a military base?", "How has funding determined how charter schools must operate and enroll students?", "How is being located on a military base challenging for charter schools?", "What school activities are made more difficult due to the background checks and showing a pass?", "What obstacles do the schools report that are similar to civilian charter schools?", "What could help ameliorate the challenges charter schools on military bases face?", "What struggles can exacerbate difficulties balancing job and family life?", "What is a large concern for military personnel?", "How do most children of military families receive schooling?", "What did the DOD do to combat this?", "What did the GAO examine in response to the House Appropriations Committee’s report?" ], "summary": [ "The military base charter schools differed in their academic focuses and served militaryconnected students to different degrees. For example, one school focused on science, technology, engineering, and mathematics while another used the arts to teach all subjects.", "Enrollment of military-connected students at these base charter schools ranged from 42 percent to 90 percent, and three schools used preferences to ensure a higher proportion of these students. For example, one charter school with a stated mission of educating military-connected children gave first preference to children of active-duty personnel, who represented the preponderance of enrolled students.", "The schools were established to address different interests, including family perceptions about the quality of education in local school districts and military officials' need to attract and retain military families to bases.", "In some instances the impetus for establishing a charter school on a military base originated with private entities.", "For example, a private developer hired to build housing on the base worked with a charter management organization to develop a charter school they thought would make living on the base more attractive to military families.", "Charter school officials cited several challenges to starting up and operating on military bases, such as using enrollment preferences for military-connected students, providing civilian access to schools, and obtaining facilities.", "Most states require schools to be open to all students, and when organizers of one school sought to enroll solely military-connected students, state law prohibited this because of the state's open enrollment requirements. Some states have changed or interpreted their charter school laws to enable schools to give enrollment preference to military-connected students.", "Furthermore, two charter schools that have enrollment preferences for military-connected students have received Department of Education (Education) Charter Schools Program (CSP) grants, which require charter schools to provide all students an equal opportunity to attend the school and admit students by lottery if there are more applicants than spaces available.", "For example, access for civilians can be difficult. Nearly all the military base charter schools were located behind the base's security gate, requiring civilians to complete a background check and show a pass.", "Several school officials reported difficulties conducting school activities such as open houses and sporting events because each base had a limit on the number of security passes for civilians.", "Like other charter schools, military base charter school officials also reported obstacles to obtaining facilities, such as financing.", "Several school and military base officials said that having guidance and more information sharing could help with startup and operational challenges charter schools on military bases face.", "Many families struggle to balance their job demands with ensuring that their children have access to a high-quality education, and for military families this struggle can be exacerbated by the highly mobile nature of their service.", "Family concerns about education affect readiness and retention of military personnel, according to the Department of Defense (DOD).", "The majority of children of military families in the United States attend public schools.", "A 2008 DOD study recommended offering military families a public charter school option in areas with poorly-performing local schools.", "In response to a directive in a House Appropriations Committee report, GAO examined: (1) the characteristics and origins of charter schools on military installations, and (2) the challenges charter schools on military installations have faced in starting up and continuing their operations." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, -1, -1, -1, 3, 3, -1, -1, 0, -1, 2, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 0 ] }
GAO_GAO-14-46	{ "title": [ "Background", "SSA Receives Death Reports from a Number of Sources, but Its Procedures for Handling Them Allow for Erroneous, Incomplete, and Delayed Death Information", "SSA Receives Death Reports From Multiple Sources to Create Its Set of Death Records", "SSA Verifies Only Certain Death Reports Before Including Them in Its Death Records, and Does Not Include Others", "SSA’s Verification and Other Procedures Do Not Ensure Accurate, Complete, or Timely Death Data For Federal Users", "Access to Death Data Varies and SSA Lacks Transparency in Communicating How it Determines Agency Eligibility and Reimbursement Costs", "SSA Lacks Written Guidance on Its Process for Determining Agency Access to Full Death Data", "Reimbursement Amounts Vary and SSA Does Not Share How They are Calculated", "Conclusions", "Recommendations for Executive Action", "Agency Comments and our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Social Security Administration", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "SSA’s primary mission is to pay benefits under its Old-Age, Survivors, and Disability Insurance and Supplemental Security Income programs, in accordance with Titles II and XVI of the Social Security Act of 1935 (the Act), as amended.(SSN)—a unique identifier assigned to each person through a process known as “enumeration”—as a way of tracking individuals’ work activities and the benefits paid to retired workers and eligible family members. In order to properly administer payments, SSA also tracks death information of SSN-holders.\nIn addition, SSA issues the Social Security Number SSA issues SSNs and uses them to administer its programs, including tracking U.S. workers’ earnings in order to determine the types and amounts of benefits individuals may be eligible for. As a result, SSA has also historically collected death information about SSN-holders so it does not pay Social Security benefits to deceased individuals and to establish benefits for survivors. The 57 vital records jurisdictions—the 50 states, New York City, the District of Columbia, and five territories—are responsible for registering deaths. Fifty-three of these jurisdictions, along with a number of other parties, provide SSA with decedents’ names, dates of death, dates of birth, and SSNs. SSA receives state death data under contracts with the 50 states, New York City, the District of Columbia, and Puerto Rico.matches that information against corresponding information in its databases, verifies the information for certain cases, and records the individual as deceased.\nWhen SSA receives a report of death it Various entities, including federal agencies, can obtain SSA’s death data. The complete file, which we refer to as “SSA’s full death file,” is available to certain eligible entities. A subset of the full death file, which SSA calls “the Death Master File (DMF),” is available to the public. The Social Security Act requires that SSA share its full death file, to the extent feasible, with agencies that provide federally funded benefits (for the purposes of this report, we refer to these as “benefit-paying agencies”), provided the arrangement meets statutory requirements. However, SSA may not include death data received from states in the DMF, which can be accessed publicly. Agencies may use the data to determine if individuals receiving benefits under their respective programs are deceased, and thus no longer entitled to those benefits. GAO has noted the value of using this information for guarding against improper payments. For example, in a June 2013 report, we recommended that the U.S. Department of Agriculture (USDA) match its payment records against SSA’s full death file to prevent improper payments to deceased farmers.\nGiven the focus on guarding against improper payments, there has been new emphasis on how agencies access critical data, such as death records, while maintaining the security of sensitive information such as SSNs. The Improper Payments Elimination and Recovery Improvement Act of 2012 established the Do Not Pay Initiative and requires federal agencies to review a number of databases, as appropriate, including the DMF, to verify eligibility prior to making payments with federal funds. A component within the U.S. Department of Treasury (Treasury) administers the Do Not Pay Business Center, which operates the centralized portal through which agencies can verify individuals’ eligibility to receive payments. Recent legislative proposals have also sought to encourage federal agencies to use SSA’s death information. For example, a Senate bill introduced in July 2013 would provide for federal agency access to the full death file for specified purposes, such as ensuring authorized payments and facilitating other agency functions, including public health or safety, law enforcement, tax administration, health administration oversight, and debt collection, as determined appropriate by the SSA Commissioner. At the same time, other proposals have sought to limit public access to SSA’s death data. For example, proposed legislation introduced in the House in July 2013 seeks to deter identity theft and tax fraud by limiting public access to the DMF, according to the bill’s sponsor. The current administration has also advanced a proposal that includes critical elements of both legislative proposals, and SSA officials have publicly supported their central provisions.", "", "SSA receives death reports from a variety of sources, including states, family members, funeral directors, post offices, financial institutions, and other federal agencies. According to agency officials, SSA received about 7 million death reports in 2012. However, except for reports submitted by states, it does not collect data identifying how many reports come from each source.received within 30 days of the date of death.\nOfficials also said nearly all death reports are Because of states’ custodial role in collecting and maintaining death records, SSA considers states to be a critical partner in its collection of death information. Thirty-four states, the District of Columbia, and New York City submit their death reports through an Electronic Death Registration System (EDRS), which automates the electronic registering and processing of death reports in order to improve timeliness and accuracy. SSA considers reports submitted by states through EDRS to be the most accurate because these systems are used by most states to verify the name and SSN of the decedent with SSA databases before the report is submitted to SSA. To get death reports from the states, SSA has established contracts that set forth a payment structure to compensate states for the reasonable costs of providing these records, in accordance with the Social Security Act. Payments are higher for reports submitted via EDRS and pre-verified with SSA databases, and those that are submitted relatively soon after decedents’ deaths. For example, for calendar year 2013, SSA paid $2.93 for each EDRS report that was pre- verified and submitted to SSA within 6 days of the date of death, compared to $0.82 for non-EDRS reports submitted within 120 days of the date of death. Because of the time saved through automated transmission of data and the use of pre-verification to ensure accuracy, SSA has encouraged the expanded use of EDRS. The contracts with the states provide that SSA will not share this information, except as authorized by federal law and section 205(r) of the Act.\nSome states and other sources provide death information voluntarily to SSA through methods other than EDRS. For example, funeral directors routinely submit a form that includes the decedent’s full name and SSN, as provided by the decedent’s family. In addition, family members often contact SSA field offices directly to report a death. SSA considers reports from families and funeral directors generally to be accurate because those sources have first-hand knowledge of the death and the decedent’s identity. SSA views death reports from post offices, financial institutions, and other government agencies generally to be less accurate because SSA does not consider these sources to have first-hand knowledge of the death.\nDeath reports from sources other than states and federal agencies are generally provided to SSA field offices. in other SSA records so payments to deceased beneficiaries can be stopped. As shown in figure 1, death reports from some sources are sent to DACUS directly, while reports from other sources are entered into DACUS by field office staff.\nDACUS matches the information in the death reports with SSA’s benefit payment systems to determine if the decedents are currently receiving Social Security program benefits (i.e. whether they are program beneficiaries). It then matches the information to SSA’s database of all SSN-holders, known as the Numerical Index File (Numident). Information in death reports from certain sources (see fig. 2) is also verified by field office staff. If the name, date of birth, gender and SSN all match a record on the Numident, SSA marks that record with a death indicator. The Numident is updated with death information on a daily basis. Numident records with new death indicators are then extracted for inclusion in the death data file also on a daily basis. SSA does not track how long it takes from the time it receives a death report until the death is recorded in the Numident.", "SSA does not independently verify all death reports it receives. In accordance with policy, the agency only verifies death reports for Social Security beneficiaries, and then verifies only those reports from sources it considers less accurate. For example, SSA only verifies death reports for persons currently receiving Social Security retirement or disability benefits because, according to agency officials, it is essential to SSA’s core mission to stop payments to deceased Social Security beneficiaries. As a result, death reports for non-beneficiaries are not verified. Officials told us it would be difficult to verify death reports for individuals who do not receive Social Security benefits because SSA would not likely have current contact information for these individuals or their family members.\nAs shown in figure 2, SSA verifies death reports of Social Security beneficiaries received from other federal agencies; third parties that learn about the death, such as post offices and financial institutions; and states that do not submit reports via EDRS. SSA considers these sources to be less accurate because they do not have first-hand knowledge of the death and, unlike states using EDRS, do not perform any verification before submitting the death report to SSA. To verify reports, SSA field office staff typically contact families or other parties with first-hand knowledge of the death to confirm the fact and date of death and confirm the decedent’s SSN.\nSSA does not verify death reports submitted by families, funeral directors, or states using EDRS. According to SSA officials, families and funeral directors have first-hand knowledge of decedents’ identities and deaths, and the information in death reports submitted through EDRS is typically already verified with SSA databases. They also noted, for example, that SSA would very quickly find out about an erroneous report because, if that beneficiary were still alive, he or she would quickly contact SSA once benefit payments stopped.\nSSA does not track the proportion of death reports it verifies or how long verifications take. Moreover, according to agency officials, SSA has never performed an analysis validating the accuracy of the various sources of death reports, but instead has based its decisions about which ones to verify on general experience over time. For example, officials told us that for death reports submitted by family members, general experience over many years has shown that a large portion of these reports are accurate.\nSome death reports, including those that SSA cannot match with a Numident record, are not included in SSA’s death data. Agency officials told us that staff conduct some follow-up steps to see if they can match the information in these reports with other agency records, but if these efforts are unsuccessful, the reports are not included. SSA also does not attempt to follow up with the source of these reports. According to agency officials, it is unlikely the sources would know any additional information beyond what they already provided. Moreover, a subsequent death report for the same individual may arrive from another source. They also added that federal privacy laws may prevent SSA from providing identifying information on the decedent because the individual’s living status is unclear. SSA does not track these cases, so officials were unable to tell us how often this occurs. There are also some deaths that SSA cannot reasonably be expected to include in its death information. These include deaths not reported to SSA because the identity of the decedent cannot be established or a body has not been recovered. While improper benefit payments to these individuals may occur, it would not be appropriate to attribute them to lack of a record in SSA’s death data.\nAfter receiving death reports and updating the Numident with death information, SSA makes the information available, in the appropriate form, to federal agencies and other parties (see Fig. 3).\nSSA provides the full death file, containing over 98 million records, directly to federal benefit-paying agencies that have an agreement with SSA for use in preventing improper payments to deceased beneficiaries or program participants. SSA also extracts Numident death records that are reported by non-state sources to create the DMF, which contains over 87 million records. SSA makes the DMF available publicly via the Department of Commerce’s National Technical Information Service (NTIS), from which any interested party or member of the public— including other federal agencies—can make a one-time purchase, subscribe for periodic updates, or subscribe to an on-line query service. For example, financial institutions or firms conducting background investigations can purchase the DMF from NTIS and subscribe to receive monthly or weekly updates. SSA does not guarantee the completeness or accuracy of its death data, stating that SSA does not have a death record for all deceased individuals. SSA also informs users of its death data that all deaths should be verified before any action, such as stopping benefits, is taken.", "SSA’s methods for processing death reports may result in inaccurate, incomplete, or untimely information for users of its death data. Consequently, this could lead to improper payments if benefit-paying agencies rely on this data. The specific procedures include (1) verifying a limited portion of death reports, (2) not including death reports that do not match with the Numident file, and (3) not performing additional reviews of reports of deaths that occurred years or decades in the past.\nBecause SSA does not verify death reports from sources it considers most accurate, the agency risks having erroneous information in its death data, such as including living individuals or not including deceased individuals. Analysis we performed on records in the full death file that were erroneously included showed that most of these errors would not have occurred if SSA had verified the death reports when it received them. We identified nearly 8,200 deaths SSA deleted from its death data between February 2012 and January 2013. These data reflect cases where a death report matched a record in the Numident and SSA marked, then later removed, a death indicator for that record. SSA officials told us this could occur because the decedent turned out to be alive or was misidentified as another individual, or as a result of data entry errors. We drew a random but non-generalizable sample of 46 cases from this group and asked SSA to search its records to see if it could determine the reasons for deleting them from its death data. In 28 of these cases, SSA was able to identify a reason for deletion. Of these, 12 were false death reports filed while the reported decedent was still alive, and 4 involved decedents for whom identifying information—such as SSNs—of other people was mistakenly included in the death reports. Separately, SSA was also able to determine that 13 of the 46 cases were reported by either family members or funeral directors—sources SSA considers more accurate and from which it does not verify death reports. Nine of the 46 cases involved non-beneficiaries, which are also not verified.\nAnother SSA practice—not contacting the source of a death report that does not match a Numident record—poses a risk to the data’s completeness. As described earlier, if SSA staff cannot match a death report to a corresponding Numident record, they do not contact the source that submitted the report or undertake any other outside investigation to resolve the discrepancy. SSA’s OIG has found that these omissions are substantial. In one case, data for about 182,000 deceased Supplemental Security Income recipients were not included in SSA’s death data. In another, it found that as many as 1.2 million deceased Old Age and Survivors Insurance beneficiaries were not included in the death data. The OIG determined that these gaps occurred because SSA could not match the identifying information for these individuals included in the death reports or other SSA records with Numident records. Therefore, no death indicator was added to the Numident records. Samples of the cases drawn for the OIG’s reviews showed that these individuals had As a result of this been deceased for an average of nearly 17 years. practice, other federal benefit-paying agencies relying on these data could make improper benefit payments.\nSocial Security Administration, Office of the Inspector General, Title XVI Deceased Recipients Who Do Not Have Death Information on the Numident, A-09-12-22132 (Baltimore, MD: May 3, 2013); and Title II Deceased Beneficiaries Who Do Not Have Death Information on the Numident, A-09-11-21171 (Baltimore, MD: July 9, 2012). The OIG found that Social Security benefit payments to a sample of these deceased individuals had been terminated.\nFinally, we also identified cases in which death reports submitted to SSA in early 2013 listed dates of death that were more than a year old. Specifically, we found about 500 records in which the date of death recorded had occurred in 2011 or earlier; in about 200 of these, the date of death was recorded to be 10 or more years before SSA received the death report. For example, in 11 of the cases, the date of death was in 1976; in another 11, the date was 2004. This is of concern because, if these dates of death are accurate, SSA and other agencies may have been at risk of paying benefits to these individuals for long periods after they died. SSA officials were not able to explain with certainty why this was occurring, but suggested some cases might be the result of data entry errors, and in others, deaths of non-beneficiaries may not be reported to SSA until spouses or families become eligible for survivor’s They informed us that SSA payment systems would identify benefits.benefit payments the agency made after these deaths occurred. When these reports are sent to field offices for verification or other development, they added, it could take an extended period of time to complete because the contact information for someone who died years ago may not be available.\nWe found other instances of potentially erroneous information in the death data that raise questions about its accuracy and usefulness. These included:\n130 records where the recorded date of death was before the date of birth;\n1,941 records where the recorded age at death was between 115 and\n1,826 records where the recorded death preceded 1936, the year SSN’s were first issued, although these decedents had SSNs assigned to them.\nAgency officials told us SSA has never investigated how these errors occurred or whether they may affect payments to Social Security and other federal program beneficiaries. They did not think these types of errors would have resulted in improper benefit payments because they involved persons recorded as deceased. SSA officials said some of these anomalies were likely associated with records added prior to the mid- 1970’s that were manually processed. For example, SSA staff could have incorrectly keyed in a date of birth that occurred after the reported date of death.\nOfficials added that SSA has undertaken or will soon undertake several initiatives aimed at correcting these types of errors and preventing them in the future. Among those they said have already been implemented are the following:\nSSA is using an edit check to identify records showing a date of birth that occurs after a date of death and taking corrective action before the report is processed further. SSA, however, has not decided whether to make corrections to these dates in records processed before the check was implemented. In December 2012, SSA identified cases and terminated benefits for individuals over 115 years old whose Numident record showed they were deceased and who had their benefits suspended or were entitled only to Medicare benefits. SSA plans to repeat this match for fiscal year 2013. SSA officials told us that, as a result of this initiative, the agency corrected about 17,000 cases to reflect terminated benefits due to death. In June 2013, SSA began making monthly comparisons of Numident records containing death information with its Title II and Title XVI payment records. It is sending alerts to field offices to resolve cases showing individuals who are receiving or scheduled to receive benefits in the near future even though they are listed as deceased. SSA officials told us, as a result of the initiative, the agency corrected about 14,500 payment records to reflect suspended or terminated payment status due to death. In September, 2013, SSA began a data exchange with CMS to identify beneficiaries ages 90 to 99 who are still receiving Title II benefits but have not used Medicare for 3 years or more and have no other insurance or nursing home information in their records. Agency officials stated that they identified and referred to SSA regional offices for action about 18,600 cases.\nSSA also plans to introduce a computer code that can be used to terminate benefits for certain Title II beneficiaries who are 115 or older, whose benefits have been continuously suspended for 7 or more years, and for whom SSA does not have a death record.", "", "The Social Security Act requires SSA to share its full death file, to the extent feasible, with federal benefit-paying agencies for the purpose of preventing improper payments, if the agency reimburses SSA for its reasonable costs and the arrangement does not conflict with SSA’s duties with respect to state data. However, SSA has no guidance on its process for determining an agency’s eligibility. As of September 2013, seven federal benefit-paying agencies obtained SSA’s full set of death information including the information reported by states, directly from SSA:\nCenters for Medicare & Medicaid Services (CMS)\nDepartment of Defense (Defense Manpower Data Center—DMDC)\nDepartment of Veterans Affairs (VA)\nInternal Revenue Service (IRS)\nOffice of Personnel Management (OPM)\nPension Benefit Guaranty Corporation (PBGC)\nRailroad Retirement Board (RRB)\nAccording to SSA officials, CMS also shares the full death file it obtains from SSA with the U.S. Department of Health and Human Services’ Health Resources and Services Administration, under an information exchange agreement between CMS and SSA, as authorized by 42 U.S.C. § 405(r)(9). determine whether they are eligible to receive access under the Act, officials told us that SSA asks the requesting agencies to explain how their proposed use of the information is in accordance with the allowable use outlined in the Act. Specifically, SSA bases its initial eligibility determinations on whether: (1) the agencies pay federally-funded benefits, and (2) the agencies propose to use the full death file to ensure proper payment of those benefits. According to officials, once SSA has determined an agency is eligible, it ensures the remaining statutory requirements regarding cost reimbursement and adherence to SSA’s duties with respect to state data are met, and establishes an information exchange agreement with the agency. However, in making this determination, SSA officials told us they do not use any criteria more specific than the language of the Act to guide decision-making, nor have they developed guidance for the procedures they follow.\nSSA’s determinations as to whether agencies meet these requirements have varied. In one example of an eligibility determination, officials told us they provide the full death file to IRS for purposes that include allowing IRS to confirm or deny taxpayers’ requests for exemptions and standard deductions. In addition, officials told us SSA would generally have the authority to share the full death file with the OIG at benefit-paying agencies for the purpose of ensuring proper payment of federally-funded benefits. In fact, SSA officials approved a request for access to the full death file for the OIG at the Department of Health and Human Services. However, officials also told us that Treasury, which operates the Do Not Pay Business Center for a similar purpose as OIGs—preventing improper payments—is not eligible to receive the full death file. Officials provided no documentation outlining their rationale for this determination, but explained that one concern they had with providing Treasury with it was that they were not authorized to provide the state-reported death data to Treasury to distribute it to other agencies. Because SSA has some discretion in making such determinations and agencies’ circumstances may differ, this variation in determinations may not represent inconsistency with the Act. However, since SSA does not make available written guidance describing the criteria it uses to make determinations as to whether the agencies meet the statutory requirements, there is no assurance that SSA’s eligibility determinations under the Act are consistent across agencies.\nWithout written guidance explaining SSA’s criteria for approving or denying agencies’ requests for the full death file, such as the factors SSA considers in deciding whether an agency provides federal benefits, potential recipient agencies may not know whether they are eligible. For example, officials at PBGC told us that they undertook a comprehensive review of all the agency’s applicable legal authorities because they were unsure whether the benefits the agency paid met the requirements of the Act. According to federal internal control standards, agencies should have written documentation, such as this type of guidance, and it should be readily available for examination. The absence of written guidance may also pose a risk to the consistency of SSA’s future determinations in the event of staff turnover, changes in administration, or any other disruption that could lead to a loss of institutional knowledge. In a September 2008 report, we found that there was a risk to the management and operational continuity of ongoing projects at SSA due to a lack of written policies and procedures. We found that during organizational change, project objectives, designs, and evaluation may be affected absent comprehensive written policies and procedures. Also, until recently, SSA did not have an officially designated organizational component for monitoring use of death data or making decisions on access to its full death data, which could have introduced additional uncertainty to those decisions. However, officials told us the agency created the Office of Data Exchange in January 2013 to clarify, simplify, and strengthen existing data exchange programs. As part of this effort, it is looking at how SSA makes decisions regarding access to its death data, as well as how it shares the data with other agencies, and is monitoring the data exchange agreements.\nAny agency that does not access SSA’s full death file can instead access the publicly-available DMF. Agencies can purchase a DMF subscription through the Department of Commerce’s National Technical Information Service (NTIS), which reimburses SSA for the cost of providing the file.In accordance with the Act, SSA excludes state-reported death records from the DMF. Federal entities that purchase the DMF from NTIS include, among others:\nDepartment of Justice\nDepartment of Homeland Security\nDrug Enforcement Administration\nNational Institute on Occupational Safety and Health\nVeterans Affairs medical facilities The death information included in the DMF is less complete and likely less accurate than that contained in SSA’s full death file, which may result in federal agencies that use the DMF receiving less useful information than agencies that use the full death file. According to SSA officials, agencies that purchase the DMF have access to 10 percent fewer records overall than agencies with access to the full death file due to the removal of state-reported deaths. Moreover, SSA officials said they expect the percentage of state-reported deaths as a proportion of all of SSA’s death records to increase over time, which could lead to a greater portion of death data being removed each year to create the DMF. For example, for deaths reported in 2012 alone, the DMF included about 40 percent fewer death records than what was included in SSA’s full death file. As a result, agencies that purchase the DMF will continue to access fewer records over time than those that obtain SSA’s full death file. In addition, because the deaths reported through EDRS by states are generally more accurate, it is likely that federal agencies using the DMF would encounter more errors than agencies using SSA’s full death file. In fact, the SSA OIG found that approximately 98 percent of deaths that SSA erroneously included in its death file were reported by non-state sources.\nIt is not SSA’s practice to proactively notify agencies that may be eligible for access to the complete set of death information. Officials explained that distributing death information to other federal agencies is not a part of SSA’s mission, nor is it an activity for which SSA receives an appropriation. As a result, some agencies may not know to request the full death file directly from SSA and may be relying on the less complete, less accurate DMF to assist them in administering their programs. In at least one case, an agency administering federal benefit-paying programs was using the less comprehensive DMF to match against its payment systems until it received access to the full file in January 2013. In a June 2013 report, we found that two agencies within the U.S. Department of Agriculture (USDA) were not matching beneficiary lists against SSA’s full death file. We spoke with program officials at another benefit-paying agency that uses the DMF—the Department of Labor’s Division of Energy Employees Occupational Illness Compensation, within the Office of Workers’ Compensation Programs—who told us they did not know until very recently that obtaining the full set of death data was an option.", "Under the Act, one condition of receiving SSA’s full death data is that the recipient agency reimburses SSA for the reasonable cost of sharing death data. However, factors including legal requirements and a quid pro quo arrangement have resulted in varying projected reimbursement amounts for different agencies (see table 1).\nSome agencies do not reimburse SSA at all. For example, VA is not required to provide reimbursement by statute, while OPM provides federal retirement data to SSA that is critical to its mission, and the agencies have agreed that the expenses involved in the exchanges are reciprocal. However, SSA officials were unable to point to any reciprocity study supporting this decision.\nFor other agencies, some of these differences in projected reimbursement amounts cannot fully be explained by the frequency with which the agencies expect to receive the data. For example, as noted in Table 1, CMS expected to receive updates to the full death file weekly from SSA and CMS officials told us the agency expected to reimburse SSA $9,900 in fiscal year 2013. RRB similarly expected to pay $9,000, despite expecting to receive the file less frequently—monthly, rather than weekly. At the same time, IRS expected to receive weekly updates to the full file plus the full file annually in fiscal year 2013, and PBGC expected to receive the file with the same frequency for fiscal year 2014. However, IRS expected to pay more than $87,000, while PBGC’s expected reimbursement amount was $70,000.\nWhile the reimbursement amounts for agencies are sometimes included in the inter-agency agreements governing how SSA provides its full death file, the agreements lack information on how these amounts were determined. According to SSA officials, these agreements specify the permissible purpose for using the death data and limitations on sharing the data within the agency. However, according to officials we spoke with at several agencies that receive the full death file, SSA staff did not provide an explanation for reimbursement amounts. SSA officials told us they calculate a detailed breakdown of expenses in an internal document, but provide only a summary of these expenses in the estimates and billing statements they send to agencies. As a result, recipient agencies do not know the factors that lead to the reimbursement amounts they are charged, which could prevent them from making informed decisions based on the amount they are spending. According to federal internal control standards, financial information is something agencies should communicate for external uses, because it is necessary to determine whether agencies are meeting goals for accountability for effective and efficient use of resources. In addition, SSA officials told us that because the Act provides for SSA to be reimbursed for its costs, the agency will not negotiate the reimbursement amounts if a prospective recipient agency indicates unwillingness to pay the quoted amount. In one case, SSA officials told us that while it approved a request for access to the file from the OIG for the U.S. Department of Health and Human Services, the two entities never finalized an agreement because the OIG determined it wanted to look for a lower-cost option for obtaining death information.", "Federal benefit programs’ need for accurate administrative data, such as death information, is increasingly evident in an environment of continuing budget shortages, where improper payments due to inaccurate information cost taxpayers billions of dollars in fiscal year 2012. Because of its mission, SSA is uniquely positioned to collect and manage death data at the federal level. SSA already has a responsibility to ensure that this information is as accurate and complete as possible for its own beneficiaries. Further, proposed legislation, if enacted, would require SSA to disseminate full death data to a number of additional eligible federal agencies. Only with more accurate and complete data can these agencies reduce the risk of paying deceased beneficiaries. However, because SSA has never analyzed the risk posed by errors or processes that could result in errors, it is not fully aware of steps that would be needed to address them. As a result, SSA and other federal agencies that use the full death data and the DMF are potentially vulnerable to making improper payments. Similarly, the absence of written guidelines for determining which agencies can access the full death data may impede federal agencies’ ability to obtain that information in a timely and efficient manner. Finally, SSA’s approach to calculating and charging agencies for death data lacks transparency about the fact that federal agencies pay varying amounts for the same information. In such a setting, there is a risk that federal agencies that could otherwise benefit from death information will decline to participate, whether due to confusion over SSA’s access protocols or uncertainty concerning its financial reimbursement policies.", "In order to enhance the accuracy of and ensure appropriate agency access to SSA’s death data, we recommend that the Social Security Administration’s Acting Commissioner direct the Deputy Commissioner of Operations to take the following three actions: 1. To be more informed about ways to improve the accuracy and completeness of its death information, conduct a risk assessment of SSA’s death information processing systems and policies as a component of redesigning SSA’s death processing system. Such an assessment should identify the scope and extent of errors, and help SSA identify ways to address them. In addition, assess the feasibility and cost effectiveness of addressing various types of errors, given the risk they pose. 2. To clarify how SSA applies the eligibility requirements of the Social Security Act and enhance agencies’ awareness of how to obtain access, develop and publicize guidance it will use to determine whether agencies are eligible to receive SSA’s full death file. 3. To increase transparency among recipient agencies, share a more detailed explanation of how it determines reimbursement amounts for providing agencies with death information.", "We provided a draft of this report to the Social Security Administration (SSA), the National Technical Information Service, the Department of Treasury (Treasury), the Department of Defense, the Department of Labor, the Centers for Medicare & Medicaid Services (CMS), the Internal Revenue Service (IRS), the Office of Personnel Management, the Pension Benefit Guaranty Corporation, and the Office of Management and Budget (OMB) for review and comment. SSA officials provided written comments, which are reproduced in appendix II and described below. IRS officials provided technical comments that further supported the impact of late-reported deaths on federal users of SSA’s death data, and we incorporated an example they provided into that discussion. The Department of Labor, the Office of Personnel Management, the Pension Benefit Guaranty Corporation, and OMB also provided technical comments, which we incorporated in the report as appropriate. CMS, the Department of Defense, Treasury, and the National Technical Information Service had no comments.\nIn its comments, SSA partially agreed with our first and third recommendations and disagreed with our second. In response to our first recommendation, SSA agreed to perform a risk assessment as part of its death information processing system redesign project, but raised concerns about performing risk assessments for other users of the death data. In making this recommendation, we did not intend for SSA to perform risk assessments for other agencies’ programs. However, we believe that by assessing the risks of inaccuracies in its death data, SSA’s efforts could shed light on risks posed to other agencies’ programs in addition to its own. To clarify this, we deleted the specific reference to other agencies. SSA also partially agreed with our third recommendation, stating that it has implemented improvements in its estimating procedures for future reimbursable agreements to ensure consistent estimates for all customers. However, the agency stated that it is not a typical government business practice to share these detailed costs for reimbursable agreements. We are encouraged that SSA has made efforts to standardize the estimates it shares with its federal partners, though we have not had the chance to evaluate their effectiveness, since these efforts were made recently. Also, we recognize that there may be limitations on the type of cost details SSA can provide to recipient agencies. However, we continue to believe that more transparency in conveying the factors that lead to the estimated and final reimbursement amounts recipient agencies are charged could help them make more informed decisions. SSA disagreed with our second recommendation, stating that each request to obtain the full death file is unique, and that officials must review them on a case-by-case basis to ensure compliance with various legal requirements. It also expressed concern that developing this guidance as we recommended would require agency expenditures unrelated to its mission in an already fiscally constrained environment. We appreciate that agencies may base their request for the full death file on different intended uses, and support SSA’s efforts to ensure compliance with all applicable legal requirements. However, we continue to believe that developing this guidance could help to ensure consistency in SSA’s future decision making by the new Office of Data Exchange, as well as enhance agencies’ ability to obtain the data in a timely and efficient manner. We do not expect such guidance, which could include information such as the factors SSA considers in deciding whether an agency provides federal benefits, would restrict SSA’s flexibility.\nSSA also outlined two general concerns with the body of the report. First, it expressed concern that we inaccurately described SSA officials’ reasons for determining that the agency could not provide Treasury with full death data for the Do Not Pay Initiative. We made revisions to the report to more accurately describe SSA’s reasoning. Second, SSA was concerned about the use of estimated reimbursement costs in Table 1 because these costs fluctuate throughout the year. SSA suggested instead using figures it provided reflecting the actual costs from fiscal year 2012. The agency also noted that Table 1 contains incorrect information related to the frequency at which the agencies receive the file. While we agree that actual costs are inherently more accurate than estimated costs, we chose to use estimated costs because this is the information federal agencies receive when they are deciding whether and how to obtain death data. In response to SSA’s assertion that our table contains incorrect information, we have added information to the table regarding whether agencies expected to receive the annual file. We followed up with an official, who clarified that our previous table was incomplete because, for some of the agencies, it lacked information about receipt of the annual full file. SSA also provided technical comments, which we incorporated in the report as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees and the heads of the agencies listed above. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202)512-7215 or bertonid@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "This report examines (1) how the Social Security Administration (SSA) obtains death reports for inclusion in the death data it maintains and steps it takes to ensure these reports are accurate; and (2) the factors affecting federal agency access to SSA’s death data. To address these objectives, we reviewed applicable federal laws and SSA procedures, as well as relevant reports and evaluations, such as reports from multiple Offices of Inspectors General. We interviewed SSA officials regarding how SSA obtains and processes death reports and maintains and shares its death information. We also interviewed representatives of some entities that provide death reports to SSA. We obtained and reviewed available corroborating documentation such as the data sharing agreements SSA made with other federal agencies. To evaluate SSA’s processes for obtaining, processing, and sharing death information, we reviewed standard criteria, such as the Standards for Internal Controls in the We performed independent testing of SSA’s death Federal Government.data to identify specific types of errors such as dates of birth that followed dates of death. We also drew a randomly selected but non-generalizable sample of cases that SSA removed from the death information for further review in order to identify potential explanations for that action. Finally, we interviewed officials at other federal agencies that use SSA’s death information about how they access and use it.\nWe tested for specific types of errors within SSA’s death data in several different ways using the full death information file; however, we did not attempt to identify all possible errors in the death data. Our reliability tests included identifying cases in which the date of birth was listed as occurring after the date of death. We also looked for cases involving deaths at very old ages—115 and higher—and cases of death that occurred before 1936 (when account numbers were first issued for administering Social Security programs) after observing such cases in a publicly-available version of the Death Master File (DMF). We then systematically tested for incidences of these occurrences in the full death information file.\nAs part of our tests to identify deaths that occurred at age 115 or older and those that occurred before 1936, we examined the monthly update file of cases SSA added in March 2013, which represent new death reports received by SSA. In conducting our analysis, we found a total of 539 deaths were added to the death data during this month that reportedly occurred in years prior to 2012 (and another 9,462 that occurred in 2012). At SSA’s request, we provided a sample of these cases to SSA staff to investigate. We selected and provided SSA lists of those cases in which the deaths were reported to have occurred in 1976 and 2004—a total of 22 cases. We chose these two years because each of these years included a sufficiently large number of cases to allow us to potentially identify patterns with respect to whether SSA had been paying benefits to deceased beneficiaries. We also chose two years that were nearly three decades apart to determine if there were any differences due to time period variation. SSA was unable to research these cases individually because of time constraints, but provided explanations of possible reasons why the agency receives reports this many years after a death.\nSSA also produces weekly and monthly update files listing deaths to be deleted from and death reports to be added to its death information files. To identify possible reasons for deleting deaths, we drew a random sample of 97 cases from the monthly update files produced from If all cases in this sample were February 2012 through January 2013. reviewed, we would have been able to make generalized observations about all of the deleted cases in this time period. We provided this list of cases listed in the order selected and requested SSA to research them— beginning at the top of the list—to determine if it had any record of the reason for deleting the case from its death data. To identify possible relationships with other characteristics, we also asked officials to provide, if available, the source of the death report, and whether or not the listed decedent was a Social Security beneficiary. We were satisfied we had a sufficient number of cases after SSA had completed work on 46 of the 97 cases. While still randomly-selected, this smaller sample was non- generalizable. In recognition of the time and resources SSA was committing to this work, we determined that the 46 cases would be sufficient to describe characteristics of these cases, even though we would not be able to make generalized statements about all deleted cases in our population. Of these 46 cases, SSA officials were able to determine reasons for deletion in 28 cases, source of the death report in 13, and determine the beneficiary/non-beneficiary status in all 46. They were able to identify all three of these characteristics in 11 of the cases.\nFor all of the tests and sampling just described, we used the full death data file. We determined that the data we used was sufficiently reliable for our reporting purposes. The computer programming we used was checked by a second programmer for accuracy, giving us further assurance that the results we present in the report are reliable.\nTo assess the factors affecting agencies’ access to SSA’s death data, we interviewed officials at seven federal agencies that used the death data— either the full death file or the Death Master File (DMF). We obtained the list of federal agencies that obtain the full death file directly from SSA, as well as the list of federal entities that purchase the public Death Master File (DMF) from the National Technical Information Service (NTIS). We obtained the former through prior discussions with SSA officials and congressional testimonies. For those federal entities that purchase the public DMF, we requested a list of federal customers from officials at NTIS. According to NTIS officials, they had to compile the list manually because, prior to our request, they had no business reason to separate federal customers from other customers. They described their manual compilation process as looking through the NTIS list of approximately 800 DMF subscription customers one-by-one and determining, for each one, whether it represented a federal customer by looking at the name and email address. Officials then sent us a list of 27 federal customers.\nOur primary criterion for selecting six of the seven agencies to interview was whether they administered programs that pay benefits. We selected the following four benefit-paying agencies that obtain SSA’s full death file because we wanted to gain an understanding of agencies’ experience with accessing and using the full death file:\nCenters for Medicare & Medicaid Services (CMS)\nDepartment of Defense/Defense Manpower Data Center (DMDC)\nInternal Revenue Service (IRS)\nOffice of Personnel Management (OPM)\nWe based this selection of four agencies on their reported improper payment amounts from 2012, focusing on those with higher amounts, such as CMS and IRS. We also selected one program within a benefit- paying agency—Department of Labor’s Division of Energy Employees Occupational Illness Compensation within the Office of Workers’ Compensation Programs—that was purchasing the DMF rather than obtaining the full file directly from SSA. We sought to understand this agency’s general experience using the DMF, as well as whether it had ever tried to obtain the full file from SSA. Additionally, we selected the Pension Benefit Guaranty Corporation (PBGC) for interviews because it transitioned from purchasing the DMF to obtaining SSA’s full death file during the course of our review, so officials had the unique perspective of receiving both files. For the seventh agency, we interviewed officials from the U.S. Department of Treasury’s (Treasury) Do Not Pay Business Center, even though it does not pay benefits, because of its program goal to prevent improper payments. Also, we had learned that Do Not Pay officials had previously requested—and were denied—access to SSA’s full death file, and we wanted to better understand the circumstances of that interaction.\nOne limitation of the approach we used to identify all federal users of SSA’s death data is the subjectivity with which NTIS officials judged its customers to be associated with federal agencies. As a result, the list we obtained of federal DMF customers may have been incomplete. However, based on our review of reports on improper federal payments and interviews with SSA officials, we are confident that the information we collected from officials at the agencies we selected accurately represents federal customers’ experience obtaining and using SSA death data.\nWe conducted this performance audit from November 2012 to November 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Lori Rectanus, Acting Director; Jeremy Cox, Assistant Director; Keira Dembowski; Joel Marus; and Sara Pelton made significant contributions to this report. Also contributing to this report were Sarah Cornetto, Holly Dye, Justin Fisher, Alex Galuten, Mitch Karpman, Mimi Nguyen, Almeta Spencer, Walter Vance, Michelle Loutoo Wilson, and Amber Yancey-Carroll.", "GAO, Farm Programs: USDA Needs to Do More to Prevent Improper Payments to Deceased Individuals, GAO-13-503 (Washington, D.C.: June 28, 2013).\nGAO, Management Report: Improvements Are Needed to Enhance the Internal Revenue Service’s Internal Controls, GAO-13-420R (Washington, D.C.: May 13, 2013).\nGAO, Social Security Administration: Preliminary Observations on the Death Master File, GAO-13-574T (Washington, D.C.: May 8, 2013)." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full h3_full h2_full", "h0_title h2_title h1_title", "", "h0_full", "h0_full h2_full h1_full", "h0_title h1_title", "h0_full h1_full", "h1_full", "h2_full", "h4_full", "h4_full", "h0_full h3_full", "", "", "", "", "" ] }	{ "question": [ "What info does the SSA receive?", "How is this info used?", "How can the general public access this information?", "How is data sometimes incorrect?", "What errors did the GAO find?", "What changes are being made to the death record system?", "Why does the agency verify death reports?", "What guideline does the SAA lack?", "How does this create confusion?", "What information is lacking regarding cost?", "What disparities in cost were found?", "What is an example of an unequal reimbursement policy across different agencies?", "What is the current discrepancy between the DMF’s files and the full death file?", "What obligation does the federal government have as the steward of taxpayer dollars?", "How can federal agencies avoid paying decreased beneficiaries?", "How is death data being used for accuracy?", "What flaws have been identified with the death data process?", "What was the GAO asked to examine?", "What does the report include?", "How did the GAO complete the report?", "What does the GAO recommend?", "How did SSA react to GAO's recommendation?", "What did GAO respond in rebuttal?" ], "summary": [ "The Social Security Administration (SSA) receives death reports from multiple sources, including state vital records agencies (states), family members, and other federal agencies to create its set of death records.", "In accordance with the Social Security Act (Act), SSA shares its full set of death data with certain agencies that pay federally-funded benefits, for the purpose of ensuring the accuracy of those payments. For other users of SSA's death data, SSA extracts a subset of records into a file called the Death Master File (DMF), which, to comply with the Act, excludes state-reported death data.", "SSA makes the DMF available via the Department of Commerce's National Technical Information Service, from which any member of the public can purchase DMF data.", "Certain procedures that SSA uses for collecting, verifying, and maintaining death reports could result in erroneous or untimely death information. For example, SSA does not independently verify all reports before including them in its death records.", "GAO identified instances where this approach led to inaccurate data. For example, GAO's analysis of a sample of death records SSA erroneously included in its death data found that these errors may not have occurred if SSA had verified them.", "According to federal internal control standards, agencies should conduct risk assessments of factors impeding their ability to achieve program objectives, such as data errors that could result in improper benefit payments. Agency officials told us SSA has not performed such risk assessments, but has initiated work on a full redesign of its death processing system.", "In accordance with its policy, the agency only verifies death reports for Social Security beneficiaries in order to stop benefit payments, and then, verifies only those reports from sources it considers less accurate, such as other federal agencies.", "SSA lacks written guidelines other than the language in the Act for determining whether agencies are eligible under the Act to access the full death file, and it does not share with agencies how it determines the reasonable cost of sharing the data, which recipients of the full file are required to reimburse SSA.", "Because SSA has not developed or shared guidance on how it determines agency eligibility, this could create confusion among potential recipients regarding eligibility.", "Additionally, there is a lack of transparency of cost information about the amounts recipients expect to pay. As a result of not knowing the factors that lead to the reimbursement amounts, agencies may not have sufficient information to make informed decisions.", "We found that SSA provided differing estimates for agencies' reimbursement amounts. Some variation is due to legal requirements and a quid pro quo arrangement.", "For example, one agency does not reimburse SSA for the cost of providing the death data because it provides SSA with its own data, and the agencies have agreed that the expenses involved in the exchanges are reciprocal.", "Ensuring appropriate access is important because the DMF contains about 10 percent fewer records than the full death file, and officials expect that difference to increase over time.", "As the steward of taxpayer dollars, the federal government must guard against improper payments.", "Federal agencies may avoid paying deceased beneficiaries by matching their payment data with death data SSA maintains and shares.", "In addition, recent legislation has established additional requirements for federal agencies to use death data to prevent improper payments.", "However, the SSA Office of Inspector General has identified inaccuracies in SSA's death data, which could diminish its usefulness to federal agencies.", "GAO was asked to examine SSA's death data.", "This report explores (1) how SSA obtains death reports and steps it takes to ensure death reports are accurate; and (2) factors affecting federal agency access to SSA's death data.", "In addressing these objectives, GAO interviewed SSA officials and representatives of entities reporting or using the death data. GAO reviewed applicable federal laws, SSA procedures, and reports. GAO also performed independent testing of SSA's death data for certain errors.", "GAO recommends that SSA assess risks associated with inaccuracies; develop and publicize guidance it will use to determine agency access under the Act; and share detailed reimbursement estimates.", "SSA partially agreed with the recommendations to assess risks and share detailed reimbursement estimates, but did not agree to develop and publicize guidance, stating that each request is unique.", "GAO believes that the recommendation remains valid as discussed in the report." ], "parent_pair_index": [ -1, 0, 1, -1, 3, -1, -1, -1, 0, -1, 2, 3, -1, -1, -1, 1, 2, -1, -1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1, 4, 4, 4 ] }
CRS_RL34207	{ "title": [ "", "Crop Insurance Background", "Crop Insurance And Disaster Provisions in the 2008 Farm Bill", "Reducing Crop Insurance Program Costs", "Timing of Crop Insurance Payments", "Insurance Company Reimbursements and Loss Sharing", "Farmer Subsidy and Costs", "Crop Production on Native Sod", "Waste, Fraud, and Abuse", "Agricultural Disaster Assistance", "Supplemental Crop Revenue Assistance Program (SURE)", "Other Authorized Disaster Programs", "Disaster Program Funding", "Appendix. Major Crop Insurance and Disaster Assistance Provisions in the Enacted 2008 Farm Bill" ], "paragraphs": [ "Agriculture is generally viewed as an inherently risky enterprise. Farm production levels can vary significantly from year to year and by location, primarily because farmers operate at the mercy of nature, and frequently are subjected to weather-related and other natural disasters. Since the Great Depression, policymakers have decided that the federal government should absorb some portion of the weather-related production losses that otherwise would depress farm income and could alter farmers' decisions about what to produce in some high-risk locations.\nFederal crop insurance is the primary ongoing crop loss assistance program. It is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq .), and is administered by the U.S. Department of Agriculture's Risk Management Agency (RMA). This is complemented with the Non-Insured Assistance Program, administered by the Farm Service Agency (FSA), which is available to producers not offered insurance coverage. Lack of insurance availability occurs in locations where there is insufficient production history to determine actuarial risks of a crop or in regions where production of a specific commodity is relatively small. Following a widespread and severe drought in 1988, Congress approved a large ad hoc disaster assistance program to supplement the ongoing disaster programs. Such ad hoc assistance subsequently has became routine. For more information on currently available agricultural disaster assistance, see CRS Report RS21212, Agricultural Disaster Assistance .\nSince the federal crop insurance program is permanently authorized, it does not require periodic reauthorization in an omnibus farm bill. However, during the 2007-2008 farm bill debate, some policymakers expressed interest in revising the crop insurance program in the context of the farm bill with two goals: to score cost savings and/or to supplement it with a permanent disaster payment program. Ultimately, the 2008 farm bill ( P.L. 110-246 ), enacted on June 18, 2008, contained provisions that accomplished both of those goals. This report provides background on the crop insurance program and describes in detail changes made to it as part of the 2008 farm bill.", "Federal crop insurance policies are marketed and serviced by private insurance companies. In purchasing a policy, a producer growing an insurable crop may select a level of crop yield and price coverage and pay a portion of the premium, which increases as the levels of yield and price coverage rise. The remainder of the premium is covered by the federal government. Coverage is made available through various insurance products, including crop-specific revenue insurance, which allows a participating producer to insure a target level of crop revenue rather than just production levels. According to the USDA, the federal crop insurance program provided coverage in 2007 to over 100 crops covering more than three-fourths of planted acreage in the country. Although the list of covered commodities has grown in recent years, 80% of total policy premiums (and federal subsidies) are accounted for by just four commodities—corn, soybeans, wheat, and cotton.\nBecause the program is not subject to periodic reauthorization, major changes to the crop insurance program usually are not addressed in the context of an omnibus farm bill. Over the past 25 years, the program has been subject to three major legislative enhancements (in 1980, 1994, and 2000), each of which has pumped additional federal dollars into the program in order to enhance farmer participation levels in anticipation of precluding the demand for ad hoc disaster payments.\nSince the last major modification in 2000, the federal subsidy to the crop insurance program has averaged about $3.25 billion per year, up from an annual average of $1.1 billion in the 1990s and about $500 million in the 1980s. Nearly two-thirds of the current federal spending is used to subsidize insurance policy premiums, and the balance primarily covers the government share of program losses and reimburses participating private insurance companies for their administrative and operating expenses (see Table 1 ).\nAlthough the scope of the program has widened significantly over the past 25 years, the anticipated goal of crop insurance replacing disaster payments has not been achieved. In virtually every crop year since 1988, Congress has provided ad hoc disaster payments to farmers with significant weather-related crop losses. These have been made available primarily through emergency supplemental appropriations, and, until recently, regardless of whether a producer had an active crop insurance policy. The exception to the historical pattern is the FY2007 supplemental appropriations act ( P.L. 110-28 , as amended by the FY2008 Consolidated Appropriations Act), which is expected to provide an estimated $2.4 billion in crop disaster payments for 2005, 2006, or 2007 crop losses, but only to those producers who held an active crop insurance policy or enrolled in the noninsured assistance program in the year of the crop loss.\nSince FY1989, total disaster payments have amounted to more than $20 billion, or just over $1 billion per year. Over the past six years (FY2001-FY2006), the federal cost of the crop insurance program combined with ad hoc supplemental disaster payments has averaged $4.5 billion per year (see Figure 1 ).\nFor a summary of all agricultural disaster assistance provided by Congress since 1988, see CRS Report RL31095, Emergency Funding for Agriculture: A Brief History of Supplemental Appropriations, FY1989-FY2009 .", "The following sections review the major crop insurance and disaster assistance provisions of the enacted 2008 farm bill ( P.L. 110-246 ) and the major issues that shaped the debate. See the Appendix , below, for a comparison of the crop insurance and disaster assistance provisions in the enacted 2008 farm bill, with the House- and Senate-passed versions of the farm bill and previous law.", "Because of the rising cost of the crop insurance program, many policymakers viewed the program as a potential target for spending reductions, whereby savings could be used to fund new initiatives in various other titles of the farm bill. Consequently, Title XII of the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , the 2008 farm bill) contains several revisions to the crop insurance program, most of which are designed to reduce program costs. For all crop insurance provisions in Title XII, the Congressional Budget Office (CBO) estimates net budget outlay savings of $3.9 billion over 5 years (FY2008-FY2012), or $5.6 billion over 10 years (FY2008-FY2017), relative to the March 2007 baseline which was the official budget scoring benchmark for the bill.", "Approximately $2.8 billion of this estimated five-year savings is attributable to changes in the timing of premium receipts from farmers, and payments to the participating insurance companies. None of these revisions would directly affect the final monetary amounts for participating farmers or insurers, but would still be scored as savings within the five-year horizon of the bill. Essentially, these 2008 farm bill provisions (Sec. 12007 and Sec. 12015) will allow USDA to collect two crop years of premiums in 2012, and delay the 2012 payment of reimbursements and underwriting gains into the next fiscal year.", "Although crop insurance is sold and serviced by private insurance companies, the federal government absorbs a large portion of program losses and reimburses the companies for their administrative and operating (A&O) expenses. Loss sharing and A&O reimbursements currently are spelled out in a Standard Reinsurance Agreement (SRA) between USDA and the private companies.\nUnder the SRA, the reimbursement rate for A&O expenses currently averages 22% to 24% of total premiums. The 2008 farm bill (Sec. 12016(E)) reduces the A&O reimbursement rate by 2.3 percentage points beginning with the 2009 reinsurance year (July 1, 2008). This reduction can be restored in any state that experiences a loss ratio of 1.2 or greater (i.e., when total indemnity payments to farmers are more than 20% greater than total premiums). The farm bill (Sec. 12016(F)) also reduces the A&O reimbursement rate to 12% for any plan of insurance that is based on area-wide losses. CBO estimates that these provisions will save $618 million over five years.\nA House provision to require the insurance companies to share more of their underwriting gains with the federal government was not included in the final version of the bill. The conferees did adopt a provision (Sec. 12017) that allows USDA to renegotiate the SRA once every five years beginning with the 2010-2011 reinsurance year.\nDuring the farm bill debate, the Administration and others contended that the private insurance companies should be required to absorb more of the program losses, and that the reimbursement rate for company A&O expenses needed to be reduced as a means of reducing federal costs. Proponents for change point out that A&O reimbursements to the companies have doubled over the last seven years (see Table 1 ), mainly because farmers have been buying up to higher levels of insurance coverage, causing total premiums to rise. Since A&O reimbursements are based on a percentage of total premiums (and premiums have been rising significantly in tandem with crop prices), the Administration contends that the companies are being overcompensated for their expenses. The private crop insurance companies contend that any reductions in the A&O reimbursement will negatively impact the financial health of the crop insurance industry and possibly jeopardize the delivery of crop insurance, particularly in high-risk areas.", "Under the crop insurance program, farmers pay no premium for CAT coverage (which is 100% subsidized by the government), and are encouraged to purchase higher levels of coverage. On average, about 50% of the premium is subsidized by the government for this buy-up coverage. For farmers whose crops are not covered by crop insurance, they are offered the equivalent of CAT coverage under a separate Noninsured Assistance Program (NAP), and pay an administrative fee for this coverage.\nA number of provisions are included in the 2008 farm bill that require participating farmers to share more in program costs, including (1) an increase in the fee paid by farmers for both catastrophic (CAT) coverage and NAP to $300 per crop per county, from the previous $100 fee (Sec. 12006); and (2) a 4 percentage point reduction in the rate of premium subsidy received by farmers for policies based on area-wide losses (Sec. 12012). The 2008 farm bill (Sec. 12003) also requires USDA to operate the crop insurance program so that the anticipated loss ratio is 1.0 (i.e., total indemnity payments equal to total premiums), compared with the then-current statutory loss ratio requirement of 1.075. To achieve the new lower ratio could mean somewhat higher premiums for farmers.", "In an attempt to protect and preserve virgin prairie, the 2008 farm bill added a provision (Sec. 12020) that declares that any parcel of native sod greater than 5 acres that is cultivated for production of an annual crop after May 22, 2008, is ineligible for federal crop insurance and noninsured crop disaster assistance during the first five crop years of planting. However, the governors for states within the Prairie Pothole National Priority Area are given the discretion of electing whether this provision is effective for their state.", "For many years, policymakers have been concerned about waste, fraud, and abuse within the federal crop insurance program. The Agricultural Risk Protection Act (ARPA) of 2000 ( P.L. 106-224 ) contained several provisions designed to enhance USDA's recognition of and response to challenges to program compliance and integrity. In response to the ARPA requirements, USDA used \"data mining\" techniques to compile an annual list of producers who either exhibit high loss ratios (i.e., high indemnity payments relative to total premiums), exhibit high frequency and severity of losses, or are suspected of poor farming practices that might contribute to production losses. USDA estimates that the use of the spot-check list has prevented between $70 million and $110 million each year in improper payments. Mandatory funding authorized by ARPA for data mining and other ARPA-related program integrity activities expired at the end of FY2005. A general provision in the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) allows USDA to use up to $11.166 million in mandatory funds in FY2008 to strengthen its ability to reduce waste, fraud, and abuse within the crop insurance program. However, future funding for this activity was uncertain.\nThe 2008 farm bill (Sec. 12021) authorizes up to $4 million annually for data mining activities beginning in FY2009, and authorizes $15 million annually for four years (FY2009-FY2013) to upgrade USDA's computer technology for crop insurance.", "During the 2007-2008 farm bill debate, some policymakers wanted to make permanent in the farm bill some level of disaster payments to supplement the crop insurance program. Supporters say that ongoing farm disaster programs do not adequately address emergency needs when a major disaster strikes and that USDA should have at its disposal a permanent source of disaster funds in the same manner as the Federal Emergency Management Administration (FEMA). Questions in the debate included how such a program would be funded given current budget constraints, and whether the permanent availability of disaster payments would adversely affect participation in the crop insurance program, and possibly encourage production on high-risk lands.\nTitle XV (Sec. 15101) of the 2008 farm bill authorizes a series of new disaster programs through September 30, 2011, the largest of which is a supplemental revenue assistance payment program for crop producers.", "The SURE program is designed to compensate eligible producers for a portion of crop losses that are not eligible for an indemnity payment under the crop insurance program (i.e., the portion of losses that is part of the deductible on the policy.) An eligible producer can receive a payment equal to 60% of the difference between a target level of revenue and the actual total farm revenue for the entire farm. The target level of revenue would be based on the level of crop insurance coverage selected by the farmer, thus increasing if a farmer opts for higher levels of coverage. (See the box in this report for a description of how the guarantee level and total farm revenue are defined by the statute.) To be eligible for a payment, a producer must be either in or contiguous to a county that has been declared a disaster area by either the President or the Secretary of Agriculture. Payments are limited so that the disaster program guarantee level cannot exceed 90% of what income likely would have been in the absence of a natural disaster.\nThe producer also must have at least the minimum level of crop insurance (CAT) coverage for insurable crops and participate in the NAP program for non-insurable crops. The statute made an exception for the 2008 crop year by allowing producers who did not purchase crop insurance or NAP coverage in advance to be eligible for the program, as long as they pay the equivalent administrative fee for coverage within 90 days of enactment.\nSome farm groups have raised concerns about the delayed timing of payments under SURE. Final payments for crop losses cannot be determined until after the marketing year since a portion of the disaster payment formula is based on the national average market price of the commodity for the year in which the loss was incurred. For example, since the 2008 marketing year for corn and soybeans ends September 30, 2009, any eligible SURE payments for 2008 losses cannot be made until late October 2009 at the earliest. Consequently, some farm groups have asked USDA to make more timely payments under the new program by providing advance payments until the final payment levels can be determined. To date, program regulations have not been released.", "In addition to the supplemental crop revenue assistance payment program described above, the 2008 farm bill also authorizes and funds four smaller disaster programs: (1) Livestock Indemnity Payments, which compensate ranchers at a rate of 75% of market value for livestock mortality caused by a disaster; (2) Livestock Forage Disaster Program, to assist ranchers who graze livestock on drought-affected pastureland or grazing land; (3) Emergency Assistance for Livestock, Honey Bees and Farm Raised Fish, which will provide up to $50 million to compensate these producers for disaster losses not covered under other disaster programs; and (4) Tree Assistance Program, for orchardists and nursery growers who can receive a payment to cover 70% of the cost of replanting trees or nursery stock following a disaster (up to $100,000 per year per producer).", "All five of these farm bill disaster programs will receive funding through a newly authorized Agricultural Disaster Relief Trust Fund within the U.S. Treasury. The Trust Fund will receive the equivalent of 3.08% of the amount received each year (FY2008-2011) in U.S. Customs receipts collected on certain goods. The Congressional Budget Office (CBO) estimates the combined total costs to be $3.8 billion over the four-year life of the programs, relative to the March 2007 budget baseline. Of this total, CBO estimates that supplemental crop revenue assistance will cost $1.7 billion over the four years, or an average of $425 million per year. Another $1.6 billion would cover increased crop insurance and NAP costs associated with the crop insurance and NAP purchase requirement. The balance of $500 million would cover the combined estimated cost of the other four disaster programs. If the cost of the programs exceeds the level of funding provided through Customs receipts, the 2008 farm bill gives the Trust Fund the authority to borrow from the Treasury such sums as necessary to meet its obligations.", "" ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 1, 1, 1, 2, 2, 2, 3 ], "alignment": [ "h0_title h1_title", "", "", "h0_full", "h0_full", "", "", "", "h0_full", "h1_title", "h1_full", "", "h1_full", "" ] }	{ "question": [ "Why does the federal crop insurance program not require periodic authorization?", "How did some policymakers view the crop insurance program?", "How will savings be generated?", "How are concerns of program waste, fraud, and abuse addressed?", "What does Title XV of the 2008 farm bill authorize?", "How does the largest program of Title XV work?", "What exception does the statute have?", "How can a producer be eligible for a program?" ], "summary": [ "The federal crop insurance program is permanently authorized and hence does not require periodic reauthorization; however, some modifications were made to it in the context of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill).", "Some policymakers viewed the projected baseline outlays for the crop insurance program as a potential target for program cost reductions, and proposed using these savings to fund new initiatives in various other titles of the farm bill. Consequently, many of the new crop insurance provisions are cost-saving measures.", "According to Congressional Budget Office estimates, the crop insurance provisions (Title XII) in the 2008 farm bill will reduce program baseline outlays by $3.9 billion over the five-year period of the bill (FY2008-FY2012). Much of the savings ($2.8 billion) is achieved through a change in the timing of crop insurance payments and receipts that will not directly affect the final monetary amounts for participating farmers or insurance companies. The rest of the savings is generated through increased fees paid by farmers for catastrophic coverage and a reduction in reimbursements to the participating insurance companies for their operating expenses, among many other provisions.", "To address concerns about program waste, fraud, and abuse, the farm bill also authorizes up to $4 million annually for data mining activities beginning in FY2009.", "Separately, Title XV of the 2008 farm bill authorizes a new trust fund with projected costs of $3.8 billion for providing agricultural disaster assistance available on an ongoing basis over the next four years through five new programs.", "The largest program is a supplemental revenue assistance payment program for crop producers that is designed to compensate eligible producers for a portion of crop losses that are not eligible for an indemnity payment under the crop insurance program.", "However, the statute makes an exception for the 2008 crop year by allowing uninsured producers to be eligible, as long as they pay the equivalent administrative fee for coverage within 90 days of enactment.", "To be eligible for a payment, a producer must be either in or contiguous to a county that has been declared a disaster area by either the President or the Secretary of Agriculture. An eligible producer also is required to have purchased crop insurance in advance of a disaster." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 2 ] }
CRS_RL33654	{ "title": [ "", "Introduction", "Background", "A Note on the Unified Congressional Budget and the Aviation Trust Fund", "Airport and Airway Development and Revenue Acts Amendments of 1971 (P.L. 92-174)", "The Cap and Penalty Era: FY1977-FY199814", "Airport and Airway Development Act Amendments of 1976 (1976 Act; P.L. 94-353) and the Aviation Safety and Noise Abatement Act of 1979 (1979 Act; P.L. 96-193, Section 201)", "The Cap", "The Penalty", "Airport and Airway Improvement Act of 1982 (1982 Act; Title V of P.L. 97-248) as amended by the Surface Transportation Assistance Act of 1982 (STAA; P.L. 97-424, Section 426 (c))", "The Cap under the 1982 Act, as amended", "The Penalty", "Airport and Airway Safety and Capacity Expansion Act of 1987 (P.L. 100-223, 101 Stat 1492; 1987 Act)", "The Cap", "The Penalty", "Tax Trigger Provisions", "Omnibus Budget Reconciliation Act of 1990 (OBRA-90; P.L. 101-508)", "The Cap", "The Penalty", "Federal Aviation Administration Reauthorization Act of 1994 (P.L. 103-305; 1994 Act)", "The Cap", "Aviation Tax Authority Lapses", "Federal Aviation Authorization Act of 1996 (P.L. 104-264; the 1996 Act)", "The Cap", "FAA Funding in the Cap and Penalty Era (FY1977-FY1998)", "Current FAA Funding Guarantees", "Guaranteed or Out-of-Order", "Waiver of the Points-of-Order", "Guarantees in Current Reauthorization Proposals", "H.R. 2881", "Funding Guarantee Options", "Come to an Agreement", "Impose New Cap and Penalty Provisions", "Take the Aviation Trust Fund Off-Budget", "Build Budgetary \"Fire Walls\"", "Rearrange Program Funding" ], "paragraphs": [ "", "Since the 1971 creation of the user-supported airport and airway trust fund under provisions of the Airport and Airway Development and Revenue Acts of 1970 (P.L. 91-259; the 1970 Act) there has been disagreement over the appropriate use of the trust fund's revenues. The disagreement centered on differing views of whether the trust fund's primary purpose was to fund airport and airway (mostly air traffic control) infrastructure and those who viewed the trust fund as a user pay mechanism that should be available to also fund part or all of FAA operations (mostly salaries) and maintenance activities. This led, beginning in 1976, to the enactment of a series of legislative mechanisms (commonly referred to as \"cap and penalty\" provisions or \"out of order\" provisions) designed to assure that federal capital spending for U.S. airports and airways would be funded at their fully authorized levels. Some supporters also hoped that these provisions would also assure a significant general fund share for the Federal Aviation Administration's (FAA) operating budget. Such funding guarantee proposals have been part of every FAA reauthorization debate since 1976.\nThis report begins with a background discussion of the establishment of the Airport and Airway Trust fund (hereafter referred to as the trust fund) and the spending policy conflict that arose from different views concerning the legitimate use of the trust fund revenue during both the debate over the creation of the trust fund and the first years of its existence. It then examines the 22-year era when Congress imposed a variety of \"cap and penalty\" provisions on aviation trust fund spending in an effort to both encourage full funding of the FAA's capital programs spending as well as assuring a significant general fund share to support the FAA's operations. The report then briefly examines the current spending guarantees that succeeded the cap and penalty provisions following passage of the Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century (AIR21; P.L. 106-181 ) in March 2000, and that were continued through FY2007 by Vision 100—Century of Aviation Reauthorization Act ( P.L. 108-176 ). Finally, the report discusses a variety of spending guarantee options which may be discussed during the upcoming FAA reauthorization debate.\nThis report's analysis necessarily assumes the spending levels and program structure of the times. There is an alternative view that too much is spent on the FAA, which is not discussed in detail in this report.", "The FAA budget is divided into four categories. Two of the categories, the grants-in-aid for Airports category (basically the Airport Improvement Program (AIP)) and the Facilities and Equipment (F&E) category are considered \"capital\" accounts or programs because they deal with the development of airport and airway infrastructure. The AIP is a program of capital grant-in-aid for airport development projects such as runways and taxiways, but it also funds noise mitigation and other airport projects. F&E, which is also a capital program, pays for the equipping, housing (such as airport towers), and modernizing of the air traffic control system. The two noncapital categories include Research, Engineering and Development (RE&D) and Operations and Maintenance (O&M). The RE&D category funds research in support of the AIP and F&E programs as well as safety research. The O&M account pays the salaries of all FAA employees (aviation related) and also funds some maintenance, safety, and administrative activities.\nThe issue of who should pay for the programs and activities of the FAA predates the creation of the aviation trust fund in 1971 by the Airport and Airway Development and Revenue Acts of 1970. Previously, the FAA's budget had been paid for out of the U.S. Treasury's general fund which is supported by general taxpayer revenues. No dedicated tax revenues were used to fund aviation use prior to implementation of the 1970 Act. The act authorized taxes on aviation users and dedicated their use to aviation purposes by crediting all these tax revenues to the aviation trust fund. Conflicts emerged immediately between those who viewed the aviation trust fund as a capital-only source of funding versus those who viewed it more as the basis of a full user-pay mechanism for all FAA funding. Studies by both the Congressional Budget Office (CBO) and the General Accounting Office (GAO; now the Government Accountability Office) have concluded that the 1970 Act was intended to provide that the aviation trust fund would finance airport and airway capital needs and that remaining funds could then be used for the operating costs of the airway system (mostly for air traffic control operations) as well. The issue of the appropriate general fund share of the FAA budget has long been one of the most contentious issues during the reauthorization debates. The general fund share within the context of aviation policy is to cover costs to the aviation system of government use (mostly military use) and the benefits of the system to nonusers. Aviation user groups have historically supported a larger general fund share than has the FAA, the Department of Transportation (DOT), the Office of Management and Budget (OMB) and the congressional budget and appropriations committees who often view, at least part of the general fund contribution as an unwarranted and/or unnecessary subsidization of civil aviation users by the general taxpayer.\nThe Nixon Administration's FAA budget requests for FY1971 and FY1972 under the new trust fund system brought it into immediate conflict with Congress over the budgetary treatment of trust fund revenues. The Administration treated the new financing system as a user-pay system to fund all or nearly all of the FAA budget, whereas many Members of Congress viewed the trust fund as primarily a user-supported capital fund (although spending on FAA operations was allowable). Adding to the controversy, the Administration's first budget submissions of the trust fund era (the proposed FY1971 supplemental and the President's FY1972 budget proposal) proposed funding both airport and airway facilities at well below the minimum authorized amounts of $280 million for airport grants and $250 million for airway facilities. For FY1972, the budget proposed that the remaining trust fund balance be used to pay for FAA administration and operations costs. This would, however, have provided more trust fund financing, $700 million, for operations than for airport grants and airway facilities combined. Many in Congress saw this holding-down of FAA capital spending to free up trust fund resources for FAA operations costs as a violation of the intent and spirit of the 1970 Act.", "The adoption of the 1970 Act followed closely on the heels of the 1969 congressional adoption of the unified budget concept, a change that would have ongoing influence on both the budgetary treatment of trust fund revenues and the operation of subsequent spending guarantees that rely on trust fund resources. Under the unified budget concept, all trust fund receipts and expenditures were made part of the annual federal budget. Consequently, trust fund amounts, collected and spent, influence the overall budget deficit or surplus totals. This, in turn, can have an impact on the budgetary treatment of trust fund-supported programs and activities. Although the inclusion of the aviation trust fund within the unified budget was not a major issue during debate over the trust fund's creation, the unified budget has, historically, had an impact on trust fund spending levels. Within the context of the unified budget, an excess of aviation trust fund revenues over expenditures can be seen as an offset in federal deficit computations. In some cases, however, the balance may be seen as having been spent on non-aviation programs or purposes. Because the balance is invested in short-term Treasury notes (the interest is payed to the aviation trust fund), the federal government is lending itself an amount roughly equal to the balance. This, in effect, frees up the money for spending elsewhere in the budget without pushing up the overall budget deficit or putting pressure on budgetary ceilings established by the congressional budget process. During the history of the aviation trust fund, concerns have been raised that this situation creates an incentive, for those whose priorities for non-aviation spending (or for deficit reduction) are higher than for aviation spending, to hold-down federal aviation trust-fund-supported spending on aviation. This situation, where the trust fund's unexpended balance (at times, somewhat inaccurately referred to as a surplus) is allowed to grow and is not spent on federal aviation programs and activities, has been opposed by much of the aviation community and by the transportation authorizing committees. The unexpended balance has also been a factor cited in attempts, since the creation of the trust fund, to legislate mechanisms that would encourage full funding of the FAA's capital budgets and assure that the aviation trust fund revenues are spent for aviation purposes only.", "Although the Nixon Administration quickly agreed to increase airport grants for FY1972 to the $280 million minimum, and expressed the intent to meet the minimum spending goals for both airport grants and airways facilities over the 10-year life of the trust fund's tax provisions, Congress passed the Airport and Airway Development and Revenue Acts Amendments of 1971, effectively banning the spending of trust fund money on FAA operations.\nThe 1971 amendment was a strong congressional reaction consistent with many Members' perceptions that the Nixon Administration was ignoring the intent of Congress under the 1970 Act. The reaction embodied in the 1971 amendment went beyond merely clarifying Congress's intent and significantly narrowed the allowable use of trust fund revenues. The Amendment made the trust fund a capital-only account (although only temporarily). The 1971 amendment eliminated the user-pay component. Ironically, by reinforcing the congressional intent that the trust fund be used primarily as a capital account, the 1971 amendment eliminated the secondary intent that private sector users, through taxes imposed under the 1970 Act, would help pay for the federal services they benefitted from (once capital needs of the airport and airway systems were met). The change, by making all noncapital components of the FAA's budget dependent on general fund revenues, left the FAA more exposed to the fiscal pressures that emerged from the constrained general budgetary environment of the period. During FY1973-FY1976 the trust fund-appropriated share of operations was zero. The general fund share of the total FAA appropriations was 56% for FY1973, 81% for FY1974, 83% for FY1975, and 65% for FY1976. The uncommitted end-of-year balance grew to $1.688 billion at the end of FY1976.", "", "In 1976, during hearings on the aviation trust fund, Administration officials continued to assert that the 1970 Act was \"intended to adopt a very broad user tax policy and to impose taxes that would pay for the full costs of the airway system including operation and maintenance.\"\nIn the end, although Congress acknowledged that the aviation taxes in the 1970 Act were intended to be user fees that could be used to fund both capital projects and some operations costs, concerns still remained in Congress that the Executive branch would deplete the trust fund to fully fund FAA operations and thereby constrain spending on airport and airway capital needs. Consequently, despite the implicit acknowledgment that some spending for FAA operations was appropriate, the 1976 Act included \"cap and penalty\" provisions, to prevent any \"misuse\" of funds by the Administration.", "Accordingly, Section 6 (d) of the act placed a cap on the use of trust fund revenues for costs of air navigation services of $275 million for FY1977, $275 million for FY1978, $300 million for FY1979, and $325 million for FY1980. No cap was authorized for FY1981 due to the lapsing of the FAA's authorization.", "In addition, Section 6 (d) imposed a penalty clause that reduced these caps proportionally due to any failure to fund airport grants at the program's authorized obligation level. In effect, the caps would have been reduced by the same fraction of Airport Development Aid Program (ADAP) obligation limitation (ObLim) to ADAP authorization. For example, if the ADAP grants ObLim was 3/4 of the ADAP authorization, then the cap on trust fund operations spending would be reduced to 3/4 of the statutory cap for the fiscal year. In the 1979 Act, added a second penalty provision. The provision provided, for FY1980 and FY1981, that any failure to fully obligate F&E funding up to the appropriated level would lead to a reduction of the cap by an amount equal to the dollar shortfall. Supporters of this provision may have hoped this would encourage the FAA to speed up its implementation of the NAS plan.\nDuring FY1977-FY1981 no penalties were assessed. ADAP's obligation limitations equaled or exceeded its authorizations in FY1977-FY1979 and 1981. The $17 million short fall in FY1980 did not lead to a penalty perhaps because F&E appropriations exceeded the F&E authorization by $43 million, more than making up the difference.\nThe cap and penalty regime seems to have had a significant impact on the general fund share of FAA funding. Although the removal of the outright ban on O&M spending of trust fund resources (which were in effect from FY1973 to FY1976) lowered the general fund share of the FAA budget, it remained high under the 1976 Act, averaging 57% during FY1977-FY1981. The general fund share had averaged 71% under the 1971 Act.\nThe restriction on trust fund spending for operations in the 1971 Amendments act and the new provisions in the 1976 Act, succeeded in limiting trust fund spending on FAA operations and maintenance (O&M), but appropriations for the capital programs did not rise sufficiently to absorb the excess revenue created by the rising tax revenues dedicated to the trust fund. Over time, the uncommitted aviation trust fund balances continued to grow. On September 30, 1980 when the original aviation trust fund authorization expired, the fund had a projected uncommitted balance of roughly $3.8 billion.\nDisputes over what to do about the aviation trust fund balance, along with continuing disagreements over the valid use of trust fund revenues and whose taxes should support the fund, as well as concerns about deficit spending in general, all had a part in the legislative deadlock that led to the lapsing of the aviation trust fund's authorization on October 1, 1980. The gridlock on reauthorization continued for almost two years. Because of the absence of revenues during the lapse, while outlays from the trust fund continued, the uncommitted balance fell to just over $2 billion at the end of FY1982.", "The 1982 Act authorized the operation of the operation of the trust fund from September 1, 1982 through December 31, 1987, as well as reauthorizing the taxes supporting the trust fund.\nSection 506 (c) of the 1982 Act significantly modified the existing \"cap and penalty\" provisions of the 1976 Act. Instead of setting dollar amounts to cap operations and maintenance spending from the trust fund, the 1982 Act set $800 million for FY1982 but for later years established the cap as the amounts actually made available for AIP times a multiplier (2.44 for FY1983, 1.57 for FY1984, 1.39 for FY1985, 1.28 for FY1986, and 1.34 for FY1987). Four months later, however, Section 426 (c) of the STAA of 1982 included a provision that significantly reduced the caps for FY1983-FY1985. Table 2 sets forth the cap amounts and related data.", "The amended Act retained the $800 million cap for FY1982 but lowered the cap ratio (applied against funds made available for AIP) for the next three fiscal years as follows: 1.83 for FY1983; 1.25 for FY1984; 1.28 for FY1985. The ratios for the following two years remained the same at 1.28 for FY1986 and 1.34 for FY1987. Using ratios, in effect, made the cap flexible: the more funds were obligated for AIP the more money would be available from the trust fund for O&M. It was probably hoped this would make the spending on AIP more attractive to both OMB and the appropriations committees. There is no clear evidence, however, that it had this intended effect.", "The basis of the penalty provision was changed from the amounts made available for airport grants under the 1976 Act to the amounts made available for F&E under the 1982 Act. The amounts authorized from the trust fund for O&M for any fiscal year were to be reduced by twice the amount that authorizations exceeded appropriations for F&E plus twice any F&E carryover funds from the previous year. This change in the penalty provision appears to have been made for two reasons. First, the cap now already included incentives for higher spending on AIP. Second was the increase in authorizations for F&E (included in Section 506 of the 1982 Act) under the influence of the proposed NAS plan and the growing perception that the airway system needs (mostly for air traffic control) were great. In short, the cap would provide incentives for spending on AIP while the penalty provisions would protect the increased spending on F&E. The 1982 Act also restricted O&M spending to the direct costs required to operate, and maintain air navigation facilities.\nAs can be seen in Table 2 , during three of the six years shown, the appropriated level of the trust fund share for O&M appropriations conformed to the cap provisions of the 1982 Act, as amended. Five of the six years, FY1983-FY1987, however, were subject to penalties because AIP and F&E funding was less than their authorizations. For three of these years, however, FY1984-FY1986, the reduction in the trust fund share of operations was less than the penalty. Even so, the aggregate amount made available from the trust fund for O&M for FY1983-FY1987 was $2.7 billion less than the aggregate of the caps for these five years.\nThe general fund share of the total FAA budget was somewhat lower than under the previous authorization, averaging 44% per year (down from an average of 57% for the previous five years). The size of the penalties in FY1984, FY1986, and FY1987 appears to have influenced the relatively high general fund share for those years.\nThe uncommitted balance of the trust fund increased nearly 180% from its FY1983 low of $1.992 billion to its FY1987 high of $5.559 billion. Also, the uncommitted balance appears to have surged in the high penalty years of FY1984, FY1986, and FY1987.\nThe role of the cap and penalty provisions in causing the rapid growth of the trust fund's uncommitted balance and its role in maintaining the high general fund share increasingly became a focus of disagreement between authorizing and appropriating committees. This led to struggles during the annual appropriations process between supporters of full adherence to the cap and penalty rules (often authorizing committee members) and those who felt the impact of the rules was excessive and would argue for a partial application of the penalties (often appropriations committee members).\nThe goal of the cap and penalty provisions continued to be to insure that the aviation trust fund operate primarily as a capital account supporting AIP and F&E while operating, in part, as a user pays system to support some operations spending. However, although the cap and penalty provisions restricted the spending on operations, they did not result in full appropriation of the authorized AIP and F&E funding levels. According to CBO,\nPrimarily because of program constraints, these provisions have merely altered the accounting for aviation spending, forcing the general fund to finance more of these expenditures ... In addition, there still remains an incentive to limit capital spending for aviation programs. Given the annual level of excise tax revenue from aviation, each dollar of aviation spending greater than these tax revenues must be funded by general revenues. Therefore, regardless of the actual accounting for aviation spending, each dollar reduction in spending on aviation either reduces the need for the general fund to finance aviation spending, or produces a trust fund surplus from which the Treasury can borrow to cover non aviation expenditures.\nAs mentioned earlier, the uncommitted balance of the trust fund continued to rise during the 1982 Act's authorization cycle, reaching $5.559 billion at the end of FY1987.", "The 1987 Act extended the excise taxes at existing rates and reauthorized FAA programs for three years. The act substantially increased the authorizations for both\nAIP and F&E. Air traffic had continued to surge during the previous authorization period, increasing the pressure on the airport and airway system capacity. The NAS plan's implementation had not progressed as quickly as planned in part for technological reasons. Some attributed delays in the capital projects to constraints on trust fund capital spending imposed for deficit reduction purposes. Others, however, argued that delays in implementation of the NAS plan led to appropriations lagging behind authorizations.\nThe act also made changes to the existing \"cap and penalty\" provisions on O&M spending.", "The new provision (Section 105 (c)) amended the cap to 50% of the total annual appropriations for AIP, F&E, and RE&D.", "Under Section 105, the annual caps would be reduced by twice the amount of any shortfall between the total of AIP obligation limitation and the appropriation for F&E and RE&D for each year, versus amounts specified in the act for each fiscal year ($3.278 billion for FY1988, $3.445 billion for FY1989, and $3.863 billion for FY1990).\nThe act also added an additional penalty of sorts by directing a following year AIP appropriation increase equal to twice the difference between the current year authorization and current year appropriation for the three programs (referred to by some as \"pop-up budget authority\").\nAs can be seen in Table 3 , although the trust fund share of O&M funding was reduced substantially below the cap, the reduction only approximated the penalty amount during one year, FY1989. For FY1988 and FY1990, although the trust fund shares of O&M funding provided for amounts that were significantly below the caps, the reductions were not equal to the full penalties for those years. Despite this, the aggregate amount made available from the trust fund for O&M was nearly $2.3 billion below the aggregate of the caps for these years and therefore roughly this amount would have remained credited to the aviation trust fund.\nThe general fund share remained more than 40% during this authorization. During FY1989, the year that the penalty was fully assessed against the spending ceiling, the general fund share was 5-6% higher than in other years and this may indicate that the penalties could have had an effect on the general fund share. Also the uncommitted balance in the trust fund rose 18% in FY1989, compared to 5% in FY1988 and 8% in FY1990, indicating that the higher penalty assessment for FY1989 may have had a significant impact on the growth of the uncommitted balance.", "In addition, the 1987 Act added a provision for FY1988-FY1989 that would trigger a reduction in the aviation tax rates, if the total of the obligation limits for AIP and the appropriations for F&E and RE&D for FY1988-FY1989 were less than 85% of the total amounts authorized for these programs. If this situation occurred, then in 1990, the GA fuel rates, ticket tax, and waybill tax would be reduced by 50%. The international departure tax would not be changed. The idea behind the tax penalty was that it would eliminate the incentive to hold down spending on capital improvements for budget deficit or non-aviation spending purposes because more revenue would be lost than could be saved in outlays or added to the unexpended balance.\nThe tax reduction trigger was never implemented. This was not only due to a reluctance to follow through on such a large percentage cut, but also because of pressure to reduce the overall federal budget deficit. The amounts appropriated for FY1988 and FY1989 together were just over 80% of the combined authorizations for those years. Without a legislative adjustment, the trigger would have taken effect on January 1, 1990. However, to meet its reconciliation target the House Ways and Means Committee proposed delaying the trigger mechanism for one year, estimating that this would save $851 million in FY1990 and $269 million for FY1991. Although supporters of the trigger mechanism, mostly on the authorizing committees, voiced opposition to an extension of the trigger date, an extension of the date to January 1, 1991 was included in the Revenue Reconciliation Act of 1989 (Title VII of the Omnibus Budget Reconciliation Act of 1989, P.L. 101-239 ).\nAt the end of FY1990 the uncommitted balance had grown to $7.446 billion from $5.559 billion at the beginning of FY1988.\nAs the 1990 FAA reauthorization approached, appropriators and budgeteers became more persistent in expressing their concerns. Among the complaints was that the \"penalty clause\" in Section 506 (c) of the 1982 Act had resulted in general fund overpayments for FAA expenses that, in effect, had the general taxpayer subsidizing aviation users. Congressional Budget Office testimony reflected this view\nThe current accumulated surplus in the aviation trust fund is illusory. While this surplus appears to indicate that private-sector users have paid more in taxes than they have received in services, the opposite is, in fact, the case. The uncommitted balance in the trust fund has developed, ironically, because private-sector users of the aviation system have received more in capital and operating spending than they have paid in taxes ... the Airport and Airway Trust Fund is particularly affected by provisions of law that restrict the level of trust fund financing of operations expenditures for the Federal Aviation Administration. These provisions tie the level of funding to the obligation limits for airport grants and the appropriations for capital and research expenditures. Generally speaking, the closer these appropriations are to their authorized levels, the greater the trust fund financing of operations. Largely because of technical problems in the modernization of the airway system, appropriations of capital expenditures have lagged behind authorizations. The result has been a low proportion of FAA spending being debited to the trust fund and an accompanying rise in its accumulated surplus.", "OBRA-90 authorized FAA programs through FY1992 (Title IX of the act). OBRA-90 reflected concerns of the time with the budget deficit. Accordingly, the tax increases in the act were designed, in part, to contribute to federal budget deficit reduction. The increases in aviation taxes were to go to the general fund for deficit reduction through FY1992 and then to the aviation trust fund through FY1995. The\nbill also included provisions allowing airports to levy a head tax, called a passenger facility charge (PFC) on each enplaning passenger. The PFC is not a federal tax but a local tax levied with FAA permission. One of the rationales for allowing airports to levy PFCs was that PFCs would lessen the level of funding that would otherwise be needed for the AIP. This concern over deficit spending as well as the concerns over the growing unexpended balance of the trust fund and the large general fund share of the FAA budget, discussed in the previous section, may have also had an impact on the changes made in OBRA-90 to existing cap and penalty mechanisms.", "Section 9107 of OBRA-90 changed the cap to 75% of the remainder of the total amounts made available for AIP, F&E, RE &D, and O&M less the amounts made available for AIP, F&E, and RE&D.", "The penalty provision was eliminated. The tax trigger rate reduction mechanism was also eliminated.\nThe elimination of the penalty was part of an agreement between authorizing and appropriating committees that provided for full funding of AIP in return for the elimination of the penalty provisions. The agreement remained in effect for two years FY1991-FY1992 (the penalty was not reinstated, however).\nUnder the OBRA-90 mechanism, trust fund spending for O&M was equal to or slightly below the statutory cap. The overall general fund share of total FAA appropriations was 25% for FY1991-FY1993. The uncommitted balance dropped from an all time high of $7.686 billion to $4.268 billion in FY1993.", "The 1994 Act reauthorized funding for both FAA programs and the aviation trust fund through FY1996.", "Section 102 (b)(3) of the 1994 Act (108 Stat. 1571) altered the operations spending cap to the lessor of 50% of the amount of funding made available for F&E, AIP and RE&D, or 70% of the total amounts made available to FAA, less the amounts made available from the trust fund for F&E, AIP, and RE&D.\nFor FY1994-FY1996 the trust fund share of O&M exceeded the statutory caps in each of the years. Because there was no penalty provision for the funding of AIP and F&E below the statutory caps and because opposition to the lack of adherence to the caps was insufficient to prevent passage of the transportation appropriations bill, Congress was able to fund the FAA at a level that began reducing the unexpended balance in the trust fund.", "Although the reauthorization of aviation taxes had not been expected to be controversial, the legislative vehicle chosen, the budget reconciliation act of 1996, was vetoed by President Clinton over other provisions in the bill. Authority to collect taxes for the aviation trust fund expired on January 1, 1996. Spending from the fund, however, continued. The lapse continued for nearly eight months, until August 27, 1996, when it was extended to the end of the calendar year by the Small Business Job Protection Act of 1996 ( P.L. 104-188 ). The authority lapsed again for roughly two months on January 1, 1997. The trust fund did not receive an estimated $4 billion during the first lapse and an estimated $1 billion during the second. Because spending from the trust fund continued (spending was reauthorized under the 1996 Act discussed below) the uncommitted balances of the trust fund were drawn down substantially. The end-of-year uncommitted balance was $1.354 billion for FY1997. It had been $5.127 billion at the end of FY1995.", "Although the 1996 Act was debated during the period when the aviation taxes had lapsed, the act reauthorized FAA operations, AIP, and F&E and the trust fund expenditure authority for two years, through September 30, 1998, and authorized RE&D for one year through September 30, 1997, but did not reauthorize the taxes that supported the trust fund.", "Section 103 (b)(3) of the 1996 Act (108 Stat. 1571) moved the operations spending cap to 72.5% of total amounts made available to the FAA (general fund and trust fund) less the amounts made available from the trust fund from AIP, F&E, and RE&D.\nFor the years FY1997-FY1998, the trust fund share of O&M was near or below the cap (see Table 6 ). The general fund share for these years increased to 34% and 36% respectively, roughly 10% above the previous authorization cycle, possibly in part reflecting adherence to the caps. However, from a low of $$1.345 billion, the uncommitted balance rebounded quickly to $4.339 billion at the end of FY1998 following the passage of the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), which provided for a significant increase in revenues.", "The success of the various cap and penalty provisions was mixed and its apparent successes were marked with unintended consequences. It is also difficult to determine cause and effect in separating out the impact of the cap and penalty provisions from other influences. Support for adherence to fully implementing the penalty appears to have been influenced by events such as the delays in the FAA's implementation of the NAS. For example, this was reflected in years when the penalties were only partially imposed, in recognition that the authorization levels for F&E were based on optimistic assumptions. Also, especially in the mid-1990s, attempts to rein in the budget deficit had an impact on the budgetary treatment of trust fund revenues. In addition, because the penalties seem to put upward pressure on both the general fund share and the uncommitted trust fund balance, it is unclear that the mechanism provided for a net increase in overall FAA spending.\nThe first Cap and Penalty regime appears to have been successful in providing for funding of AIP for FY1977-FY1979 and for both AIP and F&E in FY1980 at levels near or very near to their authorized levels. However the uncommitted balance in the trust fund increased rapidly during this period and the general fund share remained over 50%. While supporters of trust fund spending on AIP and F&E and maintaining a substantial general fund share might see this as success, some critics would note that much of the trust fund money squeezed out of the operations budget was mostly retained in the trust fund and simply not spent.\nDuring the 1980s, adherence to the penalty provisions varied from year to year probably due to the varying degree of support for implementing the penalties during the appropriations process. This was also a period when appropriators were skeptical of the FAA's ability to successfully manage and spend the amounts authorized for F&E.\nEliminating the penalty under OBRA-90 led to a period in the 1990s when the capital programs were funded below the authorized levels and the trust fund share of O&M often exceeded the legislated caps. The 1990s, however, was also a period when there was a consensus that the overall federal budget deficit was a problem and this likely had an impact on the funding of AIP and F&E, and on the support for enforcing the cap provisions. As was mentioned earlier, the broader budget environment can trump the spending mechanisms.\nAlthough the various \"cap and penalty\" mechanisms may have succeeded in restricting spending from the aviation trust fund on operations, they did not necessarily succeed in forcing full appropriation of authorized AIP and F&E funding levels in a number of years. The cap and penalty provisions, combined with the appropriations shortfalls, led also to the growth of the trust fund's uncommitted balance. As a Congressional Budget Office (CBO) report explained,\nPrimarily because of program constraints, these provisions have merely altered the accounting for aviation spending, forcing the general fund to finance more of these expenditures ... In addition, there still remains an incentive to limit capital spending for aviation programs. Given the annual level of excise tax revenue from aviation, each dollar of aviation spending greater than these tax revenues must be funded by general revenues. Therefore, regardless of the actual accounting for aviation spending, each dollar reduction in spending on aviation either reduces the need for the general fund to finance aviation spending, or produces a trust fund surplus from which the Treasury can borrow to cover non-aviation expenditures.\nIn effect, within the context of the unified congressional budget, appropriators and budgeteers were more concerned about the overall size of the budget or deficit than whether below-authorized spending on AIP and F&E caused a squeezing-down of trust fund spending for O&M. If the intent of the cap and penalty provisions was essentially political, however, (i.e. to shore up support for the authorization bills among those who were concerned about trust fund spending on operations), then it may be viewed as at least partially successful.\nIn the end the tax reduction trigger also proved somewhat ineffective. Although, as structured, the trigger should have removed the incentive to restrain spending on the FAA's capital and research programs, broader budgetary needs mitigated against this result.", "During the reauthorization debate that preceded the passage of the Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century ( P.L. 106-181 ;AIR-21) supporters of spending guarantees wanted a mechanism that would resolve the three issues that manifested themselves under the cap and penalty provisions. First, they wanted legislation that would better assure full funding of the FAA capital budget accounts, AIP and F&E. Second, they wanted the legislation to assure that spending from the trust fund would roughly equal trust fund revenues each fiscal year and thereby prevent the accumulation of large balances in the fund. Third, they wanted an outcome that would continue a significant general fund share for the operations account. Provisions that would have accomplished this by taking the aviation trust fund off-budget or erecting budgetary \"firewalls\" to assure that all trust fund revenues and interest would be spent each year for aviation purposes never emerged from the conference committee. Instead AIR-21 provided for funding guarantees that were to be enforced by points-of-order. Vision-100 retained these provisions.", "There are two existing spending guarantees which are different from the previously discussed cap and penalty provisions. One makes it \"out-of-order\" in the House or Senate to consider legislation that does not use all aviation trust fund receipts and interest annually. The second, the \"capital priority provision,\" makes it \"out-of-order\" to consider any bill that provides a general fund appropriation for any year under AIR-21 or Vision-100 for RE&D or O&M if the sum of the AIP obligation limitation and the appropriation for F&E are below their authorized levels. As a penalty of sorts, any failure to fully fund F&E will lead to an increased appropriation (sometimes informally referred to as \"pop-up budget authority\") for AIP equal to the appropriations short fall for F&E.\nOn its face, the guarantee mechanism seemed to work as designed for FY2001 through FY2003. Both F&E and AIP were funded at, or very near, their authorized levels. There were shortfalls, but they were relatively small. F&E shortfalls mostly reflected across-the-board appropriations rescissions and ranged from roughly $6 million to $39 million (for FY2002 funds provided for F&E actually exceeded its authorization by $107 million). AIP's shortfalls ranged from $60 to $105 million. In FY2003 most observers felt that the guarantees were either working or being acquiesced to (at least regarding capital spending). The general fund share of total FAA appropriations varied from 17% for FY2001, 8% for FY2002, and 24% for FY2003.\nThe next four years, under Vision-100, were years of nearly full funding for AIP. Its obligation limitation was $3.294 billion for FY2004, $3.472 billion for FY2005, $3.515 billion for FY2006, and $3.515 billion for FY2007, just $106 million, $28 million, $85 million, and $185 million short of AIP's authorized funding, respectively. F&E, however, did not fare so well during FY2004-FY2007. Its annual appropriation fell below its authorization as follows: $320 million for FY2004; $468 million for FY2005; $498 million for FY2006; and $592 million for FY2007. The general fund contribution for these years was 22% for FY2004, 20% for FY2005, 18% for FY2006, and 19% for FY2007.\nAlthough AIP did not share the same funding fate as F&E, the F&E experience makes it clear that, as was true with the \"cap and penalty\" provisions, the current spending guarantees can still be trumped by broader budget policy goals (such as deficit reduction) or by the spending priorities of appropriators. The experience of F&E lends credence to the view that AIP's funding success has more to do with the popularity of the program within Congress and around the country than the guarantees. Every congressional district has at least one NPIAS airport and nearly every county does also. Although F&E spending benefits localities across the nation, the federal spending involved does not garner the same local government and media attention across the nation as AIP grants.\nUnder AIR21 and Vision-100, beginning in FY2002, there has been a rapid draw-down of the aviation trust fund's uncommitted balance. The highway trust fund dropped from an FY2001 end-of-year uncommitted balance of $7.3 billion to an estimated balance of $1.9 billion for FY2005. According to GAO, part of this decline was due to overestimates of trust fund revenues. Actual revenues were $383 million less than forecast for FY2001, $2.3 billion less than forecast for FY2002, and $1 billion less than forecast for FY2003 and FY2004. Especially in FY2002, but perhaps also a factor in the later years was the post-911 drop in flying, especially at high fare levels. Because the funding guarantee requires that the spending of trust fund resources equal the estimated annual revenues, these overestimates have led to a drawing down of the trust fund's balances. The revenue could be an issue of concern during the reauthorization debate.", "Congress, can and often does, waive all points-of-order against a bill. Spending guarantees that are enforced by point-of-order actions only work if they are raised by a member and if they have not been waived by rule. In the House, recent annual appropriations bills have had all points-of-order waived by the Rules Committee. Senators have chosen not to raise points-of-order against violations of the AIP and F&E funding guarantees. Points-of-order have not been allowed on appropriations bill conference reports. Also the \"pop-up\" AIP budget authorities, which some viewed as part of the mechanism for preventing appropriators from spending any F&E shortfall for noncapital aviation spending, can and have been rescinded. Congress has been rescinding this pop-up budget authority in recent years. These rescissions allow appropriators to bring down the nominal total cost of the Transportation/Treasury Appropriations bills in the next budget year.\nThe questionable effectiveness of the spending guarantees has implications for the future of FAA spending. As discussed earlier, the uncommitted balance in the aviation trust fund dropped from $7.674 billion for the end of FY2000 to a projected $1.356 billion for the end of FY2008. The commitments to spend from the trust fund have exceeded the trust fund income for each of these years. The resulting smaller trust fund cushion increases the likelihood that AIP and F&E spending could level off or even decline in the face of resistance to raising revenues or increasing general fund spending for the FAA. The FAA program authorizations and the authorization of the taxes that provide revenue to the trust fund under Vision 100 expired on September 30, 2007. The taxes and program authorizations continue under short-term authorization extension legislation. Given the reduced size of the trust fund's uncommitted balance, if the taxes supporting the fund are allowed to expire, the uncommitted balance could quickly become negative.", "The Vision 100 authorization of FAA's programs and activities ended at the close of FY2007. As was mentioned earlier, short-term extension legislation has allowed these programs and activities to continue. Reauthorization proposals have originated in the Senate, the House, and the FAA. The Senate bill ( S. 1300 ) would extend the current spending guarantees through FY2011. The FAA proposal ( H.R. 1356 ) is silent on spending guarantees. The House bill ( H.R. 2881 ), however, would make some changes in the spending guarantee mechanism.", "H.R. 2881 would amend the airport and airway trust fund guarantee that requires that the total amounts made available from the trust fund be equal to the level of receipts plus interest for the year. Under H.R. 2881 , for each year FY2008-FY2009, the amounts made available would equal 95% of the estimated level of receipts plus interest on the fund for each respective fiscal year. For FY2010 and FY2011, the guaranteed level would be 95% for each respective year plus the difference between the actual receipts and total amounts made available for obligation from two years before (i.e., FY2008 and FY2009, respectively). The bill would retain the point-of-order enforcement mechanisms.\nThis change would have a number of possible implications. First, the change could lessen the demands on trust fund revenues for the first two years of the reauthorization, allowing a modest accumulation in the unexpended balance of the trust fund during these years. Second, it would reduce the likelihood that overly optimistic revenue projections could lead to spending at rates that exceed the actual revenues accruing to the trust fund (as has happened in recent years), at least during the first two years of the bill. Finally, by limiting trust fund spending, the change could, in the minds of some, increase the likelihood that the general fund contribution percentage for the FAA budget could be set at a higher level.", "Because of the nature of the topic, the analysis of the various spending guarantees in this report, necessarily, assumes the existing programmatic structure and funding levels of the times. Advocates of the guarantees view the fully authorized funding of the capital programs as well as a significant general fund share as good things. Over time, however, there has also been an alternative view, that too much was being spent on FAA programs. This view casts a more critical eye on AIP and F&E, whose funding the guarantees were specifically designed to assure. These critics often view the breadth of AIP spending and ever-widening project eligibilities as allowing for spending that is increasingly inefficient, unfocused and of questionable federal purpose. They are often critical, for example, of the amount of AIP's resources that go to projects at small local airports, that by their nature are questionable from a national mobility standpoint. They tend to view F&E spending as having often been wastefully managed and having pursued questionable technologies that have failed to pan-out. Some would even argue that by downsizing FAA programs and/or restricting program spending, it could be feasible to fund the entire FAA budget out of the trust fund and thereby ease the burden on the general taxpayer.\nDespite questions about the effectiveness of existing and previous spending guarantee mechanisms, it may be unlikely that an FAA reauthorization bill would be enacted without language designed to encourage full funding of the FAA's capital programs, including AIP. The guarantee language in an authorization bill emphasizes the importance that authorizers place on fully funding AIP and F&E. The provisions are seen by some as helping shore-up support for the overall authorization legislation while the bills work their way through the legislative process. Extending the current guarantees might be enough to maintain the political advantage during the reauthorization debate. Extending or making minor modifications to the existing \"guarantees\" would probably encounter the least resistance. Should spending guarantees become a major focus of legislative effort, there are a number of options could arise during the debate. It is important to keep in mind that as past history indicates, with the possible exception of the first option, all the options would almost certainly be opposed by the appropriations and budget committees in Congress as well as DOT and the Office of Management and Budget.", "As mentioned earlier, historically, the authorizing committees and appropriating committees have approached the funding of FAA programs and activities from different perspectives. Authorizing committees generally support the full authorized level of spending for AIP and F&E as the appropriate level of spending to meet the needs of the nation's airports and airways. Although also concerned about the needs of the airport and airway system, appropriators have viewed trust fund spending within the context of the unified congressional budget and the pressures of the overall budget environment of the time. This conflict of goals between the committees has meant that the AIP and F&E appropriations have often been less than their authorizations. On its face, the simplest way to resolve the disagreement between committees would be for the committees to come to an agreement on trust fund spending. An informal, negotiated \"treaty\" between the transportation authorizing and appropriating committees, although unusual, has been done at least once in the past. In 1990, the appropriations committees agreed to fully fund AIP and the authorizing committees agreed to eliminate the penalty portion of the penalty and cap regime. This option has the advantage of being the simplest. Its weakness is that any participant may abrogate the treaty. Under the treaty, AIP was fully funded for two years (FY1991, FY1992).", "A reimposition of something similar to the cap and penalty provisions of the 1970s or 1980s might be considered by some during reauthorization. The time the cap and penalty mechanism was probably at its most effective was when it was first authorized in 1976. At that time, support in Congress for the provisions was strong, perhaps because it followed closely on the previously mentioned conflicts over the appropriate use of trust fund money with the Nixon and Ford Administrations. This environment might have encouraged adherence to the cap and penalty provisions during the appropriations process.\nAs mentioned earlier, the success of the cap and penalty provisions has been mixed, and at times may have had a role in unintended consequences such as rapidly growing trust fund balances and, in the view of some, a higher than justified general fund shares of the FAA budget. Also, the history of the cap and penalty indicates that, over time, it does not appear to have been successful in assuring the full funding of FAA capital programs such as AIP and F&E. During much of the cap and penalty era appropriators simply absorbed the penalty, allowed the unexpended balance of the aviation trust fund to increase as a result, and used this growing balance as an off-set for spending elsewhere.\nThe historical cap and penalty provisions may not be compatible with the current law concerning the \"Airport and Airway Trust Fund Guarantee.\" The guarantee requires that annual trust fund spending equal the estimated receipts for the year. The object of the guarantee is to assure the full spending each year's trust fund receipts. The cap and penalty mechanism, on the other hand, is designed to limit and penalize certain kinds of spending.", "Taking the aviation trust fund \"off-budget\" has, during past reauthorization debates, been proposed as a means of assuring that the tax revenues deposited in the trust fund are used for aviation purposes. In theory, an off budget entity's budget authority, receipts, outlays and, in most proposals, any deficit or surplus would not be counted in regard to the congressional or presidential budgets. If the trust fund were off-budget there would be no apparent incentive for budgeteers or appropriators to support spending less on aviation in order to be able to spend more on other government programs or activities. Proponents also argue that unexpended trust fund balances could no longer be used to mask the size of the federal budget deficit. Opponents of off-budget proposals often argue that trust fund revenues should not be separated from overall national needs and fiscal policies. Also, as mentioned earlier in regard with the aviation trust fund, the uncommitted balance has been much reduced in recent years and some are now more concerned about the trust fund going into deficit.\nThe trust fund's revenues in and of themselves are not sufficient to cover all of the FAA's needs. This increases the likelihood that an off-budget aviation trust fund would not assure full funding for FAA capital programs. AIP and F&E would still have to compete with other aviation activities, such as operations, for the available trust fund resources in any given year.", "Borrowing from surface transportation legislation, one alternative to taking the aviation trust fund off-budget would be to amend the Balanced Budget and Emergency Deficit Control Act of 1985 to create a discretionary spending guarantee (firewall) for the FAA's spending. This could be done by creating a separate budget category for aviation and annual spending caps for programs within the category. Funding from within this category could not be used to, in effect, off-set increased spending elsewhere in the budget thereby removing any incentive for restraining the spending of available trust fund revenues. In some ways, this mechanism has effects similar to going off-budget, but the budgetary resources are still counted as part of the unified congressional budget. This would prevent the reduction of FAA capital program spending to free up funding for spending elsewhere in the budget. It is uncertain how effective this would be for FAA spending. This option would be subject to many of the same caveats as taking the aviation trust fund off-budget but would, in the eyes of proponents of full funding for AIP and F&E, have the advantage of setting annual funding guarantees that appropriators would have to abide by. Because this option reduces the appropriations committees' influence on spending, they could be expected to vigorously resist the change. Also because this option amends a budget act it would require the acquiescence of the House and Senate budget committees.", "Historically, the rationale underlying the cap and penalty provisions was that the reward for fully funding the AIP and F&E capital accounts with trust fund revenues would be to fund the full authorized trust fund amount for O&M and thereby lighten the demands for general fund support for the FAA budget. Recently, the funding of the Federal Transit Administration (FTA) underwent a change. Instead of using both trust fund and general fund monies to fund all programs, the FTA's formula programs are entirely paid for from the trust fund while the congressionally popular New Starts capital program is entirely funded out of the general fund. Although this goes against the historical rationale that trust fund resources should first pay for capital needs, it also puts advocates of spending constraints in the position that they have to cut a part of the FTA budget that has a history of strong congressional support. For FAA, an analogous change would be to fund all of FAA's budget, except the well supported AIP program, with trust fund revenues and fund AIP with general fund revenues. This would require that those who wish to constrain FAA spending to cut the part of the FAA budget that has the broadest and deepest support in Congress. On the other hand, this option could leave AIP more exposed than other components of the FAA budget should a consensus for deficit reduction reemerge or should other priorities take precedence over AIP in the spending of general fund revenues." ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 3, 3, 2, 3, 3, 2, 3, 3, 3, 2, 3, 3, 2, 3, 3, 2, 3, 2, 1, 2, 3, 1, 2, 1, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full", "h0_full h1_full", "", "", "h1_title", "", "", "", "", "", "", "", "", "", "", "h1_title", "", "h1_full", "", "", "", "", "", "h1_full", "h2_full h1_full", "h2_full", "h2_full", "", "", "h2_title h1_title", "h2_full", "h1_full", "", "", "" ] }	{ "question": [ "What issue have the Airport and Airway Development and Revenue Acts had?", "How did some members of Congress view the trust fund?", "How did other members of Congress view the trust fund?", "How has Congress guaranteed full funding of the FAA's capital programs?", "What did the guarantees consist of?", "Why were penalty mechanisms put in place?", "How did the cap and penalty revisions fare?", "What guarantees did the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century include?", "How were these guarantees extended?", "What has and has not been fully funded as a result of these provisions?" ], "summary": [ "Since the 1971 creation of the user-supported airport and airway trust fund in the Airport and Airway Development and Revenue Acts of 1970 (P.L. 91-259) there has been disagreement over the appropriate use of the trust fund's revenues.", "Some Members of Congress viewed the trust fund as primarily a capital account that would fund the Federal Aviation Administration (FAA) airport and airway (mostly air traffic control) capital requirements.", "Others, including the Office of Management and Budget (OMB), some executive agencies, as well as some members of congressional appropriations and budget committees, viewed the trust fund as the basis for a user-pay system that would also fund some or all of the FAA's operations expenses.", "Since 1976, Congress has passed and amended a series of legislative provisions designed to \"guarantee\" the full funding of the FAA's capital programs—the Airport Improvement Program (AIP) and Facilities and Equipment program (F&E).", "From FY1977 through FY1990, the guarantees consisted of a variety of \"cap and penalty\" provisions which set a legislated cap on the amount of aviation trust fund money that could be used to fund FAA operations.", "In addition, penalty mechanisms were put in place that would reduce the cap by formula amounts in proportion to the capital programs' shortfall of appropriated funding from their authorized amounts.", "Although the cap and penalty provisions had some apparent early success, there was growing resistance to passing appropriations bills that adhered to the penalties during the 1980s. In 1990, Congress removed the penalty. Some form of cap continued through 1998.", "One made it \"out-of-order\" in the House or Senate to consider legislation that failed to use all trust fund receipts and interest annually. The second made it out-of-order to consider any bills that provided any funding for research or operations if it failed to fully fund AIP and F&E at their authorized levels.", "These guarantees were extended through FY2007 in Vision 100-Century of Aviation Reauthorization Act (P.L. 108-176; Vision 100).", "AIP has been nearly fully funded under these provisions. F&E has not during recent years." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 2, 2, 2 ] }
CRS_R43695	{ "title": [ "", "Overview", "Data Sources and Limitations", "Small Business Innovation Research", "SBIR Overview", "SBIR Phases", "Phase I", "Phase II", "Phase III", "Technical Assistance", "SBIR Eligibility", "Current and Historical SBIR Awards Data23", "Small Business Technology Transfer", "STTR Overview", "STTR Phases", "Phase I", "Phase II", "Phase III", "Technical Assistance", "STTR Eligibility", "Current and Historical STTR Awards Data43", "SBIR/STTR Reauthorization Act of 2011 Provisions", "Participation of Small Businesses That Are Majority-Owned by Venture Capital Companies", "Agency Set-Aside Percentages and Award Limitations", "GAO Audit of Agencies' Extramural R&D Budget Calculations", "Company Flexibility in Pursuit of Phase II Grants", "Commercialization Focus", "Annual Reporting of Agencies' Advanced Manufacturing Activities", "Data Rights Protection", "Provisions to Reduce Waste, Fraud, and Abuse", "Management and Administrative Improvements", "Issues for Consideration", "Eligibility of Venture Capital-Backed Small Businesses", "Agency Compliance with Mandatory Minimum Expenditure Levels", "Calculation of Extramural Research Funding and Set-Aside", "Enactment of Appropriations after Start of Fiscal Year", "Agency Views of Requirement to \"Expend\" Funds", "Improving Technology Commercialization, Trade-Offs Among Program Objectives", "Tracking of Commercialization Successes and Other SBIR Information", "Concerns About Certain Awardees' (\"SBIR Shops\") Lack of Progress Toward Commercialization", "Concerns About Duplicative Awards and Other Types of Waste, Fraud, and Abuse", "SBA Delays in Meeting Statutory Reporting Requirements", "Other Issues" ], "paragraphs": [ "", "The Small Business Innovation Research (SBIR) program was established by Congress in 1982 to expand the role of small businesses in federal research and development (R&D). In establishing the program, Congress found that technological innovation plays an important role in job creation, productivity improvements, and U.S. competitiveness; that small businesses are among the most cost-effective performers of R&D and particularly capable of bringing R&D results to market in the form of new products; and that despite the role of small businesses as \"the principal source of significant innovations in the Nation,\" the vast majority of federally funded R&D is performed by large businesses, universities, and federal laboratories. With this in mind, Congress established the SBIR program to advance four objectives:\nto stimulate innovation, to use small businesses to meet federal R&D needs, to foster and encourage the participation of minority and disadvantaged persons in technological innovation, and to increase private sector commercialization of innovations derived from federally-funded R&D.\nIn 1992, Congress established the Small Business Technology Transfer (STTR) program. Similar in design to the SBIR program, STTR was created to facilitate the commercialization of university and federal R&D by small companies.\nThe SBIR and STTR programs have been reauthorized on multiple occasions, most recently by the SBIR/STTR Reauthorization Act of 2011 ( P.L. 112-81 ), which authorizes both programs through FY2017. Highlights of this law are provided in \" SBIR/STTR Reauthorization Act of 2011 \" later in this report.\nExecution of the SBIR and STTR programs is decentralized. Both the SBIR and STTR statutes require that federal agencies with extramural R&D budgets in excess of specified amounts set aside a percentage of such funds to conduct their own SBIR and STTR programs. Currently, 11 federal departments and agencies operate SBIR programs and 5 operate STTR programs. The Small Business Administration (SBA) helps to coordinate the SBIR and STTR programs, establishes overall policy guidance, reviews agencies' progress, and reports annually to Congress on the operation of the programs.\nThrough FY2011, federal agencies had made more than 133,000 SBIR and STTR awards to small businesses to develop and commercialize innovative technologies. The total amount awarded was $33.7 billion. Figure 1 shows SBIR and STTR funding for FY2000-FY2011.\nThis report provides information on the legislative foundations, structure, operation, and current and historical funding levels of the SBIR and STTR programs; summarizes the most recent legislative changes to the programs; provides highlights of external reviews of the program; and identifies and discusses selected policy issues.", "The SBA, through its SBIR.gov website, makes available certain data on SBIR and STTR awards through FY2013 (and some awards data for FY2014). However, the SBA has communicated to CRS that the data for FY2012 and later years have not been cleared by the Office of Management and Budget. For this report, CRS has relied on the SBIR.gov website for data from the inception of the SBIR and STTR programs through FY2010. For FY2011, this report relies on data provided directly to CRS by the SBA. However, the FY2011 data set has some inconsistencies; in several cases, the sum of individual agency amounts does not correspond to the stated total. The SBA informed CRS that some agency numbers were modified prior to publication of the FY2011 figures, but that the totals for each row were inadvertently not recalculated. Accordingly, for this report CRS uses the sum of the individual agency amounts rather than the totals provided by the SBA.", "", "The Small Business Innovation Research program was established under the Small Business Innovation Development Act of 1982 ( P.L. 97-219 ) and subsequently reauthorized or extended multiple times, most recently in 2011 when the program was reauthorized through September 30, 2017. Under the program, each federal agency with an extramural R&D budget greater than $100 million is required to allocate a portion of that funding to conduct a multi-phase R&D grant program for small businesses. The objectives of the SBIR program include stimulating technological innovation; increasing the use of the small business community to meet federal R&D needs; fostering and encouraging participation in innovation and entrepreneurship by socially and economically disadvantaged individuals; and expanding private-sector commercialization of innovations resulting from federally funded R&D.\nCurrently, 11 federal agencies participate in the SBIR program: the Departments of Agriculture (USDA), Commerce (DOC), Defense (DOD), Education (ED), Energy (DOE), Health and Human Services (HHS), Homeland Security (DHS), and Transportation (DOT); the Environmental Protection Agency (EPA); the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF).\nUnder the 2011 reauthorization, the minimum percentage of extramural R&D funds that agencies are required to set aside for the SBIR program increases 0.1% per year for five years, from 2.5% in FY2011 to 3.0% in FY2016, then increases to 3.2% for FY2017 and each fiscal year thereafter. Agencies may opt to exceed these minimum percentages. In FY2011, the aggregate level of SBIR funding for all federal agencies was $2.119 billion, approximately 2.6% of the participating agencies' aggregate extramural R&D funding. However, a recent report by the Government Accountability Office (GAO) found that some agencies did not comply with the SBIR and STTR spending requirements. This issue is addressed in greater detail in \" Agency Compliance with Mandatory Minimum Expenditure Levels .\"\nEach participating agency operates its own SBIR program under the provisions of the law and regulations, as well as with the policy directive issued by the U.S. Small Business Administration (SBA) in its Small Business Innovation Research Program Policy Directive (referred to hereinafter as the SBIR Program Policy Directive ). According to some analysts, this approach allows for general consistency across SBIR programs, while allowing each agency a substantial degree of control and flexibility in the execution of its program in alignment with its overall mission and priorities. (See \" Improving Technology Commercialization, Trade-Offs Among Program Objectives \" for related discussion.)", "The SBIR program is a three-phase program. The purposes and parameters of each phase are discussed below.", "In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility-related experimental or theoretical research or research and development (R/R&D) related to agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow, depending on the needs of the agency. Phase I grants are intended to determine \"the scientific and technical merit and feasibility of ideas that appear to have commercial potential.\" Generally, SBIR Phase I awards are not to exceed $150,000, though the law provides agencies with the authority to issue awards that exceed this amount (the Phase I award guideline) by as much as 50%. In addition, agencies may request a waiver from the SBA to exceed the award guideline by more than 50% for a specific topic. In general, the period of performance for Phase I awards is up to six months, though agencies may allow for a longer performance period for a particular project.", "Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application. In general, only Phase I grant recipients are eligible for Phase II grants. There are two exceptions to this guideline: (1) a federal agency may issue an SBIR Phase II award to a Small Business Technology Transfer (STTR) Phase I awardee to further develop the work performed under the STTR Phase I award; and (2) through FY2017, the National Institutes of Health (NIH), DOD, and ED are authorized to make Phase II grants to small businesses that did not receive Phase I awards. Exercise of this authority requires a written determination from the agency head that the small business has demonstrated the scientific and technical merit and feasibility of the ideas and that the ideas appear to have commercial potential.\nPhase II awards are to be based on the results achieved in Phase I (when applicable) and the scientific and technical merit and commercial potential of the project proposed in Phase II as evidenced by: the small business concern's record of successfully commercializing SBIR or other research; the existence of second phase funding commitments from private sector or non-SBIR funding sources; the existence of third phase, follow-on commitments for the subject of the research; and the presence of other indicators of the commercial potential of the idea.\nThe SBIR Program Policy Directive generally limits SBIR Phase II awards to $1 million (the Phase II award guideline), though the directive provides agencies with the authority to issue an award that exceeds this amount by as much as 50% (for an amount up to $1.5 million). As with Phase I grants, agencies may request a waiver from the SBA to exceed the Phase II award guideline by more than 50% for a specific topic. In general, the period of performance for Phase II awards is not to exceed two years, though agencies may allow for a longer performance period for a particular project. Agencies may make a sequential Phase II award to continue the work of an initial Phase II award. This sequential Phase II award is also subject to the $1 million Phase II guideline and agencies' authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3 million in Phase II awards for a particular project to a single recipient at the agency's discretion, and potentially more if the agency requests and receives a waiver from the SBA. For sequential Phase II awards, some agencies require third party matching of the SBIR funds.", "Phase III of the SBIR program is focused on the commercialization of the results achieved with Phase I and Phase II SBIR funding. The SBIR program does not provide funding in Phase III. Phase III funding is expected, generally, to be generated in the private sector. However, some agencies may use non-SBIR funds for Phase III funding to support additional R&D or contracts for products, processes, or services intended for use by the federal government. In addition, the 2011 reauthorization act directs agencies and prime contractors \"to the greatest extent practicable,\" to facilitate the commercialization of SBIR and STTR through the use of Phase III awards, including sole source awards.", "In addition to funding provided in Phases I-III, the 2011 reauthorization act also allows agencies to award SBIR Phase I and Phase II award recipients up to $5,000 per year for technical assistance, in addition to the amount of the award, or to provide such assistance through an agency-selected vendor. This funding is intended to provide SBIR recipients with technical assistance services, such as access to a network of scientists and engineers engaged in a wide range of technologies or access to technical and business literature available through online databases. These services are provided to help SBIR awardees make better technical decisions, solve technical problems, minimize technical risks, and develop and commercialize new commercial products and processes.", "A small business' eligibility for the SBIR program is contingent on its location, number of employees, ownership characteristics, and other factors. Eligibility to participate in the SBIR program is limited to for-profit U.S. businesses with a location in the United States. Eligible companies must have 500 or fewer employees, including employees of affiliates. The small business must be:\n(1) more than 50% directly owned and controlled by one or more citizens or permanent resident aliens of the United States, other small business concerns (each of which is more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States), or any combination of these; or\n(2) more than 50% owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of these, with no single such firm owning more than 50% of the small business; or\n(3) a joint venture in which each entity to the joint venture meets the requirements in paragraphs (1) and (2) above.\nAgencies are restricted on how much of their SBIR funds they can make available for awards to small businesses that are more than 50% owned by venture capital operating companies, hedge funds, or private equity firms. The NIH, DOE, and NSF may award no more than 25% of the agency's SBIR funds to such small businesses; all other SBIR agency programs are limited to using 15% of their SBIR funds for such awards.\nSmall businesses that have received multiple prior SBIR/STTR awards must meet certain bench-mark requirements for progress toward commercialization to be eligible for a new Phase I award. For both Phase I and Phase II, the principal investigator's primary employment must be with the small business applicant at the time of award and during the conduct of the proposed project.\nGenerally, R/R&D work under the STTR must be performed in the United States, though agencies may allow a portion of the work to be performed or obtained outside of the United States under \"rare and unique\" circumstances.", "In FY2011, the latest year for which the SBA has published data on SBIR awards, agencies made awards for $2.222 billion, including 3,739 Phase I awards totaling $525.4 million and 1,759 Phase II awards totaling $1.696 billion. The success rate was 15% for Phase I SBIR proposers and 49% for Phase II proposers.\nWhile more than two-thirds of SBIR grants made in FY2011 were Phase I awards (68.0%), more than three-fourths of SBIR funding went to Phase II awards (76.4%). Between FY2000 and FY2011, funding for both Phase I and Phase II has generally increased. See Figure 2 .\nTwo agencies accounted for more than three-fourths of total SBIR funding in FY2011: DOD ($1,080.8 million, 49%) and HHS ($623.8 million, 28%). The next three highest SBIR funding agencies (NASA, DOE, NSF) together accounted for 20%. The remaining agencies accounted for less than 4% of the total. See Figure 3 .\nThe allocation of SBIR funding between Phase I and Phase II awards varies among agencies. Agencies that allocated the largest share of their SBIR funding to Phase I awards in FY2011 were EPA (45%), NSF (36%), and DOC (35%). Agencies that allocated the largest share of their SBIR funding to Phase II awards in FY2011 were DOT (84%), DOD (81%), and DOE (81%). Figure 4 illustrates each SBIR agency's FY2011 distribution of SBIR funding between phases.\nAgency shares of aggregate Phase I and Phase II SBIR funding are as shown in Figure 5 . The agencies with the highest share of total Phase I funding in FY2011 were DOD (40%), HHS (35%), and NASA (9%). The agencies with the highest share of total Phase II funding in FY2011 were also DOD (51%), HHS (26%), and NASA (8%).\nIn FY2011, minority or disadvantaged businesses received 238 Phase I awards (about 6.4% of all Phase I SBIR awards) totaling $31.3 million (about 6.0% of total Phase I funding), and 107 Phase II SBIR awards (6.1%) totaling $90.8 million (8.5%). Companies in Historically Underutilized Business Zones (HUBZones) received 87 Phase I awards (about 2.3% of all Phase I awards) totaling $11.5 million (about 2.2% of total Phase I funding) and 45 Phase II awards (2.6%) totaling $29.8 million (2.8%).\nFigure 6 shows the aggregate funding level and number of SBIR awards by state for FY2006-2010 (the latest five-year period for which award data by state are available). Although every state, the District of Columbia, and Puerto Rico received awards during this period, SBIR funding was concentrated among certain states. The four states that received the largest number and amount of SBIR awards during this period—California (5,467 awards totaling $1.826 billion), Massachusetts (3,570 awards totaling $1.235 billion), Virginia (1,786 awards totaling $561.8 million), and Maryland (1,404 awards totaling $492.8 million)—accounted for 38% of the total number of SBIR awards and 43% of the total funding for this period. These four states also received the largest overall amounts of federal R&D funding in FY2010, accounting for a total of 44%.\nThe top ten states accounted for more than two-thirds of SBIR awards and funding. This concentration mirrors overall federal R&D funding as well. Nine of the top 10 states in SBIR funding are also among the top 10 states in overall federal R&D funding (which account for 66% of total federal R&D funding). In contrast, the ten states with the fewest number of SBIR awards and lowest aggregate award amounts accounted for about 1% of awards and total funding during this period. The ten states with the least federal R&D funding in FY2010 also accounted for about 1% of total federal R&D funding.\nTable 1 provides information on overall agency SBIR obligations for FY2011, as well as the number and aggregate amounts of Phase I and Phase II SBIR awards.\nTable 2 provides historical data on the number and amount of Phase I and Phase II SBIR awards from the program's inception through FY2011.", "", "The Small Business Technology Transfer (STTR) program was created by the Small Business Research and Development Enhancement Act of 1992 ( P.L. 102-564 ) and has been reauthorized several times, most recently by the SBIR/STTR Reauthorization Act of 2011 ( P.L. 112-81 ) which reauthorized the program through September 30, 2017. Modeled largely after the SBIR program, the STTR program seeks to facilitate the commercialization of university and federal R&D by small companies. Under the program, each federal agency with extramural R&D budgets of $1 billion or more is required to allocate a portion of its R&D funding to conduct a multi-phase R&D grant program for small businesses. The STTR program provides funding for research proposals that are developed and executed cooperatively between a small firm and a scientist in an eligible research institution and that are aligned with the mission requirements of the federal funding agency.\nCurrently, five agencies participate in the STTR program: DOD, DOE, HHS, NASA, and NSF. Under the 2011 reauthorization act, the minimum percentage of funds to be set aside for the program is to increase from 0.30% in FY2011 to 0.35% in FY2012 and FY2013; to 0.40% in FY2014 and FY2015; and to 0.45% in FY2016 and beyond. In FY2011, total STTR award funding among all STTR-participating federal agencies was $238.1 million, accounting for 0.31% of the agencies' aggregate extramural R&D funding.\nThe SBA emphasizes three principal differences between the STTR and SBIR programs:\nUnder STTR, the small business and its partnering research institution must establish an intellectual property agreement detailing the allocation of intellectual property rights and rights to carry out follow-on research, development or commercialization activities. Under STTR, the small business partner must perform at least 40% of the R&D and the research institution partner must perform at least 30% of the R&D. The STTR program does not require the principal investigator to be primarily employed by the small business, a requirement of the SBIR program.\nAs with the SBIR program, each participating agency operates its own STTR program under the provisions of the law and regulations, as well as with the policy directive issued by the U.S. Small Business Administration (SBA) in its Small Business Technology Transfer Program Policy Directive (referred to hereinafter as the STTR Program Policy Directive ). According to some analysts, this approach allows for general consistency across STTR programs, while allowing each agency a substantial degree of control and flexibility in the execution of its program in alignment with its overall mission and priorities. (See \" Improving Technology Commercialization, Trade-Offs Among Program Objectives \" for related discussion.)", "Like the SBIR program, the STTR program has three phases. The purposes and parameters of each phase are discussed below.", "In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility-related experimental or theoretical research or research and development (R/R&D) related to agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow, depending on the needs of the agency. Phase I grants are intended to determine \"the scientific and technical merit and feasibility of the proposed effort and the quality of performance of the [small business] with a relatively small agency investment before consideration of further Federal support in Phase II.\" Generally, STTR Phase I awards are limited to $150,000 (the Phase I award guideline), though law provides agencies with the authority to issue awards that exceed this guideline by as much as 50%. In addition, agencies may request a waiver from the SBA to exceed the award guideline by more than 50% for a specific topic. In general, the period of performance for Phase I awards is not to exceed one year, though agencies may allow for a longer performance period for a particular project.", "Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application. In general, only Phase I grant recipients are eligible for Phase II grants. Awards are to be based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase II. The STTR Program Policy Directive generally limits STTR Phase II awards to $1 million (the Phase II award guideline), though the directive provides agencies with the authority to issue awards that exceed this guideline by as much as 50% (for an amount up to $1.5 million). As with Phase I grants, agencies may request a waiver from the SBA to exceed the Phase II award guideline by more than 50% for a specific topic. In general, the period of performance for Phase II awards is not to exceed two years, though agencies may allow for a longer performance period for a particular project. Agencies may make a sequential Phase II award to continue the work of an initial Phase II award. This sequential Phase II award is also subject to the $1 million Phase II guideline and agencies' authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3 million in Phase II awards for a particular project to a single recipient at the agency's discretion, and potentially more if the agency requests and receives a waiver from the SBA. For sequential Phase II awards, some agencies require third-party matching of the STTR funds.", "Phase III of the STTR program is focused on the commercialization of the results achieved through Phase I and Phase II STTR funding. The STTR program does not provide funding in Phase III. Phase III funding is expected, generally, to be generated in the private sector. However, some agencies may use non-STTR funds for Phase III funding to support additional R&D or contracts for products, processes, or services intended for use by the federal government. In addition, the 2011 reauthorization act directs agencies and prime contractors \"to the greatest extent practicable,\" to facilitate the commercialization of SBIR and STTR through the use of Phase III awards, including sole source awards.", "The 2011 reauthorization act also allows agencies to award STTR Phase I and Phase II award recipients up to $5,000 per year for technical assistance, in addition to the amount of the award, or to provide such assistance through a vendor. This funding is intended to provide STTR recipients with technical assistance services, such as access to a network of scientists and engineers engaged in a wide range of technologies or access to technical and business literature available through online databases. These services are provided to help STTR awardees make better technical decisions, solve technical problems, minimize technical risks, and develop and commercialize new commercial products and processes.", "A small business' eligibility for the STTR program is contingent on its location, number of employees, ownership characteristics, and other factors. The partnering research institution must meet eligibility qualifications as well. Eligibility to participate in the STTR program is limited to for-profit U.S. businesses with a location in the United States. Eligible companies must have 500 or fewer employees, including employees of affiliates.\nThe small business must be:\n(1) more than 50% directly owned and controlled by one or more citizens or permanent resident aliens of the United States, other small business concerns (each of which is more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States), or any combination of these; or\n(2) a joint venture in which each entity to the joint venture meets the requirements in paragraph (1) above.\nUnlike the SBIR program, the STTR does not have authority to make awards to small businesses that are more than 50% owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of these. However, as with SBIR, the STTR program may make awards to companies that are majority-venture capital backed if the VC firm is itself more than 50% directly owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States. In such a case, that VC is allowed to have majority ownership and control of the awardee; however, the VC and the awardee, and all other affiliates, must have a total of 500 employees or less.\nIn addition, small businesses that have received multiple prior SBIR/STTR awards must meet certain benchmark requirements for progress toward commercialization to be eligible for a new Phase I award. For both Phase I and Phase II, the principal investigator's primary employment must be with either the small business or the partnering research institution at the time of award and during the conduct of the proposed project. Generally, R/R&D work under the STTR must be performed in the United States, though agencies may allow a portion of the work to be performed or obtained outside of the United States under \"rare and unique\" circumstances.\nThe partnering research institution must be located in the United States, and be either a nonprofit college or university, a domestic nonprofit research organization, or a federally funded research and development center (FFRDC).\nFor both Phase I and Phase II, not less than 40% of the R/R&D work must be performed by the small business, and not less than 30% of the R/R&D work must be performed by the single, partnering research institution. Agencies can choose whether to determine these percentages using either contract dollars or labor hours, but must explain this in the solicitation.", "In FY2011, the most recent year for which the SBA has published data on STTR awards, agencies made awards for $251.2 million, including 482 Phase I STTR awards totaling $59.6 million and 238 Phase II STTR awards totaling $191.6 million. The success rate for Phase I STTR proposers was 22% and for Phase II proposers was 44%.\nWhile 67% of STTR grants made in FY2011 were for Phase I awards, more than 76% of STTR funding went to Phase II awards. In FY2004, the STTR set-aside doubled from 0.15% to 0.30%. In the first year (FY2004), aggregate funding for Phase I and aggregate funding for Phase II approximately doubled. However, from FY2004 to FY2011, Phase I aggregate funding fell by about 25% while Phase II aggregate funding increased by about 74%. The proportional change in funding between the phases may reflect an increased focus on commercialization by the STTR agencies. See Figure 7 for Phase I and Phase II STTR funding for FY2000-2011.\nLike SBIR funding, STTR funding is highly concentrated. Two agencies—DOD ($120.9 million, 48%) and HHS ($77.5 million, 31%)—accounted for nearly four-fifths of STTR funding in FY2011. NASA accounted for 8%, DOE for 7%, and NSF for 5%. See Figure 8 .\nThe allocation of STTR funding to Phase I and Phase II awards varies among agencies, but the differences are smaller than for SBIR funding. Among STTR agencies, HHS allocated the largest share (29%) of its STTR funding to Phase I awards in FY2011; NSF allocated the largest share (95%) to Phase II awards. See Figure 9 .\nThe agencies with the highest share of total Phase I funding in FY2011 were DOD (50%) and HHS (37%). The agencies with the highest share of total Phase II funding in FY2011 were also DOD (48%) and HHS (29%). See Figure 10 .\nMinority or disadvantaged businesses received 31 Phase I STTR awards (6% of all Phase I STTR awards) totaling $3.1 million (5% of total Phase I STTR funding) in FY2011, and 14 Phase II STTR awards (6%) totaling $7.9 million (4%).\nCompanies from Historically Underutilized Business Zones (HUBZones) received 16 Phase I STTR awards (3% of all Phase I awards) totaling $1.5 million (3% of total Phase I STTR funding) in FY2011, and 6 Phase II STTR awards (3%) totaling $2.6 million (1%).\nFigure 11 shows the aggregate funding level and number of STTR awards by state for FY2006-FY2010 (the latest five-year period for which award data by state are available). STTR funding was concentrated in certain states. The three states that received the largest number and amount of STTR awards during this period—California (651 awards totaling $195.8 million), Massachusetts (474 awards totaling $139.9 million), and Virginia (267 awards totaling $77.2 million)—accounted for 33% of the total number of SBIR awards and 32% of the total funding for this period. The top ten states accounted for more than 60% of awards and funding. In contrast, the ten states with the fewest awards and lowest aggregate award amounts accounted for about 1% of awards and total funding during this period.\nTable 3 provides information on overall agency STTR obligations for FY2011, as well as the number and aggregate amounts of Phase I and Phase II awards.\nTable 4 provides historical information on the number of Phase I and Phase II STTR awards and total annual STTR funding from the program's inception through FY2011.", "The SBIR/STTR Reauthorization Act of 2011 (enacted as Division E of the National Defense Authorization Act for Fiscal Year 2012, P.L. 112-81 ) authorizes the SBIR and STTR programs through September 30, 2017. The act also changes certain aspects of the programs. This section provides an overview of these changes.", "Perhaps the most widely debated issue of the reauthorization was whether to permit small companies that are majority-owned by venture capital operating companies, hedge funds, or private equity firms to receive grants under the SBIR and STTR programs. In what might be considered a compromise position, the act permits NIH, DOE, and NSF to award not more than 25% of SBIR funds to small businesses \"that are owned in majority part by multiple venture capital operating companies, hedge funds, or private equity firms through competitive, merit-based procedures that are open to all eligible small business concerns.\" Other federal agencies may not award more than 15% of SBIR funds to such firms. The act directs the GAO to conduct triennial studies on venture capital operating company, hedge fund, and private equity firm involvement in the program. The first report is due in December 2014. For further discussion of this issue, see \" Eligibility of Venture Capital-Backed Small Businesses .\"", "The act increases the percentages of extramural R&D funding that agencies must set aside for the SBIR and STTR programs, introducing the changes over multiple years. See Table 5 .\nAdditionally, the law increases the award guidelines on Phase I SBIR/STTR awards from $100,000 to $150,000 and on Phase II SBIR/STTR awards from $750,000 to $1,000,000. Agencies cannot exceed these guidelines by more than 50% without a waiver from the SBA. The act also provides express authority to agencies to make a sequential Phase II award to continue the work of an initial Phase II award. Sequential Phase II awards are also subject to the $1 million guideline/$1.5 million limit. Upon agency request, the SBA Administrator may grant a waiver allowing an agency to exceed the limits with respect to a specific topic for a fiscal year if the limitations will interfere with the ability of the agency to fulfill its research mission through the SBIR program or the STTR program. The agency must agree to minimize the number of awards that exceed the award guidelines.", "The act directs the GAO to audit and report on agency calculation of their extramural R&D budgets. GAO has reported that agencies have been inconsistent and late in reporting to the SBA their explanations of how they calculate their extramural R&D budgets, which are the basis used to calculate the minimum SBIR and STTR set-aside amounts. For further discussion of this issue, see \" Calculation of Extramural Research Funding and Set-Aside .\"", "The act gives small businesses more flexibility in applying for Phase II awards. Recipients of a Phase I award from one federal agency may now apply for a Phase II award from another agency to pursue the original work (e.g., a company that received a Phase I award from the Department of Energy may apply for a Phase II award from the Department of Defense to build on its Phase I work). In addition, a small business may switch between the SBIR and STTR programs for Phase I and Phase II awards (e.g., a small business that wins an SBIR Phase I award may now compete for a Phase II STTR award). The act requires agency heads to verify that any activity to be performed with respect to a project with a Phase I or Phase II SBIR or STTR award has not been funded under the SBIR program or STTR program of another Federal agency to prevent the duplication of funded work.\nIn addition, the act establishes a pilot program that allows the Department of Defense, Department of Education, and National Institutes of Health to award Phase II grants to small businesses that did not first receive a Phase I grant.", "The 2011 reauthorization act includes a number of provisions seeking to increase the programs' effectiveness in technology commercialization. The act requires each SBIR/STTR agency to establish a system to measure the success of small businesses that received Phase I awards in securing Phase II awards. Agencies are also required to establish minimum performance standards for small businesses in advancing from a Phase I award to a Phase II award, and to evaluate each recipient's compliance with the standard. Small firms that fail to meet this standard are barred from competing for additional Phase I SBIR or STTR awards from that agency for a one year. Similarly, the act requires each agency to: establish systems to measure the success of SBIR and STTR awardees in securing Phase III SBIR or STTR awards, establish a minimum performance standard in this regard, evaluate each recipient's compliance with the standard, and bar firms that fail to meet this standard from competing for additional Phase I (and in some cases, Phase II) SBIR or STTR awards for one year. Agencies are required to report their tracking systems and minimum performance standards to the SBA Administrator for approval.\nThe act also authorized agencies to establish commercialization readiness pilot programs. This authority allows each agency to use up to 10% of its SBIR and STTR funds to make awards of up to three times the dollar amounts established for Phase II awards. These awards may be used to support technology development, testing, evaluation, and commercialization assistance for SBIR and STTR Phase II technologies, or to support the progress of R/R&D and commercialization conducted under the SBIR or STTR programs to Phase III. To establish a commercialization readiness pilot program, agencies must first make a written application to the SBA Administrator for approval describing\na compelling reason that additional investment in SBIR or STTR technologies is necessary, including unusually high regulatory, systems integration, or other costs relating to development or manufacturing of identifiable, highly promising small business technologies or a class of such technologies expected to substantially advance the mission of the agency.\nIn making such awards, agency heads are directed to consider whether the technology to be supported by the award is likely to be manufactured in the United States.\nThe act encourages agencies to award SBIR and STTR grants to small businesses that work with federal laboratories or that are involved in cooperative research and development agreements (also known as CRADAs).\nIn addition, the act allows agencies to contract with a vendor to provide SBIR/STTR awardees with technical assistance services. Such services could include access to a network of scientists and engineers engaged in a wide range of technologies or access to technical and business literature available through online databases. Funding of these services is intended to help the small businesses make better technical decisions, solve technical problems which arise during the conduct of their SBIR/STTR projects, minimize technical risks associated with such projects, and develop and commercialize new commercial products and processes resulting from such projects. Alternatively, an agency may authorize SBIR/STTR awardees to purchase such services up to $5,000 per year, in addition to the amount of the recipient's award.\nThe act also establishes a \"Phase 0 Proof of Concept Partnership Pilot Program\" at NIH to accelerate the creation of small businesses and the commercialization of research innovations from universities or other research institutions that participate in the NIH STTR program. Under this pilot, NIH may make awards of up to $1 million per year for up to three years. These funds may be used to support technical validations, for market research, to clarify intellectual property rights position and strategy, or to investigate commercial or business opportunities. These funds may not be used for basic research activities or for the acquisition of research equipment or supplies unrelated to commercialization activities.\nAnother commercialization-focused provision of the act provides a special acquisition preference to SBIR and STTR award recipients. The act directs agencies and prime contractors, to the greatest extent practicable, to issue Phase III awards relating to technology, including sole source awards, to the SBIR and STTR award recipients that developed the technology.", "The act requires each agency that makes total SBIR and STTR awards in excess of $50 million to report annually to the SBA Administrator on efforts to improve U.S. manufacturing activities and to make recommendations for further improvements. The SBA is required to incorporate the agency reports into its mandatory annual report to Congress.", "The act includes a provision to protect the rights of small businesses to data generated in the performance of an SBIR award for a period of not less than four years. In addition, the act directs GAO to report to Congress on the implementation and effectiveness of data rights protection. Specifically, the act directs GAO to assess whether federal agencies comply with data rights protections for SBIR awardees and their technologies; whether the laws and policy directives intended to clarify the scope of data rights are sufficient to protect SBIR awardees; and whether there is an effective grievance tracking process for SBIR awardees who have grievances against a federal agency regarding data rights and a process for resolving those grievances. The act required a report within 18 months of its enactment (approximately June/July 2013). GAO issued a letter in November 2013 stating that it was awaiting SBA's revision of the policy directive as it \"has a bearing on the issue of whether laws and policy directives are sufficient to protect SBIR awardees.\" SBA subsequently published its updated policy directive on February 24, 2014. GAO has not published a report on this matter as of August 2014.", "Congress has expressed continuing concerns about waste, fraud, and abuse in the SBIR and STTR programs. The 2011 reauthorization act includes a number of provisions to identify and eliminate waste, fraud, and abuse. To this end, the act:\nrequires the SBA administrator to amend the SBIR Policy Directive and the STTR Policy Directive to include measures to prevent fraud, waste, and abuse; directs that the amendments to the policy directives include definitions or descriptions of fraud, waste, and abuse; guidelines for the monitoring and oversight of applicants to, and recipients of, awards; and a requirement that each SBIR/STTR agency provide information on the method established by each agency inspector general to report fraud, waste, and abuse on its website and in any SBIR/STTR solicitation; requires SBIR and STTR applicants and award recipients to certify its compliance with the laws relating to the programs and the conduct guidelines established under the policy directives; directs inspectors general in SBIR and STTR agencies to establish fraud detection indicators; review regulations and operating procedures; coordinate information sharing between agencies, to the extent otherwise permitted under federal law; and improve the education and training of and outreach to program administrators, applicants, and recipients; and requires the GAO to publish an initial report within one year from the date of enactment and every four years thereafter.\nFor further discussion of this issue, see \" Concerns About Duplicative Awards and Other Types of Waste, Fraud, and Abuse .\"", "The act requires the Director of the Office of Science and Technology Policy to establish an Interagency SBIR/STTR Policy Committee that includes representatives of the SBA and all agencies with an SBIR or STTR program. The law directs the committee to develop policy recommendations on ways to improve program effectiveness and efficiency, including issues related to development of the SBIR and STTR awards databases; agency flexibility in establishing Phase I and II award sizes; best practices in technology commercialization and mechanisms for addressing company funding gaps after Phase II but prior to commercialization; a framework for a systematic assessment of SBIR and STTR programs, including tracking awards and outcomes; and outreach and technical assistance activities that increase the participation of small businesses underrepresented in the SBIR and STTR programs. Following initial one-year and 18-month reports, the committee is to report to selected committees of Congress every two years.\nThe act also establishes a pilot program that allows agencies to use no more than 3% of SBIR program funds for administrative activities, oversight, and contract processing. Among the authorized uses of these funds are: to support the administration of the SBIR and STTR programs; to support outreach and technical assistance relating to the SBIR and STTR programs, including technical assistance site visits, personnel interviews, and national conferences; to increase outreach activities to increase the participation of women-owned and socially and economically disadvantaged small business concerns; to support the implementation of commercialization and outreach initiatives of P.L. 112-81 ; to increase participation of states that have traditionally received low levels of SBIR awards; to support activities related to congressional oversight, including the prevention of waste, fraud, and abuse; to carry out the laws authorizing participation by majority venture capital-owned small businesses; to pay for contract processing costs relating to the SBIR and STTR programs; and to pay for additional personnel and assistance with application reviews.\nThe act further required the SBA to publish revised SBIR and STTR policy directives incorporating the act's changes in the programs mandated by the act within 180 days of the passage of the legislation. SBA published revised policy directives for comment in the Federal Register on August 6, 2012; the comment period closed on October 5 th ; and final action occurred in December 2013. The policy directives were updated on February 24, 2014. The final rule for venture capital participation was finalized and published in the Federal Register on December 27, 2012.", "As it has since establishing the SBIR and STTR programs, Congress seeks to better understand and address challenges to the programs' effectiveness. The following section provides an overview of selected ongoing issues that Congress may opt to consider.", "Much of the debate over the reauthorization of the SBIR and STTR programs in 2011 revolved around a regulation that required at least 51% ownership by an individual or individuals. Some experts argued that participation by small firms that are majority-owned by venture capital companies, hedge funds, and private equity firms should be permitted. Proponents of this change maintained that, particularly in the biotechnology sector, the most innovative companies were not able to use the SBIR program because they did not meet these ownership criteria. Opponents of altering the eligibility requirements argued that the program is designed to provide financial assistance where venture capital is not available. They asserted that the program's objective is to bring new concepts to the point where private sector investment is feasible. While the new law permits limited participation by majority venture capital owned companies, it remains to be seen how this will affect the outcomes of the two programs.", "A continuing issue for the SBIR and STTR programs is agency compliance with expending the statutory minimum percentage of extramural research funding annually. In a September 2013 report, GAO found that 8 of the 11 agencies participating in the SBIR program and 4 of the 5 agencies participating in the STTR program failed to consistently comply with spending requirements for FY2006-FY2011. In June 2014, GAO reported that three agencies failed to comply with the SBIR requirement and three failed to comply with the STTR requirement in FY2012. GAO reported that program managers at two of the non-compliant agencies asserted that their agencies would be in compliance if the agencies spent the total amount reserved or budgeted for their programs, regardless of what year the funding was spent. GAO asserted that the law requires agencies to \"expend\" a certain amount of funding each year and attributes the agencies' misinterpretation, in part, to the SBA's SBIR and STTR policy directives which \"inaccurately state that the authorizing legislation requires agencies to 'reserve' the minimum amount each year.\"\nAmong the factors affecting agencies' failure to comply with meeting the mandatory minimum expenditure levels are challenges in calculating the amount to be set aside; the enactment of appropriations after the start of the fiscal year; and differing agency interpretations of the statutory requirement for \"expended.\"", "The SBIR and STTR set-asides are based on an agency's extramural budget for research or research and development. The calculation of the amount of this budget can be complex for some agencies. For example, several agencies support extramural R/R&D funding through multiple subunits. In addition, agency extramural R/R&D funding can come from more than one appropriations account, and such accounts can include activities and programs that are not extramural R/R&D. Accordingly, each agency must determine its extramural R/R&D budgets using a methodology that identifies extramural R/R&D funding as well as what is to be excluded from this amount.\nGiven the complexity of this challenge, Congress required each agency to report its methodology to SBA annually within four months of enactment of its appropriation. The SBIR Program Policy Directive requires that this report also include an itemization and explanation of excluded items. However, GAO also found that at least six agencies did not itemize and/or explain exclusions from their calculations. In addition, according to GAO, agencies generally have submitted these reports to SBA too late for the SBA to provide timely feedback to the agencies after reviewing their methodologies and exclusions. GAO recommended that agencies submit their methodology reports in accordance with the four months provided after enactment of appropriations as specified in law.\nAnother factor affecting the calculation of SBIR funding is that, in practice, agencies generally calculate their SBIR set-asides based on their extramural R/R&D budgets and not on their extramural R/R&D obligations as required by statute . An agency's extramural R/R&D budget reflects its spending plans for a fiscal year, whereas an agency's extramural R/R&D obligations reflect the amount of funds an agency obligates to spending in a fiscal year; a final obligation figure for extramural R/R&D may not be calculable until the end (or very close to the end) of a fiscal year. Thus, an agency's extramural R/R&D obligations (and the minimum SBIR set-aside amount) may be higher or lower than the level the agency anticipated in its extramural R/R&D budget.", "Enactment of appropriations after the start of a fiscal year may also affect the ability of agencies to expend SBIR/STTR funds in that fiscal year. For example, if an agency plans its expenditures around a level specified in a continuing resolution but then receives a higher level of funding in its final appropriations act(s), then expenditure of the additional amount set aside for SBIR/STTR in that fiscal year may be difficult.\nA related factor that may delay calculation of the amount to be set aside for SBIR/STTR is the time required for an agency to determine the amount of its extramural research funding. Appropriations acts often provide funding to accounts with multiple purposes, including extramural R&D, intramural R&D, and non-R&D activities. In such cases, agencies must make allocation decisions for these funds (subject to limitations and guidance provided in the appropriations act(s) and related report language) before the extramural research budget can be calculated.\nSimilarly, agency officials have asserted that agencies had already planned their programs and made awards in FY2012 prior to enactment of the SBIR/STTR Reauthorization Act of 2011 which contained provisions increasing the set aside percentage and which was enacted a quarter into FY2012.", "Some program managers at agencies that fell short of the statutorily required expenditures in FY2012 told GAO that they believed their agency was in compliance if their agency spent the total amount reserved or budgeted for the program regardless of what year the funding is spent. GAO, however, responded that the statute requires each agency to \"expend\" the funds in the year it is set aside. GAO recommended that SBA revise its SBIR and STTR policy directives to accurately reflect the statutory language regarding program spending requirements.\nCongress might consider statutory changes that alter or clarify how agencies are to determine the amount to be set aside each year for SBIR and STTR, and whether those amounts must be spent in the same fiscal year; obligated, in whole or in part, for expenditure over multiple fiscal years; or expended without restriction to any given period.", "A statutory goal of the SBIR and STTR programs is to foster the development and commercialization of new technologies. Success in achieving this goal can take different forms, for example an innovation that addresses an agency need (e.g., an improved material for a NASA spacecraft), a commercial opportunity, or both. Such innovations can promote economic growth, job creation, and national competitiveness, or address other societal needs and challenges such as national defense, public health, and environmental protection. The 2011 reauthorization act includes a number of provisions focused on improving commercialization. For example, the act authorizes agencies to provide assistance to SBIR/STTR awardees to overcome technical barriers and to allow agencies to establish commercialization readiness pilot programs.\nSome analysts have cautioned against placing too much emphasis on commercialization for evaluating the success of the SBIR program. These analysts argue that commercialization is only one of the four overarching SBIR/STTR program goals, and that too strong of a focus on one goal might diminish the emphasis on the others. GAO has noted that using commercialization outcomes as the primary metric of SBIR/STTR success may be insufficient because SBIR and STTR awardees make be making contributions to other agency goals—such as meeting research needs or expanding innovation. Given SBIR/STTR agencies' wide range of missions—from general missions, such as advancing fields of science, to more specific missions, such as providing for the national defense—some analysts have recommended that Congress continue to provide flexibility to agencies in the operation of their programs.", "Data collection has been and remains an issue for the SBIR and STTR programs according to several reports. An August 2009 GAO study reiterated earlier GAO findings of deficiencies in the SBA Tech-Net system designed to collect information from agency SBIR programs. This report noted that \"Although SBA did not meet its statutorily mandated deadline of June 2001, the database has been operational since October 2008, and contains limited new information but may also contain inaccurate historical data.\" A November 2010 report issued by the SBA's Office of the Inspector General noted that \"limited progress\" had been made on the Tech-Net system.\nParticipating agencies were still experiencing difficulty in searching the database for duplicative awards and other indicators of fraud because information in the Tech-Net database was incomplete, and the search capabilities of the system were limited…. Additionally, SBA had not developed the government-use component of Tech-Net to capture information on the commercialization of SBIR research and development projects.\nGAO also addressed agencies' shortcomings with respect to assessing the commercialization success of awardees in reports issued in November 2010 and August 2011. The earlier report found that \"DOD lacks complete commercialization data to determine the effectiveness of the program in transitioning space-related technologies into acquisition programs or the commercial sector\" and that \"there are inconsistencies in recording and defining commercialization.\" The later study indicated that \"Comparable data are not available across participating agencies to evaluate progress in increasing commercialization of SBIR technologies.\" The report goes on to state that, \"with the exception of DOD, agencies that GAO reviewed did not generally take steps to verify commercialization data they collected from award recipients, so the accuracy of the data is largely unknown.\"\nIn a December 2013 report, GAO stated that it was \"unable to assess the extent of technology transition associated with the military department SBIR programs because comprehensive and reliable technology transition data [for SBIR projects] are not collected.\" Among the challenges GAO identified in this regard were the lack of a common definition for technology transition across SBIR programs resulting in potential inconsistencies in reporting and the difficulty in tracking transitions due to the long time periods over which they can take place. GAO stated that DOD has not communicated a timeline for when it will be able to comply with statutory reporting requirements. To address these shortcomings, GAO recommended that DOD establish a common definition for technology transition to be used by all DOD SBIR programs; develop a plan to meet new technology transition reporting requirements that will improve the completeness, quality, and reliability of SBIR transition data; and report to Congress on its plan for meeting the reporting requirements set out in P.L. 112-81 .\nIn testimony before the House Small Business Committee in July 2014, GAO once again noted the continuing problem. While acknowledging that DOD agencies have collected selected transition success stories on an ad hoc basis from SBIR program officials, acquisition program officials, prime contractors, and small businesses, GAO found that \"the extent of transition is unknown because comprehensive and reliable transition data are not collected.\" Further, GAO found that the two data systems used by DOD to identify transition successes program-wide \"have significant gaps in coverage and data reliability concerns that limit their transition tracking capabilities. In addition, the systems are not designed to capture detailed information on acquisition programs, fielded systems, or on projects that did not transition.\"", "Some critics of the SBIR/STTR programs express particular concern that some firms had become adept at competing for SBIR awards to support their research activities, but had little record of accomplishment in the commercialization of their work. These critics, who sometimes refer to such small businesses as \"SBIR shops,\" assert that these firms may have little interest in commercialization. For example, Lux Research, Inc., an emerging technologies consulting firm, asserts that such firms \"go from one SBIR grant to another for years, sometimes decades, and their teams have professional grant writers who are paid to do nothing else but submit successful grant applications into multiple agencies.\"\nOthers analysts assert that that while the issue bears watching, the evidence shows that \"more of the multiple award winners are also successful in commercialization, receiving additional investment dollars from other sources, and/or successful in having their technologies infused into federal agencies.\"\nCongress responded to such concerns in the 2011 reauthorization act by requiring agencies to track companies success in advancing their work from Phase I to Phase II or from Phase I to Phase III, establishing minimum performance standards in this regard, and denying firms the right to participate in Phase I and Phase II of an agency's SBIR and STTR programs for one year if they fail to meet these standards.", "Identification and elimination of waste, fraud, and abuse in the SBIR/STTR programs have been abiding concerns of Congress. Congress has held multiple hearings, enacted legislation intended to address these concerns, and directed GAO to monitor and report on agency progress in implementing the law and combatting waste, fraud, and abuse. (For example, see \" Provisions to Reduce Waste, Fraud, and Abuse \" for a discussion of the waste, fraud, and abuse provisions of the 2011 reauthorization act.)\nWhile waste, fraud, and abuse can occur in a variety of ways, duplication of research proposals has been a particular concern for many years. In 1995, GAO reported that contractors had received duplicate funding for similar SBIR research proposals and attributed such duplication to false contractor certifications, lack of a consistent definition for \"similar'' research,\" and lack of interagency sharing of data on SBIR awards.\nAt a 2009 Senate Committee on Commerce, Science, and Transportation hearing, a technology company executive testified that his former employer sought to defraud agency SBIR programs in a number of ways, including duplication in Phase I and Phase II proposals prior to funding; duplication in Phase I and Phase II contracts after funding within performance reports; invoicing the government for the same equipment and materials under different SBIR grants; subcontracting SBIR work out to another company without the government's knowledge; and cross-charging labor and materials used to complete commercial work to government-funded SBIR contracts. The witness further asserted, \"To certain types of individuals, the ease that research fraud can be conducted with SBIR funds becomes an addictive alternative to the hard work of commercializing actual research.\"\nAt the same hearing, the NASA acting inspector general testified that the agency had investigated or was currently investigating cases of alleged fraud for submitting duplicate proposals to different federal agencies and receiving multiple awards for essentially the same work under the SBIR program; submitting different proposals to multiple federal agencies but providing duplicate deliverables based on the same research; failing to comply with subcontracting limitations; using principal investigators who were not primarily employed by the small business awardee; and failing to perform a substantial portion of the research work contracted by NASA. In addition, he testified that some firms had misrepresented their eligibility, including false assertions of American ownership and meeting the small business size standard. While testifying that NASA had taken corrective measures to address vulnerabilities to waste, fraud, and abuse, he noted that \"in the cases that we are conducting today, we still see the same violations that we saw as early as 1992.\"\nAmong its provisions, the 2011 reauthorization act directs the SBA to amend its SBIR and STTR policy directives to include definitions or descriptions of fraud, waste, and abuse. The amended directives now identify a variety of actions that constitute waste, fraud, or abuse, including:\nmisrepresentations or material, factual omissions to obtain, or otherwise receive funding under, an SBIR award; misrepresentations of the use of funds expended, work done, results achieved, or compliance with program requirements under an SBIR award; misuse or conversion of SBIR award funds, including any use of award funds while not in full compliance with SBIR program requirements, or failure to pay taxes due on misused or converted SBIR award funds; fabrication, falsification, or plagiarism in applying for, carrying out, or reporting results from an SBIR award; failure to comply with applicable federal costs principles governing an award; extravagant, careless, or needless spending; self-dealing, such as making a sub-award to an entity in which the principal investigator has a financial interest; acceptance by agency personnel of bribes or gifts in exchange for grant or contract awards or other conflicts of interest that prevents the government from getting the best value; and lack of monitoring, or follow-up if questions arise, by agency personnel to ensure that awardee meets all required eligibility requirements, provides all required certifications, performs in accordance with the terms and conditions of the award, and performs all work proposed in the application.\nThe 2011 authorization act required GAO to publish an initial report within one year from the date of enactment of the act and every four years thereafter on agency efforts to combat waste, fraud, and abuse and comply with the provisions of the act in this regard. In November 2012, GAO published Small Business Research Programs: Agencies Are Implementing New Fraud, Waste, and Abuse Requirements . The GAO report found that the SBA had revised its SBIR and STTR policy directives in August 2012 to include new requirements to help agencies identify and prevent waste, fraud, and abuse, including 10 minimum requirements that all SBIR/STTR agencies must meet. GAO also found that while SBIR and STTR programs varied in their plans to implement the new requirements, program managers did not anticipate significant challenges in this regard. GAO also noted that each agency already had in place tools to address or partially address the new requirements.", "The Small Business Act has required the SBA to report annually to Congress on the SBIR and STTR programs since the inception of these programs. SBA compliance with this requirement has been an ongoing issue. Most recently, the SBA did not produce an annual report to Congress for FY2009 or FY2010, instead producing a single report covering the three-year period from FY2009 to FY2011. In addition, as of July 25, 2014, the SBA had not delivered an FY2012 or an FY2013 annual report to Congress. Failure to produce these reports on a timely basis may impede Congress's exercise of its oversight responsibilities. Among the issues that may affect the timeliness of SBA reporting are SBIR/STTR agencies' delays in providing data to the SBA and adequate staffing levels at SBA devoted to producing the report.", "As the 2011 reauthorization law is implemented, Congress may decide to explore how the new provisions affect program operation and outcomes including efforts to identify and eliminate duplication of awards and to protect the rights of small businesses to data generated in the performance of an SBIR award. In addition, some experts question whether the SBIR and STTR programs are meeting their different mandated objectives. Other critics maintain that the government has no role in directly supporting industrial research and development. These and other issues may be debated as the SBIR and STTR programs continue to function through September 30, 2017." ], "depth": [ 0, 1, 1, 1, 2, 2, 3, 3, 3, 3, 2, 2, 1, 2, 2, 3, 3, 3, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 3, 2, 3, 3, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h3_full h2_full", "", "h0_title h1_title h3_title", "h0_full", "h1_title", "h1_full", "h1_full", "", "", "", "h3_full", "h0_title h1_title h3_title", "h0_full", "h1_title", "", "", "h1_full", "", "", "h3_full", "h2_full", "", "", "", "", "h2_full", "", "", "", "", "h1_title", "", "h1_full", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "Why was the SBIR formed?", "What does the Small Business Innovation Development Act do?", "What is the STTR program?", "What requirement is related to the funding of agency-run STTR programs?", "How are SBIR and STTR programs similar?", "What is Phase I of the SBIR and STTR programs?", "What is Phase II of the SBIR and STTR programs?", "What is Phase III of the SBIR and STTR programs?", "How were the SBIR and STTR programs most recently reauthorized?", "What did the act that reauthorized the SBIR and STTR programs do?", "How did the SBIR and STTR programs for federal agencies do?", "What accounted for the majority of SBIR funding in FY2011?", "What happened to the majority of funding in FY2011?", "What accounted for the majority of STTR funding?", "How were SBIR and STTR grants and funding similar?" ], "summary": [ "The Small Business Innovation Research (SBIR) program was established in 1982 by the Small Business Innovation Development Act (P.L. 97-219) to increase the participation of small innovative companies in federally funded R&D.", "The act requires federal agencies with extramural R&D budgets of $100 million or more to set aside a portion of these funds to finance an agency-run SBIR program.", "A complementary program, the Small Business Technology Transfer (STTR) program, was created by the Small Business Research and Development Enhancement Act of 1992 (P.L. 102-564) to facilitate the commercialization of university and federal R&D by small companies.", "Agencies with extramural R&D budgets of $1 billion or more are required to set aside a portion of these funds to finance an agency-run STTR program. As of 2014, five federal agencies operate STTR programs.", "Both the SBIR and STTR programs have three phases.", "Phase I funds feasibility-related research and development (R&D) related to agency requirements.", "Phase II supports further R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application.", "Phase III is focused on commercialization of the results of Phase I and Phase II grants, however the SBIR and STTR programs do not provide funding in Phase III.", "Most recently, the programs were reauthorized through September 30, 2017 under the SBIR/STTR Reauthorization Act of 2011 which was enacted as Division E of the National Defense Authorization Act for Fiscal Year 2012 (P.L. 112-81).", "Among its provisions, the act incrementally increases the set-aside for the SBIR effort to 3.2% by FY2017 and beyond; incrementally expands the set-aside for the STTR activity to 0.45% in FY2016 and beyond; increases the amount of Phase I and Phase II awards; allows recipients of a Phase I award from one federal agency to apply for a Phase II award from another agency to pursue the original work; allows the National Institutes of Health, the Department of Energy, and the National Science Foundation to award up to 25% of SBIR funds to small businesses that are majority-owned by venture capital companies, hedge funds, or private equity firms, and allows other agencies to award up to 15% of SBIR funds to such firms; creates commercialization pilot programs; and expands oversight activities, among other things.", "Through FY2011, federal agencies had made more than 133,000 awards totaling $33.7 billion under the SBIR and STTR programs. In FY2011, agencies awarded $2.224 billion in SBIR funding.", "In FY2011, agencies awarded $2.224 billion in SBIR funding. The Department of Defense (DOD) and Department of Health and Human Services (HHS) accounted for more than three-fourths of SBIR funding in FY2011.", "While more than two-thirds of SBIR grants made in FY2011 were Phase I awards, more than three-fourths of SBIR funding went to Phase II awards.", "DOD and HHS accounted for nearly four-fifths of STTR funding.", "Like the SBIR program, most STTR grants (76%) were for Phase I awards, while most funding (76%) went to Phase II awards." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, 1, 1, -1, 0, -1, -1, 1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 3, 3, 3, 3, 3 ] }
GAO_GAO-15-563	{ "title": [ "Background", "Treasury Eliminated Paper Savings Bonds to Reduce Costs but Created Challenges for Some Savings Bond Investors", "Treasury Eliminated Paper Savings Bonds to Reduce Program Costs and Provide Other Benefits", "Eliminating Paper Savings Bonds Has Created Challenges for Some Bond Buyers", "Decline in Purchases after the Elimination of Paper Savings Bonds Is Consistent with Long-Term Trends, and Treasury Is Addressing Access and Usability Challenges", "Tax Time Program Promotes Savings, but Treasury Has Not Considered Costs Along with Benefits in Its Annual Decisions to Extend the Program", "Tax Time Savings Bond Program Promotes Savings through the Purchase of Paper Savings Bonds, Including by Lower-Income Households", "Treasury Plans to Extend the Tax Time Program in the Short-Term, but Has Not Considered Program Costs Along with the Benefits", "Savings by Lower- Income Households Are Limited but Federal Agencies and Other Entities Have Created Savings Programs", "Lower-income Households Have Limited Financial Assets and May Have Difficulty Saving", "Federal Agencies Generally Focus on Promoting Financial Literacy, but Some Are Involved in Savings Programs", "Money Smart and Model Safe Account Programs", "Youth Savings Pilot Program", "Assets for Independence Program", "Family Self Sufficiency Program", "State and Local Government Agencies and Nonprofits Have Also Developed an Array of Programs for Lower- Income Households to Promote Savings", "Prize-Linked Savings", "Short-Term Emergency Savings", "Conclusion", "Recommendation for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of the Treasury", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Treasury has issued savings bonds since 1935. Savings bonds offer investors the ability to purchase securities with lower minimum denominations than those for marketable Treasury securities. When individuals purchase savings bonds, they loan the amount they paid for the bonds to the U.S. government. Over a period of time (up to 30 years), the savings bonds earn interest and, after 12 months of their original purchase, can be cashed in for their purchase price, plus the interest they have earned, subject to a 3-month interest penalty during the first 5 years. Over the years, Treasury has offered a number of savings bonds with different terms and interest rates. Currently, Treasury offers Series EE bonds, which have a fixed interest rate, and Series I bonds, which pay an interest rate that is tied to inflation. Savings bonds do not represent a major source of funds for the Treasury.\nThe Bureau of the Fiscal Service, one of Treasury’s 10 bureaus, helps to fund the federal government by selling Treasury securities, including savings bonds. Treasury Securities Services within the bureau operates Treasury’s Retail Securities program, which allows retail investors to purchase savings bonds and marketable securities in electronic form directly from Treasury. The office’s flagship system is TreasuryDirect, an online proprietary system created in 2002 that allows customers to buy and hold savings bonds and marketable securities, and to manage their accounts without assistance from a customer service representative. TreasuryDirect customers can purchase securities at any time, direct electronic payments to bank accounts, and convert paper savings bonds to electronic savings bonds in the same series and with the same issue date. TreasuryDirect customers also can set up payroll deductions and automatically recurring purchases. As of March 2015, TreasuryDirect had around 580,700 accounts that were funded and held nearly $27 billion.", "The elimination of paper savings bonds reduced program costs but made purchasing bonds more difficult for some savers. However, our analysis of Treasury’s bond data showed that the drop in bond purchases after the elimination of paper savings bonds was not statistically significant. As shown in figure 1, annual purchases of U.S. savings bonds declined significantly from 2001 through 2013, falling from around $14.6 billion to less than $1 billion, or by more than 90 percent.savings bond purchases declined every year, except from 2002 to 2003. Likewise, the role of savings bonds in helping to fund the federal debt also declined over the period, accounting for about 3.2 percent of the federal debt in 2001 and about 1.0 percent in 2013.", "Following the long-term decline in savings bond purchases, Treasury stopped selling paper savings bonds through over-the-counter channels, including through financial institutions and mail-in orders, on January 1, 2012, as part of its agency-wide electronic initiative to reduce program costs and improve customer service. According to Treasury officials, the agency phased out the issuance of paper savings bonds through employer-sponsored payroll savings plans in 2010, and the ending of savings bond sales through over-the-counter channels was the last step of discontinuing paper savings bonds. Treasury estimated that the elimination of over-the-counter sales of paper savings bonds would save nearly $70 million in program costs from 2012 through 2016. Treasury calculated these savings by estimating how much it would save in costs associated with issuing new paper bonds and servicing and redeeming existing paper bonds, which include fees paid to banks, postage, and printing. For example, Treasury estimated that the change would eliminate around $14.5 million in fees paid to financial institutions for issuing and redeeming savings bonds and around $12.7 million in postage expenses for mailing paper bonds to customers over the 5-year period. Additionally, Treasury estimated that it would save in personnel costs because fewer employees would be needed to process customer service transactions. According to Treasury’s estimates, the change would save around $4.9 million in compensation and benefit costs for Treasury staff and $28.5 million in Federal Reserve Bank personnel costs over the 5-year period. Finally, Treasury estimated $9 million in savings from reductions in paper stock, overhead, forms, and other costs.\nIn addition to the cost savings, Treasury expected the change to provide customer benefits, such as increased security and convenience. Although paper bonds allowed buyers to purchase savings bonds at financial institutions, Treasury’s online system for purchasing savings bonds and other Treasury securities—TreasuryDirect—allows customers to buy, manage, and redeem savings bonds electronically at any time. Treasury officials told us that electronic bonds are safer and more secure, because paper bonds could be lost, stolen, altered, or fraudulently redeemed. Treasury officials also added that electronic bonds provide the agency with both operational advantages and enhanced customer experience, since Treasury can automatically track bond purchases, redemptions, and values for the customer.", "When Treasury eliminated paper savings bonds, it created access challenges for bond buyers who do not have a bank account and Internet access. Customers now must use TreasuryDirect to purchase electronic savings bonds, although some can purchase paper savings bonds through the Tax Time program, which we discuss later in this report. To open a TreasuryDirect account, a customer generally must have both Internet access and a bank account. While TreasuryDirect can be accessed through cellular phones and other mobile devices, the website is not optimized for such use. According to representatives from a nonprofit organization that focuses on savings for lower-income households, mobile access is the primary means of Internet access for some lower-income consumers. According to 2011 Census Bureau data, around 50 percent of households with less than $25,000 in income did not have computer-based Internet access from some location.according to the 2013 Federal Deposit Insurance Corporation’s (FDIC) National Survey of Unbanked and Underbanked Households, 7.7 percent of U.S. households, or nearly 9.6 million households, were unbanked— Further, that is, they did not have a bank account at an insured institution.result, such households or individuals may not be able to access TreasuryDirect or complete a transaction if they wanted to buy savings bonds.\nTreasury officials recognized the access challenges related to TreasuryDirect that some potential users might face, but told us such challenges could be mitigated. Treasury officials said that they worked with organizations that provided Internet access to the public, such as libraries and community centers, and determined that such organizations provide the level of Internet access required for potential TreasuryDirect users. The officials also told us that in lieu of a bank account, individuals could use reloadable debit cards to purchase and redeem savings bonds through TreasuryDirect. While the use of such cards provides an avenue for those without a traditional bank account to purchase savings bonds, Treasury estimated that few savings bonds, approximately 1,426, had been purchased using prepaid debit cards from mid-April 2005 through mid-November 2014. Further, Treasury officials told us that unbanked individuals could use the Tax Time program to purchase paper savings bonds. Our analysis of IRS data on the Tax Time program indicates that around 91 percent of tax filers who used part of their tax refund to purchase paper savings bonds had part of their refund directly deposited into a bank account. Similarly, based on data from SCF surveys from 2001 through 2010, over 90 percent of households who owned savings bonds have bank accounts. Additionally, according to FDIC’s survey, more than 90 percent of all households the agency surveyed had a bank account.\nAccording to Treasury officials and representatives from several nonprofit organizations that we interviewed, TreasuryDirect also poses some usability challenges. For example, Treasury officials and nonprofit representatives told us that giving savings bonds as a gift through TreasuryDirect can be a cumbersome process. They explained that TreasuryDirect requires the individual buying the savings bond to have the Social Security number and TreasuryDirect account number of the recipient of the gift bond, information the individual may not know. The gifting process also requires the recipients or their parents or guardians to set up a TreasuryDirect account, if they do not have one. Treasury officials told us that issues associated with the process of buying bonds as gifts were the source of the most common complaints from customers about savings bond transactions through TreasuryDirect. In addition, representatives from nonprofit organizations and an academic we interviewed told us that TreasuryDirect generally was not a user-friendly system, even for individuals who were comfortable using the Internet for their financial transactions. They told us that navigating the system was not easy and could pose challenges to potential customers who were not familiar with online financial transactions. Similarly, Treasury officials told us that customers anecdotally had expressed concerns about difficult navigation, lengthy application pages, organization of information, security features, complicated linked accounts processes, and difficulty locating tax reporting information. When Treasury eliminated paper savings bonds in January 2012, there were nearly 379,000 total funded TreasuryDirect accounts.580,000 total funded TreasuryDirect accounts, but the extent to which the increase resulted from savings bond investors has not been determined.", "Our analyses of Treasury savings bond data indicated that the decline in savings bond purchases after Treasury discontinued the sale of paper savings bonds in January 2012 was consistent with the overall long-term decline in savings bond purchases. In addition, the decline since January 2012 generally was not statistically significant based on models we estimated. While there was a large decline in purchases in 2012 and 2013 when sales of paper savings bonds were discontinued, there are a number of factors that could account for this decline. For example, savings bond purchases declined in 9 out of 10 years from 2002 to 2011, and some declines were quite large, hence recent declines in purchases may be reflective of long-term trends. In addition, we found that savings bond purchases have been sensitive to interest rate changes, with savers typically purchasing more when interest rates are higher and purchasing less when they are lower. The low interest rates in recent years may account for some of the decline in savings bond purchases.\nAlthough lower-income households that do not have bank accounts or Internet access could face challenges accessing or using TreasuryDirect, this challenge may only affect a small percentage of such households. Our analyses indicate that a small percentage of such households buy savings bonds in general, even when they were available in paper form. According to data from the 2013 SCF survey, 4.6 percent of lower-income households held savings bonds in 2013, and this percentage had declined from 7.7 percent in 2001.\nIn a July 2014 Federal Register release, and in support of its strategy to reach new customers, develop new product delivery streams, and increase the number of available product offerings, Treasury released its plans to introduce the Treasury Retail Investment Manager (TRIM), which According to Treasury officials, TRIM will be will replace TreasuryDirect.more flexible and responsive to changing business and digital investing needs. Treasury officials told us that they plan to offer mobile phone access through TRIM, which could improve access for households that do not have computer-based Internet access at home. Treasury officials also told us that TRIM would attempt to address a number of TreasuryDirect’s usability challenges. For example, Treasury officials told us that the TRIM system should be more user friendly for customers, because it will have an online interface that is similar to the online interfaces that banks and stock brokers offer and with which most customers are likely familiar. The system also is expected to streamline various steps for customers navigating the system—for example when they open or sign into accounts—to improve usability and potentially save Treasury money by reducing calls to customer service.\nAccording to Treasury officials, they also are exploring ways for TRIM to simplify the process for buying savings bonds as gifts and to allow for multiple funding options. One option under consideration is for a customer to buy a savings bond gift certificate that can be given to another individual, who can go online to open a TRIM account and use the certificate to buy the savings bond directly. Treasury also is exploring multiple funding options for customer accounts to provide options to savers who do not have bank accounts.\nAs of May 2015, TRIM was under development, and Treasury officials told us that its release date had not been set. According to Treasury officials, TRIM is being developed in four phases—initiation, planning, execution, and closing. Treasury officials told us that TRIM was in the planning phase and that the system’s design was being developed. Specifically, Treasury officials are working on defining technical requirements for the system. Before TRIM can be implemented, Treasury will need to complete the execution and closing phases, which include technical design, system coding, various testing, consumer education, and system documentation. Treasury officials told us that they did not have a specific release date for TRIM, which will depend on the time needed to complete the next steps in the project plan. According to a Treasury estimate issued in 2013, TRIM was expected to cost around $18 million to develop and implement. Treasury officials told us that, as of May 2015, they did not have any changes to this estimate and that the costs they had incurred thus far had been consistent with the estimate. They also told us that Treasury had tentative plans to develop an implementation plan for TRIM by April 2016.", "Since 2010, U.S. tax filers have used the Tax Time program to save by using their tax refund to purchase paper savings bonds. For example, about 55,000 tax filers with adjusted gross incomes of $25,000 or less participated in the program for tax years 2010 through 2013 and bought about $13.7 million in savings bonds. Treasury has been extending the program annually in consideration of some of the program’s benefits, but not in consideration of the program’s costs.", "Since 2010, U.S. tax filers have been able to use their tax refund to purchase paper savings bonds through the Tax Time Savings Bond program. In 2009, President Obama proposed a package of initiatives to spur increased savings that included a provision for purchasing savings bonds with tax returns. Under the Tax Time program, tax filers receiving a tax refund may use an IRS form to allocate their refund among several options, such as purchasing paper savings bonds or depositing their refund directly into their bank account. As shown in table 1, in tax years 2010 through 2013 about 142,000 total tax filers used the Tax Time program to buy a total of about $72.5 million in paper savings bonds.(According to data provided by Treasury, of the 142,000 total tax filers that used the Tax Time program, about 20 percent were repeat participants in the program). These filers purchased, on average, approximately $500 in paper savings bonds each year. Table 1 also shows that about 55,000 tax filers with an adjusted gross income of $25,000 or less collectively bought about $13.7 million in paper savings bonds. These filers purchased, on average, approximately $250 in paper savings bonds each year. At the same time, the number of tax filers participating in the Tax Time program and the amount of savings bonds purchased under the program were relatively small. The total number of tax filers receiving a refund for tax years 2010 through 2013 was more than 100 million in each year, and Tax Time participants made up less than 1 percent of this group. Similarly, the amount of savings bonds purchased through the program from 2010 through 2013 accounted for about 1 percent of the total amount of all savings bonds purchased during those years.\nAbout 30 percent of Tax Time program participants also were tax filers who received the Earned Income Tax Credit. Enacted by Congress in 1975, the Earned Income Tax Credit is one of the largest antipoverty programs. Generally, income and family size determine a taxpayer’s eligibility, and the credit is a refundable tax credit for low-to-moderate income working individuals and couples—particularly those with children. As shown in table 2, about 30 percent of tax filers participating in the program from 2010 through 2013 received the Earned Income Tax Credit.\nAccording to representatives from three nonprofit organizations and two academics we interviewed, tax season provides an opportunity for tax filers receiving a refund to set aside an amount of money specifically for savings. They told us that tax season was often the one time during the year that tax filers—particularly those with low incomes—had a relatively large lump sum of money available to save. However, in some instances, tax filers receiving a refund may already know what they plan to use their refunds for, and that may not include any savings.", "Treasury has been extending the Tax Time program on an annual basis and plans to continue extending it in the short term. According to Treasury officials, the program was scheduled to expire after the 2015 tax season, in which case tax filers would no longer have had the option to use the IRS form to purchase paper savings bonds. However, Treasury officials told us that the agency decided in December 2014 to extend the program through the 2016 tax season. The decision was made by the Fiscal Assistant Secretary of the Treasury based on an internal recommendation from the Commissioner of the Bureau of the Fiscal Service, which oversees the savings bond program. Treasury officials said that they intended to continue recommending the continuation of paper tax-time bonds until a suitable electronic alternative is implemented. However, Treasury officials did not provide us with any additional information on how an electronic alternative would replace the option of purchasing paper savings bonds. For participants who do not have Internet access or want to buy bonds electronically, it is not clear what a suitable electronic alternative would be.\nAlthough Treasury has been extending the Tax Time program on an annual basis, it has not assessed the program’s costs along with its benefits. In deciding to extend the program in the last 2 years, Treasury officials told us that they considered participation levels and the amount of savings bonds purchased through the program. Such data indicate some of the program’s benefits, namely its ability to promote savings by lower- income and other households. While the amount of bonds purchased and program participation levels can be quantified, other benefits of the program, such as providing a savings opportunity for lower-income households that may not be able to access TreasuryDirect to purchase savings bonds online, are more difficult to quantify. Although Treasury officials considered some of the Tax Time program’s benefits in deciding to extend it, they generally did not consider the program’s costs in their decision-making process. According to Treasury and IRS officials, Treasury has not conducted an analysis on the current costs of the program or determined how much Treasury would save if the program were allowed to expire after the 2016 tax season. IRS officials told us that IRS’s current costs to administer the program were minimal, because IRS largely processes the forms electronically. Treasury officials told us that its current cost of printing and mailing a paper savings bond was approximately 17 cents, but this estimate did not include the share of the overhead, system, and other costs attributable to paper savings bonds. Moreover, the 17 cent estimate also did not include any cost that IRS incurred for its role in implementing the program.\nIn prior work on agency stewardship of public funds, we reported that properly estimating program costs is necessary for several reasons and that comparing these costs to the program’s benefits to evaluate alternatives related to program decisions is a best practice. Producing cost estimates is important for evaluating resources and making decisions about programs at key decision points. Credible cost estimates also help support funding decisions for an agency’s programs. Comparing these costs to the benefits in order to consider all alternatives for a program ensures linkage between the alternatives.\nIn deciding to extend the Tax Time program, Treasury has considered some of the program’s benefits but generally not the program’s costs, both of which are needed to evaluate program performance and alternatives. As discussed, Treasury has previously considered levels of program participation and amounts of savings bonds purchased by participants in its decisions, and most recently has extended the program until a suitable electronic alternative is available. Consideration of not only the Tax Time program’s benefits but also the program’s cost would provide Treasury with important information in evaluating not only the resource requirements when deciding whether to allow the program to expire but also the program’s performance in relation to its benefits and costs. For example, if the program’s operating costs are minimal, then the program’s benefits may outweigh its costs, such as providing opportunities for lower-income households to save. Conversely, if program costs are significant, those costs might outweigh the program’s benefits in light of the number of tax filers using the program and the availability of an electronic alternative. However, by not having full, reliable, estimates of the cost of the Tax Time program to compare to the benefits, Treasury’s ability to make a fully informed decision is limited.", "GAO found that lower-income households save relatively small amounts and face a number of savings challenges that result, in part, from limited access to financial institutions and products. According to several academics and nonprofits we interviewed, savings and other asset- building programs are fundamental building blocks for helping lower income-households achieve economic mobility and security. Savings provide a buffer against unexpected events and a means to move up the economic ladder through investments, such as by buying a home, paying for college, starting a business, or saving for retirement. In addition to the Tax Time program, discussed above, federal, state, and local agencies as well as nonprofits have developed a number of programs aimed at assisting lower-income households to save and build assets. These programs include providing financial literacy and education services, and range from promoting short-term financial goals, such as emergency savings, to long-term financial goals, such as saving for retirement.", "According to 2013 SCF data, lower-income households have limited savings in bank accounts and other financial assets. the lowest income quintile (or bottom fifth) had a median income of around $14,200 in 2013, and households in the next income quintile had a median income of around $28,400. As shown in table 3, 82 percent and 93 percent of the U.S. households in the bottom two income quintiles had financial assets, but the median value of these financial assets were $550 and $3,064, respectively. In other words, half of the households in the lowest income quintile held $550 or less in financial assets. In comparison, the median value for financial assets for all surveyed households in 2013 was $17,580. Bank accounts are the mostly widely held financial asset among lower-income households, according to 2013 SCF data. However, separate from bank accounts, a significant majority of lower-income households hold few or no other financial assets, such as stocks, bonds, or mutual funds. For example, 9 percent of U.S.\nFinancial assets in SCF include bank accounts, certificates of deposit, savings bonds, bonds, stocks, mutual funds, retirement accounts, and cash value life insurance. households in the bottom income quintile have retirement accounts, compared with around 28 percent of households in the next lowest income quintile.\nAs shown in figure 3, median household financial assets, excluding retirement accounts, dropped in the wake of the 2001 and 2008 recessions and have not recovered to pre-recession levels. Median holdings in 2013 were down by 40 percent or more in comparison to median holdings in 2001 for both the population as a whole and for lower- income households.assets for the two lowest income quintiles was $1,000 in 2013. This total reflects the relatively low level of short-term savings for these households.", "Since at least 2003, the federal government has played a broad role in promoting financial literacy, which encompasses financial education—the process by which individuals improve their knowledge and understanding of financial products, services, and concepts. Financial literacy plays an important role in helping to promote the financial health and stability of individuals and families. In prior work on financial literacy, we reported that federal agencies have made progress in recent years in coordinating their financial literacy activities and collaborating with nonfederal entities, in large part due to the efforts of the federal multiagency Financial Literacy and Education Commission (FLEC).\nIn addition to their financial literacy efforts, some federal agencies have developed savings programs involving financial assets. These programs are aimed at helping households and individuals that may not have access to traditional savings vehicles, such as employer-sponsored retirement plans.\nAccording to a Treasury official, Treasury launched the myRA program, which is in a soft-launch phase, to promote retirement savings among individuals without access to employer-sponsored retirement plans.According to Treasury, the program offers a retirement savings account that is a Roth IRA, so it follows the same rules that apply generally to Roth IRAs and receives the same tax treatment.no minimum-amount requirement, a maximum balance of $15,000, and it can be funded through payroll direct deposit. The account houses a savings bond that will never go down in value (except from withdrawals) and the security in the account, like other Treasury securities, is backed by the U.S. Treasury. Participating employers make myRA information available to their employees. Employees are able to enroll in the program, and then elect to have a portion of each paycheck directly deposited into their myRA automatically.\nA myRA has no fees, Treasury officials stated that they worked to develop the framework for this program in 2014, including issuing a new Treasury security to serve as the investment option for these accounts, and designing easy-to- understand materials for savers. Treasury continued to build on the development process by making myRA available to a small group of employers, including federal agencies. Presently, Treasury is working closely with this small group of participants to get feedback and better ensure that the user experience is as simple and straightforward as possible–both for employers and employees–before myRA becomes more broadly available later this year. Treasury has indicated that it is too early to begin evaluating the impact of the myRA program. However, Treasury officials told us that they will continue to monitor the progress of the program as it moves through its soft-launch phase.", "Given the challenges low-and-moderate income households face in obtaining financial or banking services, FDIC has created a number of initiatives to help low and moderate-income individuals improve their financial skills and use financial institutions according to FDIC officials. For example, FDIC officials stated that, in 2001, FDIC developed the Money Smart program, which is a comprehensive financial education curriculum designed to help consumers, especially low- and- moderate income consumers and entrepreneurs, enhance their financial skills and help create positive banking relationships. Officials added that FDIC provides the curriculum free of charge in formats for consumers to complete on their own or through instructor-led classes. According to FDIC, the program has reached over 2.75 million consumers since 2001. In April 2007, FDIC used a three-part survey to determine the effectiveness of its Money Smart financial education curriculum and found that the program positively influenced how course participants managed their finances and their financial confidence. The study also found that these positive changes were sustained months after participants had completed Money Smart training. Specifically, the study found that participants were more likely to open deposit accounts, save money in a mainstream deposit product, use and adhere to a budget, and demonstrate increased confidence in their financial abilities when they were contacted 6 to 12 months after completing the Money Smart course compared to before beginning the course.\nTo further promote low and moderate income consumers’ access to financial services, FDIC developed the Model Safe Accounts Pilot in January 2011. The pilot was designed to evaluate the feasibility of having financial institutions offer safe, low-cost transaction and savings accounts (Safe Accounts) that are responsive to the needs of underserved consumers- including those with low and moderate incomes. Nine financial institutions participated in the pilot by offering Safe Accounts, which are checkless, card-based electronic accounts that limit acquisition and maintenance costs. These accounts allow withdrawals only through automated teller machines, point-of-sale terminals, automated clearinghouse pre-authorizations, and other automated means. Overdraft and nonsufficient funds fees are prohibited with the transaction accounts. According to FDIC, the nine banks opened more than 3,500 Safe Accounts during the pilot. Retention of these accounts exceeded expectations—more than 80 percent of transaction accounts and 95 percent of savings accounts remained open at the end of the 1-year pilot period. According to FDIC, Safe Accounts performed on par with or better than other transaction and savings accounts and several of the banks plan to continue to offer Safe Accounts—some banks are also considering the possibility of graduating pilot accountholders to traditional deposit accounts. Although the Safe Accounts program was only a 1-year pilot, FDIC officials told us that the agency provides interested FDIC insured institutions with a Safe Accounts template that includes guidelines for offering cost-effective transactional and savings accounts to underserved consumers. This template was based, in part, on lessons learned during the pilot phase.", "FDIC announced its Youth Savings Pilot Program on August 4, 2014. According to FDIC, this pilot program seeks to identify and highlight promising approaches to offering financial education tied to the opening of safe, low-cost savings accounts for school-aged children. The pilot has two phases. According to FDIC officials, Phase I includes FDIC insured institutions currently working with schools or nonprofit organizations that help students open savings accounts in conjunction with financial education programs during the 2014 to 2015 and 2015 to 2016 school years. Nine banks differing in size, location, and business models were selected for the first phase. The officials added that Phase II will include FDIC insured institutions beginning or expanding youth savings account programs during the 2015 to 2016 school year. FDIC is collecting summary information—including data on the number of accounts opened and financial education approaches used—from pilot participants. When the pilot is complete, FDIC intends to publish a report to provide financial institutions with promising approaches to working with schools and other organizations to combine financial education with access to a savings account.", "The Office of Community Services at the Department of Health and Human Services’ Administration for Children and Families administers the Assets for Independence program. Started in 1998, the Assets for Independence program awards grants to community-based entities, nonprofits and state, local, and tribal government agencies that partner with nonprofits to implement an asset-based approach for assisting low income families to become economically self-sufficient according to the Administration for Children and Families. According to agency officials, entities receiving these grants enroll participants in Assets for Independence projects to save earned income in special-purpose, matched savings accounts, also called individual development accounts. According to agency officials, every dollar that a participant deposits into an Assets for Independence individual development account is matched by the Assets for Independence project. Match rates can vary from $1 in match funds for every $1 the participant deposits in his or her individual development account, to as much as $8 in match funds for every $1 saved. Participants generally must use their individual development accounts and matching funds for a qualified expense: the purchase of a home; the capitalization or expansion of a business; or post-secondary educational expenses. According to agency officials, under the program, grantees are required to assist participants in the demonstration project in obtaining the skills necessary to achieve economic self-sufficiency. Examples of such activities include providing financial education and credit counseling.\nAs illustrated in table 4, from 2010 through 2014, according to agency officials the Administration for Children and Families awarded 269 Assets for Independence grants and over $62 million to a number of organizations including nonprofits, state or local governments, tribal governments, and community development financial institutions, to name a few. Table 4 also shows that the program budget for the Administration for Children and Families since fiscal year 2010.\nAccording to Administration for Children and Families data through fiscal year 2010, more than 90 percent of Assets for Independence projects allowed participants to pursue homeownership as an asset goal, while more than 80 percent allowed participants to pursue postsecondary education or training and business capitalization as asset goals. Nearly one-third of projects allowed participants to transfer account savings to the individual development account of a spouse or dependent.\nIn 2011, Administration for Children and Families began a random assignment evaluation of the Assets for Independence program at two grantee sites. This evaluation will assess the impact of Assets for Independence program participation on savings, savings patterns, and asset purchase by lower-income individuals and families. It builds on the previous quasi-experimental evaluation and studies of other non-Assets for Independence funded individual development account projects. The 2008 evaluation used data from the early to mid-2000s and found that Assets for Independence program participants were 35 percent more likely to become homeowners, 84 percent more likely to become business owners, and nearly twice as likely to pursue post-secondary education or training compared with a corresponding national sample of nonparticipants eligible for the program. According to the Administration for Children and Families, the random assignment evaluation will further understanding of the program’s overall impact on early participant outcomes. The evaluation team completed participant enrollment and baseline data collection in July 2014 and expects to release its final report in early 2016.", "The Department of Housing and Urban Development (HUD) awards competitive grants to public housing agencies for the administration of programs that encourage residents of public housing to attain self- sufficiency through programs such as the Family Self Sufficiency program. The program funds coordinators who help participants achieve employment goals and accumulate assets. Through the coordination and linkage to local service providers, program participants receive training and counseling that enables them to increase their earned income and decrease or reduce their need for rental assistance. Under the Family Self Sufficiency program, escrow accounts are used as incentives to increase work effort and earnings. Specifically, when participants have to pay a higher rent after their earned income increases, the public housing agency calculates an escrow credit that is deposited each month into an interest-bearing account (see fig. 4). Families that successfully complete their contract for the Family Self Sufficiency program receive their accrued escrow funds.\nAccording to HUD officials, over 72,000 households participated in the program in fiscal year 2014, and 4,382 families successfully completed their Family Self Sufficiency contracts. The 2013, 2014 and 2015 appropriation amounts for the Family Self Sufficiency program was $75 million. HUD is requesting $85 million in 2016.\nIn September 2004, HUD commissioned a 5-year prospective study of the Family Self Sufficiency program, focusing on programs serving Housing Choice Voucher recipients.\nThe study provided a final assessment of the experiences of a representative sample of Family Self Sufficiency participants that enrolled in 2005 and 2006. The study also examined the relationship between participants’ characteristics, Family Self Sufficiency programmatic features, and program outcomes. The study found that after 4 years in the Family Self Sufficiency program, 24 percent of the study participants completed program requirements and graduated. When the study ended, 37 percent had left the program without graduating and 39 percent were still enrolled in the Family Self Sufficiency program. Program graduates were more likely to be employed than participants who did not graduate or who still were enrolled in the program. Program graduates also had higher incomes, both when they enrolled in the Family Self Sufficiency program and when they completed the program, than participants with other outcomes. Staying employed and increasing their earned incomes helped graduates to accumulate substantial savings in the Family Self Sufficiency escrow account. The average escrow account balance was $5,294 for program graduates, representing about 27 percent of their average household income at the time of program enrollment.", "Recognizing that financial literacy or education is only part of the solution to help lower-income households achieve financial security, state and local government agencies and nonprofits have developed a variety of programs targeting specific populations or serving a specific savings purpose. These include retirement savings programs, prize-linked savings programs, short-term emergency savings programs, and various asset building (or asset accumulation) programs that promote savings for specific goals (e.g., post-secondary education, home ownership, or business ownership).", "Several states have created prize-linked savings programs to offer a new way to help lower-income and other individuals to save. As of 2015, Michigan, Nebraska, North Carolina, and Washington have created Save to Win programs, in which participating credit unions offer their members the opportunity to open prized-linked savings accounts. A Save to Win account is designed as a 12-month share certificate that allows for unlimited deposits throughout the year. Savers are required to deposit only $25 to open an account and earn raffle tickets for every additional $25 deposited in the account, with a cap on the number of entries per month. The cap helps ensure that individuals who cannot save as much still have opportunities to win. Raffle tickets qualify participants for the chance to win monthly cash prizes and grand prizes at the end of the year. According to Doorways to Dreams Fund, since the launch of Save to Win in 2009, over 50,000 accounts have been opened with over $94 million in savings in Michigan. Moreover, the nonprofit reported that among surveyed Save to Win accountholders, between 62 percent 81 percent were financially vulnerable. Michigan passed a law in 2003 to allow for credit unions to offer “savings promotion raffles.” The other four states also have modified their laws to allow credit unions to offer prize- linked accounts, savings promotion raffles, or other promotional contests of chance. On the federal level, in 2014, Congress passed the American Savings Promotion Act to provide for the use of savings promotion raffle products by financial institutions to encourage savings.", "According to some nonprofit officials and academics we interviewed, federal and state savings programs primarily promote and provide tax incentives for retirement savings, which tend to benefit higher-income households more than lower-income households. At the same time, they told us that short-term or emergency saving tends to be more important for lower-income households, because it helps households meet their immediate needs—for example, to cover unexpected car repairs, medical expenses, or temporary unemployment. Some government entities and nonprofit organizations have developed pilot and other programs to promote short-term emergency savings.\nAccording to program officials, the AutoSave Pilot was a joint initiative of two nonprofits—New America and MDRC. Program officials told us that the pilot tested the feasibility of establishing automatic savings programs that use direct deposit to divert a small amount of after-tax wages into savings accounts. Automatic savings programs would be especially valuable for individuals who have few liquid assets and limited access to low-cost credit products, because these savings can be used as a personal safety net in the event of unanticipated expenses or a sudden decrease in income, according to New America and MDRC. AutoSave investigated two different program designs. The first program design, implemented in fall 2009, was the “opt -in program,” where employees signed up for the AutoSave savings program through their employer. Employees who did not have a savings account were able to open one through a bank or credit union that partnered with the workplace site. With this version of the program design, only the savings deposits were automatic.\nThe opt-in AutoSave program design had been offered to employees at eight workplace sites, ranging in size between 13 and 25,000 employees. The pilot had a special focus on generating participation among low- to moderate-income workers, although all employees were eligible to sign up. Overall participation rates ranged between 2 percent and 62 percent of all employees at these targeted workplaces, with most sites ranging between 9 percent and 25 percent. In sites where wages were tracked, the majority of participants had wage levels within the lower three-fifths of the wage distribution in their workplace. These participation results were consistent with expectations for the opt-in program design. The second investigated program design was an “opt-out program,” where all employees would have been automatically enrolled in the AutoSave savings program unless they elected not to be in the program. With this design, both enrollment and deposits would have been automatic. Opt-out enrollment was not actually piloted because MDRC’s assessment of the legal and operational risks concluded that while this approach would presumably be legal in some states, a lack of regulations or case law addressing the model meant that employers would be taking undue risks to implement the opt-out model. In the absence of such guidance or precedence, MDRC has determined that it is not currently feasible to implement the opt-out enrollment program design (even by using a payroll card with an attached savings product).\nAccording to an official at the City of San Francisco, the EARN Starter Account program, developed by the California non-profit EARN, seeks to increase the supply of starter account products that allow unbanked lower-income households to begin saving. Program participants must make at or below 50 percent of their area median income. The EARN Starter Account is an online program that rewards participants for consistently saving at least $20 each month for six months, and participants earn a maximum of $55 in matched funds over the six month period according to the nonprofit. Participants link their existing savings accounts to the EARN Starter Account platform to facilitate savings. If participants make any withdrawals over the 6 months matched funds earned will be forfeited and the account may be closed. At the end of 6 months, participants can claim the funds. Participants can continue using the EARN website for another 6 months. Since 2002, 6,000 EARN clients have saved $6.8 million dollars, and 83 percent of participants have continued to save after their formal program ended, according to a qualitative study by the nonprofit. The study found that consistent savers also demonstrated a shift toward future orientation. More specifically, these program participants were planning to acquire more assets (such as further education, the purchase of a home, or founding or developing a small business). EARN is partnering with the City and County of San Francisco to bring the Starter Account platform to low-income San Franciscans, beginning with a pilot program for public housing residents.\nSome government entities and nonprofit organizations have developed programs to encourage lower-income households to save part of their income tax refund.\nAccording to officials at the Center for Social Development at Washington University in St. Louis, Refund to Savings is a pilot program intended to help lower-income households build savings and increase financial security. Launched in 2012, the pilot is a collaboration among Washington University in St. Louis, Duke University, and Intuit Inc. According to program officials, the program is implemented through a version of Intuit’s tax preparation software that is available for free to lower-income taxpayers and reaches approximately 1.2 million households. The goal of the initiative is to design and test a low-cost scalable intervention that can lead tax filers to save part of their tax refund. Under the pilot, Intuit users are assigned randomly to a treatment or control group. The treatment group uses a version of the software in which they receive prompts to motivate them to save part of their tax refund as emergency savings. In 2013, the pilot tested automatic refund splitting in which the software automatically put part of the tax filer’s refund in a savings account or savings bond. According to officials at the Center for Social Development, tax filers who did not want to split their refund had to select an “I don’t need to save” button to opt out. In 2013, almost 900,000 low- and moderate-income tax filers participated in the pilot, depositing approximately $5.9 million more in savings accounts than they would have without the intervention, according to the Center for Social Development officials. Data generated by program use and refund allocation behavior will be evaluated to determine whether the prompts, saving opportunity, or both increased saving levels compared with the control group, according to the Center for Social Development at Washington University.\nAccording to officials at MDRC and New York City’s Office of Financial Empowerment, the SaveUSA program (formerly $aveNYC) is administered by the Mayor’s Fund to Advance New York City and the New York City Center for Economic Opportunity and offers lower- income households an incentive to save a portion of their tax refund. According to program officials, SaveUSA was launched in 2011 in four cities (New York City, Tulsa, San Antonio, and Newark). Participants open a SaveUSA account when they file their taxes. They are required to save at least $200 of their refund for a year, and earn 50 cents for every dollar saved, with a maximum match of $500. According to an April 2014 study of the program by MDRC, nearly two-thirds of SaveUSA participants in 2011 (the program’s first year) qualified for the savings match and received, on average, $191 in savings match dollars. In the second program year, 39 percent of the 2011 SaveUSA sample participated again, and about 27 percent received a savings match according to the MDRC study. The MDRC study found that on average, SaveUSA group members received $96 in savings match dollars in the program’s second year. According to the MDRC study, those who received a savings match in both years appear to have been in a better position to save—they tended to be older, were more likely to have more income, and were more likely to have pledged the maximum amount allowed of $1,000, compared with other SaveUSA group members. In contrast, SaveUSA group members who had especially low incomes or who pledged the minimum amount of $200 were the least likely to ever receive a savings match.\nAsset building is based on strategies that help households build financial or tangible assets, such as savings, a home, or a business. A number of nonprofits, states, and municipalities have developed programs to help lower-income households build assets through the use of individual development accounts or child development accounts.\nAs discussed, the Office of Community Services at the Administration for Children and Families administers the Assets for Independence program, which awards grants to community-based entities, nonprofits, and government agencies to implement special-purpose, matched savings accounts or individual development accounts. The length of the program, amount of matching dollars provided, allowable uses for savings, and other rules may be different from one program to the next.\nAn example of an individual development account is the Assets for All Alliance program. According to officials at the Opportunity Fund, this individual development account was launched in 1999 by the Opportunity Fund (formerly Lenders for Community Development) in collaboration with the Silicon Valley Community Foundation Center for Venture Philanthropy and several community partners, including a number of nonprofit social service agencies. According to a study published by the Silicon Valley Community Foundation and Lenders for Community Development, the Assets for All Alliance individual development account program is intended to help lower-income families “learn financial management skills and build assets that would help them permanently improve their economic situation.“ Savings by program participants are “matched by philanthropic and government dollars on a two-to-one basis” according to the study. According to the Opportunity Fund, this program has resulted in 1,028 individual development accounts and $2.77 million in total savings towards asset goals.\nAccording to officials at the Center for Social Development at Washington University in St. Louis, child development accounts are savings or investment accounts opened as early as birth. The goal of child development accounts is to promote saving and asset building for lifelong development. Child development accounts assets may be used for postsecondary education, homeownership, or enterprise development. In many cases, public and private entities deposit funds into these accounts to supplement savings for the child. Although the goal of child development accounts is long-term savings accumulation, programs differ in design and features. According to the Center for Social Development, enrollment in some states, including Maine and Nevada, is automatic unless parents opt out (opt-out programs). Some other child development accounts are voluntary or opt-in, meaning that parents must enroll their children, often by opening a 529 or bank savings account. For example, the Nevada College Kick Start program automatically deposits $50 into a 529 account for every public school kindergartner in the state according to officials at the Center for Social Development. In 2014, 70,000 students had been enrolled in Kick Start. Officials told us that Maine’s College Challenge is the only statewide universal child development account program in the nation, benefiting all children born in Maine (more than 40,000 children in 2014). The program automatically deposits $500 into a 529 account on the child’s behalf. Both Nevada and Maine’s 529 plans offer savings matches to state residents according to officials at the Center for Social Development. Other examples of child development accounts include those developed by national nonprofits including the Corporation for Enterprise Development and New America. According to New America, some municipalities also have launched their own child development account programs. For example, as New America reports, in San Francisco the Kindergarten to College program was launched in 2011 and opens accounts for every kindergartner in the city’s public schools.", "Lower income households face a variety of challenges to saving. U.S. savings bonds continue to provide Americans, including those with lower- incomes, with an affordable, safe, and convenient way to save and invest. However, when Treasury ended the over-the-counter sale of paper savings bonds through financial institutions in January 2012, it created challenges for some bond buyers who had to rely on accessing TreasuryDirect to purchase savings bonds online. Treasury has taken steps to develop a more flexible and responsive Internet-based system than TreasuryDirect, but the TRIM system is in the early stages of development. Treasury intends for these changes to address some of the existing access and other challenges associated with TreasuryDirect. Currently, the Tax Time Savings Bond program provides the only means by which individuals can purchase paper savings bonds, but the program’s future is uncertain, because Treasury may discontinue the program when TRIM is implemented. However, the TRIM system still will require Internet access by computer or mobile device, and Tax Time program users who lack Internet access may not be able to save by buying savings bonds at tax time if the program is discontinued. How the benefits and costs of the Tax Time program would compare when Treasury implements TRIM is not known—in part because Treasury generally has considered the program’s benefits but not the program’s costs. Without considering both, Treasury cannot make a fully informed decision on whether to discontinue the Tax Time program when an electronic alternative is available.", "To help ensure that Treasury can make a fully informed decision on whether to discontinue the Tax Time Savings Bond program as it implements the TRIM system, GAO recommends that the Secretary of the Treasury consider the benefits and costs of the Tax Time program in future decisions on whether to extend the program.", "We provided a draft of this report to Treasury and IRS for review and comment. In their comment letter, which is reprinted in appendix II, Treasury agreed with GAO’s recommendation and stated that it would conduct a cost-benefit analysis of the Tax Time Savings Bonds program. Treasury also provided technical comments, which we incorporated, as appropriate. We also provided draft excerpts for technical comment to federal and other agencies—including the Departments of Health and Human Services and Housing and Urban Development, FDIC, New York City’s Office of Financial Empowerment, and San Francisco Office of Financial Empowerment—and nonprofit organizations, including the Center for Social Development at Washington University, Doorways to Dreams Fund, MDRC, and Opportunity Fund. These third parties provided technical comments, which we have incorporated, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to Treasury, IRS, FDIC, HUD, and the Department of Health and Human Services, interested congressional committees, members, and others. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact Cindy Brown Barnes at (202) 512-8678 or brownbarnesc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "Our review examines (1) the effect of Treasury’s elimination of paper U.S. savings bonds, including on the savings bond program and bond purchases; (2) the extent to which Treasury’s Tax Time Savings Bond program has promoted savings, particularly by lower-income households, and Treasury’s plans for the program’s future; and (3) the extent to which lower-income households are saving using financial products, and some of the government and nonprofit programs developed to promote savings by lower-income households.\nFor all three objectives, we analyzed various data. First, we used data issued by the Department of the Treasury (Treasury) on the amount of U.S. savings bonds purchased from 2001 through 2013 to analyze trends in savings bond purchases over this period, including the effect of the Treasury’s elimination of paper savings bonds on savings bond purchases. Second, we used data from the triennial Survey of Consumer Finances (SCF) issued by the Board of Governors of the Federal Reserve System for survey years 2001, 2004, 2007, 2010, and 2013 to estimate the percentage of U.S. households holding financial assets, including U.S. savings bonds; the median value of such financial assets held by U.S. households, and the median income of households. The survey data include information on families’ balance sheets, pensions, income, investments, and demographic characteristics. We analyzed the U.S. population data as a whole and also considered the bottom two income quintiles separately. We chose these survey years because they provide a period of about 10 years prior to and 1 year after the discontinuation of the sale of paper savings bonds at financial institutions. We analyzed the U.S. population data as a whole and also considered the bottom two income quintiles separately. SCF data are based on probability samples and estimates are formed using the appropriate estimation weights provided with the survey’s data. Because each of these samples follows a probability procedure based on random selections, they represent only one of a large number of samples that could have been drawn. Since each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (i.e., plus or minus 2.5 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Unless otherwise noted, all percentage estimates have 95 percent confidence intervals that are within 5 percentage points of the estimate itself, and all numerical estimates other than percentages have 95 percent confidence intervals that are within 5 percent of the estimate itself. We also reviewed documentation on the SCF, such as codebooks and Federal Reserve bulletins. Third, we used aggregated data provided by the Internal Revenue Service (IRS) on income tax filers who used at least part of their tax refunds to buy paper savings bonds from 2010 through 2013 to analyze the number of tax filers who bought paper savings bonds, including those with adjusted gross incomes of $25,000 or below—the lowest income category reported in the data—and the amount of savings bonds they purchased. We also used the aggregated data to analyze refund options used by the tax filers (such as paper check and paper savings bond, direct deposit and paper savings bond, or paper savings bond only) and demographic information about the filers, such as their age. We assessed the reliability of the data we used by interviewing knowledgeable officials, and conducting manual testing on relevant data fields, such as the number of tax filers who participated in the program and amounts of savings bonds purchased. We found the data we reviewed to be sufficiently reliable for the purposes of our analyses.\nTo examine the effect of Treasury’s elimination of paper U.S. savings bond, including on the savings bond program and bond purchases, we reviewed data on savings bonds purchases from 2001 through 2013, and analyzed trends in purchases for this time period, including before and after paper savings bonds were discontinued in January 2012. Specifically, to analyze long- term trends in savings bond purchases and more recent trends since the end of paper sales, we estimated two econometric models. The first model was based on a portfolio choice model, and modeled purchases as a function of interest rates, inflation, and economy-wide risk (using the Chicago Board Options Exchange’s Volatility Index). In other words, consumers may make savings bond purchase decisions the same way they make other decisions about financial portfolio allocation, based on risk and return considerations. The second model was based on linear and quadratic time trends to capture the long-term reduction in purchases. We included monthly seasonal effects in both models. The drop in savings bond purchases after the end of paper sales was consistent with long-term trends and generally not statistically significant. The drop in purchases after the end of paper sales also was consistent with the reduction in interest rates at the time (the coefficient on interest rates was highly statistically significant). As with any econometric model, our approach is imperfect and is unlikely to include all factors that influence savings bond purchases. Additional data over time might provide different or more definitive estimates of the change in purchases associated with the end of paper sales. We reviewed Federal Register releases on TreasuryDirect and its replacement system, the Treasury Retail Investment Manager; Treasury documentation, including a description of data in the monthly statement of public debt, estimates of cost savings from eliminating paper savings bonds, press releases, Bureau of the Fiscal Service’s President’s budgets and capital investment plans; and TreasuryDirect materials. To assess the reliability of Treasury’s cost estimates, we interviewed Treasury officials on how the estimates were determined and reported. We also interviewed Treasury officials to discuss a range of issues related to its savings bond program, including the benefits and costs of eliminating paper savings bonds, concerns raised about TreasuryDirect, and plans for replacing TreasuryDirect.\nTo determine the extent to which Treasury’s Tax Time Savings Bond program has promoted savings, we analyzed IRS data on the use of the program by tax filers for tax years 2010 through 2013 (as discussed in detail above). We also reviewed IRS documentation on the program, such as descriptions on how the program operates and answers to common questions about the program, and studies on the Tax Time program published by academics and nonprofit organizations focusing on social or economic policy. We interviewed Treasury and IRS officials about the Tax Time program’s operations, benefits, costs, and future in terms of its expiration. To better understand the extent to which this program can help lower-income households to save, we interviewed nonprofit organizations focusing on social or economic policy, including Doorways to Dreams Fund, New America, Corporation for Enterprise Development, and MDRC.\nTo examine the extent to which lower-income households are saving using financial products, we examined SCF data for survey years 2001, 2004, 2007, 2010, and 2013 (as described in greater detail above). Based on these data, we defined lower-income households as the lower two distributions (or quintiles) of households in the United States. To describe some of the government and nonprofit programs developed to promote savings by lower-income households, we conducted Internet and literature searches for research, initiatives, testimonies, and studies on savings programs targeting lower-income households and reviewed materials on such programs. We specifically reviewed select federal, state, local, and nonprofit programs targeting either long-term (such as retirement or asset accumulation) or short-term savings goals for lower- income households. For the purposes of this report, we focused on programs designed to promote savings using financial assets, such as bank accounts, bonds, mutual funds, and retirement accounts. We generally excluded programs designed to promote savings through home ownership or other nonfinancial assets. For federal programs, we focused our review on federal agencies involved in promoting financial literacy that are members of the multiagency Financial Literacy and Education Commission (FLEC). We interviewed six FLEC member agencies—the Departments of the Treasury, Housing and Urban Development, Health and Human Services, and Education; the Federal Deposit Insurance Corporation; and the Bureau of Consumer Financial Protection, also known as the Consumer Financial Protection Bureau—about their savings programs and reviewed related documentation.\nWe also reviewed select state, local, and nonprofit programs targeting lower-income households. We selected these programs based on our research of savings programs for lower-income households and interviews with FLEC members and other stakeholders. For the programs we selected, we interviewed relevant program officials and reviewed documentation on the programs, including information on participation in the programs where available. Finally, we interviewed other relevant stakeholders, including Doorways to Dreams Fund, New America, Corporation for Enterprise Development, MDRC, Consumers for Paper Options, and academics.\nWe conducted this performance audit from August 2014 to July 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Richard Tsuhara (Assistant Director), Tarek Mahmassani (Analyst-in-Charge), Emily R. Chalmers, Michael Gitner, Michael Hoffman, Wati Kadzai, Robert Letzler, Marc Molino, Patricia Moye, and Andrew Stavisky made significant contributions to this report." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 3, 3, 3, 3, 2, 3, 3, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_full h3_title", "h0_full h3_full", "h0_full h3_full", "h0_full", "h3_title h1_full", "h3_full h1_full", "h1_full", "h2_title h3_title", "h2_full", "h2_full", "", "", "", "", "h2_full h3_title", "", "h3_full", "h3_full h1_full", "h4_full h1_full", "", "h4_full h2_full", "", "", "", "" ] }	{ "question": [ "What does GAO analysis say about the Treasury's elimination of paper saving bonds?", "How much was estimated to be saved by eliminating paper saving bonds?", "How can customers buy saving bonds?", "What is Treasury in the process of doing?", "What was the status of over one-third of users of the Treasury's Tax Time Savings Bond Program?", "Why has Treasury been extending the program?", "What did Treasury tell GAO about the program?", "What did GAO suggest to the Treasury?", "Why might Tax Time users be unable to save by buying bonds with their refunds after TRIM is implemented?", "Why have federal agencies developed programs to promote savings?", "What is the my RA® program?", "What kind of programs have state, local, and nonprofit agencies initiated?", "What is the eligibility for these programs?", "What do US savings bonds provide?", "How can savings bonds be purchased?", "What did Treasury stop doing in 2012?", "What does this report examine?", "How did GAO get information for this review?", "What was GAO requested to do?" ], "summary": [ "The Department of the Treasury's (Treasury) elimination of paper savings bonds made buying bonds more difficult for some customers, but GAO's analyses generally indicated that the decline in bond purchases after the change was not statistically significant.", "It estimated the change would save about $70 million in program costs from 2012 through 2016.", "Except for the Tax Time Savings Bond program, customers who want to buy savings bonds must use TreasuryDirect—an online system that requires users to have Internet access and a bank account.", "Treasury is in the early stages of developing a new system, the Treasury Retail Investment Manager (TRIM), to make it easier to buy savings bonds, such as by using a mobile device, which often is the primary means of accessing the Internet for many lower-income households.", "A little more than one-third of the users of Treasury's Tax Time Savings Bond program—the only way to purchase paper bonds—were lower-income tax filers (filers with an adjusted gross income of $25,000 or less), but the program's future is uncertain.", "Treasury has been extending the program partly because the amount of bonds purchased and participation levels indicate that the program is providing benefits, but it generally has not considered the program's costs.", "In May 2015, Treasury officials told GAO that they plan to continue to extend the program until TRIM can provide a suitable electronic alternative.", "In prior work on agency stewardship of public funds, GAO reported that agencies, as a best practice, should consider both benefits and costs in considering alternatives related to program decisions.", "Because TRIM will require Internet access by computer or mobile device, Tax Time program users without such access may no longer be able to save by buying bonds with their refunds after TRIM is implemented.", "Given the limited savings of lower-income households and savings challenges faced by such households, a number of federal agencies have developed programs to promote savings.", "For example, Treasury's my RA®, which is in a soft-launch phase, promotes retirement savings for individuals without access to employer-sponsored retirement plans.", "State, local, and nonprofit agencies also have initiated programs that promote savings for retirement, child development, or emergencies and generally target lower-income households.", "Eligibility requirements and participation vary by program.", "U.S. savings bonds provide Americans with an affordable way to save.", "As a result, savings bonds generally must be purchased through TreasuryDirect®. The one exception is the Tax Time Savings Bond program, established in 2010 to enable taxpayers to use their tax refund to buy paper savings bonds.", "In 2012, Treasury stopped selling paper savings bonds at banks as part of its broader electronic initiative.", "This report examines (1) the effect of Treasury's elimination of paper U.S. savings bonds on the program and bond purchases, (2) the extent to which the Tax Time Savings Bond program has promoted savings by lower-income households and Treasury's future plans for the program, and (3) the extent to which lower-income households are saving and programs developed by federal agencies and others.", "GAO reviewed agency rules and other documents; analyzed Treasury, Internal Revenue Service, and other data, in part using economic models; and interviewed federal, state, and nonprofit entities and experts involved in savings programs.", "You requested that GAO examine Treasury's savings bond program, including the accessibility of TreasuryDirect, and other savings programs." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, 0, 2, -1, -1, -1, -1, 2, -1, 0, -1, -1, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 1, 1, 1 ] }
GAO_GAO-15-710	{ "title": [ "Background", "MA Enrollment Opportunities and Trends", "Provider Network Formation and Directories", "Regulation of MA Network Adequacy", "For MA Network Adequacy, CMS Uses Robust Travel Time and Distance Criteria; Other Programs Include Provider Availability Standards", "CMS Established County- Based Time and Distance Criteria for Determining Minimum Number of Providers Constituting an Adequate MA Network", "Unlike MA, Some Other Programs Consider Provider Availability as a Component of Network Adequacy", "CMS Applies Its Network Adequacy Criteria to Very Few MAO Provider Networks Each Year and Grants Permanent Exceptions to Its Criteria", "CMS’s Reviews of MAO Network Adequacy Reach Less than 1 Percent of County-Based Provider Networks Each Year", "For Networks Subject to Adequacy Assessments, CMS Uses an Automated Review Process but Performs Minimal Data Validation", "CMS Commonly Grants Permanent Exceptions from Its Network Adequacy Criteria When MAOs Offer Alternatives Consistent with Local Patterns of Care", "CMS Does Not Routinely Examine Current Network Information, but Relies on MAO Self- Disclosure and Enrollee or Provider Complaints to Identify Network Issues", "While CMS Checks in Regularly with MAOs, the Agency Does Not Require MAOs to Routinely Submit Updated Information on Network Composition", "CMS Allows MAOs Discretion in Disclosing Adequacy Issues Stemming from Narrowing Provider Networks", "CMS Relies on Complaints Reported to the Agency to Identify Network Adequacy Issues Not Disclosed by MAOs", "CMS Has Not Set Information Requirements for Notices MAOs Send to Enrollees Regarding Provider Terminations and Options for Care", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Medicare Advantage Network Adequacy Criteria", "Appendix II: Comments from the Department of Health and Human Services", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "For the approximately 10,000 individuals who age into Medicare every day, the first opportunity to sign up for an MA plan may occur during their initial Medicare election period. After that, beneficiaries in FFS Medicare may enroll in MA—and MA beneficiaries may change their plan selection—during the annual election period from October 15 to December 7. Beneficiaries’ plan selections, effective January 1, are then “locked in” for that calendar year, with some exceptions. CMS grants certain special election periods (SEP) outside of the annual election period when beneficiaries may join MA or change their MA plan selection. For example, MA enrollees who move to states not served by their MA plans are entitled to an SEP to select new coverage.\nBy offering comprehensive coverage and limiting out-of-pocket costs, MA has attracted a substantial number of Medicare beneficiaries. As of May 2015, nearly 16 million beneficiaries, or 30 percent of the Medicare population, were enrolled in approximately 3,800 plan options offered by about 500 MAOs. The Congressional Budget Office has projected that, as the Medicare-eligible population increases, MA enrollment will grow to 30 million beneficiaries, representing about 40 percent of Medicare, by 2025.", "A fundamental characteristic of MA is that most plans direct enrollees to a limited network of health care providers. The size of a provider network may range from very narrow to fairly broad, depending on the type of plan, the area of the country, and local market characteristics. For example, in urban areas, competition may allow MAOs to recruit providers who are willing to offer discounts on their usual fees in order to be included in the network, providing easy access to an MAO’s many enrollees. However, in rural areas, MAOs may have difficulty organizing an adequate network due to the more limited supply of providers in those areas. To provide beneficiaries with wide access to MA plans, CMS network adequacy requirements take into account differences in utilization, patterns of care, and supply of providers in urban and rural areas.\nIn building their networks, MAOs contract directly with providers. To establish or renew a contract, MAOs negotiate with providers to find agreed-upon payment rates, terms, and duration. MAOs can initiate contracts with providers at any point during the year and can also terminate contracts with network providers at any point. These terminations can be made “for cause,” for such things as a loss of license or breach in contract, or “without cause”—requiring no explanation for the termination. Under Medicare rules, MAOs must give providers written notice at least 60 days in advance of terminating them without cause and must offer providers a process for appealing contract terminations. CMS does not take part in those appeals.\nTo determine whether their current provider, or a provider they wish to use, participates in their MA plan network, beneficiaries commonly rely on provider directories. CMS has published a model directory template, which, though not mandatory, provides MAOs that use it with an expedited agency review. MAOs are required to provide enrollees with paper directories and maintain current directories on their websites at all times. However, research has shown that provider directories issued by insurers often contain inaccurate information and, as a consequence, may mislead beneficiaries about their provider options. The following are examples:\nThe HHS Office of Inspector General reported that 35 percent of 1,800 primary care and specialty providers could not be found at the location listed by the selected Medicaid managed care organizations.\nThe California Department of Managed Health Care called physician offices listed in the provider directories for two large plans in the state’s PPACA marketplace. For Anthem Blue Cross, it found that 12.5 percent of the listings had inaccurate locations and about 13 percent of physicians did not take Anthem Blue Cross patients. For Blue Shield of California, it found that about 18 percent of the listings had inaccurate locations and about 9 percent of physicians did not take Blue Shield of California patients.\nA study of 4,754 MA dermatology providers listed in directories of large MAOs in 12 metropolitan areas found that about 46 percent of the listings were duplicates and 8.5 percent of the unique providers had died, retired, or moved out of the area.\nPosing as patients, researchers phoned 360 in-network psychiatrists listed on a major insurer’s website and attempted to make appointments. Sixteen percent of the telephone numbers were wrong and 15 percent of practices were not accepting new patients.", "Through the annual MAO contracting process, MAOs must attest to the regulatory requirement that they “maintain and monitor a network of appropriate providers that is supported by written agreements and is sufficient to provide adequate access to covered services to meet the needs of the population served.” These networks must also conform to the local pattern of health care delivery. MAOs that do not comply with CMS requirements for network adequacy or do not maintain complete and accurate provider directories may be subject to enforcement actions, including civil monetary penalties or enrollment sanctions.\nBeginning with contract year 2011, CMS adopted network adequacy criteria designed to be more objective and defensible, as well as updated procedures for reviewing the criteria. Lewin analyzed utilization patterns and standards used by other entities, among other things, to develop the current criteria that CMS regional offices use in conducting their reviews of the MAO submissions. Lewin also revisits network adequacy criteria and CMS oversight processes annually, and provides recommendations for improvement, as needed. To update requirements for MAOs and its oversight of network adequacy, CMS sets forth new policies in its Medicare Managed Care Manual and Marketing Guidelines as well as in its annual Final Call Letter. For example, the 2015 Final Call Letter put forth several changes in network adequacy-related guidance, including a policy that allows an SEP when beneficiaries are affected by significant midyear provider network terminations initiated by MAOs without cause.", "Through its network adequacy criteria, CMS requires that MAOs have enough providers in their networks to ensure that enrollees can access care within specific travel time and distance maximums. The agency’s quantitative criteria take into account differences in utilization across provider types and patterns of care in urban and rural areas. However, contracting with a certain number and type of providers may not be the same as true provider availability—measured by appointment wait times, providers accepting new patients, or how often a provider practices at a particular location. To varying degrees, provider availability standards have been incorporated broadly into other programs and used in some states to more completely assess the adequacy of provider networks.", "Since 2011, CMS has defined an adequate MAO network as meeting two criteria: a minimum number of providers and maximum travel time and distance to those providers. These criteria are sensitive to local conditions in that they vary by type of provider and type of county.\nA minimum number of providers. To determine the minimum number of providers required, CMS considers such county-specific factors as the total number of Medicare beneficiaries and historical data on MA market share in similar counties. CMS sets minimum provider ratios per 1,000 beneficiaries by provider type in each county, for both primary care (including geriatrics and internal medicine) and specialty care (such as cardiology, gastroenterology, and oncology). These ratios differ by the county’s geographic designation as large metro, metro, micro, rural, or counties with extreme access considerations.\nMaximum travel time and distance. CMS’s time and distance criteria also vary substantially by provider type and county geographic designation. CMS developed these measures—such as 10 minutes/5 miles for primary care providers in large metro counties or 40 minutes/30 miles for primary care providers in rural counties—by juxtaposing beneficiary addresses with provider locations. At least 90 percent of beneficiaries in a county must have access to the appropriate number of providers within the required time and distance maximums. To count toward the threshold, network providers do not have to be located in the same county as beneficiaries as long as they are within the required proximity.\nEach year, CMS updates its network adequacy criteria for each county and provider type for the subsequent contract year. In advance of contract year 2016, CMS required that MAO networks comprise 55 provider types, including 6 specific primary care provider types, 26 specialty care types, and 23 facility types. For the minimum number of providers criterion, CMS counts each specialty care type separately, but counts all primary care provider types together as one group for mapping purposes. For example, in a metro county with nearly 32,000 total Medicare beneficiaries, each MAO—regardless of the number of plan enrollees—must include in its network at least 7 primary care providers, 2 cardiologists, 2 general surgeons, and 1 of each of the remaining specialty care types. Each MAO in this metro county must also include 47 acute inpatient beds per 1,000 beneficiaries, and one of each of the facility and transplant program types. (For more information on CMS’s network adequacy criteria for contract year 2016, see app. I.)\nHealth care researchers have noted that network adequacy criteria measured by provider type and geographic designation serve to protect beneficiary access while preserving MAO flexibility in provider network design. Furthermore, some researchers have pointed out that quantitative standards derived from sound research provide clarity and certainty, and level the playing field among insurers. In addition, the CMS regional office officials we spoke with expressed a preference for the current criteria. Before 2011, the criteria CMS used were more ambiguous and did not allow for the more objective and consistent application they do now. One beneficiary advocacy group we interviewed described the MA network adequacy criteria as acceptable and appropriate parameters for the program.\nHowever, some medical associations we spoke with and recent research by the HHS Office of Inspector General have noted shortcomings in CMS’s reliance on geography-based provider ratios. Medical associations stated that CMS does not obtain information on whether providers in MAO networks are accepting new patients or if the appointment wait times reasonably ensure that patients can see a provider in a timely manner. In commenting on CMS’s draft Call Letter for contract year 2016, a number of medical associations collectively stated that a provider’s full-time equivalent status at a given location should be taken into account to ensure access to care without unreasonable delay. As the HHS Office of Inspector General recent study of Medicaid managed care standards found, when provider availability is not factored into network adequacy criteria, insurers may be able to meet network adequacy criteria even if their network providers are not readily available to all their enrollees.\nAs noted by a Lewin representative, CMS’s priority in updating MA criteria has focused on the number and geographic distribution of providers over other measures of access. She noted, for example, the challenge in identifying network physicians who do not take new MA patients due to practice capacity constraints. Although physicians may choose to participate in multiple health plans or serve FFS patients, MAOs do not require that they report on their practice capacity—that is, the extent to which they contract with other MAOs or the size of their patient panel. Without such data it is difficult to determine the number of potential beneficiaries providers could reasonably serve.\nAdditionally, medical associations told us that CMS’s provider type classifications in the MA criteria mask distinctions within specialties that could have consequences for how MAOs design their networks. The American Academy of Ophthalmology noted that MAOs do not make distinctions for retina or glaucoma specialties. Similarly, the American Society of Retina Specialists reported that it can be challenging for MA enrollees with certain eye conditions to receive treatment when MAOs are not required to include retina specialists in their networks. The American Academy of Dermatology said that dermatologists in plan networks may include subspecialists whose practices focus on certain populations, such as pediatric dermatology. Therefore, counting all specialists regardless of practice focus, as CMS’s criteria do, may overstate the actual number of specialists available to serve MA enrollees. Lewin acknowledged the difficulty in recognizing variation with medical subspecialties as the provider identification data used to establish ratios does not account for these type of breakdowns. For example, because retina specialists are not identified separately from other ophthalmologists in CMS data, there was no way for Lewin to develop subspecialty requirements.", "Network adequacy standards in other managed care programs we examined cover a variety of approaches to setting network adequacy criteria and differ, to some extent, from MA criteria. To measure the adequacy of provider networks, these standards generally include aspects of provider availability, along with time and distance maximums and provider-to-enrollee ratios. Most of the programs—NAIC’s model act, PPACA marketplaces, and Medicaid managed care—establish minimum network requirements, with states having flexibility to impose additional standards.\nSince 1996, NAIC has made available to states a model act for network adequacy. To update the model act, NAIC convened a group of state insurance regulators and other interested parties and expects to issue a new model act in 2015. The draft NAIC revised model suggests that states incorporate aspects of provider availability, such as wait times for visits with network providers. NAIC uses a subjective “reasonable access” standard instead of distinct time and distance maximums, which accommodates state differences in geographic accessibility and population dispersion. NAIC’s model act also suggests that states consider provider-to-enrollee ratios for primary and specialty care. While some groups, such as consumer advocates, called on NAIC to establish more quantitative requirements, it has chosen not to be as prescriptive as these groups recommend.\nQHPs offered in the PPACA marketplaces (whether state-based or federally facilitated) are subject to federal network adequacy standards, which CMS updates in annual rulemaking. CMS used the 1996 NAIC model act for network adequacy as the basis for the PPACA marketplace standards and intends to use the revised model to update requirements applicable to QHPs. States may also impose additional network adequacy requirements on QHPs. Federal rules for PPACA marketplaces do not address network provider availability. Federal regulations do specify that services be accessible without unreasonable delay, but do not include any maximum time or distance requirements. Also, federal regulations do not set any provider-to-enrollee ratios, although QHPs are generally required to contract with a sufficient number of essential community providers, such as federally qualified health centers and other providers that serve predominately low-income, underserved populations. A 2015 Commonwealth Fund study of plans in PPACA marketplaces found that 23 states have quantitative time or distance criteria, while fewer states have quantitative criteria for appointment wait times (11 states) and provider-to-enrollee ratios (10 states).\nMedicaid managed care organizations are subject to broad federal network adequacy requirements, and states may impose additional or more specific standards. Federal law generally requires a Medicaid managed care organization to provide adequate assurances it has sufficient capacity to serve expected enrollment in its service area. Federal Medicaid regulations contain standards covering different aspects of network adequacy, but do not include any quantitative measures. To address provider availability, regulations require that states consider the numbers of network providers who are not accepting new Medicaid patients. While the rules do not set specific time and distance maximums, regulations point to other access considerations—means of transportation and physical access to care for individuals with disabilities. Additionally, the law does not set specific provider-to-enrollee ratios, but requires that states consider other aspects that would factor into a ratio, including anticipated enrollment, expected utilization, and number and types of providers required to furnish services. In a review of 33 states with Medicaid managed care programs, the HHS Office of Inspector General reported that states typically set standards for appointment wait time, travel time and distance, as well as provider-to-enrollee ratios. These requirements varied widely among the states reviewed, with some differentiation by provider type (primary or specialty care) and location (urban or rural). For example, the states ranged from a maximum appointment wait time for a routine primary care visit of 10 business days in California and Pennsylvania to 45 calendar days in Massachusetts and Minnesota. CMS recently issued a proposed rule that would amend current Medicaid managed care standards to reduce variation in how states evaluate and define network adequacy, and would impose minimum time and distance standards for certain types of providers.\nTRICARE’s managed care access standards generally have a more quantitative approach. To address provider availability, TRICARE sets appointment wait time limits for routine visits, well-patient visits or specialty care referrals, and urgent care. TRICARE standards set maximum travel times at 30 minutes for primary care and 1 hour for specialty care under normal circumstances. The only aspect of network adequacy standards that TRICARE does not set specific requirements for are provider-to-enrollee ratios, where TRICARE generally requires a sufficient number and mix of specialists to reasonably meet the anticipated needs of enrollees.\nThe inclusion of provider availability in other programs’ network adequacy requirements suggests CMS may be missing a key element for measuring access. In addition, recent health care research we examined and representatives of medical associations we spoke with have suggested that provider availability is a key element for measuring access to care, which most network-based programs have broadly incorporated into federal standards, state standards, or both. While the federal or nationwide requirements are largely broad and subjective, some states have set more quantitative criteria. MA criteria are more robust than those of other programs in terms of distinct travel time and distance for a defined set of providers, but CMS does not assess whether those providers are truly available to enrollees. CMS’s goal has been to set objective measures of network adequacy. Certain programs or states have demonstrated that quantifiable criteria can also extend to measures of provider availability, such as appointment wait time limits.", "One of CMS’s key MA oversight responsibilities is to ensure that MAOs maintain a network of providers sufficient to meet the needs of all their enrollees. However, CMS limits its annual application of its network adequacy criteria to only those provider networks in counties that MAOs propose to enter in the upcoming year—less than 1 percent of all networks. To facilitate its review of these networks, CMS has established standardized data collection via an automated system. However, the agency performs minimal validation of network data. MAO applicants cannot serve counties without meeting all network criteria, but they may seek—and often receive—exceptions from CMS.", "While CMS has established criteria defining network adequacy, the agency does not ensure that every network is meeting its current requirements. Instead, it has chosen to collect data for only a minimal subset of MAO networks during the annual application process. Rather than assessing all MAO county-based provider networks against its network criteria, CMS limits its use of the criteria by focusing exclusively on networks in counties that MAOs propose to enter in the upcoming year. During the annual MA application process, CMS’s criteria are only applied against proposed networks, not networks in counties that MAOs already serve. For contract years 2013 through 2015, the agency reviewed over 9,000 proposed networks. CMS approved about half of these networks, while the rest were either withdrawn by MAOs or denied by CMS. (See table 1.) The approval rate varied greatly across the 10 CMS regional offices, ranging from 68 percent at the Atlanta regional office to 22 percent at the San Francisco regional office.\nThe proposed county-based provider networks that CMS approves constitute a fraction of MAO networks and account for a small percentage of enrollees. For contract years 2013 through 2015, new provider networks comprised 0.38 percent of all networks and served 1.99 percent of all MA enrollees during their initial year of operation (see table 2). The small scope of CMS’s network adequacy reviews raise questions as to the agency’s internal controls. For an agency to achieve its objectives, federal internal control standards provide that management must obtain relevant data in a timely manner based on identified information requirements. However, CMS only collects network information for proposed MAO networks during the annual application process.", "CMS has established a standardized process for collecting data on proposed county-based MAO provider networks. Each January, CMS posts on its website Health Services Delivery (HSD) reference tables that contain network adequacy criteria thresholds for each county. CMS requires MAO applicants to report network data using the HSD table format and transmit the data through the Health Plan Management System (HPMS)—the primary communication tool between CMS and MAOs. The HSD table template has fields to record each network provider’s name, address, provider type, medical affiliation, and employment status. Before submitting their applications to CMS in February, MAOs are able to determine the adequacy of their provider networks by comparing their HSD table data against the thresholds in the HSD reference tables. For example, MAOs planning to enter Cook County, Illinois, for contract year 2016 know from the HSD reference tables that they need at least 92 primary care providers within 10 minutes or 5 miles from at least 90 percent of beneficiaries’ homes in that county, and also know the thresholds for all other required provider types. If MAOs do not meet all the thresholds in Cook County, they may choose, among other options, to contract with more providers to build an adequate network or to not enter that county.\nAfter MAOs submit their applications, CMS evaluates their provider networks using an automated system. Through HPMS, CMS performs automated checks, which rely on the HSD reference tables, to determine whether provider networks meet each threshold and then generates two reports on the data errors detected. One report lists problematic address information, such as blank fields, duplicative records, and street addresses and zip codes that are not recognized by the system. The other HPMS report lists all providers shown as supporting the threshold for more than one type of specialty care within a given network. CMS regional office officials praised the automated checks for being far more thorough than the manual review process used before contract year 2011 and for requiring significantly less of their time. Beyond these system- generated reports, CMS does little else to assess the accuracy of the HSD data that MAOs submit.\nWhile the HPMS reports identify certain data errors and anomalies, challenges remain with verifying MAO provider network data submissions. In its review of provider submissions, Lewin raised concerns about the validity of addresses in the HSD tables and the overstatement of beneficiary access. In addition, CMS and MAOs both told Lewin they had difficulty verifying provider data. They noted that commonly used verification resources, such as public Medicare websites for comparing physicians or hospitals against quality and cost ratings, often contain incorrect data due to lags in updates and poor provider self-reporting. To address these concerns, Lewin recommended that CMS develop data verification tools to facilitate the accuracy and consistency of application data submissions and HSD table reviews and include more information on the strengths and limitations of commonly used verification resources in its standard operating procedures. While CMS officials said they developed a tool during the contract year 2015 application cycle to facilitate the consistency of submissions, they told us they have no plans to develop additional tools to determine the accuracy of submissions or add information to the standard operating procedures.\nFederal internal controls call for management to obtain relevant data that have a logical connection with, or bearing upon, identified information requirements; be reasonably free from error and bias; and faithfully represent what they purport to represent. For effective monitoring, management must also evaluate the reliability of data sources. However, CMS does not check the HSD data against other data sources to identify inconsistencies and other indications of error. Officials from one CMS regional office questioned the purpose of cross-checking the HSD data, but officials from another regional office noted that they occasionally call providers and perform Internet searches to verify the data. The lack of data validation is notable because provider directories, which contain the same elements as the HSD data, have been proven to be inaccurate, as previously discussed. Because the HSD data and provider directories are populated from the same source, according to the trade organization that represents MAOs, the HSD data likely contain the same inaccuracies.\nInaccuracies in provider directories—and, as an extension, HSD tables— may be attributable to both MAOs and providers. According to the trade organization that represents MAOs, it is a challenge for health plans to ensure that provider directories are up-to-date and accurate because providers often do not notify the plans of changes, such as retirements and office relocations, in a timely manner. The American Academy of Dermatology representatives explained that MAOs are responsible for updating provider directories, in part because MAOs use networks to attract consumers and sell their insurance policies. Representatives from two medical associations reported that they were not aware of any MAO contract requirements regarding updates to directory information. The American Academy of Ophthalmology representatives told us that most providers inform MAOs of address changes, for example, but such notices are not always acted upon by the MAOs. To eliminate the hassle of notifying multiple MAOs of changes in office hours or locations, the representatives proposed the construction of an electronic portal accessible by all health plans to allow providers to update their information in one place. Medical association representatives also contended that MAOs are in a better position to detect when directories need to change, because the absence of claims for a specific period, such as 30 days, would indicate whether a provider has, for example, moved or died. In CMS’s 2016 Final Call Letter, the agency reported plans to conduct direct monitoring of online provider directories to verify the information MAOs include about network providers. The agency also indicated it will consider requiring MAOs to provide, and regularly update, network information in a standardized, electronic format for eventual inclusion in a nationwide provider database readily available to beneficiaries and others.", "March MAOs whose provider networks do not meet CMS’s network adequacy criteria are able to request exceptions from the criteria.\nCMS allows MAOs whose proposed networks fail to meet the adequacy criteria for a particular provider type in a county to request an exception from the criteria. After completing the automated checks, CMS provides an opportunity in March to MAOs whose provider networks did not pass the checks to request exceptions from its network criteria along with a justification. If MAOs’ provider networks do not initially pass the automated checks, CMS notifies them and requests updated data, if applicable. HPMS then generates a report that MAOs can use to prepare exception requests for each provider type deemed insufficient. According to CMS, exceptions are intended to be granted under limited circumstances, primarily when its network criteria are not in line with local patterns of care. CMS’s standard operating procedure for reviewing exceptions states that they may be allowed when an insufficient number of providers are located in or near the county, the pattern of care in the county does not support the need to have the required number of providers, or the services of the provider type can be rendered by another provider type.\nFor each exception request, CMS requires MAOs to submit a detailed plan for ensuring access to the services of the provider type for which the exception is being made. MAOs must identify non-contracted providers in or near the county, explain why they have not contracted with those providers, specify the local patterns of care issues they identified, propose another provider type to offer services, and describe each data source used. Along with this information, MAOs must upload in HPMS lists of the network providers that can provide the services of the provider type and the closest network providers of the provider type. CMS’s policy is that an MAO’s refusal to contract with a provider or a provider’s refusal to contract with an MAO is not a valid reason for an exception.\nApril CMS manually reviews the exception requests from MAOs.\nIn April, regional offices—which CMS officials said best understand their markets—review and grant exception requests on a case-by-case basis. Regional office reviewers manually scrutinize each request for the counties in their region. While the Atlanta, Boston, Kansas City, and Philadelphia regional offices approved all the exception requests they reviewed during contract years 2013 through 2015, the San Francisco and Seattle regional offices each approved approximately 80 percent. According to the reviewers we interviewed, it can take 5 minutes to up to a day to review each one, depending on the experience and workload of the reviewer, the complexity and thoroughness of the exception request, and the availability of providers in a county. The reviewers may use Internet search engines and mapping tools to confirm whether providers are at the listed location and may call providers to determine the local pattern of care in a county. Some reviewers told us they also examine state and local medical board information, while others said they perform only spot checks for well-written exception requests. Asked if they considered analyzing Medicare FFS claims data for patterns of care, reviewers from one regional office said such analyses would not be helpful in determining where a county’s beneficiaries customarily obtain health services. They explained that determining the local pattern of care can be subjective and an understanding of the geographic area where exceptions are requested is all that is needed.\nCMS has approved most exception requests of those it has reviewed over the past 3 years. For contract years 2013 through 2015, CMS reviewed approximately 2,300 exception requests and approved 91.8 percent. For contract year 2015, CMS approved all but 1 of the 641 exception requests it reviewed. (See table 3.)\nWhile exceptions may be warranted under certain conditions, CMS never revisits its approved exceptions to see if they continue to be justified. Although provider networks and provider markets are constantly changing, exceptions that are based on a point in time hold indefinitely. Moreover, CMS officials noted that regional office account managers are often not aware of past exceptions that have been granted to existing MAOs.\nThe number of exception requests CMS has reviewed has varied greatly across different types of counties. For contract years 2013 through 2015, less densely populated counties accounted for most exception requests. Approximately 23 percent of the requests were for provider types in counties with extreme access considerations, 24 percent in rural counties, 18 percent in micro counties, 27 percent in metro counties, and 8 percent in large metro counties. Although the time and distance requirements are more generous in less populated areas, the pattern of care may be unusual. Some provider types do not exist in certain rural areas, according to CMS officials, and it may not be unusual for beneficiaries to travel far distances to receive specialty care.\nIn addition, since contract year 2013, the number of exception requests and the CMS approval rate have varied widely across provider types. Of the 2,304 exception requests CMS reviewed over the past 3 years, specialists accounted for 78 percent, facilities for 20 percent, and primary care providers for 2 percent. While the CMS approval rate for exception requests was 78 percent for facilities, it was 95 percent and 96 percent for specialists and primary care providers, respectively. The 4 types of providers with the greatest number of exception requests were gastroenterology (154), dermatology (151), outpatient dialysis facilities (132), and pulmonology (102). The CMS approval rate ranged from 12 percent for chiropractors to 100 percent for infectious diseases, physiatry and rehabilitative medicine, neurosurgery, and 12 other provider types. In addition to chiropractors, the approval rate was notably low for outpatient dialysis facilities (40 percent) and skilled nursing facilities (67 percent).\nApril-May CMS approves or denies MAOs’ applications depending on the adequacy of their provider networks.\nAfter the manual review of exception requests ends in late April, CMS either approves the requests or issues a notice of intent to deny the requests. MAOs whose exception requests are not approved have the opportunity to submit revised requests in May, and then CMS makes its final decisions. The regional office reviewers we interviewed noted that they commonly deny requests from MAOs that do not follow the instructions, provide poorly written responses, or do not provide enough information on the local pattern of care. The reviewers explained that many denials are the result of MAOs trying to expand too quickly or being pressured by deadlines. MAOs may choose to withdraw their application for a particular county so that CMS does not deny their entire application.", "CMS’s regional account managers hold regular discussions with MAOs during which network adequacy issues are sometimes raised, but CMS does not routinely examine MAO information on provider networks to assess ongoing compliance with criteria. CMS recently added a requirement that MAOs disclose their plans to significantly narrow their networks, but the agency has not defined what it means to have a significant change, allowing each MAO to determine the need for disclosure. CMS further expects that evidence of problems related to any undisclosed network narrowing to appear as complaints to the agency, even though some complaints may not be accounted for.", "As part of its broader MAO oversight activities, CMS regularly holds teleconferences with MAOs, where network issues may or may not be discussed. The agency’s regional account managers monitor compliance with various aspects of MA contracts—such as issues with provider payments—but network adequacy is not always an item for discussion. At the regional offices we interviewed, CMS account managers met with MAOs in varying frequencies, with some meeting weekly and others meeting monthly. Officials from three of the five regional offices told us that account managers regularly prompt MAOs to discuss network issues, such as pending provider contract negotiations; officials at the remaining two told us that network adequacy discussions occur only on an as- needed basis.\nMoreover, CMS does not routinely collect or review provider network information from MAOs not subject to the application process, leaving nearly all—over 99 percent—of ongoing county-based provider networks unexamined against the current MA criteria. Internal control standards stipulate that agencies should establish and operate ongoing monitoring activities to assess quality performance over time; the standards also note that operating information is needed to determine whether agencies are achieving compliance with requirements under various laws and regulations. Because a plan’s network providers and enrollees change from year to year, the lack of regular review means CMS cannot be assured that MAO networks continue to be adequate, providing sufficient access for enrollees. CMS also never examined the networks that existed before 2011 against the current network adequacy criteria, and as a result, lacks the requisite information needed for proper oversight of network adequacy in the MA program. Lewin analyzed samples of these pre-existing networks and found that most, but not all, of the provider network specialties met current adequacy requirements. Lewin further concluded that more regular assessments of provider networks against the current network adequacy criteria could help ensure that MA plans continue to meet network adequacy criteria and would not be overly burdensome for MAOs. Lewin recommended to CMS that the agency develop a rigorous network monitoring program to ensure that all MAO networks—not just those entering a county for the first time—continue to meet network adequacy criteria. For example, Lewin suggested that CMS consider evaluating each MA plan on a cyclical basis, such as every 3 years. Additionally, officials from two regional offices noted that more regular assessments of adequacy based on HSD data submissions would be an effective monitoring tool. CMS told us that it does not have plans underway to review all networks for adequacy on a cyclical basis, but the agency has announced plans to include network adequacy as a part of its audit process on a pilot basis beginning in late 2015.", "Under the monitoring processes that CMS has put in place, MAOs must disclose efforts to significantly narrow provider networks, but the agency allows MAOs discretion in determining whether this disclosure is necessary. As of contract year 2015, MAOs must notify CMS at least 90 days prior to significant changes involving provider contract terminations. In deciding whether a network reduction is significant, CMS has not provided any explicit criteria but directed MAOs to take a conservative approach. According to CMS, leaving the definition of significant to each MAO stems from the lack of consensus among stakeholders—including beneficiary advocates and professional associations—about how to define a significant network change.\nIn the event of a self-disclosed significant change, CMS requires MAOs to provide information demonstrating their continued compliance with network adequacy criteria, such as through the submission of updated HSD tables or automated reports. In addition, it requires MAOs to develop and submit a plan for ensuring continuity of care for affected enrollees. If CMS determines that access for a large number of enrollees has been impaired as a result of a significant network reduction, the agency may approve an SEP. This would allow those enrollees to switch MAOs or enroll in FFS Medicare outside the annual open election period. To make this determination, CMS takes into account the number of enrollees affected, the size of the area served, the timing of the termination, and information related to the enrollee notification, but also requires that enrollees demonstrate that they were affected by the loss of their network provider. Some CMS officials we spoke with asserted that MAOs have an incentive to self-disclose major provider network reductions because they are subject to more severe compliance actions if they are not forthcoming about changes impacting access to care. However, from 2011 to early 2015, CMS had taken only one compliance action—issuance of a warning letter—against an MAO for a network adequacy issue.\nOther MAOs, including Humana and Blue Cross Blue Shield affiliates, have conducted similar provider network narrowing efforts. UHC is presented here because it was the largest MAO in 2014, accounting for 20 percent of total MA enrollment.", "CMS relies on complaints it receives to identify any problems related to network changes that are not identified through MAO self-disclosure, but does not routinely review complaints made to MAOs directly or data on out-of-network service utilization. CMS tracks complaints from beneficiaries and providers made to its Medicare call center (1-800- MEDICARE), State Health Insurance Assistance Programs, congressional offices, or directly to its regional offices. Complaint information is compiled in CMS’s Complaints Tracking Module (CTM) and categorized by topic before being assigned to a regional office caseworker. Agency officials told us that any network adequacy issues not already disclosed by MAOs would be reflected as a spike in complaints reported by MA enrollees or providers. As a part of the agency’s ongoing monitoring responsibilities, CMS account managers are directed to analyze trends in the CTM data and investigate those trends that they believe need to be addressed, particularly as they relate to beneficiary access issues. Until recently, network adequacy was not a separate category in the CTM but may have been included under other categories, such as one for problems with plan enrollment. In 2014, CMS created a distinct category—”provider or network issues”—to better monitor trends in network-related complaints, but agency officials acknowledge that such complaints may still appear in several other categories.\nFurthermore, CMS does not routinely ask MAOs about the complaints they receive through their customer service lines or information about out- of-network utilization. In the event an MAO discloses significant network changes, CMS may follow up about the types of complaints the MAO subsequently receives, but the agency does not regularly do so. In addition, CMS does not collect data from MAOs on how frequently enrollees claim care from out-of-network providers, which would provide account managers an additional tool to evaluate access in provider networks.", "CMS requires that MAOs make a good faith effort to give enrollees advance written notice when a provider contract is terminated, but has not established information requirements for those notices. MAOs are expected to send a letter to affected enrollees at least 30 calendar days before the effective date of termination, and CMS suggests a longer notification period in the event of a significant change to a provider network. CMS issued guidance in its 2015 Final Call Letter that suggests that, as a best practice, MAOs include information on in-network providers to replace terminated providers in their notification letters to enrollees. CMS also recommended that notices indicate how enrollees can request continuation of ongoing medical care—such as chemotherapy or post-operative rehabilitation—from the enrollee’s current provider at in-network rates for a limited period of time.\nUnlike some other beneficiary communications, CMS has not developed a model template or list of required content for these notices. The agency maintains standards for other MAO material distributed to beneficiaries to ensure clarity and completeness. For example, CMS developed models for MAO marketing materials, including provider directories. MAOs may use a directory format different from the model directory, but it must contain, at a minimum, all the same information elements required in the model directory. Similarly, MA plans offering prescription drug coverage must mail standardized annual notices of change to enrollees that contain CMS-required elements about formularies and pharmacies. Yet, CMS does not require that enrollee notifications of provider terminations include all pertinent information in an understandable format.\nFurthermore, CMS does not regularly review sample notices of terminated providers sent to enrollees. For instance, officials at one regional office told us that MAO account managers would review enrollee notification letters only in the event of significant terminations. Officials at four other regional offices did not identify this as a triggering event for review. CMS officials explained that these notifications are considered ad hoc communications and are classified as materials that are not subject to marketing review.\nCMS regulations prohibit MAOs from engaging in marketing activities, including communications about provider networks, that could mislead or confuse Medicare beneficiaries. In addition, internal control standards state that management should ensure there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency achieving its goals. Because CMS neither requires specific information elements nor reviews notifications, enrollees may receive inconsistent and potentially confusing or inaccurate information when their providers are terminated from MAO networks. For example, communication we examined indicated that enrollees had been told by their MAO to select a new provider long before the effective termination date for their current provider. An MAO wrote to a primary care physician on May 21, 2014, stating that his contract with the MAO would end May 11, 2015, the anniversary date of the agreement. Then the MAO sent a letter to that physician’s patient, dated June 3, 2014, stating that he must select a new primary care provider by July 8, 2014, or one would be chosen for him. Thus, although the enrollee could have continued receiving care from his network physician for another 10 months, the MAO shifted the physician’s patients to other providers.", "CMS is responsible for ensuring that Medicare beneficiaries can access timely care. To do this effectively, the agency must set appropriate MA network adequacy criteria, oversee MAOs’ adherence to its requirements, and ensure that enrollees are properly notified about MAO network changes. Yet, the rules and processes the agency has put in place— which lack certain elements used in other managed care programs and outlined in federal internal controls—cannot reasonably ensure that MAO networks continue to meet the needs of MA enrollees.\nCMS has established network adequacy criteria that put a premium on the number of providers in a network within county-based time and distance standards. The advantage of such quantitative criteria is that they can be operationalized through automated processes. However, unlike those of some other managed care programs, the CMS criteria ignore measures of provider availability. CMS does not consider whether an MAO’s contracted providers are part-time, work at their listed locations, or are taking new patients. As a result, provider networks may appear to regulators and beneficiaries as more robust than they actually are if not all providers are open for business.\nUnder current CMS policy, the agency cannot be sure that all MAO networks either fully meet its current criteria or qualify for an exception. Although Medicare contracts with MAOs every year, CMS does not require that MAOs demonstrate compliance with network adequacy criteria every year. Instead, CMS performs systematic reviews of network adequacy for only a small fraction of MA networks, relying on information that is supplied by MAOs but is not fully checked for accuracy. For the vast majority of plans, MAOs annually attest that they have an adequate network, and CMS accepts that statement without verification. The agency’s approach to monitoring existing networks is largely reactive, relying on MAO disclosure of adequacy issues and beneficiary and provider complaints. Unless CMS verifies provider information submitted by MAOs and periodically requires evidence of compliance, for example every 3 years, the agency cannot be confident that MAOs are meeting network adequacy criteria.\nFurthermore, while CMS requires that MAOs make a good faith effort to notify enrollees in advance of a provider termination, the agency has no standards for those notices. Also, unlike some beneficiary communication and plan marketing materials, MAO notification letters are not subject to any minimum information requirements. Without greater standardization, the agency cannot ensure that MAO communications are clear, accurate, and complete, and MA enrollees remain at risk of receiving potentially confusing information.", "To improve its oversight of network adequacy in MA, we recommend that the Administrator of CMS augment MA network adequacy criteria to address provider verify provider information submitted by MAOs to ensure validity of the Health Services Delivery data; expand network adequacy reviews by requiring that all MAOs periodically submit their networks for assessment against current Medicare requirements; and set minimum requirements for MAO letters notifying enrollees of provider terminations and require MAOs to submit sample letters to CMS for review.", "We provided a draft of this report to HHS for comment. The agency provided written comments, which are printed in appendix II. In addition, CMS provided technical comments, which we incorporated as appropriate.\nHHS concurred with our recommendations. In its comment letter, the agency outlined several actions it plans to take, or is considering, to strengthen its oversight of MAO network adequacy. Because these efforts have yet to be implemented, it is too early to determine whether they will fully address the issues we identified.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from its date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Health and Human Services, and the CMS Administrator. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "The Centers for Medicare & Medicaid Services (CMS) uses two criteria for determining network adequacy in Medicare Advantage (MA): minimum number of providers and maximum travel time and distance. There are several key elements CMS uses each year to update its requirements. One key element is the provider types that MA organizations (MAO) must include in their networks. Lewin—the agency contractor that developed the criteria—explained that CMS had an original list of provider types that it reviewed to see if the categorizations were appropriate. They found that CMS’s list was mostly aligned with frequently used facility types. The 55 provider types required in contract year 2016 are listed in table 4.\nFor the minimum number of providers, CMS requires that MAOs demonstrate that their networks have a sufficient number of providers based on county characteristics. The five county classifications are based on population and density estimates from U.S. Census Bureau and Office of Management and Budget data. A county must meet both the population and density indicators to be included as that county type. CMS then multiplies three variables to determine the minimum number of providers. The first variable is the 95th percentile of MA market penetration rates for each county type. CMS chose the 95th percentile to estimate market share through work conducted by Lewin, which examined the market penetration in managed care and network-based private fee-for-service (FFS) plans. The percentiles are updated each year based on current enrollment. County type classifications and each county’s respective percentile for contract year 2016 are listed in table 5.\nThe second variable in the formula is the number of Medicare beneficiaries—those in MA and FFS—in a specific county. Each year, CMS updates the total number of beneficiaries in each county. This variable is multiplied with that year’s 95th percentile of MA market penetration in the respective county type to determine the number of beneficiaries an MAO could reasonably serve in its initial year in the proposed county. For example, the 95th percentile for metro counties in contract year 2016 was 12.1 percent. For an MAO seeking to enter that county, the 95th percentile (0.121) would be multiplied by the total number of Medicare beneficiaries in the county the MAO proposes to enter to develop the number of beneficiaries the MAO must cover.\nThe third and final variable in the calculation is the established ratios of provider types required per 1,000 beneficiaries for each county type. CMS bases the established ratios on primary and secondary research of utilization patterns and clinical needs of beneficiaries. To calculate the minimum number of each provider type in each county, CMS multiplies the ratio for each provider type by the number of beneficiaries an MAO must cover and then rounds up to the nearest whole number. Table 6 illustrates the calculation for a minimum number of providers for primary care in Muscogee, Georgia, which is a metro county.\nFor maximum travel time and distance, CMS requires that MAOs ensure that their networks meet specific geographic metrics. CMS uses geo- mapping software to determine the distance between the locations of beneficiaries’ addresses and network provider practices. For each county MAOs propose to enter, they must show that at least 90 percent of beneficiaries in that county will have access to at least one provider of each type within CMS’s time and distance criterion for the applicable county type.", "", "", "", "In addition to the contact named above, Rosamond Katz, Assistant Director; Sandra George; David Grossman; Kate Nast Jones; and E. Jane Whipple made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "h0_title h1_title", "h0_full h1_full", "h0_full", "h0_title h4_title h1_full", "h4_full h1_full", "h1_full", "h0_full", "h2_full", "h2_full", "h2_full", "h2_full", "h3_full", "h0_full h3_full h4_full h1_full", "", "", "h0_full", "", "", "", "" ] }	{ "question": [ "What is CMS?", "What are the requirements for MA provider networks?", "What do the MA criteria not reflect?", "How is this criteria different than other network-based health programs?", "Why may the requirements differ across the board?", "What do federal Medicaid managed care rules address?", "What may happen as long as MA provider networks do not take availability into account?", "How does CMS apply network adequacy criteria?", "What did CMS reviews account for from 2013 through 2015?", "How does CMS review all of its networks?", "What does CMS not yet do regarding assessing accuracy of networks?", "What does CMS need to do?", "What does CMS not require from MAOs?", "What did CMS recently require of MAOs?", "How does CMS identify problems?", "Why can CMS not be assured that networks continue to be adequate and provide sufficient access for enrollees?", "What has CMS not yet done?", "Why is this lack of action inconsistent?", "What is the problem with CMS not having a minimum set of required information elements?", "What was GAO asked to do?", "What does this report examine?", "How did GAO get information for this report?", "What interactions did GAO have with CMS to get information?" ], "summary": [ "The Centers for Medicare & Medicaid Services (CMS) is the agency within the Department of Health and Human Services (HHS) responsible for overseeing the Medicare Advantage (MA) program—Medicare's private plan alternative.", "Since 2011, CMS has defined an adequate MA provider network as meeting two criteria: a minimum number of providers and maximum travel time and distance to those providers.", "However, the MA criteria do not reflect aspects of provider availability, such as how often a provider practices at a given location.", "In contrast, other network-based health programs use provider availability measures to assess network adequacy.", "To reflect local conditions, the requirements are specific to different county types and a range of provider types.", "For example, federal Medicaid managed care rules address providers' ability to accept new patients and TRICARE criteria address appointment wait times for active duty servicemembers.", "Without taking availability into account, as is done in some other programs, MA provider networks may appear to CMS and beneficiaries as more robust than they actually are.", "Rather than assessing all county-based provider networks against its criteria, CMS limits its annual application of the criteria to provider networks in counties that MA organizations (MAO)—private organizations that offer one or more health benefit plans—propose to enter in the upcoming year.", "From 2013 through 2015, CMS's reviews accounted for less than 1 percent of all networks.", "To facilitate its review of these networks, CMS has established standardized data collection via an automated system.", "However, CMS does little to assess the accuracy of the network data in applications MAOs submit, even though the submissions contain the same data elements as in provider directories, which have been shown to be inaccurate in a number of government and private studies.", "Until CMS takes steps to verify MAO provider information, as outlined in federal internal control standards, the agency cannot be confident that MAOs meet network adequacy criteria.", "For established provider networks, CMS does not require MAOs to routinely submit updated network information for review, but may learn of any adequacy issues through its broader oversight of MAOs.", "CMS recently required that MAOs disclose efforts to significantly narrow provider networks, allowing MAOs to determine when such disclosure is necessary.", "CMS also relies on complaints it receives to identify any problems related to network changes that are not otherwise identified.", "Because a plan's providers may change at any time, CMS cannot be assured that networks continue to be adequate and provide sufficient access for enrollees until the agency collects evidence of compliance on a regular basis.", "While CMS requires that MAOs give enrollees advance notice when a provider contract is terminated, the agency has not established information requirements for those notices and does not review sample notices sent to enrollees.", "This lack of scrutiny appears inconsistent with the agency's oversight of other Medicare beneficiary communications and with internal controls.", "Without a minimum set of required information elements and a check on adherence to them, the agency cannot ensure that MAO communications are clear, accurate, and consistent.", "GAO was asked to review how CMS ensures adequate access to care for MA enrollees.", "This report examines (1) how CMS defines network adequacy and how its criteria compares with other programs, (2) how and when CMS applies its criteria, (3) the extent to which CMS conducts ongoing monitoring of MAO networks, and (4) how CMS ensures that MAOs inform beneficiaries about terminations.", "GAO reviewed CMS and other guidance on network adequacy, federal regulations, and standards for internal control.", "GAO also interviewed CMS officials and representatives of medical associations and beneficiary advocacy groups, and analyzed CMS data on oversight of MAO provider networks for contract years 2013 through 2015." ], "parent_pair_index": [ -1, -1, 1, 2, 1, -1, -1, -1, -1, -1, 2, -1, -1, 0, -1, -1, -1, 0, -1, -1, -1, 1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 1, 1, 1, 1 ] }
CRS_RL33870	{ "title": [ "", "Introduction", "Most Recent Developments", "The Safe and Drug-Free Schools and Communities Program: Authorizations", "State Grants", "Program Assessment Rating Tool (PART)", "National Programs", "Appropriations and Funding History", "The Gun-Free Schools Act", "Legislation in the 109th Congress", "Legislation in the 110th Congress", "Possible Reauthorization Issues", "Reporting Up-to-Date School Crime Data", "Restructuring Responsibility for Assessing the SDFSCA State Grant Program", "Department of Homeland Security Funding for K-12 Schools", "Underreporting School Crime" ], "paragraphs": [ "", "The 107 th Congress considered and approved reauthorization legislation to amend and extend through FY2007 the Elementary and Secondary Education Act (ESEA) and the Safe and Drug-Free Schools and Communities Act (SDFSCA). The ESEA (and, therefore, the SDFSCA) is likely to be considered for reauthorization in the 110 th Congress.", "For FY2008, the President requested $324.2 million for the program—$100 million for state grants, and $224.2 million for national programs (see \" Possible Reauthorization Issues ,\" below, for the Administration's reauthorization proposals). For FY2007, the President requested $216.0 million for the program that would fund the national programs component only. The President did not request funding for the state grant component (see the discussion below). The House Appropriations Committee, however, recommended $526.0 million, including $310 million for state grants ( H.R. 5647 ), and the Senate Appropriations Committee recommended $492.5 million, which also includes $310 million for the state grant program ( S. 3708 ). For FY2006, Congress appropriated $568.8 million for the SDFSC program. This figure includes $346.5 million for state grants and $222.3 million for national programs. The program continues to operate at FY2006 levels under a continuing resolution through February 15, 2007.\nThis report discusses the 107 th Congress SDFSCA reauthorization and appropriations to fund the SDFSC program. For background information about the program, see CRS Report RL30482, The Safe and Drug-Free Schools and Communities Program: Background and Context .", "The No Child Left Behind Act (NCLBA, P.L. 107-110 ) amended and reauthorized SDFSCA as Part A of Title IV—21 st Century Schools. It authorizes funds for the SDFSC program, which is the federal government's major initiative to prevent drug abuse and violence in and around schools. It awards state grants by formula to outlying areas, state educational agencies (SEAs), and local educational agencies (LEAs) in all 50 states, the District of Columbia (DC) and the Commonwealth of Puerto Rico. Also, funds go to a state's Chief Executive Officer (Governor) for creating programs to deter youth from using drugs and committing violent acts in schools. National programs are supported through discretionary funds for a variety of national leadership projects designed to prevent drug abuse and violence among all educational levels, from preschool through the postsecondary level.", "For FY2002, $650 million was authorized for state grants and such sums as necessary for each succeeding fiscal year through FY2007. Of the funds authorized, 1% or $4.75 million (whichever is greater) is reserved for Guam, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands; 1% or $4.75 million (whichever is greater) is reserved for the Secretary of the Interior to administer programs for Indian youth; and 0.2% is reserved to provide programs for native Hawaiians. The remaining funds are distributed to the states, DC, and Puerto Rico, by a formula of 50% based on school-aged population and 50% based on ESEA Title I, Part A concentration grants for the preceding fiscal year. No state receives less than the greater of one-half of 1% (0.5%) of the total allotted to all of the states or the amount the state received for FY2001, under prior law. If total appropriations for state grants are less than the FY2001 level ($428.6 million), as has been the case in recent years, each state receives an equal proportional share of its FY2006 grant.\nState grant funds in any amount may be redistributed to other states if the Secretary determines that a state will not be able to use the funds within two years of the initial award. Also, a limitation is included stipulating that funds appropriated for national programs may not be increased unless state grant funding is at least 10% more than the previous fiscal year's appropriation. Language in the FY2005 Consolidated Appropriations Act negated the \"limitation\" provision for FY2006. Since the FY2006 national programs appropriation was less than its FY2005 appropriation, however, the limitation did not appear to apply. For FY2007, the Administration did not suggest funding for state grants, so the limitation provision would not need to be considered.\nOf the total state allotment, 20% goes to the Governor to award competitive grants and contracts to LEAs, community-based groups, other public entities, private groups and associations. The Governor may use not more than 3% of the funds for administrative costs.\nAn SEA must distribute at least 93% of its allotment to LEAs for drug and violence prevention and education programs and activities. Of those funds, 60% are allocated based on the relative amount LEAs received under ESEA Title I, Part A for the previous fiscal year, and 40% are based on public and private school enrollments. Also, of the amount received from the state, LEAs may use not more than 2% for administrative costs.\nSEAs may use up to 3% of their allotments for administering the program. In FY2002, they also could have used (in addition to the 3% for administrative costs), 1% of their allotment (minus funds reserved for the Governor) to implement a uniform management information and reporting system (UMIRS). Funds could have been used directly or through grants and contracts to create the UMIRS, which was designed to collect information on truancy rates; the incidence, seriousness, and frequency of violence and drug-related crimes that resulted in suspending and expelling students in elementary and secondary schools in a state; the kinds of curricula, programs, and services provided by the Governor, SEAs, LEAs, and other fund recipients; and the incidence and prevalence of drug use and violence among minors, age of onset of such behavior, and the perception of health risk and social disapproval for such behavior. SEAs may use not more than 5% of allotted funds for state activities for: planning, developing, and implementing capacity building; providing technical assistance and training, evaluation, and program improvement services; and for coordinating activities for LEAs, community-based groups, and other public and private entities.", "PART is an instrument that was developed by the Administration to examine the performance of certain programs across federal agencies. In 2002 and in 2006, the state grants component of the SDFSC program was rated by the instrument. The state grants component was found to be \"ineffective\" because ED was unable to demonstrate that those programs worked and because state grant funds were judged to be distributed too thinly to support quality interventions. The Administration determined that the program provided approximately 64% of LEAs with funding that was less than $10,000 per year, which it concluded was typically too small to conduct general and effective drug prevention and school safety programs. Also, it was decided that the state grants program did not have a track record producing measurable or positive outcomes. Because of the PART assessment and fiscal constraints affecting the FY2007 budget, the Administration proposed to terminate the state grants program in order to fund what it considered to be higher-priority programs, including several SDFSC national programs.\nPART determined that the national program component of SDFSC held more promise in achieving important results and in helping to enlarge the nation's knowledge base on effective methods and actions related to drug and violence prevention. The Administration believed that national programs provided direct support to select LEAs in sufficient funding amounts potentially to be able to make a difference in such programs and would allow grantees and independent evaluators to assess progress, hold projects accountable, and measure the effectiveness of such interventions.\nThe Department of Education explained that the department's strategy to determine whether positive outcomes were occurring as a result of the state grants program was to use national survey data from the Centers for Disease Control and Prevention's Youth Risk Behavior Surveillance System. It will use these data along with data that reveal the extent SDFSC state grant recipients implement research-based programs, to determine how widespread teen drug use and violence are in the nation. Also, ED is conducting an evaluation \"using rigorous methodology for measuring the impact of promising interventions, and supporting grants and technical assistance to help States improve the collection, analysis, and use of data to improve the quality, and report the outcomes, of their SDFSC programs.\"", "The authorization for national programs is such sums as necessary for FY2002 through FY2007. Funds available under national programs allow the ED Secretary to consult with the Department of Health and Human Services Secretary, the Director of the Office of National Drug Control Policy (ONDCP), and the Attorney General to administer programs aimed at preventing violence and illegal drug use among students and promoting their safety and discipline. Also, from national program funds, up to $2 million may be reserved for evaluating the national impact of the SDFSC program, and an amount necessary is reserved to continue the Safe Schools/Healthy Students (SS/HS) initiative. In FY1999, the National Coordinator Initiative was created under national programs allowing LEAs to recruit, hire, and train persons to serve as SDFSC program coordinators in middle schools. ED officials believed that middle school students were at the age where they were most likely to begin experimenting with drugs and becoming more involved in violence and crime. NCLBA expanded the coverage of this permissive activity for national coordinators to serve as drug prevention and school safety program coordinators in all schools with notable drug and safety problems. Funding for this initiative, however, was terminated in FY2004.\nNational program funds may be made available as formula grants to states with 50% of allotted funds based on school-aged population and 50% based on ESEA Title I, Part A concentration grants for the preceding fiscal year. No state would receive less than one-half of 1% (0.5%) of the total allotted to all of the states. Competitive grants may be awarded, in consultation with the Administrator of the Substance Abuse and Mental Health Services Administration (SAMSHA, within HHS), to LEAs allowing school districts to develop and implement programs to reduce alcohol abuse in secondary schools. In addition, grants may be awarded to LEAs, non-profit community-based groups, or to a partnership between an LEA and such an organization for assistance in creating and supporting mentoring programs and activities for children with greatest need in middle schools to assist them in successfully making the transition to secondary school.\nOther permissive initiatives authorized under national programs include:\nallowing the ED Secretary to make grants to LEAs and community-based groups to assist localities most directly affected by hate crimes; creating a School Security Technology and Resource Center at the Sandia National Laboratories in partnership with the National Law Enforcement and Corrections Technology Center—Southeast and the National Center for Rural Law Enforcement in Little Rock, Arkansas, to be administered by the Attorney General as a resource for LEAs to assess school security, develop security technology, evaluate and implement such security, and to provide technical assistance for improving school security; and establishing a National Center for School and Youth Safety to be jointly created by the ED Secretary and the Attorney General to provide emergency assistance to local communities in response to school safety crises, to establish an anonymous student hotline so students can report possible violent behavior, to provide consultation to the public regarding school safety, to compile information about best practices related to school violence prevention, and to provide outreach to rural and impoverished communities.", "For FY2008, the President requested $324.2 million for the SDFSC program—$100 million for state grants and $224.2 million for national programs. For FY2007, the President requested $216.0 million for the SDFSC program. As in his FY2006 request, the President did not request funding for state grant programs, but only for the national program component. The House Appropriations Committee, however, recommended a total of $526.0 million, including $310 million for state grants and $216.0 million for the national programs ( H.R. 5647 ). The Senate Appropriations Committee ( S. 3708 ) recommended $492.5 million for the SDFSC program ($276.5 million more than requested, but $76.3 million less than the FY2006 appropriation). The Senate Committee's recommendation also includes $310 million for the state grant program, but $182.5 million for the national programs ($39.9 million less than the FY2006 appropriation). For FY2006, the President requested $317.3 million for the SDFS program (also only for national programs). Congress, however, appropriated $568.8 million, which included $346.5 million for state grants and $222.3 million for national programs.\nThe Administration noted that the reason it did not request state grant funding was because of fiscal constraints affecting the FY2007 budget, and because a PART review (discussed above) found that the SDFSC state grants component was \"ineffective.\" Also, for FY2007, the President requested $216.0 million for national programs, which is $6.3 million less than the FY2006 appropriation.\nFor FY2008, the President did not request funding for the mentoring program. For FY2007, the President requested $19 million for the mentoring program (within the national programs' total) because FY2007 was the final year of a two-year phase-out of the mentoring program, which the Administration believed would have met its objectives. To support the FY2007 final year for the program, the House and Senate Appropriations Committees both recommended $19 million as requested. For FY2006, Congress appropriated the exact amount the President requested ($49.3 million) for mentoring. A required 1% across-the-board discretionary FY2006 budget reduction, however, slightly lowered mentoring funding to $48.8 million.\nUnder national programs, the Administration did not request funding for the Alcohol Abuse Reduction (AAR) program from FY2005 through FY2008, because it was believed to be duplicative of other SDFSC-funded activities. Congress, however, appropriated $32.7 million for AAR for each of FY2005 and FY2006. With the FY2006 required 1% across-the-board rescission, funding was slightly reduced for the program, to $32.4 million. For FY2007, the House Appropriations Committee did not recommend funding for AAR. The Senate Appropriations Committee, however, recommended $32.4 million for AAR, the same as the FY2006 appropriation. The SDFSC program continues to operate at FY2006 levels under a continuing resolution through February 15, 2007.\nTable 1 presents an appropriation funding history for the program.", "The Gun-Free Schools Act (GFSA), which was Title XIV, Part F of the ESEA, was incorporated as part of SDFSCA because of its close relationship with the SDFSC program. This provision calls for each state receiving funds under the No Child Left Behind Act to have a law that requires LEAs to expel for one year any student bringing a weapon to school. The chief administering officer of a LEA, however, can modify the expulsion requirement on a case-by-case basis. GFSA does not prevent a state from allowing a LEA to provide educational services to an expelled student in an alternative setting.\nEach LEA requesting SEA assistance through GFSA funds must assure the state that the LEA is complying with requirements concerning the expulsion of students mentioned above, and must describe the circumstances that led to the expulsions, including the school's name, the number of students expelled, and the type of firearms involved. Each SEA must report the information received from the LEA annually to the ED Secretary. LEAs can not receive GFSA funds unless they have a policy requiring that any student who brings a firearm or weapon to school is reported to the criminal justice or juvenile delinquency system.\nGFSA requirements do not apply to a firearm that is lawfully stored inside a locked vehicle on school property, or if the firearm will be used for LEA approved or authorized activities, and the LEA adopts appropriate safeguards to guarantee student safety.", "During the 109 th Congress, several bills were introduced related to school safety and violence prevention. All of the bills were referred to the appropriate Committee, but died at the end of the 109 th Congress, except one ( H.R. 3010 ). H.R. 3010 , the Department of Labor, Health and Human Services, and Education and Related Agencies Appropriations Act of 2006 ( P.L. 109-149 ) was amended by the Senate to require the ED Secretary to conduct a study evaluating the effectiveness of violence prevention programs that receive funding under SDFSCA. This amendment, however, was not included in the conference agreement and did not become law. Furthermore, there was no similar provision included by the House. Another amendment to H.R. 3010 was introduced on the Senate floor to increase funding for the SDFSC program, but was ruled out of order by the chairman.\nThe other measures introduced were H.R. 283 , the Bullying and Gang Prevention for School Safety and Crime Reduction Act of 2005; H.R. 284 , which would have amended SDFSCA to include bullying and harassment prevention programs; H.R. 3655 , the School Violence Prevention Act of 2005; H.R. 5295 , the Student and Teacher Safety Act of 2006; S. 1974 , the Drug Free Varsity Sports Act of 2005; and S. 4028 , Fighting Gangs and Empowering Youth Act of 2006.\nThe Bullying and Gang Prevention for School Safety and Crime Reduction Act of 2005 ( H.R. 283 ) was introduced by Representative Sanchez on January 6, 2005. Referred to the House Education and the Workforce Committee and the House Judiciary Committee, the bill would have amended SDFSCA specifically to cover bullying and gang prevention as well as drug and violence prevention. Also, the Omnibus Crime Control and Safe Streets Act of 1968 would have been amended (Sec. 1801 relating to Juvenile Accountability Block Grants) to create and maintain accountability-based programs designed to enhance school safety that could include research-based bullying and gang prevention programs.\nH.R. 284 was introduced on January 6, 2005, by Representative Shimkus (with 46 cosponsors) to amend SDFSCA to include bullying and harassment prevention programs. It was also referred to the House Education and the Workforce Committee. The legislation would have included the terms bullying and harassment under the definition of violence, and provided for bullying and harassment prevention programs.\nThe School Violence Prevention Act of 2005 ( H.R. 3655 ) was introduced by Representative Baca on September 6, 2005, and referred to the House Education and the Workforce Committee. The bill directed the ED Secretary to review and revise the SDFSCA Principles of Effectiveness guidelines to improve state and local prevention programs, and to ensure that the guidelines met the findings of a 2002 study prepared for ED.\nH.R. 5295 , the Student and Teacher Safety Act of 2006, was introduced on May 4, 2006, by Representative Geoff Davis, and referred to the House Education and the Workforce Committee. The House passed the measure by voice vote on September 19, 2006. On September 20, it was received in the Senate and referred to the Health, Education, Labor, and Pensions (HELP) Committee. The act would have required LEAs to have policies in effect that would allow full time teachers or officials to search students on school property who were under reasonable suspicion (based on professional opinion and judgment) to ensure that the school and students would remain free from the threat of weapons, illegal drugs, or dangerous materials. Furthermore, the bill stated that any LEA that did not comply with those requirements would have been denied SDFSCA funds after FY2008.\nThe Drug Free Varsity Sports Act of 2005 ( S. 1974 ) was introduced by Senator Bill Nelson on November 8, 2005 and referred to the Senate HELP Committee. The legislation directed the ED Secretary (acting through the Office of SDFS) to award competitive grants to SEAs to conduct statewide pilot programs to test high school students for performance-enhancing drug use.\nThe Fighting Gangs and Empowering Youth Act of 2006 ( S. 4028 ) was introduced by Senator Menendez on September 29, 2006 and referred to the Senate Judiciary Committee. The bill would have reauthorized SDFSCA and increased the state grants authorization level from $650 million to $700 million for FY2007, and would have authorized $400 million for national programs for FY2007. The bill would have authorized not less than $40 million for the National Coordinator Initiative for each fiscal year stipulated, and would have required LEAs to hire individuals who were gang prevention coordinators as well as drug prevention and safety program coordinators. Furthermore, for mentoring program grants, the bill would have required the ED Secretary to reserve not less than $50 million to award such grants. It would have stipulated that when awarding competitive grants for mentoring programs, the ED Secretary would give priority to each eligible entity that served elementary and middle school children with greatest need who lived in rural and high crime areas, and lived in troubled homes, or attended schools with violence problems. The measure also would have added an Anti-Gang Discretionary Grant, stipulating that the ED Secretary reserve not less than $50 million to award competitive grants to nonprofit groups so they could create programs to assist public elementary and secondary schools in providing an innovative way to combat gang activity in the school and surrounding community. Priority would have been given to applicants describing programs targeting teens living in a community with a crime rate above the average crime level of the state in which the community was located.", "One bill has been introduced thus far in the 110 th Congress related to SDFSCA. H.R. 354 , the Safe Schools Against Violence in Education Act (SAVE Act), introduced by Representative McCarthy on January 9, 2007, would amend the ESEA requiring states to allow a student attending a public elementary or secondary school \"that does not have a safe climate for academic achievement,\" or who becomes a violent crime victim on school property, while riding a school bus, or attending a school function, to transfer to a safe public school within the same school district, including a private charter school. Furthermore, the bill would provide the option of counseling or removal of the offender, where appropriate.\nThe current ESEA provision (Title IX, Part E, Subpart 2, Sec. 9532, Unsafe School Choice Option) stipulates that a student who attends a persistently dangerous public elementary or secondary school, or who becomes a violent crime victim while in or on the grounds of a public school he or she attends, must be allowed to attend a safe public school within the same school district, including a public charter school. H.R. 354 differs from current law by not using the term \"persistently dangerous,\" stipulating that a student be allowed to attend a safe school who becomes a victim not only in or on school grounds, but also while riding a school bus, or attending a school function, and providing the option of counseling or removal of the offender. H.R. 354 was referred to the House Education and Labor Committee (formerly the House Education and the Workforce Committee). To date, no further action has occurred.", "In the 110 th Congress, SDFSCA is likely to be considered for reauthorization. In anticipation of those activities, the Administration has recommended significantly restructuring the SDFSC program requiring SEAs to support LEAs in implementing effective program models for creating safe, drug-free, healthy, and secure school environments. Also, the Administration proposes consolidating the SDFSC national programs into one flexible discretionary grant program that would focus on four areas of priority—planning for and managing emergencies; violence and drug-use prevention, including student drug testing; school culture and climate, including character education; and other related emerging needs for improving the learning environment to help students reach high academic standards.\nIn addition to those reauthorization proposals, Congress might opt to consider the following SDFSCA-related issues:", "Policy makers might consider requiring K-12 schools to obtain and report up-to-date school crime data to law enforcement agencies. To date, there is no federal mandate that requires tracking and reporting actual school crime and violence incidents to law enforcement agencies. ED data on school crime and violence are based upon limited self-reported surveys and academic research studies, not actual crimes reported to law enforcement. Given DOJ's expertise in public safety, security, emergency preparedness training, crime, and crime data collection and analysis, there might be consideration of giving that agency responsibility for school safety and school crime data collection, instead of ED taking the lead in such efforts. DOJ maintains the Uniform Crime Reporting System and has expertise in collecting and analyzing crime beyond the expertise and scope of ED.", "The PART assessment found state grant programs to be ineffective because ED was unable to show that those programs worked. One response that might be considered is restructuring the responsibility for the state grant program. For example, the responsibility for illicit drugs and alcohol prevention curriculum and programs, suicide prevention and related education and curriculum-based programs could remain at ED in collaboration with public health experts at HHS. On the other hand, school safety, security and emergency preparedness programs and funding might be placed under the direction of DOJ because of its public safety expertise, as previously mentioned.", "Another potential option might be legislation that would allow K-12 schools to apply for Department of Homeland Security (DHS) funding for increased security and emergency preparedness to protect against possible terrorist attacks upon schools and school buses. In particular, it might be considered whether K-12 schools should be eligible for national Critical Infrastructure programs.", "The Unsafe School Choice provision of the ESEA, as amended by the No Child Left Behind Act, may have unintended consequences. By allowing students who attend persistently dangerous schools (based on definitions by each individual state) or have been victims of crime to transfer to a safer school, state education officials might feel pressure to create definitions for persistently dangerous schools in such a way that local schools would never meet that definition. Furthermore, eventually, legal concerns might arise since what is defined as \"persistently dangerous\" in one state, might not be considered as such in another state. Also, some school officials may underreport school crime and violence because of potentially serious political and administrative implications if their school is labeled as persistently dangerous. By keeping their school crime data down to avoid being labeled as a persistently dangerous school, such officials might reduce their opportunities to obtain funding for school violence prevention grants, since the lack of corroborating data would prohibit them from qualifying to receive such grants. Furthermore, it has been observed that \"The 'persistently dangerous' component of NCLB has no funding to help schools identified as such to improve their school safety programs, while federal and state budgets continue to cut school safety funds that could be used to help prevent schools from becoming 'persistently dangerous' in the first place.\"" ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 1, 1, 1, 1, 1, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h1_full", "h0_full", "", "", "", "h1_full", "", "h2_full", "h2_full", "", "", "", "", "" ] }	{ "question": [ "How was the No Child Left Behind Act amended and reauthorized?", "What is the SDFSC program?", "What occurs through the program?", "What do discretionary funds do?", "What did the President request for the The Safe and Drug-Free Schools and Communities Act in FY2007?", "What did the House and Senate Appropriations Committees recommend for this same year?", "What did the President request for the The Safe and Drug-Free Schools and Communities Act in FY2008?", "How is the SDFSC program operating?", "What was introduced in the 109th Congress?", "What bill did not die at the end of the 109th Congress?", "How was H.R. 3010 amended?", "What happened with the amendment?", "What is H.R. 354?", "What action has been taken with this bill?" ], "summary": [ "The No Child Left Behind Act (P.L. 107-110) amended and reauthorized through FY2007 the Safe and Drug-Free Schools and Communities Act (SDFSCA) within the Elementary and Secondary Education Act (ESEA) as Part A of Title IV, 21st Century Schools.", "Funds are authorized for the SDFSC program, which is the federal government's primary initiative to prevent drug abuse and violence in and around schools.", "Through the program, state educational agencies, local educational agencies, and outlying areas are awarded grants by formula to create programs deterring drug abuse and violence among elementary and secondary students.", "Discretionary funds support national programs for various national leadership projects to prevent drug abuse and violence among students from preschool through postsecondary educational levels.", "For FY2007, the President requested $216.0 million for national programs only, and proposed no funding for state grant programs.", "The House Appropriations Committee, however, recommended $526.0 million for the SDFSC program, and the Senate Appropriations Committee recommended $492.5 million (both including $310 million for state grants).", "For FY2008, the President has requested $323.2 million for the program, which includes $100 million for state grants and $224.2 million for national programs.", "The SDFSC program continues to operate at FY2006 levels under a continuing resolution through February 15, 2007.", "In the 109th Congress, several bills were introduced related to school safety and violence prevention.", "All of the bills were referred to the appropriate committee, but died at the end of the 109th Congress, except one (H.R. 3010).", "H.R. 3010, the Department of Labor, Health and Human Services, and Education and Related Agencies Appropriations Act of 2006 (P.L. 109-149), was amended by the Senate to require the Secretary of Education to conduct a study evaluating the effectiveness of violence prevention programs that receive funding under SDFSCA. Another amendment to H.R. 3010 was introduced on the Senate floor to increase funding for the SDFSC program, but was ruled out of order by the chairman.", "This amendment, however, was not included in the conference agreement and did not become law.", "H.R. 354, the Safe Schools Against Violence in Education Act (SAVE Act), would amend the ESEA by requiring states to allow a student attending a persistently dangerous public school, who has been a violent-crime victim on school property, while riding a school bus, or attending a school function, to transfer to a safe public school within the school district.", "The bill was referred to the House Education and Labor Committee, but no further action has occurred." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, -1, -1, -1, 1, 2, -1, 4 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2 ] }
GAO_GAO-15-297	{ "title": [ "Background", "IRS Is Required to Report Quarterly to Congress on the Status of Its Major IT Investments", "GAO and the Treasury Inspector General for Tax Administration Have Reported on IRS’s Major IT Investments", "IRS Has Made Limited Progress in Implementing Prior Recommendations to Improve Reliability and Reporting of Cost, Schedule, and Scope Information", "IRS Has Taken Action to Improve the Timeliness of Reported Performance Information for Completed Investment Activities", "IRS Has Begun to Take Steps to Address the Reporting of Performance Information for In-Process Investment Activities", "IRS Has Not Developed Guidance for Determining Projected Cost and Schedule Amounts for In- Process Investment Activities", "IRS Has Not Taken Steps to Report Cumulative Investment Performance Information", "IRS Has Not Taken Steps to Provide Scope Information for Selected Investments", "IRS Reported Most Investments Meeting Cost, Schedule, and Operational Performance Goals, but Facing Increased Risks", "Most Investments Were Reportedly Within Cost and Schedule Goals", "IRS Reported Increased Risks for Selected Investments", "Most Major IT Investments Reported Meeting Operational Performance Goals", "Variances from Selected Investments’ Initial Cost, Schedule, and Scope Goals Have Not Been Transparent and Reporting of ACA Testing Status Is Not Comprehensive", "IRS Delivered Less RRP Functionality at Higher Cost and Delayed Schedule", "IRS Has Delivered a Key Phase of CADE 2; however, Development of this System Has Been More Costly and Taken Longer than Planned", "IRS Has Cancelled the IRDM Case Management Project", "IRS Is Performing Testing of ACA Releases; However, Reporting of Efforts Is Not Comprehensive", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Investment Profiles", "Affordable Care Act Administration", "Customer Account Data Engine 2", "Appendix III: Comments from the Internal Revenue Service", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The mission of IRS, a component of the Department of the Treasury (Treasury), is to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforcing the federal tax laws with integrity and fairness to all. In carrying out its mission, IRS annually collects over $2 trillion in taxes from millions of individual taxpayers and numerous other types of taxpayers and manages the distribution of more than $300 billion in refunds. To guide its future direction, the agency has two strategic goals: (1) deliver high quality and timely service to reduce taxpayer burden and encourage voluntary compliance and (2) effectively enforce the law to ensure compliance with tax responsibilities and combat fraud.\nIT plays a critical role in enabling IRS to carry out its mission and responsibilities. For example, the agency relies on information systems to process tax returns, account for tax revenues collected, send bills for taxes owed, issue refunds, assist in the selection of tax returns for audit, and provide telecommunications services for all business activities, including the public’s toll-free access to tax information.\nIRS’s fiscal year 2014 budget was $11.3 billion. Of this amount, IRS expected to spend about $2.4 billion on IT investments. IRS expected to fund 19 major investments at a cost of about $1.7 billion, or 71 percent, of the total IT request, and 135 non-major investments at a cost of about $700 million, or 29 percent, of the total IT request. For IRS, a major investment is one that costs $10 million in either the current year or budget year, or $50 million over the 5-year period extending from the prior year through 2 years after the budget year. Table 1 provides high-level descriptions of IRS’s 19 major IT investments and appendix II provides detailed profiles of 7 investments critical to IRS’s mission for which we performed in-depth reviews in recent audits (ACA, CADE 2, e-Services, IRDM, IRS.Gov, Modernized e-File, RRP).", "The conference report accompanying the Consolidated Appropriations Act, 2012, directed IRS to submit quarterly reports on the cost and schedule performance of its major IT investments to the Committees on Appropriations and GAO no later than mid-April 2012. These quarterly reports are to include detailed information on selected investments, including their purpose and life-cycle stage, reasons for cost and schedule variances, risks and mitigation strategies, expected developmental milestones to be achieved, and costs to be incurred in the next quarter. IRS’s current reporting provides detailed information on eight investments, including six major investments that we have included in our reviews: CADE 2, e-Services, IRDM, IRS.Gov, MeF, and RRP.", "GAO and the Treasury Inspector General for Tax Administration (TIGTA) have previously reported on IRS’s major IT investments.\nWe reported in June 2012 that while IRS reported on the cost and schedule of its major IT investments and provided chief information officer ratings for them, the agency did not have a quantitative We measure of scope–a measure that shows functionality delivered.reported that having such a measure is a good practice as it provides information about whether an investment has delivered the functionality that was paid for. We recommended that the Commissioner of Internal Revenue develop a quantitative measure of scope, at a minimum for its major IT investments, to have more complete information on the performance of these investments. IRS agreed with our recommendation at the time we made it. In March 2014, IRS reported that it had practices and processes in place that addressed this recommendation, including quarterly reports to Congress, and a baseline change request process. However, we did not believe these practices addressed the recommendation, as neither approach included a quantitative measure. For this reason, we believed the recommendation was still warranted.\nWe noted in April 2013 that the majority of IRS’s major IT investments were reportedly within 10 percent of cost and schedule estimates and eight major IT investments reported significant cost and/or schedule variances. We also reported that weaknesses existed, to varying degrees, in the reliability of reported cost and schedule variances, and key risks and mitigation strategies were identified. As result, we made recommendations for IRS to improve the reliability of reported cost and schedule information by addressing the identified weaknesses in future updates of estimates. We also recommended that IRS ensure projects consistently follow guidance for updating performance information 60 days after completion of an activity and develop and implement guidance that specifies best practices to consider when determining projected amounts. IRS agreed with three of our four recommendations and partially disagreed with the fourth recommendation related to guidance on projecting cost and schedule amounts. The agency specifically disagreed with the use of earned value management data as a best practice to determine projected cost and schedule amounts, stating that the technique was not part of IRS’s current program management processes and the cost and burden to use it outweigh the value added. While we disagreed with IRS’s view of earned value management because best practices have found that the value generally outweighs the cost and burden of implementing it, we provided it as one of several examples of practices that could be used to determine projected amounts. We also noted that implementing our recommendation would help improve the reliability of reported cost and schedule variance information, and that IRS had flexibility in determining which best practices to use to calculate projected amounts. For those reasons, we believed our recommendation was still warranted. In September 2013, TIGTA reported on CADE 2 development challenges and changes to the planned schedule for this investment. TIGTA reported, among other things, that the CADE 2 database cross-functional triage team had effectively managed and resolved more than 1,000 data defects.that the downstream system interfaces had not been implemented due to data quality issues and the implementation date of these interfaces was revised to January 2014.\nHowever, TIGTA’s review determined\nWe reported in April 2014, that 6 of IRS’s 19 major IT investments were within 10 percent of cost and schedule estimates during fiscal year 2013; however, the reported variances were for the fiscal year only, and we therefore noted that IRS’s reporting would be more meaningful if supplemented with cumulative cost and schedule variances for the investments or investment segments. In addition, the reported variances for selected investments were not always reliable because the projected and actual cost and schedule amounts on which they depend had not been consistently updated in accordance with OMB and Treasury reporting requirements. Further, IRS was not working on developing a quantitative measure of scope (i.e., functionality) as we recommended in 2012, and we noted that reporting qualitatively in congressional reporting until a quantitative measure is developed would help provide Congress with a complete picture of the agency’s performance in managing its major investments. Lastly, IRS continued to lack guidance that included best practices for calculating projected cost and schedule amounts. We made three recommendations for IRS to report more comprehensive and reliable cost and schedule information and improve the transparency of reported scope information for its major investments. IRS agreed with our recommendations and stated it believed it had addressed our recommendation to report cumulative investment and investment segment cost and schedule information in the quarterly reports to Congress, as well as our prior recommendation to develop a quantitative measure of scope; we disagreed, however, and maintained our recommendations. In September 2014, TIGTA reported on challenges faced by IRS in implementing the IRDM Case Management project. More specifically, TIGTA noted that after a year of user acceptance testing, IRS officials acknowledged that the IRDM Case Management project could not effectively process business cases containing underreported income and could not be deployed into the IRS production environment; TIGTA identified insufficient project requirements as contributing to these challenges. In addition, IRS officials stated that budget constraints and difficulties encountered during user acceptance testing resulted in IRS “strategically pausing” development of the IRDM Case Management project. In response to TIGTA’s report, IRS’s Chief Technology Officer stated that in January 2014, IRS decided to strategically pause development of the IRDM Case Management project due to budget constraints and the inability to certify that the ongoing case management functionality deployment would not have an adverse impact on taxpayers.", "IRS has made limited progress in improving the reliability and reporting of cost, schedule, and scope performance information: it has partially implemented two of our five related recommendations and not yet addressed the remaining three. IRS’s implementation of these recommendations is critical in ensuring that Congress receives the reliable information it needs for effective oversight and decision making. Table 2 identifies the status of IRS’s efforts to address the recommendations.", "In April 2013, we reported that the cost and schedule performance information for the completed activities for six selected investments was updated within the 60-day time frame required by Treasury guidance in 77 percent of the cases. While the number of activities expected to be completed was relatively low and IRS had updated the variance calculations for these activities in the majority of the cases, we noted that ensuring that updated actual information is consistently reported within the required 60-day time frame would strengthen the reliability of their variances and provide information that better reflects their performance. Consequently, we recommended that IRS ensure its projects consistently follow guidelines for updating performance information 60 days after completion of an activity.\nTreasury and IRS subsequently took actions to address our recommendation. Specifically, starting in fiscal year 2014, Treasury addressed the timeliness issue for schedule calculations by having the monthly reporting system automatically calculate a variance based on the current date for any activity where the planned completion date had passed and investment staff have not provided an actual figure within 45 days. For cost, in June 2014, officials in IRS’s Strategy and Planning group—which is responsible for overseeing monthly variance reporting— stated that they have been working closely with investment staff and program managers to ensure that reporting is completed within the 60- day requirement.\nWe reviewed the cost and schedule performance information for the six selected investments for fiscal year 2014 and found that the actions taken have resulted in actual cost and schedule amounts for completed activities being updated within the 60-day time frame required in 86 percent of the cases. While this is an improvement from the 77 percent we previously reported, IRS should continue its efforts to ensure full compliance with Treasury’s guidance and thereby provide reliable information on which to gauge its performance in meeting cost and schedule goals.", "In April 2014, we reported that IRS did not consistently report updated variances for in-process investment activities for six investments in fiscal year 2013 even though OMB and Treasury require cost and schedule variances to be updated on a monthly basis. This was partly due to an inconsistent understanding among investment staff of the information that was to be included in the monthly reporting. As a result, we recommended that IRS ensure that projected cost and schedule variances for in-process activities are updated monthly consistent with OMB and Treasury reporting requirements by ensuring investment staff have a consistent understanding of the information to be included in monthly reporting.\nIn response to our recommendation, IRS’s Investment Management and Control office provided training in October 2014, which focused on, among other things, the monthly update of investment performance information. We believe this training will help to ensure investment staff have a consistent understanding of the information to be included in monthly reporting as the training outlines the specific information that is to be reviewed or updated for in-process activities. However, since the training was provided in October 2014, there have not yet been enough monthly reports to determine the extent to which this training has improved monthly reporting of variances for in-process activities.\nAdherence to IRS’s training on monthly performance reporting should help to ensure investments’ cost and schedule variances are updated in accordance with OMB and Treasury guidance, and contribute to producing reliable information on which to gauge IRS’s performance.", "In April 2013, we found that IRS had determined variances using —which comprised projected cost and schedule for in-process activities75 percent of all its activities. However, Treasury’s guidance, which IRS follows, did not specify how projected amounts should be determined when actual amounts are not available. We therefore recommended that IRS develop guidance for determining projected amounts.\nIn response, IRS stated that the estimate variance reporting performed by its Estimation Program Office applies the best practices we previously recommended, and the practices used are documented in its July 2014 cost and schedule variance reporting procedure. We reviewed this document and found that, while it described the methodology for revising an estimate, it does not address the calculation of projected cost and schedule amounts used for the monthly reporting of cost and schedule variances for in-process activities, which was the subject of our recommendation. At the conclusion of our review, officials sought clarification on what was needed to address our recommendation and agreed that the action taken did not address it. Developing and implementing the recommended guidance should provide greater assurance that projected amounts, when reported, are determined consistent with best practices and therefore more reliable. This is particularly important given the high percentage of reported investment activities that we noted were in-process.", "In April 2014, we reported that IRS’s reporting of cost and schedule information in the quarterly reports to Congress would be more meaningful for determining whether the agency is effectively managing its investments if it included cumulative cost and schedule variances for the investments or investment segments, consistent with OMB’s guidance for measuring progress towards meeting investment goals. We noted that cost and schedule variances were for the fiscal year only in that they provide cost and schedule variance information for all projects and activities underway in any portion of the fiscal year.year focus did not provide cumulative cost and schedule information at the investment or investment segment level because it did not account for activities that were completed in previous fiscal years. Accordingly, we recommended that IRS report cumulative performance information at the However, the fiscal investment or investment segment level. At that time, the IRS Commissioner stated that the agency agreed with our recommendation but believed it had already been addressed in quarterly reports to Congress. We noted that while the reports provide cumulative information, it is for the fiscal year only, not for the investment as recommended, and we therefore maintained our recommendation.\nIn June 2014, IRS officials stated they believed the investment information reported in the Office of Management and Budget exhibit 300 addressed our recommendation and, therefore, they had not taken additional steps. However, the reported cost and schedule variances in the exhibit 300 are for the fiscal year only, and as a result, we believe our recommendation is still warranted.\nProviding Congress with cost and schedule information at the useful segment level—in addition to the current fiscal year reporting—in the quarterly reports would provide a more meaningful gauge of whether investments are meeting cost and schedule performance goals.", "In 2012, we reported that IRS did not have a quantitative measure of scope (i.e. functionality delivered) that would provide a measure of whether an investment delivered the functionality that was paid for and recommended that the agency develop the measure, at a minimum, for its major IT investments. At the time, IRS agreed with the recommendation but stated that it had other methods in place to document delivered functionality of a project throughout the life cycle. We agreed that the methods identified addressed project functionality, but they did not provide a quantitative measure of performance. In April 2014, seeing that IRS had not made progress on developing a quantitative measure of scope, we recommended the agency report qualitative scope information in the interim.\nIRS responded that it agreed with the recommendation and had practices and processes in place to assess and report on the delivery of scope in conjunction with cost and schedule management, and therefore, IRS had not taken any additional steps to address our recommendation; however, we did not believe that these practices and processes addressed our recommendation. As of June 2014, IRS continued to assert that it had addressed the recommendation and therefore did not take any additional steps. Officials noted that the information reported in the Office of Management and Budget exhibit 300 included information on changes in investment scope. However, this reporting does not provide a quantitative measure of scope or qualitative information showing how delivered scope compares to what was planned.\nUntil IRS reports on progress in meeting scope in its quarterly reporting to Congress, Congress may lack important information that it needs to determine the extent to which the investments are delivering the functionality that was paid for. This is particularly important given the major changes in development highlighted in the latter portion of this report.", "Most of IRS’s major IT investments reportedly met cost and schedule goals, with 11 of 17 investments within 10 percent of cost estimates, and 13 of 17 investments within 10 percent of schedule estimates. It is important to note that the cost and schedule information was not updated for two investments however, IRS did not consistently indicate so in its reports to Congress. Consistently disclosing when reported information is not updated would provide Congress and other decision makers with improved information for oversight and decision-making purposes.\nIRS also reported “green” ratings for investments instead of their previous “yellow” ratings for Chief Technology Officer summary-level risk assessments. However, IRS does not provide these ratings for the six investments for which it provides detailed information in the quarterly reports to Congress. Providing summary-level risk ratings for all major investments would improve the visibility into changes in investment risk, and provide Congress with the information to more easily determine the investments requiring greater attention. Finally, of the 85 operational performance metrics associated with the 17 major investments reporting operational performance information, IRS reported meeting approximately 73 (86 percent) of these metrics.", "According to IRS, 11 of 17 IT investments were within 10 percent of cost estimates between October 2013 and September 2014, and 13 of 17 investments were within 10 percent of schedule estimates between October 2013 and September 2014. While IRS reports on the cost and schedule variance for its 19 major investments, the reports for two investments (IRDM and RRP) were not updated to reflect actual performance throughout the fiscal year. As illustrated in figure 1, of the six investments that reported significant cost variances (equal to plus or minus 10 percent variance from cost goals), four were significantly under planned costs for at least 1 month during fiscal year 2014, one investment reported being over cost, and one investment reported being, at different times, both under and over cost during this period.\nThree investments–ACA, e-Services, and IRS Telecommunications Systems and Support–reported significant cost variances for a period of 3 or more consecutive months. IRS reported several reasons for these variances, including refinement of processes for allocating costs, fewer investment staff working on the investment during the 2013 government shutdown, overestimation of required contractor support, and reduction of planned funding.\nIn addition, as illustrated in figure 2, one investment reported being significantly ahead of schedule for at least 1 month during fiscal year 2014, while three investments reported being significantly behind schedule during this period.\nAs previously mentioned, Treasury and OMB guidance require cost and schedule variances to be updated on a monthly basis. However, IRS did not update information on cost and schedule variances to reflect actual performance for their RRP and IRDM investments in its reports to Congress. Officials said that updated cost and schedule performance information for these investments was not included following pauses in their development (which occurred in January 2014 for IRDM and February 2014 for RRP) and during approval of baseline change requests. IRS officials stated they did not yet know how to include the pauses in development in their reports and that they had been instructed by Treasury not to update monthly performance information until the change requests had been approved. However, instances where information was not updated were not disclosed in a consistent manner for all investments. Specifically, while IRS identified such instances for RRP, it did not provide similar disclosure for IRDM following its development pause. Consistently disclosing reasons for why monthly updates are not being made (such as during the baseline change request approval process) would be helpful in providing decision makers with the information they need for oversight purposes.", "During the third quarter of fiscal year 2014, IRS reported increased risks for the 13 investments for which it provides summary-level Chief Technology Officer risk assessments to Congress. Specifically, while the 13 investments had a risk rating of “green” during the second quarter of fiscal year 2014, 12 of these investments reported a risk rating of “yellow” during the third quarter of fiscal year 2014, and 1 investment reported a risk rating of “red.” According to the Deputy Chief Information Officer for Strategy and Modernization, the Chief Technology Officer and Deputy Chief Information Officers meet quarterly to make a broad assessment of the major IT investments, and as a result, assign summary-level risk ratings for 13 of the major IT investments. This assessment is based on these officials’ knowledge of each of the major investments, as well as an assessment of six key performance indicators (cost, schedule, scope, risk, organizational readiness, and technical).\nA reason IRS provided for the change in risk ratings for its major IT investments was funding constraints as a result of additional legislative mandates, such as the ACA and FATCA investments, which IRS noted it In addition, IRS does not receive funding from Congress to implement.noted that it has had to reallocate staffing to these investments, which has created a skill set gap for other investments. To address this, IRS stated that it is currently creating a skill set inventory to specifically identify gaps between available and required skill sets.\nIt is important to note that, while IRS identified increased risks for the 13 major IT investments via its Chief Technology Officer risk ratings for the first time in quarter three of fiscal year 2014, the assessments were not indicative of new risks. Rather, they better reflected risks IRS had previously shared with us during quarterly briefings. During the fourth quarter of fiscal year 2014, the risk rating for 6 of the investments improved from “yellow” to “green.” IRS’s Deputy Chief Information Officer for Strategy and Modernization explained that this happened because the agency was able to draw resources from infrastructure investments deemed less critical for the upcoming filing season to address the risks associated with most of the investments previously rated “yellow.” This explains the “red” rating for the infrastructure investments in the fourth quarter, as illustrated in figure 3 below.\nWe have previously reported on the importance of providing summary- level risk ratings for major IT investments. Specifically, we have noted that such ratings improve the visibility into changes in the risk level of investments over time. While IRS provides summary-level Chief Technology Officer risk assessment ratings for 13 investments in quarterly reporting to Congress, it does not provide such ratings for the 6 investments for which it reports detailed information–CADE 2; e-Services; IRDM; IRS.Gov; MeF; and RRP. While the detailed information on the 6 investments is consistent with congressional reporting requirements, supplementing it with Chief Technology Officer summary-level risk assessment ratings would improve the visibility into risks faced by these investments, and provide Congress with the information to more easily determine the investments requiring greater attention. Figure 3 shows the Chief Technology Officer risk assessment ratings for the four quarters of fiscal year 2014.", "According to OMB, operational performance metrics are used to examine the performance of an investment in operation and demonstrate that the investment is meeting the needs of the agency, delivering expected value, or being modernized and replaced consistent with the agency’s enterprise architecture. As of September 2014, IRS had reported on the operational performance for 17 of its 19 major investments. IRS establishes operational metrics and associated targets for its investments, and on a quarterly, monthly, or annual basis reports on its performance in meeting the targets. The operational metrics established for investments include, for example, percentage of scheduled system availability, percentage of individual tax returns processed electronically, and the percentage of refunds processed daily.\nAs illustrated in figure 4, of the 85 operational performance metrics reported with associated actuals, IRS reported meeting approximately 73 (86 percent) of these metrics. With respect to the 12 operational performance metrics that were not met, the difference between the target and actual performance was generally insignificant. For example, half of the metrics were within 5 percent of the target.", "Selected investments experienced variances from initial cost, schedule, and scope goals that were not transparent in congressional reporting because IRS has yet to address our prior recommendations for reporting at the investment level and on progress in delivering scope. Specifically, RRP has so far exceeded planned costs by $86.5 million and has yet to deliver functionality that was scheduled for September 2012, in large part due to the need to implement new technology and a lack of adequate resources, including contracting expertise and staff; a key phase of CADE 2 was developed 10 months late and at $183.6 million more than planned; and the IRDM Case Management project was cancelled. However, these variances were not all included in congressional reporting. In addition, the reports on the status of testing for the ACA investment are not comprehensive, making it difficult to determine whether all required testing is being performed.", "IRS delivered less functionality than planned for the RRP investment, and did so at a higher than planned cost and behind schedule. Specifically, IRS exceeded initial planned costs for this investment by approximately $86.5 million and has yet to complete the first phase of the investment, which was originally planned to be delivered in September 2012.\nAs early as May 2010, IRS issued several contracts to, among other things, plan and develop four transition states to complete the RRP investment; these contracts had a total planned cost of $57.5 million. Figure 5 identifies the current and historical development plans for the RRP investment.\nThe planned schedule and functionality for the four RRP transition states are identified in table 3.\nIn March 2012, a baseline change request was approved for RRP that included a revision to the planned completion dates for Transition States 1 and 2 to December 2013 and 2014, respectively. In addition, the planned cost for the RRP investment was revised to $136.2 million, an increase of approximately $79 million. According to IRS, these changes to initial plans were a result of IRS’s decision to implement new technology for delivering the RRP investment. More specifically, IRS began implementation of the RRP investment using existing technologies; however, IRS determined that new technology would be better suited to meet the goals of the investment.\nIn February 2014, after developing most of the planned functionality for Transition State 1–a senior RRP official estimates about 70 percent– IRS’s Executive Steering Committee made a decision to pause further development of this investment. According to IRS officials, factors contributing to this decision included budget constraints, as well as uncertainty about next steps from a business and a technology perspective, and the need to ensure alignment of RRP with the new senior leadership’s strategic vision for identity theft and fraud detection.\nIn March 2014, IRS reported delivering the following Transition State 1 functionality: Improvements in data analytics and linked return analysis above current EFDS capabilities in order to detect more fraud.\nLeveraged new Massive Parallel Processing technology, which IRS noted has proven itself in data analysis, performance, and scoring improvements in analyzing 3 years of taxpayer data.\nEntity-based Data Model with a 3-year view of tax filer’s data.\nAbility to add or modify rules and models in current processing year based on current fraud patterns.\nIn addition, in April 2014, IRS launched a limited deployment of one of RRP’s planned fraud detection capabilities–the capability to detect identity theft in filed tax returns. IRS plans to use the RRP identity theft functionality in conjunction with the Electronic Fraud Detection System (the fraud detection system RRP is expected to eventually replace) for all tax returns filed during the 2015 tax filing season. IRS also reported beginning requirements development activities for RRP Transition State 2.\nIn September 2014, IRS proposed additional changes to the RRP investment. More specifically, it revised the planned completion dates for Transition States 1 and 2 to March 2015 and 2016, respectively. In addition, the planned cost for the RRP investment was revised to $226.9 million, an increase of approximately $91 million. IRS identified several reasons for these changes in plans to include, among other things: lack of experience in integrating new technology required for RRP implementation; the need for higher levels of contracting expertise; and lack of staff to support the entire planned scope of RRP due to budgetary constraints and increased costs.\nAs illustrated in figure 6, IRS reported spending approximately $144 million for the RRP investment through fiscal year 2014. Thus far, this amount exceeds the initial planned cost for the investment by $86.5 million.\nWith respect to future development of the RRP investment, IRS stated that it has begun work on a plan for re-starting development which is heavily influenced by IRS’s Small Business/Self Employed and Wage and Investment Concept of Operations (issued in July 2014), and an IT technical roadmap that is currently being developed. IRS’s Small Business/Self Employed and Wage and Investment Concept of Operations identifies refund fraud and identity theft, as key drivers for transforming the agency’s compliance efforts and services.\nAlthough IRS has thus far exceeded the initial planned cost for the RRP investment by $86.5 million, the agency reported a zero percent cost variance for this investment in its fiscal year 2014 fourth quarter reporting to Congress. Further, while IRS noted that it had delivered about 70 percent of the planned functionality for Transition State 1 of the RRP investment that was planned for September 2012 in March 2014, this was not identified in congressional reporting.\nIf IRS implemented our prior recommendations relative to cumulative reporting of performance information, and reporting of quantitative scope information, as previously mentioned, the variances from cost, schedule, and scope plans identified for RRP would be more transparent in congressional reporting.", "IRS has delivered a key phase of its modernized tax processing system; however, in doing so, the agency exceeded planned costs by $183.6 million and fell behind schedule by 10 months; this included an unplanned transition state with an associated cost of $101.1 million.\nFigure 7 identifies the current and historical development plans for the CADE 2 investment.\nIn 2008, IRS began defining a new strategy–CADE 2–that was intended to deliver improved individual tax processing sooner, and move to a single tax processing database. As shown in table 4, IRS planned to deliver the CADE 2 investment through the completion of two transition states and a target state.\nIn 2012, IRS completed a cost estimate for Transition State 1 of the CADE 2 investment; this cost estimate was $315 million.\nIRS reported completing functionality for the daily processing of individual taxpayer returns in January 2012, and completing Transition State 1 in November 2012, at a cost of $397.5 million; Transition State 1 was completed 10 months behind planned schedule, and in excess of planned costs by $82.5 million. Further, while IRS reported the completion of Transition State 1, this transition state completed “conditionally” meaning that the investment was approved to proceed to the next phase with outstanding issues remaining to be addressed.\nIn June 2013, IRS submitted a baseline change request to create a new transition state–Transition State 1.5–to address unfinished work from Transition State 1. More specifically, this unfinished work included ongoing data assurance, performance tuning, and downstream systems efforts to prepare the CADE 2 database for filing season 2014 production; IRS completed this transition state in July 2014. IRS officials stated that the creation of this transition state did not affect the overall schedule for the CADE 2 investment; however, it was accompanied by $101.1 million in unplanned costs–$69.7 million in fiscal year 2013, and $31.4 million planned for fiscal year 2014. IRS officials stated that investment funding allocated for future work on Transition State 2 was used to fund the unplanned Transition State 1.5 activities.\nIRS began work on Transition State 2 in October 2010, and as of September 2014, expected to complete this transition state by March 31, 2015. However, IRS noted that this planned completion date is likely to change as soon as a revised schedule estimate is completed for this transition state.\nIRS’s delivery of CADE 2 Transition State 1 10 months behind its initial planned completion date and in excess of initial planned costs by $183.6 million is not identified in congressional reporting. More specifically, IRS’s congressional reporting identifies cost and schedule performance for a 12-month period of time, and does not compare current investment performance to initial plans, as we have done in this report. Further, while IRS’s fiscal year 2014 fourth quarter reporting to Congress identifies the scope delivered for CADE 2 Transition State 1 during fiscal years 2009 through 2012, the reporting does not include a quantitative measure of scope, or qualitatively show how the delivered scope compares to what was planned for this transition state.\nSimilar to RRP, the CADE 2 schedule delays and challenges in meeting planned costs would be more transparent in congressional reporting if it contained cumulative reporting of performance information and reporting of quantitative scope information.", "IRS has cancelled its IRDM Case Management project—one of five projects that make up the IRDM investment—due to budget constraints, and is instead considering using an enterprisewide case management solution. Table 5 identifies the initial planned cost, schedule, and scope for the IRDM Case Management project.\nAccording to IRS, the IRDM Case Management project began beta testing in January 2013; however, further execution of the IRDM Case Management project was cancelled in January 2014, and IRS noted that this project would be shut down after the existing cases being worked within the application were completed. According to officials, IRS made a decision to investigate an off-the-shelf system for case management that could be used as an enterprise-wide common service at IRS. IRS noted that it has held three technical demonstrations to identify the extent to which a vendor-provided, off-the-shelf solution would meet the enterprise- wide need, and future development of a case management tool will be done using EntelliTrak technology. IRS officials stated they plan to execute enterprise case management solutions as soon as budget resources become available. As previously mentioned, TIGTA identified challenges during user acceptance testing of the IRDM Case Management project; however, IRS officials stated that these challenges were not a contributing factor in the agency’s decision to pause development of this project. As of October 2014, IRS reported spending $16.2 million on the IRDM Case Management project—$8.8 million for IRDMCM and $7.4 million for IRDMCM R2/Release Content Management Plan.", "ACA encompasses the planning, development, and implementation of IT systems needed to support IRS’s tax administration responsibilities associated with certain provisions of the Patient Protection and Affordable Care Act. IRS is developing this investment in 24 releases–12 which are in production, 1 that is in production/in progress, 6 that are in progress, and 5 that are in planning. IRS’s release plan for this investment is shown in table 5.\nReleases 5.0 and 6.0 (shaded in table 6) include development work that is critical in implementing ACA requirements for the 2015 tax filing season. The work associated with these releases impacts 66 IRS systems via a system modification or by building a new system.\nAccording to best practices, software testing should be guided by an organizational test strategy that defines different levels of testing required such as component, system, integration, and acceptance level testing. In addition, the strategy should address how testing is to be managed and results reported.that defines various levels of testing for ACA and has also assigned responsibility for testing to various organizations within IRS.\nConsistent with these practices, IRS has a test strategy ACA systems testing is performed by each of the following organizations within IRS, depending on the type of system work required. According to IRS officials, these organizations coordinate testing activities during systems integration testing.\nThe Enterprise Systems Testing group is responsible for performing testing on systems that require modification to existing system functionality. According to the Enterprise Systems Testing Director, the group performs (1) systems acceptability testing, (2) integration testing, and (3) final integration testing.\nThe Implementation and Testing group is responsible for performing project and integration testing on new and modified ACA systems, and coordinates integration tests with Enterprise Systems Testing for ACA and existing tax return processing systems. In addition, Implementation and Testing ensures testing for non-functional requirements such as performance, security, and accessibility through partnership with experts.\nIRS has performed various levels of testing for the ACA releases that are now in production. In addition, testing for systems currently in progress is underway.\nAccording to the Carnegie Mellon University Software Engineering Institute (SEI), a consolidated report drawing information from many sources is key to providing decision makers with the information they need to make timely and informed decisions. This suggests that consolidated reporting would be critical for a complex process such as testing, where there are several organizations involved and a large number of systems and requirements being tested at different levels. In addition, SEI practices suggest that the status of all impacted systems and requirements should be accounted for in overall status reporting— whether or not they are tested.\nAlthough reports on the overall status of ACA testing activities are provided to IRS senior management via ACA Testing Review Checkpoint reports and filing season status reports, these reports are not comprehensive because they do not identify the status of testing for all systems impacted by ACA Releases 5.0 and 6.0. For example, IRS’s October and December 2014 ACA Testing Review Checkpoint reports did not identify the status of testing for 26 and 24 of the 66 impacted systems, respectively. When asked about this, IRS officials stated that all systems do not undergo the Enterprise Systems Testing and Implementation and Testing group tests identified above. Specifically, the two organizations responsible for testing collectively identify systems deemed critical for testing and only those systems are included in the reports we reviewed. Nevertheless, including all impacted systems in reporting, including those that are not tested, as suggested by best practices, would ensure accountability for all systems.\nIt is important to note that IRS’s Testing Review Checkpoint reports and filing season status reports are not always aligned with the manner in which ACA testing is being performed. For example, while IRS noted that ACA testing is conducted on requirements, the reports did not provide a status of requirements tested, making it difficult to determine whether all requirements have been tested. Without status reports that account for all impacted systems and are aligned with the manner in which IRS performs testing, it will be difficult to determine whether all required testing is being performed to ensure ACA is ready for the filing season.", "IRS has made limited progress in improving the reliability and reporting of cost, schedule, and scope performance information. Until the agency fully implements the prior recommendations highlighted in our review, the information Congress receives will not be reliable for effective decision making and oversight.\nWhile IRS is required to provide monthly updates on the cost and schedule performance of its major investments, the information for two investments (RRP and IRDM) was not always updated, and IRS did not always disclose when this was the case in congressional reporting. In addition, IRS reports summary-level risk assessment ratings for 13 of its major investments in its reporting to Congress. Providing similar ratings for its remaining 6 major investments would allow Congress to more easily determine the ones requiring greater attention.\nThree selected investments had exceeded initial planned costs, fallen behind initial planned schedule, and had not produced all the expected functionally; and two had been paused or cancelled. However, these deviations were not transparent in congressional reporting because IRS has yet to implement our prior recommendations regarding cumulative performance and scope reporting. The magnitude of some of the changes to plans we identified underscores the criticality of implementing our prior recommendations in improving the transparency of congressional reporting so Congress has the appropriate information needed to make informed decisions.\nFinally, the reporting of testing activities for the ACA investment segments which are critical for the 2015 filing season showed that impacted systems were not all captured in overall status reports. In addition, these reports were not aligned with the manner in which ACA testing is being performed. Addressing these two issues would improve IRS’s and key decision makers’ ability to determine whether all required testing to ensure readiness for the filing season is being performed.", "To improve the reliability and reporting of investment performance information and management of selected major investments, we recommend that the Commissioner of the IRS direct the Chief Technology Officer to take the following three new actions:\nFor major investments included in congressional reporting, disclose instances where cost and schedule performance information reported to Congress is not updated.\nProvide summary-level Chief Technology Officer risk assessment ratings for all major investments in the quarterly reporting to Congress.\nModify reporting of ACA testing status to senior management to include a comprehensive report on all impacted systems—including an explanation for why impacted systems were not tested at a particular level—and ensure this reporting is aligned with the manner in which testing is being performed.", "We obtained written comments on a draft of this report from the Commissioner of the IRS, which are reprinted in appendix III. In his written comments, the Commissioner stated that IRS appreciated the acknowledgment of progress it had made to address two prior year recommendations to improve the consistency and timeliness in reporting cost, schedule and scope information for its major information technology (IT) investments, but disagreed with our assessment of its efforts to address three prior recommendations for improving the reliability and reporting of cost, schedule, and scope information. Finally, he stated that IRS agreed with our two recommendations related to disclosing instances where performance information is not updated in quarterly reporting to Congress and expanding summary-level risk assessment ratings to all major investments. Further, the Commissioner stated the agency would provide a detailed corrective action plan addressing these recommendations. The Commissioner also stated that IRS disagreed with our third recommendation to modify the reporting of testing for the Affordable Care Act Administration (ACA) investment to senior management.\nRegarding our prior recommendation to develop and implement guidance that specifies best practices to consider when determining projected cost and schedule amounts for in-process activities in the monthly reporting, the Commissioner stated that this continues to be a work in progress for IRS. Specifically, he stated that IRS’s Information Technology Strategy and Planning organization and members of various investment teams are currently collaborating on best practices and a centralized process for determining project cost and schedules for in-process activities. As noted in our report, we reviewed a July 2014 cost and schedule variance reporting procedure that IRS stated addressed our recommendation. However, while the document described the methodology for revising an estimate, it did not address the calculation of projected cost and schedule amounts used for the monthly reporting of cost and schedule variances for in-process activities, which was the subject of our recommendation. As a result, we believe the status of this recommendation stands as not addressed.\nRegarding our prior recommendation to report cumulative investment and investment segment cost and schedule information in the quarterly reports to Congress, the Commissioner stated that IRS believed the recommendation was satisfied through its reporting of performance information in the Department of the Treasury’s SharePoint Investment Knowledge Exchange (SPIKE) tool, which is also included in IRS’s quarterly reporting to Congress. However, as noted in our report, this performance information is for the fiscal year only and is not cumulative for the investment or investment segment, as recommended, and therefore does not account for activities that were completed in previous fiscal years. As a result, we believe the status of this recommendation stands as not addressed.\nRegarding our prior recommendation to develop a quantitative measure of scope for IRS’s major investments, the Commissioner identified several practices and processes that he stated are currently in place to assess and report on the delivery of scope. He mentioned (1) IRS’s quarterly reporting to Congress, and (2) the OMB exhibit 300 baseline change request process as examples of such practices and processes. However, as noted in this and prior reports, while these methods address project functionality, they do not provide a quantitative measure of progress in delivering this functionality. In addition, the Commissioner also mentioned the post implementation review process; however, the post implementation review process does not provide a measure of progress in delivering scope as IRS has noted that this process is performed at the close of each segment. For these reasons, we continue to believe the status of this recommendation stands as not addressed.\nRegarding our recommendation to modify reporting of ACA testing status to senior management, the Commissioner stated that IRS followed a rigorous risk-based process for planning the tests of ACA-impacted systems, including the types and levels of testing. In addition, he stated that IRS had comprehensive reporting for the filing season 2015 release, which included ACA impacted systems. We acknowledge the various levels and types of ACA testing that IRS has performed and have noted this in our report. However, as also noted in our report, our review of ACA Testing Review Checkpoint reports and filing season reports which officials stated were used to provide comprehensive reports to senior managers did not identify the status of testing for all systems impacted by ACA Releases 5.0 and 6.0. For example, we found that IRS’s October and December 2014 ACA Testing Review Checkpoint reports did not identify the status of testing for 26 and 24 of the 66 impacted systems, respectively. Including all impacted systems in reporting, including those that are not tested, as best practices suggest, would ensure accountability for all systems. Accordingly, we believe our recommendation is still warranted. IRS also provided us with technical comments that we have incorporated in the report as appropriate.\nWe are sending copies of this report to interested congressional committees, the Commissioner of the IRS, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staffs have any questions on the matters discussed in this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.", "Our objectives were to (1) evaluate IRS’s efforts to address our recommendations for improving the reliability and reporting of cost, schedule, and scope information; (2) summarize the reported cost, schedule, and performance of IRS’s major IT investments; and (3) assess the status and plans of selected investments.\nFor the first objective, we determined the status of actions taken to address each of five prior recommendations to improve the reliability and reporting of cost, schedule, and scope information we made in our 2013 and 2014 reviews of IRS’s major IT investments. They address (1) the timely reporting of cost and schedule variance information for completed activities; (2) consistently updating cost and schedule information for in- process activities; (3) developing guidance on best practices to consider when determining cost and schedule variances for in-process activities; (4) reporting cost and schedule information at the investment or investment segment level (rather than by fiscal year only); and (5) reporting qualitatively on how delivered scope compares to what was planned for investments until a quantitative measure is developed.\nFor the first recommendation, we calculated the 60-day reporting time frame required by Treasury for completed activities. We then analyzed the four quarterly reports on the performance of IT investments submitted by IRS to the appropriations committees and us between December 2013 and September 2014 to determine whether completed activities showed updated cost and schedule information within those time frames.\nFor the second recommendation, we reviewed materials related to training that IRS officials stated were provided to investment staff to ensure a consistent understanding of the information to be included in the monthly reports.\nFor the third recommendation, we reviewed the July 2014 cost and schedule variance reporting procedure and other guidance IRS stated it was using to determine projected cost and schedule amounts to determine whether best practices were being included.\nFor the last two recommendations related to reporting cumulative performance information and progress in meeting scope expectations, we reviewed IRS’s reporting through the Office of Management and Budget (OMB) exhibit 300 process that IRS stated addressed the recommendations.\nWe assessed a recommendation as being fully addressed if IRS provided evidence that it fully addressed our recommendation; partially addressed if IRS provided evidence that it addressed our recommendation to some extent; and not addressed if IRS did not provide any evidence that it addressed our recommendation.\nFor our second objective, we obtained from IRS a list of the investments classified as “major” during fiscal year 2014. We reviewed monthly cost and schedule variance reports for these investments from October 2013 through September 2014, and followed up with IRS officials to identify the reasons for investment-level variances that were significant (equal to plus or minus 10 percent variance from cost or schedule goals) and recurring (reported for 3 consecutive months or more). We assessed the reliability of the reported information by confirming our understanding of IRS’s process for reporting monthly cost and schedule variances, and by determining the extent to which IRS had taken action to improve the reliability and reporting of this information.\nWe reviewed operational performance information reported for IRS’s major IT investments as of September 2014, to determine the extent to which each investment met its operational performance goals; this information included, where reported, the performance target and actual results for each metric. We compared this information to information reported for IRS’s major IT investments on OMB’s IT Dashboard website. Lastly, we reviewed the four quarterly reports on the performance of IT investments submitted by IRS to the appropriations committees and GAO between December 2013 and September 2014, to identify the Chief Technology Officer summary-level risk ratings assigned to major IT investments. We analyzed these risk ratings to identify trends, and interviewed IRS officials (including the Deputy Chief Information Officer for Strategy and Modernization) to identify IRS’s methodology for deriving these ratings.\nFor our third objective, we selected Return Review Program (RRP), Customer Account Data Engine 2 (CADE 2), and Information Reporting and Document Matching (IRDM) because the cost, schedule, or scope of these investments had changed from initial plans; and the Affordable Care Act Administration (ACA) investment due to the investment’s criticality to the 2015 tax filing season and the significant amount of resources expected to be expended. For RRP, CADE 2, and the IRDM Case Management project, we interviewed program officials and analyzed documentation such as performance work statements, business cases, baseline change requests, and the four quarterly reports on the performance of IT investments submitted by IRS to the appropriations committees and us between December 2013 and September 2014. From this documentation, we determined the initial cost, schedule, and scope plans for these investments, as well as any revisions to these plans, and the functionality delivered.\nFor ACA, we obtained documentation and interviewed key officials– including those from the ACA Program Management Office, and IRS’s systems testing organizations–to determine the plan for deployment of the investment. Further, we identified the plans and status of testing for Releases 5.0 and 6.0, which are expected to be implemented for the 2015 tax filing season. Specifically, we analyzed the ACA system architecture for Releases 5.0 and 6.0 to identify associated systems impacted by the development of ACA. We then reviewed testing documentation, such as testing status reports and test plans to determine the extent to which these systems were tested. Lastly, we reviewed various test reports to determine the extent to which IRS had a mechanism in place to comprehensively report on the status of testing for all systems related to ACA Releases 5.0 and 6.0. We compared the information against best practices for software testing promulgated by the International Organization for Standardization/International Electrotechnical Commission/Institute of Electrical and Electronics Engineers.\nWe conducted this performance audit from June 2014 to February 2015, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "This appendix contains the profiles for seven investments critical to IRS’s mission which we examined in greater detail in our prior reviews of IRS’ major IT investments. Information contained within these profiles includes, but is not limited to:\nCurrent life-cycle phase: Life-cycle phases can be represented as planning; development, modernization, and enhancement; operations and maintenance; or mixed. Planning refers to preparing, or acquiring the information used to design the asset; assess the benefits, risks, and risk-adjusted costs of alternative solutions; and establish realistic cost, schedule, and performance goals for the selected alternative, before proceeding to full acquisition or termination of a project. Development, modernization, and enhancement refers to projects and activities that result in new assets/systems or projects and activities that result in changes or modifications to existing assets that lead to substantive improvements, implement legislative or regulatory requirements, or meet an agency leadership request. Operations and maintenance refers to those projects and activities that are operating in a production environment. Finally, mixed refers to projects and activities that are a combination of development, modernization, and enhancement and operations and maintenance. Having detailed information allows for clear tracking of a program’s costs as it moves through its various life-cycle phases.\nDevelopment methodology: This is a framework that is used to structure, plan, and control the process of developing an information system. There are a number of approaches that can be utilized by an investment. IRS’s Enterprise Lifecycle methodology includes the following approaches: waterfall, planned maintenance, iterative, and managed services. Waterfall is a sequential development of a solution with planned reviews and formal approvals required before continuation of work. The planned maintenance approach manages change in an organized manner, minimizes the disruption caused by frequent system changes, and increases the efficiency and effectiveness of the system change process. Additionally, the iterative approach is an adaptive development approach in which projects start with a conceptual vision of the solution and end with deployment, with repeated cycles of requirements discovery, development, and testing in between. Finally, the managed services approach is designed to capitalize on the benefits of managed services provided by either an outside service, internal business processes, and/or existing infrastructure service provider. This provides useful information on the requirements of how a project is to progress through the life cycle.\nContract type: For purposes of this report, this can be broken down into two categories. The first is firm, fixed price contracts in which the price is not subject to any adjustments. The second is cost reimbursement contracts which provide for the payment of allowable incurred costs, to the extent prescribed in the contract. Types of cost reimbursement contracts include, but are not limited to (1) a cost plus fixed fee in which actual costs and a fixed fee can be charged; however, costs are not allowed to exceed the agreed upon estimate without approval; and (2) a cost plus incentive fee that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.\nNumber of rebaselines: Rebaselines are changes to projects’ cost, schedule, and performance goals (i.e., baselines). According to officials, scope changes must go through a baseline change request process and be approved by Treasury and OMB.", "According to IRS, the Affordable Care Act Administration (ACA) investment encompasses the planning, development, and implementation of IT systems needed to support IRS’ tax administration responsibilities associated with certain provisions of the Affordable Care Act. Initiatives that have already been deployed include the initial release of the Branded Prescription Drug Industry Fee project; an effort intended to secure connection between IRS and the Department of Health and Human Services/Centers for Medicare and Medicaid Services (CMS) to support health insurance exchange open enrollment for the Fall of 2013; and 2014 Non-Marketplace Provisions. Releases of the ACA investment that are critical to the 2015 tax filing season include Release 5.0 for filing season 2015, and Release 6.0 which includes compliance activities.", "The Customer Account Data Engine 2 (CADE 2) investment began in 2010 as a new strategy for accelerating completion of a modernized database and converting to a single processing system sooner than was expected under CADE (which was the predecessor investment to CADE 2, intended to provide a modernized system of taxpayer accounts, with the ultimate goal of eventually replacing the Individual Master File). CADE 2 is expected to deliver its functionality incrementally through transition states. Transition State 1 includes: 1. Daily batch processing of individual taxpayer returns provided by modifying the IMF to run on a daily, rather than weekly, basis. 2. A comprehensive database for housing all individual taxpayer accounts and loaded with data from CADE and IMF to provide more timely updates of taxpayer information for use by IRS employees for compliance and customer service.\nIRS reported completing functionality for the daily processing of individual taxpayer returns in January 2012, and completing Transition State 1 in November 2012, at a cost of $397.5 million. In July 2014, IRS completed Transition State 1.5, which included ongoing data assurance, performance tuning, and downstream systems efforts to prepare the CADE 2 database for filing season 2014 production.\nIRS began work on Transition State 2 in October 2010, and expects to complete this transition state by March 31, 2015; however, IRS noted that this planned completion date is likely to change. Transition State 2 includes re-writing IRS’s legacy core tax processing applications in modern programming language, and is intended to increase flexibility, scalability, reliability, and security.\nFull operational capability: Not applicable Life-cycle costs: 193.644 million Actual spent to date: $182.837 million Current life-cycle phase: Mixed (development, modernization and enhancement, and operations and maintenance)\nThe e-Services investment is a suite of web-based products that are intended to allow tax professionals and payers to conduct business with IRS electronically. These services are only available to tax practitioners, registered agents, and other third parties and are not available to the general public. The program is available via the Internet 24 hours a day, 7 days a week, and it contains products such as registration, an e-file application, a Transcript Delivery System (a system which tax professionals may use to request and receive account transcripts, wage and income documents, tax return transcripts, and verification of non- filing letters), and Taxpayer Identification Number Matching (a pre-filing service which allows authorized payers to match up to 25 payee taxpayer identification number and name combinations against IRS records prior to submitting an information return).\nThe Information Reporting and Document Matching (IRDM) investment is aimed at helping close the tax gap—the difference between what business taxpayers should have paid and actually did. It is intended to improve voluntary compliance and accurate reporting of income by establishing a new business tax return and information returns that focus on merchant card payments and securities basis reporting. IRDM supports IRS business using information systems that sort, match, identify, manage, and report on returns that are likely sources of tax gap- reducing revenue. To accomplish this, IRS requires operational resources and systems to be put in place to implement business and technology changes that are intended to expand and improve its automated matching of data on information returns to the data submitted on tax returns filed. The investment consists of the following four projects. As detailed in this report, this investment previously included a case management project that was cancelled in January 2014.\nData Assimilation: Identifies the link between tax forms and information returns filed for the same taxpayer to identify potential under-reporter cases. The project then groups these into specific categories to support IRS compliance programs associated with merchant card payments, securities cost basis, and government payments.\nData Correlation: Matches tax return and information return data and applies business rules to identify potential under-reporter cases for use in the IRDM case selection process. After case selection, data correlation builds a complete case record for analysis by a tax examiner to support IRS compliance programs.\nBusiness Master File analytics: Provides IRS users the ability to define and execute logic for the intelligent selection of business taxpayer case inventory to ensure cases selected result in the largest financial return.\nCase Inventory Selection and Analytics: Provides IRS users the ability to define and execute logic for the intelligent selection of individual taxpayer case inventory and creates an analytical environment that offers a greater ability to evaluate case data to improve the selection of cases worked.\nThe IRS.Gov investment consists of a public user portal—IRS.Gov, a registered user portal, and an employee user portal. The key goals of the program include simplifying and transforming the user web experience, consolidating and advancing IRS web technology to industry standards, implementing a high-performing contract structure and terms, and marketing competitive costs throughout the program’s life cycle.\nActual spent to date: $560.118 million Current life-cycle phase: Mixed (development, modernization and enhancement, and operations and maintenance) provide a cost effective and affordable program cost structure; and transition successfully from the old programs to the new program.\nThe Modernized e-File (MeF) investment is the primary system to receive and process all tax returns submitted electronically. When MeF receives an electronic tax return, the system determines if it satisfies the acceptance rules required for further processing. MeF is intended to benefit the tax preparation community and enables the IRS to answer questions quickly and helps to resolve issues. MeF is also intended to benefit corporations and tax-exempt organizations that must file tax returns or annual information returns electronically and is intended to reduce the handling/mailing of voluminous paper returns.\nActual spent to date: $417.871 million Current life-cycle phase: Mixed (development, modernization and enhancement, and operations and maintenance)\nMeF stores all tax return data in Extensible Markup Language format in a Modernized Tax Return Database, allowing authorized IRS viewers (IRS Help Desk personnel and tax examiners) to see tax returns securely online. According to IRS, as of August 2014, taxpayers used MeF to submit over 228 million individual returns and over 14 million business returns.\nIRS deployed MeF Release 9.5 in May 2014, for filing season 2015. According to IRS, Release 9.0 and 9.5 add the employment/unemployment tax family of forms (forms 94x) and the U.S. Income Tax Return for Estates and Trusts (Form 1041) to the MeF environment, as well as a new RRP interface, Affordable Care Act and other legislative changes.\nThe Return review Program (RRP) investment is a web-based automated system that is intended to replace the legacy Electronic Fraud Detection System (EFDS) built in the mid-1990s. It is intended to deliver functionality incrementally through transition states. In September 2013, IRS officials adopted a risk mitigation approach that split Transition State 1 into two releases. The first release —called Transition State 1 Release 1.0—occurred in March 2014 and contained functionality needed for processing filing season returns. The second release—called Transition State 1 Release 1.1—is planned to occur after filing season. RRP is to, among other things: enable more effective routing of returns, detect noncompliant and fraudulent returns, ensure timely issuance of refunds and credits, prevent issuance of refunds and credits not legally due to filers, and streamline business processes used by the IRS criminal investigative staff.\nThe new system is comprised of three major activities:\nDetection. Intended to incorporate several existing models as well as new models to enhance detection of probable noncompliance. Using algorithms and business rule sets, the system is intended to detect questionable information on each return as the return is processed. The system is also intended to detect returns with potential fraud characteristics, thereby allowing criminal investigators to link and analyze groups of returns to identify schemes for potential criminal prosecution.\nResolution. Intended to accommodate existing treatment streams and new treatment streams. Returns will be routed systemically to the best treatment stream, opened into the treatment stream’s inventory and, if applicable, the system will send an initial contact letter to the taxpayer.\nPrevention. Intended to automatically integrate the results of each return’s resolution into the detection models. The results can be used to help target education and outreach efforts to taxpayers and preparers on how to avoid unintentional noncompliance. The system is also intended to allow analysis and identification of fraud and noncompliance not identified by the predictive detection models.", "", "", "", "In addition to the individual named above, the following staff made key contributions to this report: Sabine Paul, assistant director; Chris Businsky; Mary Evans; Rebecca Eyler, Nancy Glover, James MacAulay; Paul Middleton; Bradley Roach; and Karl Seifert." ], "depth": [ 1, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h2_full", "", "", "h2_full", "", "", "", "", "", "h0_full", "h0_full", "", "", "h1_full", "", "h1_full", "", "h1_full", "h0_full", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What were IRS investments reported as meeting?", "What did the agency report for Chief Technology Officer summary-level risk assessments?", "What are these ratings not provided for?", "What would providing summary level risk rating for all major investments do?", "Why did selected investments experience variances?", "What is one of these investments?", "Why is it difficult to determine whether all required testing is being performed?", "What does the IRS rely on?", "What did IRS expect to spend on IT in FY 2014?", "Why is it important that Congress be provided reliable information about IT?" ], "summary": [ "Most of IRS's major information technology (IT) investments were reported as meeting cost and schedule goals. Specifically, 11 of 17 investments were reportedly within 10 percent of cost estimates, and 13 were within 10 percent of schedule estimates between October 2013 and September 2014.", "In addition, the agency reported “green” ratings for investments instead of their previous “yellow” ratings for Chief Technology Officer summary-level risk assessments.", "It is important to note that these ratings are not provided for 6 investments for which IRS provides detailed reporting to Congress.", "Providing summary-level risk ratings for all major investments would improve the visibility into changes in investment risk, and provide Congress with the information to more easily determine the investments requiring greater attention.", "Selected investments experienced variances from initial cost, schedule, and scope plans that were not transparent in congressional reporting because IRS has yet to address GAO's prior recommendations.", "Specifically, the Return Review Program has so far exceeded planned costs by $86.5 million and has yet to deliver functionality that was scheduled for September 2012, and a key phase of Customer Account Data Engine 2 was developed 10 months late and at $183.6 million more than planned.", "In addition, the consolidated reports on the status of testing for the Affordable Care Act Administration investment are not comprehensive, making it difficult to determine whether all required testing is being performed.", "IRS relies extensively on IT systems to annually collect more than $2 trillion in taxes, distribute more than $300 billion in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations.", "For fiscal year 2014, IRS expected to spend about $2.4 billion on IT.", "Given the size and significance of IRS's IT investments and the challenges inherent in successfully delivering these complex IT systems, it is important that Congress be provided reliable cost, schedule, and scope information to assist with its oversight responsibilities." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, -1, 0, -1 ], "summary_paragraph_index": [ 5, 5, 5, 5, 6, 6, 6, 0, 0, 0 ] }
GAO_GAO-19-374	{ "title": [ "Background", "TSA’s Aviation Security Responsibilities", "TSA Checkpoint and Checked Baggage Screening", "Overview of Inspection and Security Operations Testing Processes", "Using a Risk-Informed Approach for Covert Testing", "TSA Revised Its Covert Test Processes since 2016 but Is Not Fully Using and Documenting a Risk-Informed Approach for Selecting Test Scenarios", "Inspection Redesigned Its Covert Test Process to Be More Risk-Informed and Quantitative but Has Not Fully Documented Its Rationales for Selecting Test Scenarios", "Inspection’s Redesigned Covert Test Process", "Inspection Has Not Fully Documented a Risk-Informed Approach for Testing", "Security Operations Redesigned Its Covert Tests to Address Prior Deficiencies but Has Not Fully Incorporated Known Risks or Documented How It Selects Scenarios to Test", "Security Operations Redesigned Its Covert Test Process", "Security Operations Has Not Fully Incorporated or Documented a Risk-Informed Approach for Selecting Test Scenarios", "Inspection’s Updated Process Is Designed to Produce Quality Information, but Security Operations Faces Challenges with the Quality of Its Test Results", "Inspection’s New Process is Designed to Produce Quality Test Results and Analysis", "Security Operations Faces Challenges with the Quality of Its Covert Test Information and Its Quality Assurance Process", "Security Operations Faces Challenges with the Quality of Airport Test Results", "Security Operations’ Testers Face Challenges Identifying the Root Cause of Some Test Failures", "Security Operations Has Not Documented Its Methodology for HET Testing", "TSA Uses Covert Test Results to Help Address Vulnerabilities, but Has Made Limited Efforts to Implement Mitigation Activities, Analyze Test Results, and Disseminate Beneficial Practices", "Inspection’s Test Results Inform an Agency-Wide Process Intended to Mitigate Vulnerabilities, but This Process Has Not Yet Resolved Any Identified Vulnerabilities", "Security Operations Uses Test Data for Feedback and Reporting to Airports and Others, but Does Not Analyze National Data to Identify Potential Vulnerabilities in Screener Performance", "Security Operations Monitors Covert Test Data to Identify Potential Vulnerabilities", "Security Operations Uses Test Data to Provide Feedback and Reporting to Airports and Other Stakeholders", "Security Operations Does Not Conduct and Share a Comprehensive Analysis of National Covert Test Data to Identify Potential Vulnerabilities", "TSA Airport Officials Have Developed Beneficial Practices for Conducting Covert Tests and Using Test Data, but Security Operations Does Not Systematically Document and Disseminate This Information", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix III: GAO Contact and Staff Acknowledgments", "Staff Acknowledgments" ], "paragraphs": [ "", "TSA is the primary federal agency responsible for implementing and overseeing the security of the nation’s civil aviation system and is responsible for ensuring that all passengers and property transported by commercial passenger aircraft to, from, within, or overflying the United States are adequately screened. Specifically, TSA performs, or oversees the performance of, screening operations at about 440 TSA- regulated (i.e., commercial) airports nationwide. These airports range in size from smaller airports (category III and IV airports) to larger airports (categories X, I, and II airports). According to TSA policies and procedures in effect at these airports, all passengers, their accessible property, and their checked baggage are to be screened prior to entering the airport sterile area—the portion of an airport beyond the security screening checkpoint that provides passengers access to boarding aircraft. Among other things, these policies and procedures generally provide that passengers must pass through security checkpoints where their person, identification documents, and accessible property are to be screened by TSOs, and that all checked baggage must be screened by TSOs.", "Checkpoint Screening. The checkpoint screening process, as set forth in TSA’s procedures, is intended to deter and prevent passengers from carrying any unauthorized or prohibited items into the airport’s sterile area and onboard an aircraft. Upon entering the airport terminal security checkpoint, passengers provide travel document checkers their boarding passes for review. Based on the printed boarding pass result, travel document checkers are to direct passengers to designated areas for standard, enhanced, or expedited screening.\nStandard screening is generally applied to all passengers with boarding passes that are not marked for enhanced or expedited screening. This screening typically includes passing through either a walk-through metal detector or advanced imaging technology (the latter of which identifies objects or anomalies concealed on the person) and using X-ray equipment to screen the passenger’s accessible property. In the event that any of these screening devices identify a potential item of concern, additional security measures are to result as part of the alarm resolution process. These measures may include pat downs, explosives trace detection searches (which involve a device to detect explosive particles), and colorimetric testing to identify the concentration of certain chemical elements.\nEnhanced screening is generally required for passengers TSA identifies as high risk, such as passengers that have been matched to federal government lists of known or suspected terrorists. Enhanced screening involves the same procedures applied during a typical standard screening experience, as well as a pat down and an explosives trace detection search or physical search of the interior of the passenger’s accessible property, electronics, and footwear.\nExpedited screening is allowed for passengers TSA believes to be low risk. One group of passengers who routinely receive expedited screening are those enrolled in TSA’s Pre✓®—a program through which individuals vetted and approved by TSA are eligible for this level of screening. At airports with dedicated TSA Pre✓® lanes, expedited screening includes walk-through metal detector screening and X-ray screening of the passenger’s accessible property, and travelers do not have to remove their belts, shoes, or light outerwear, or remove items such as laptops from carry-on baggage.\nChecked Baggage Screening. TSA procedures for checked baggage screening establish a process intended to deter, detect, and prevent the transport of any unauthorized explosive, incendiary, or weapon aboard an aircraft. Checked baggage screening generally entails the use of explosives detection systems—which use X-rays and other technology to automatically measure the physical characteristics of objects in baggage and trigger an alarm when objects that exhibit the physical characteristics of explosives are detected.", "Inspection’s tests are intended to identify vulnerabilities related to any aspect of TSA’s checkpoint and checked baggage screening systems, to include the procedures for screening, the TSOs who implement these procedures, and the technology for screening (e.g., X-ray machines and advanced imaging technology). Security Operations’ testing focuses entirely on TSO performance of existing standard operating procedures for checkpoint and checked baggage screening, and unlike Inspection’s testing, does not test other aspects of screening, such as the performance of screening equipment.\nTo carry out covert testing, both Inspection and Security Operations create test scenarios that describe the overall intent of the test, the threat item, the method of execution (e.g., an explosive device concealed in a shoe carried through the checkpoint), and other pertinent details. Generally, Security Operations’ scenarios have tested TSOs’ performance of procedures pertaining to one of three different paths travelers must follow to have either their persons or property screened (i.e., screening paths): checkpoint on-person—the tester travels through the checkpoint with the threat item concealed on his or her person; checkpoint in-property—the tester travels through the checkpoint with the threat item concealed in a carry-on bag; and checked baggage—the threat item is concealed in checked baggage.\nFor both offices, covert tests begin when program managers notify an airport’s FSD and local law enforcement agency that testing is scheduled to begin. Testers typically pose as passengers and attempt to smuggle a threat object, concealed either on their person or in their property, through one or more layers of the checkpoint or checked baggage screening process (see fig. 1). These layers of screening include the travel document checker and the walk-through metal detector or the advanced imaging technology machine, among others.\nIn general, TSA’s covert tests conclude with a meeting between either Inspection or Security Operations staff and the TSOs and their supervisors who were tested to discuss the results. These meetings, known as post-test reviews, allow officials to reinforce actions resulting in test successes, review the correct procedures for any failures, and collect additional data relating to factors contributing to success and failure. In addition, documented test results are reported to local TSA airport officials, so that they may schedule and track TSO participation in the remedial training that is required by law when screeners fail a test. More broadly, Inspection and Security Operations report test results to certain internal and external stakeholders. Historically, Inspection has reported its test results directly to TSA management to inform executive leadership about the aviation screening system’s potential vulnerabilities to new and evolving threats. In addition, Security Operations has reported test results for its prior testing program to the Office of Management and Budget quarterly and has also briefed TSA senior leadership on results periodically.", "DHS policy requires that its components, including TSA, use risk information and analysis to inform decision making. A risk-informed approach helps decision makers identify and evaluate potential risks so that actions can be taken to mitigate those risks. DHS defines risk as a calculation of threat, vulnerability, and consequence. These elements are defined as follows:\nThreat likelihood is estimated based on intent and capability of an adversary.\nVulnerability is a physical feature or operational attribute that renders an entity open to exploitation or susceptible to a given hazard. In calculating risk, vulnerability is based on the likelihood that an attack is successful, given that it is attempted.\nConsequence refers to the negative effect of an event, incident, or occurrence.\nAccording to the 2010 DHS Risk Lexicon, which defines key risk- management terms for DHS agencies and components, risk-based decision making uses the assessment of risk as the primary decision driver, while risk-informed decision making may consider other relevant factors in addition to risk assessment information, for decision making.\nTo guide agency efforts to make risk-based decisions, TSA issues annually its Transportation Sector Security Risk Assessment—a report on transportation security that assesses risk by establishing risk scores for various attack scenarios within different transportation sectors, including domestic aviation. These scenarios are continuously refined to reflect evolving threats to the various transportation modes and feedback from subject matter experts. In scoring risk scenarios for the Transportation Sector Security Risk Assessment, TSA considers the three elements of risk (threat likelihood, vulnerability, and consequence).", "", "", "In 2016, Inspection redesigned its process to conduct covert tests more consistently across airports, and began using quantitative methods to design tests and analyze results so that its findings might be applied more broadly across airports nationwide. Inspection officials explained that, prior to redesigning their process, Inspection’s findings could not be applied more broadly because of how tests were designed and executed. In addition, officials noted that some prior test practices risked diminishing the quality of testing. For example, some testers consistently ran tests at the same airports, increasing the likelihood that they might be recognized by TSOs and compromise the covertness of tests.\nAs part of its new testing effort, Inspection recruited a technical team of employees with expertise in statistics and engineering to enhance the design, execution, analysis, and reporting of its covert tests. Inspection also documented its new covert test process and rationales for key program decisions, including its approach to performing quantitative analysis of test results, in overarching guidance issued in October 2016. These documents set forth a framework for conducting tests that includes the creation of detailed scenarios that specify Inspection’s covert test objectives and scope of testing. For example, for one Inspection test scenario conducted in fiscal year 2016, Inspection conducted 280 tests at larger airports to assess whether certain types of assembled explosive devices contained in carry-on luggage could evade detection at the checkpoint. Under new guidance, Inspection’s testers may not conduct tests at the same airport within a predetermined period, to limit the potential of being recognized by airport staff. In addition, under its new process, Inspection selects airports for testing so that it may apply its findings more broadly across airports nationwide. Once Inspection testers complete all tests for a given scenario, Inspection develops classified reports containing results of its quantitative analysis (including detection rates for specific threat items) and suggested actions aimed at addressing any identified vulnerabilities.", "Inspection uses a risk-informed approach to select locations and scenarios for covert tests, but has not fully documented this approach. According to Inspection officials, to select airport locations for tests, they use a tool to randomly select airports from various regions and of various sizes to ensure appropriate representation. According to our review of the locations Inspection tested in fiscal years 2016 and 2017, Inspection predominantly conducted testing at the larger airports. As previously discussed, this is consistent with a risk-informed approach, as TSA’s analysis has shown that larger airports face an increased threat of a terrorist attack.\nIn addition, Inspection officials said that they use a risk-informed approach to select scenarios for their covert tests that takes into consideration all three aspects of a comprehensive risk assessment— threat, vulnerability, and consequence. According to officials, Inspection’s approach to each of the three components of risk is described below.\nEfforts to Consider Threats. According to Inspection leadership officials, Inspection has developed close working relationships with key intelligence community agencies to obtain current and specific intelligence information about threats to commercial aviation. Inspection uses this information to create test scenarios involving threat items and attack methods that correspond with the most current threat intelligence. Inspection officials explained that they also consult risk assessments such as the Transportation Sector Security Risk Assessment to help determine which scenarios to test, but do not rely solely on this information. Officials said this is because such assessments can lack specificity about the type and placement of threat items along different screening paths. For example, the Transportation Sector Security Risk Assessment may not convey the specific type of device or the mechanism by which an explosive device will be presented at the checkpoint (e.g., in a laptop). Inspection’s approach, which uses both current intelligence and risk assessments, is consistent with a risk-informed approach, which allows agencies to utilize resources beyond risk assessments to inform decision making.\nEfforts to Consider Vulnerability. Inspection officials told us they have considered vulnerability as a factor for making risk-informed decisions, and have found that it is not useful when deciding which scenarios to test for two reasons. First, their covert testing is intended to identify the existence of vulnerabilities in the aviation security system. Second, officials explained that vulnerabilities at some airports are well-documented and understood; therefore, they would generally not use their limited resources to test a vulnerability that is well-known.\nEfforts to Consider Consequence. Inspection officials explained that when selecting among possible scenarios to test, considering the consequences that might result from a scenario is less important than the likelihood of a given threat. However, Inspection officials explained that they require that any scenario tested is one that would result in the loss of life if the attack were actually to occur.\nAlthough Inspection program officials could articulate the risk-informed approach used to select scenarios for testing, they had not sufficiently documented this approach. Specifically, we found that Inspection documents its process for making risk-informed selections of scenarios in formal work plans. This documentation includes general criteria that Inspection leadership is to consider when developing threat scenarios, one of which is threat likelihood. However, the work plans we reviewed did not identify selection criteria that address the vulnerability or consequence components of risk.\nDHS’s Risk Management Fundamentals (2011) requires that agency documentation include transparent assumptions about the rationale behind risk management decisions. In addition, according to Standards for Internal Control in the Federal Government, agencies should document key decisions in a way that is complete and accurate. According to Inspection officials, they have not fully documented their risk-based process for selecting scenarios because their decision making is often informed by unforeseen events associated with the most exigent threats. Nevertheless, without documenting in its work plans how consequence and vulnerability are considered when determining which scenarios to test, current Inspection program managers may not be able to ensure that their scenario selection decisions are appropriately accounting for risk as called for by DHS and TSA guidance. Furthermore, although vulnerability and consequence are less important criteria for Inspection’s current risk-informed selections, documentation of its approach toward each would serve as a baseline for how Inspection makes risk-informed decisions for selecting scenarios to test. This baseline could inform future program managers and agency leadership seeking to make changes.", "", "In 2016, Security Operations replaced its Aviation Screening Assessment Program with a new covert test program. Security Operations issued guidance for this new program that, among other things, established a parallel test process carried out by headquarters staff to validate (i.e., determine the quality of) local covert test results from airports. In conjunction with this process, Security Operations also developed and launched a new web-based tool to collect more detailed information on covert tests. According to Security Operations officials, the new program is intended to address problems with its covert testing process identified by an independent contractor in 2015. Specifically, the contractor performed the same covert tests that TSA personnel at local airports conducted, and the contractor’s test results showed that screeners performed more poorly on its tests. In September 2016, we reported that, based on the results of the contractor’s study, TSA had determined that prior-year tests conducted by TSA officials at airports likely showed a higher level of performance than was actually the case. Further, TSA attributed these higher detection rates, in part, to local airport difficulties in successfully maintaining the covert nature of their tests.\nTo address deficiencies identified by the TSA-contracted study, Security Operations issued test guidance in December 2016 and January 2017 that provides more structure to the planning and execution of tests and is intended to help ensure the quality of test results, among other things. For example, the guidance directs local test coordinators to schedule covert tests at varying times of day and varying days of the month, to prevent TSOs from becoming accustomed to testing at particular times. Also, to help ensure that testers are not recognizable by TSOs, the guidance states that airports must not recruit testers from the airport in which the test is to be conducted. Additionally, Security Operations’ guidance expands opportunities for recruiting testers at airports.\nSecurity Operations’ new covert test program also features a headquarters-based covert test effort, known as Headquarters Evaluation Team (HET) testing, to help validate the results of covert tests conducted by TSA officials at airports, known as Field Evaluation Team (FET) testing. Under the new process, FET teams, which are composed of TSA staff at airports and locally recruited testers, oversee testing at airports where FSDs are located and at any smaller airports under the FSD’s authority. FET teams perform tests of three different screening paths—checkpoint in-property, checkpoint on-person, and checked baggage—using a variety of scenarios assigned by Security Operations program managers every 6 months. FET teams test scenarios for a designated number of times over the 6-month period, after which, program managers are to select and assign a new set of scenarios for testing for the next 6-month period. For its HET tests, Security Operations is to select, on a quarterly basis, three scenarios to test from among the current set of scenarios assigned for FET testing. HET teams are to travel to airports quarterly to conduct these tests and help validate the FET testing results. Security Operations’ validation process involves comparing detection rates—the percentage of tests in which TSA screening recognized and prohibited a threat item from entering the sterile area of an airport—for similar scenarios from both groups of testers.\nTo assist HET and FET teams in collecting more detailed information from its new test program, in April 2016, Security Operations developed a web-based data collection instrument called the Task Process Factor (TPF) tool that TSA officials use to record more detailed information on covert tests. According to program officials, collecting more detailed information about test failures was part of the agency’s effort to improve screener performance following the DHS Inspector General’s 2015 covert test findings that identified vulnerabilities in TSA’s checkpoint screening. The tool defines the key TSO activities for conducting checkpoint and checked baggage screening as tasks (e.g., interpret the X-ray image). The tool also identifies the various processes associated with a given task (e.g., move property into the X-ray scanner and stop when a full image appears). For any task in which a TSO fails, testers are to use the TPF tool to record the task and process associated with the failure—so that Security Operations may identify points of failure for tests with greater specificity. Furthermore, for all test failures, the tool requires HET and FET testers to identify the factor, or root cause, for failure.", "Although Security Operations considers some TSA risk information when selecting airport locations to test, we found that Security Operations does not fully consider this information when determining which scenarios to use for its covert tests, and also does not document its rationale for choosing the scenarios it selects. According to its planning documents for conducting HET and FET tests, Security Operations conducts more tests at larger airports than smaller airports. According to TSA officials, this is because larger airports generally have more TSOs who are subject to covert testing. TSA’s decision to allocate more testing resources to larger airports is based on its own risk analysis and, therefore, is consistent with a risk-informed approach. However, Security Operations has not taken steps to incorporate known risks—such as those documented in TSA’s annual Transportation Sector Security Risk Assessment, TSA’s primary risk assessment of threats for all transportation modes—into its process for selecting covert test scenarios. As our prior work has shown, implementing a risk-informed approach involves using risk assessments or other risk information to determine the most pressing security needs and developing strategies to address them.\nIn reviewing TSA’s 2016 Transportation Sector Security Risk Assessment—the version that would have informed Security Operations’ selection of tests for fiscal year 2017—we identified numerous attack scenarios that could have been incorporated into Security Operations’ selection of scenarios to test. Specifically, the 2016 risk assessment included 20 scenarios that involved attacks that could be carried out through expedited screening conducted in dedicated TSA Pre✓® screening lanes. We reviewed all scenarios Security Operations selected to test in fiscal year 2017, but found that only one involved a test of the TSA Pre✓® lane. More generally, we also found that TSA’s selection of threat items to test at the checkpoint in fiscal year 2017 did not reflect threats identified in TSA’s 2016 Transportation Sector Security Risk Assessment.\nSecurity Operations officials acknowledged that they do not use formal TSA risk assessments to determine what threat scenarios or items to test. They also do not work with intelligence agencies or review classified information when developing covert test scenarios. Instead, Security Operations officials said they rely mainly on professional judgment regarding which areas of checkpoint and checked baggage procedures TSOs frequently overlook or may not perform correctly (e.g., pat downs). Officials explained that their judgment is informed by monitoring covert test results; unclassified media reports on threats; and requests from agency leadership, such as from TSA’s Administrator. Security Operations’ program managers further explained that because their tests are intended to assess TSO performance of screening procedures and identify any gaps, their selection of scenarios for testing is intended to cover the breadth of checkpoint and checked baggage screening procedures. However, as previously discussed, using a risk-informed approach would allow program managers to balance other goals of testing, such as the need to test a variety of screening procedures, with risk information, when making decisions on what to test.\nDHS’s Policy for Integrated Risk Management (2010) states that DHS components should use risk information and analysis to inform decision making. Additionally, the TSA Strategy 2018–2026 prioritizes structuring programs to manage risk and optimize resource allocation. Formal risk assessments such as the Transportation Sector Security Risk Assessment identify the most significant risks to checkpoint and checked baggage screening, and accordingly identify some of the most critical skills TSOs need to detect or prevent possible attack scenarios. Using a risk-informed approach to select scenarios that more fully account for known risks—such as those identified in the Transportation Sector Security Risk Assessment or a similar risk assessment—could better ensure that TSA is using its finite testing resources to target screening activities that will counter the most likely threats.\nAdditionally, DHS’s Risk Management Fundamentals (2011) requires that agency documentation include transparent assumptions about the rationale behind risk management decisions. However, Security Operations has not documented its rationales for selecting covert test scenarios in any of its overarching guidance or planning documentation. Such rationales would delineate Security Operations’ framework for determining what screening activities to test, and specify how Security Operations officials balance a risk-informed selection of scenarios with their need to test scenarios that cover the breadth of requirements within existing screening procedures. Security Operations officials said they do not document their scenario selection process because they review covert test data on a frequent enough basis to identify which processes have low detection rates and, thus, are in need of testing. However, documenting a risk-informed rationale for its selection of scenarios would better enable Security Operations or an external party to assess TSA’s covert test programs and ensure that decisions are appropriately accounting for risk as called for by DHS and TSA guidance. It would also allow Security Operations to demonstrate how it balances its goal of promoting a risk-informed culture, as required by DHS, with program goals to ensure that TSOs are following all required screening procedures correctly.", "", "Inspection has established a new process and principles for conducting covert tests, as well as collecting and analyzing test data, intended to result in quality information on screening vulnerabilities. We reviewed two reports on results of Inspection’s covert testing that were completed using its new processes, and found they resulted in quality information on screening vulnerabilities. With respect to its new processes Inspection has implemented guidance to ensure a standardized process for developing and executing tests. Specifically, Inspection guidance requires that headquarters staff with expertise in relevant fields (including physical security, explosives, and intelligence analysis) develop all threat items used for testing and conceal these items within test bags or on testers in the same manner across tests. In addition, Inspection program managers require that testers have detailed background stories to explain the purpose(s) of their travel.\nInspection now employs multiple standard practices to ensure test covertness. We observed several of these practices during four Inspection tests conducted at one airport. These four tests consisted of two scenarios that were each tested at two different checkpoints within the airport. First, we observed that Inspection teams notified the FSD of their presence only immediately prior to beginning tests, to limit the potential for local airport staff to be forewarned. We also observed that Inspection conducted tests simultaneously across checkpoints, and concluded testing at the airport after an initial round of testing. According to Inspection program managers, conducting tests simultaneously and leaving after the initial round of testing are necessary because once TSOs at a tested checkpoint become aware of testing, there is no reliable way to prevent this knowledge from spreading to other checkpoints.\nInspection now integrates its technical operations team (technical team) into all aspects of test design and data collection and analysis. Inspection officials recruited staff with expertise in research and test design, statistics, and systems engineering, among other relevant fields, to analyze this information. Inspection has integrated these staff into all aspects of its test process to ensure the quality of test information collected and analyses performed. For example, according to TSA documentation, Inspection technical team members are to oversee the selection of airports for testing by first conducting an analysis to determine the number of airports to be tested, and then ensuring the selection of airports for testing is made using a random process—a requirement, given that Inspection intends to use test results to understand and describe screening activities at airports nationwide.\nInspection now identifies data to be collected for each scenario and monitors this data as it is being collected for quality assurance. According to TSA documentation, Inspection’s technical team develops the data collection forms used to record test information for every scenario. Such data elements are specific to each scenario and can include, for example, the time when the tester entered the checkpoint, whether the TSO running the X-ray machine stopped the belt to review the tester’s bag, and the brand of X-ray machine. According to TSA documentation, the technical team is also to monitor incoming data from scenarios on a regular basis to address any problems as they arise.\nInspection now uses guidance to ensure consistency in analysis and reporting. This includes requirements for reviewing all test data and applying rules about which data should be excluded. Inspection also developed guidance to specify the types of statistical analyses that may be used to draw conclusions about test results and how to report on the results to ensure that its analysis of test results is appropriate and transparent. For example, Inspection guidance identifies what technical information should be included in the report to help readers interpret Inspection’s conclusions that are based on statistical analysis of results. We reviewed the two full reports that Inspection issued using this new guidance and found that Inspection generally followed the guidance for using statistical analysis and reporting final results in these reports.", "", "As previously discussed, the primary method by which Security Operations tries to ensure that quality covert test results are generated at airports is by having HET and FET testers conduct the same test scenarios at airports, and then comparing detection rates identified by the two teams. Security Operations program managers explained that this method presupposes that test results collected by HET and FET (following Security Operations’ overarching guidance for conducting tests and using the same test scenarios) should produce similar detection rates at the national level. Security Operations program managers further explained that, because HET testers are unaffiliated with the airports they test, they can more easily maintain test covertness. According to program managers, this aspect of HET testing, along with additional training HET testers receive in conducting covert tests, gives them greater assurance that HET tests accurately reflect screener performance at airports. Therefore, program managers generally consider large disparities between HET and FET detection rates to indicate problems with the quality of local airport covert test results.\nAccording to our analysis of Security Operations national covert test data for fiscal years 2017 and 2018, checked baggage tests consistently met the Security Operations criterion for quality test results, but checkpoint tests did not. In fiscal year 2018, TSA included a new criterion for quality test results for Regional Director and FSD annual performance evaluations. The criterion requires that HET and FET covert test detection rates at airports under their supervision be within a designated percentage point difference for the three types of tests (checkpoint in- property, checkpoint on-person, and checked baggage).\nAccording to our analysis of Security Operations national covert test data for fiscal year 2017 and the first half of fiscal year 2018, checked baggage tests consistently met the criterion for quality test results, however, checkpoint on-person and in-property tests did not. Specifically, we calculated HET and FET detection rates for the three kinds of Security Operations tests (checkpoint on-person, checkpoint in-property, and checked baggage tests) for three 6-month periods from fiscal year 2017 through the first half of fiscal year 2018. We found that, for each 6-month period, HET detection rates for checkpoint tests were lower than FET detection rates, and the differences exceeded TSA’s established criterion for quality test information. Security Operations officials acknowledged the differences between HET and FET rates, but noted that the differences generally decreased from the last 6-month cycle of testing for fiscal year 2017 through the first 6-month cycle of 2018, and program managers are working to address them further. Nevertheless, our analysis showed that for the first half of fiscal year 2018 (the most recent cycle’s data available for our analysis) differences between HET and FET test detection rates for checkpoint on-person and checkpoint in-property remained greater than Security Operations’ criterion for quality test information.\nIn our observations of FET tests, we identified practices in local airport testing that impact the covertness of tests, and thus may contribute to differences between HET and FET detection rates. First, in our observations of local airport FET tests in which TSOs correctly identified the threat items, at one airport the TSA airport official in charge of FET testing was present at the checkpoint, and his presence may have provided advance notice to the TSOs that testing was in progress. Further, we learned from airport testing officials that having the FET test coordinator present at the checkpoint was a routine practice when testing was in progress. At another airport visit, one TSO told us that TSOs often know a FET test is in progress because TSA airport officials use the same test bag to conceal threat items across all tests performed at the airport. According to TSA documentation, potential lapses in the covertness of covert tests, similar to those we observed and were told about, can make TSOs aware that they are being tested and lead to results on tests that overstate actual TSO performance.\nIn addition, we found that the level of potential variability in how TSA airport officials build threat items and test bags for FET tests may affect the quality of the test results used for comparison purposes. Security Operations requires that FET personnel build the threat items, such as explosive devices, that are used for scenarios according to specifications included within TSA headquarters-disseminated scenarios. These scenarios provide a description of the test scenario, a list of materials needed for the threat item, assembly instructions, and directions on how to conceal the threat item within checked or carry-on baggage. TSA provides standard kits to local airports that contain some of the materials FET teams need to build threat items (e.g., an explosive simulant), but TSA staff at the airport must independently procure a number of items needed for each scenario. Given that approximately 80 different teams of FET testers use non-standardized items to build and conceal threat items for tests, the test bags used by teams of FET testers vary to a certain extent across test programs nationwide. According to TSA officials, variations in the construction of test bags (including the simulated explosive devices and test bag assembly) can affect how easy or difficult it is to detect a threat item.\nThe program manager for the HET-FET testing program agreed there is a need for greater assurance of the quality of covert test results, but stated that Security Operations has not taken action on this issue due to resource constraints. However, quality assurance is critical to ensure that the resources TSA has invested in covert testing will yield valid and usable information. Moreover, given its resource constraints, Security Operations’ actions to improve local airport test results could encompass less resource-intensive undertakings, such as providing more standardized items for FET tests or improving guidance to address issues that impact the covertness and consistency of tests.\nStandards for Internal Control in the Federal Government states that management should use quality information to achieve an entity’s objectives, and that reliable internal sources should provide data that are reasonably free from error and bias and faithfully represent what they purport to represent. By assessing its current FET testing processes— including factors that may compromise the covertness and consistency of tests—Security Operations could identify opportunities to improve the quality of its testing. Further, making changes to its testing process based on its assessment of the current FET testing process could help improve the quality of test results. This, in turn, would better position those who use these results (including agency leadership and TSA airport officials) to reliably identify and address vulnerabilities based on TSO performance.\nIn addition, we found that issues we identified with the quality of FET test results also affect Security Operations’ reporting to external stakeholders. As previously discussed, officials internal and external to TSA use Security Operations test results to assess the effectiveness of TSO performance. Currently, Security Operations reports quarterly FET detection rates as a performance measure to the Office of Management and Budget. The measure identifies the percent of time that TSOs correctly detect threat items at the checkpoint (concealed in carry-on baggage and on the passenger’s body) and within checked baggage. However, as previously discussed, we found that airport testers were not generating quality covert test information on checkpoint screening because their FET detection rates were higher than the HET rates used for comparison, and the difference between the rates exceeded the criterion TSA established for quality covert test information. TSA management officials acknowledged that the agency needs to use more reliable covert test results for measures reported to the Office of Management and Budget. In October 2018, TSA notified the Office of Management Budget that it is in the process of assessing the quality of covert test results it uses to report on TSO performance, and expects to develop new measures by fiscal year 2020.", "In addition to issues with the overall quality of airport test results, we found that Security Operations faced challenges with the quality of information it collected on the root cause of tests failures. For each test failure, HET and FET testers are to use the TPF tool to identify and record the factor, or root cause, leading to a covert test failure. The TPF tool groups test failure factors into three main categories—(1) failures characterized by the screener’s lack of knowing what is required to effectively accomplish a task or job (a knowledge deficiency); (2) failures caused by incorrectly performing a procedure (a skill deficiency); or (3) failures due to the TSO not assigning the correct level of importance to performing a specific screening procedure (a value deficiency).\nAlthough Security Operations has provided some guidance on when to apply a particular factor as a root cause for a covert test failure, this guidance may not be adequate and some testers may not be selecting factors appropriately as a root cause. In our analysis of the factors assigned by both Security Operations HET and FET testers for all covert test failures in fiscal year 2017, we found that testers assigned one factor more than the other two. To assist HET and FET testers in conducting root cause analyses for test failures, Security Operations provides definitions of the three root causes (knowledge, skills, and value). It also requires that all testers (HET or FET) complete three online exercises for using the TPF tool to record results, but the exercises do not provide additional guidance on how to appropriately select root causes. In addition, Security Operations provides in-person training to all HET testers that includes a practice case on selecting from among the factors, and the training course material indicates that the process can be subjective.\nIn our observation of HET tests, we observed numerous failures in which HET testers had to assign a root cause. In a majority of these failures, the tester attributed the same factor as the root cause. HET testers who completed the root cause analyses for these failures all told us they assigned this particular factor by default, once they ruled out the other two causes. Our observations were consistent with a 2017 independent evaluation of the TPF tool performed by the DHS Science and Technology Directorate. Among other things, subject matter experts conducting the 2017 evaluation found that testers they spoke with were not clear on the meaning of the three root causes, and the evaluation recommended that Security Operations provide better guidance to testers on how to select the root cause of a test failure.\nSecurity Operations’ program managers concurred with the DHS Science and Technology Directorate’s recommendation that testers need better guidance on how to select among the factors as the root cause for test failures. They also stated they are working on guidance to assist testers in selecting the appropriate root cause for failures. However, in September 2018, program managers told us they had suspended these efforts to address the recommendation as a result of TSA efforts to transfer program operations to Inspection and in anticipation of broader changes to the Security Operations testing program. Inspection officials, who will assume responsibility for HET and FET testing once the transfer of the program to Inspection is complete, stated that they were unsure what changes they would make to Security Operations’ legacy testing process with respect to HET and FET tests at local airports, but stated both types of testing will continue to use their respective legacy testing processes in fiscal year 2019 until final decisions are made.\nStandards for Internal Control in the Federal Government states that management should use quality information to achieve an entity’s objectives, and that reliable internal sources should provide data that are reasonably free from error and bias and faithfully represent what they purport to represent. As long as Security Operations’ legacy testing process is in use, testers will continue to inconsistently and potentially incorrectly identify the root cause for test failures, and in doing so, will diminish the usefulness of root cause information for addressing TSO performance problems. Reviewing existing guidance and training and providing, where appropriate, additional clarification on applying the factors as a root cause would allow TSA to collect more reliable information on the factors leading to test failures. This, in turn, would better position those who use this information (including agency leadership and TSA airport officials) to address root causes of screener failures at individual airports and across the entire system.", "Security Operations has not fully documented its methodology for using HET testing as a quality assurance process for FET test results. While Security Operations has documented some aspects of the HET test process, such as training for HET testers on how to conduct tests and post-test reviews with TSOs, we found that Security Operations has not documented its methodology for using HET tests to ensure the quality of FET test results in either its program guidance or other internal documentation. For example, Security Operations has no documentation on how program managers should select airports (e.g., by airport category) and scenarios for HET testing, as well as how they should analyze, compare, and report on HET test results against FET test results.\nSecurity Operations officials described some aspects of how they calculate HET and FET test detection rates for comparison purposes, but they did not have a documented methodology for this quality assurance process. For example, Security Operations officials said that they only use data from the largest airports that receive both HET and FET tests (approximately 120 of the about 440 commercial airports) for comparison purposes. Security Operations officials also explained they exclude all HET and FET tests involving enhanced screening from the rates used for comparison purposes because enhanced screening involves a more detailed inspection of the subject that tends to result in the screeners identifying threat items at a higher rate. In addition to these explanations, program managers provided a document explaining Security Operations’ rationale for selecting each of the HET test scenarios used for the last half of fiscal year 2017. While these explanations and the accompanying documentation helped clarify aspects of Security Operations’ process, Security Operations has not developed a policy that provides a comprehensive description (and therefore understanding) of the quality assurance process that its program managers are to use for program planning purposes. Such a policy would describe Security Operations’ approach to selecting HET test scenarios used for ongoing covert testing, how it calculates and compares test results, and how it reports and uses the results. Security Operations program managers agreed that more transparent information regarding the use of HET test results to assess FET test results would be beneficial, but, given that the program was established in late 2016, they acknowledged that they have not had time to document this process.\nStandards for Internal Control in the Federal Government states that all transactions and other significant events need to be clearly documented, and this documentation should be readily available for examination. The documentation should appear in management directives, administrative policies, or operating manuals. By fully describing its methodology for comparing the results of HET testing with FET test results as a quality assurance process within its program guidance, Security Operations can better ensure that all aspects of this process are clear and available for assessment and validation by third party users of HET and FET test information, such as TSA senior leadership officials. Doing so can also ensure that future program managers for the HET-FET test program can continue to use this quality assurance method appropriately by following the guidance.", "", "Inspection submits its covert test findings that it determines to be security vulnerabilities to TSA’s Security Vulnerability Management Process. TSA established this agency-wide process in 2015 to review and address any systemic vulnerability facing TSA (including those related to checkpoint and checked baggage screening). However, it is unclear if vulnerabilities reviewed through this process are being addressed in a timely manner because the process lacks clear timeframes and milestones for mitigation steps, as well as an established method for monitoring the achievement of such timeframes and milestones.\nIn 2015, before establishing the Security Vulnerability Management Process, TSA conducted a review of then-existing processes for evaluating and managing identified vulnerabilities, and found that they were not centralized and did not ensure the level of visibility and accountability needed to adequately mitigate and resolve (or close) the vulnerabilities. Consequently, TSA determined that its processes for tracking and managing the closure of identified security vulnerabilities represented an organizational deficiency that should be addressed. In addition, Inspection officials stated that, under the prior processes, they lacked complete knowledge of all agency resources that could be leveraged to develop mitigation strategies, as well as the necessary authority to compel offices to share these resources, which made it difficult to ensure identified vulnerabilities were addressed. As a result, TSA created the Security Vulnerability Management Process to better ensure the cooperation of various program offices within TSA that had the expertise needed to address vulnerabilities identified by Inspection or other offices within TSA. This process is intended to centralize agency efforts to mitigate vulnerabilities by ensuring that they receive agency- wide visibility and are evaluated, resourced, and managed by appropriate TSA program offices until fully addressed.\nTSA’s Strategy, Policy Coordination, and Innovation office is responsible for managing and overseeing the Security Vulnerability Management Process, as well as enforcing deadlines for vulnerability mitigation. The Strategy, Policy Coordination, and Innovation office submits vulnerabilities for review by one of two groups of TSA stakeholders—the Executive Risk Steering Committee or the Risk Assessment Integrated Project Team. These two groups are responsible for identifying all TSA program offices affected by the vulnerability in question and working with those program offices to determine whether and how vulnerabilities can be mitigated and formally closed (see fig. 2). According to TSA Strategy, Policy Coordination, and Innovation office officials, to close a given vulnerability, one of the two groups will assess whether the risk posed by the vulnerability aligns to the identified amount of risk that TSA is willing to accept. TSA officials told us that the agency is risk averse to any vulnerability that could cause catastrophic consequences, such as the loss of an airplane.\nThe Strategy, Policy Coordination, and Innovation office has responsibility for enforcing deadlines for mitigating identified vulnerabilities, but our review of TSA documentation found that the office does not establish timeframes and milestones to ensure measured progress toward mitigation of those vulnerabilities. Moreover, we found that although the Security Vulnerability Management Process charter establishes a broad framework for developing and implementing mitigation strategies, it does not establish a method for how the Strategy, Policy Coordination, and Innovation office is to monitor mitigation activities to ensure that TSA program offices are meeting identified timeframes and milestones, such as by identifying a person or entity responsible for escalating cases when these requirements are not being met.\nSpecifically, we found that Inspection has submitted nine vulnerabilities for consideration. With one exception, as of September 2018, none of the vulnerabilities have been formally closed as a result of mitigation steps taken via the vulnerability management process. Under the process, a vulnerability owner has responsibility for developing and leading mitigation efforts for a specific vulnerability. TSA closed one of the nine vulnerabilities 2 years after submission to this process because the relevant program office made policy changes that addressed Inspection’s interim findings. The remaining vulnerabilities have been in progress from 4 months to 2.5 years. Of these eight vulnerabilities, five have had TSA offices assigned as vulnerability owners, and three of these five have mitigation efforts in progress. The three remaining open vulnerabilities that did not yet have vulnerability owners assigned at the time of our review had been waiting for vulnerability owners for a period of 4, 5, and 7 months, respectively; however, TSA officials told us that these three open vulnerabilities had owners assigned in September 2018.\nTSA officials told us that timeframes for vulnerability mitigation can vary due to the number of stakeholders required to address the situation. They also explained that the complexity of certain threats affect the timeliness of final mitigation solutions (e.g., those requiring technology solutions can involve multiple TSA offices); and before such solutions are developed, Inspection works with program offices to help them develop interim mitigation procedures. Additionally, they cited factors beyond TSA’s control that can delay mitigation efforts, such as changes to agency leadership or in staff within a particular office. For example, mitigation has been delayed for one of the vulnerabilities under review for over 2 years, due to changes in agency leadership in 2016, among other things. In another example, TSA officials told us that mitigation for a vulnerability under review had been delayed for over two years due to personnel changes within the office tasked with developing and leading mitigation efforts. Inspection officials told us that while officials are working on mitigation solutions for identified vulnerabilities, Inspection will assist TSA program offices with implementing interim mitigation procedures before formal mitigation plans are developed. For example, Inspection officials stated that they worked with Security Operations to provide interim guidance to TSA airport officials to address an identified vulnerability that involved Transportation Security Specialists for Explosives using screening equipment incorrectly to clear passengers through the checkpoint.\nAlthough TSA has implemented interim mitigation steps for some vulnerabilities while its program offices develop long-term solutions, in some cases Inspection’s findings represent system-wide vulnerabilities to commercial aviation that could result in potentially serious consequences for TSA and the traveling public. For this reason, it is important that TSA make timely progress on formal mitigation solutions. Moreover, tracking progress for a given vulnerability against timeframes and milestones would not necessarily preclude TSA program managers from accounting for complex mitigation efforts. Program managers could, for example, establish longer timeframes at a mitigation effort’s onset and adjust these as needed, should challenges arise.\nThe Standard for Program Management states that the governance of programs includes establishing minimum acceptable criteria for success and the standards by which they are measured and communicated to achieve desired outcomes. Additionally, programs should include the concept of time and incorporate schedules through which specific milestone achievements are measured to ensure that appropriate progress is made toward achieving a defined set of outcomes. In TSA’s case, this would mean the mitigation of identified vulnerabilities. The Standard for Program Management further states that program governance plans are to describe the systems and methods to be used to monitor a given program, and the responsibilities of specific roles for ensuring the timely and effective use of those systems and methods.\nTSA officials agreed that their vulnerability management process lacks a clear set of deadlines for the timely completion of mitigation steps, as well as a method for monitoring completion of these steps to ensure vulnerabilities are closed. By establishing timeframes and milestones for vulnerability mitigation, TSA would better ensure that progress toward addressing vulnerabilities continues, despite internal challenges, such as personnel changes, or external factors. In addition, by establishing the methods by which TSA’s Strategy, Policy Coordination, and Innovation office will monitor milestones for completion, and the steps it will take when mitigation is not progressing as planned, TSA will be better positioned to ensure that the agency is making measured progress toward addressing the vulnerabilities managed through this process.", "", "Security Operations program managers said that they continuously monitor covert test results to identify potential vulnerabilities and to assess progress at airports in addressing vulnerabilities identified through covert tests. Security Operations primarily monitors TSO performance by reviewing information within its TPF tool. Specifically, program officials said that they monitor the database each month to identify gaps between HET and FET detection rates at an individual airport and regional level. Security Operations officials said that they will alert TSA officials at airports if they detect anomalies or large disparities between their HET and FET test rates, and suggest strategies for conducting tests. While reviewing the data, Security Operations officials told us they may also identify specific test scenarios that TSOs are experiencing difficulties with, and sometimes develop strategies to improve performance. For example, officials said that when TSOs demonstrated difficulty with a scenario involving colorimetric testing, Security Operations developed a pamphlet for TSOs to clarify those procedures.\nSecurity Operations’ monitoring has also resulted in changes to processes and procedures. For example, according to TSA documentation, in early 2016 Security Operations officials conducted an ad hoc analysis of relevant covert test data. This analysis led to the implementation of Enhanced Accessible Property Screening procedures for personal property screened at airport checkpoints. According to TSA documentation, these new procedures are intended to help TSA officers obtain a clearer X-ray image to enhance screening effectiveness. Among other things, they involve advising passengers to remove organic materials from carry-on bags for X-ray screening, requiring that electronics larger than a cell phone be removed from carry-on bags and placed in bins for X-ray screening, and more targeted property search protocols.\nIn addition to periodic monitoring of test data within the TPF tool’s database, Security Operations officials also told us they monitor Threat Detection Improvement Plans, which are based on recommended actions stemming from each airport’s covert testing results. TSA officials told us that these plans can include test-specific action plans and high-level improvement strategies. Security Operations now monitors airport progress against these plans in order to ensure that airports are taking the necessary actions to improve TSO performance deficiencies identified in covert testing.", "Security Operations officials told us they use covert test results as the basis for feedback and periodic reporting on TSO performance and the quality of covert test programs or results to headquarters, regional, and local TSA officials and other stakeholders. According to Security Operations officials, this feedback and reporting includes the following.\nHET reports and feedback: Security Operations directly communicates with TSA officials at airports on HET test performance. For example, in our observations of HET tests at airports, testers conducted an equal number of post-test reviews, during which they reviewed with TSOs and their supervisors the intent and results of the HET tests, reinforced actions resulting in test successes, and reviewed the correct procedures for any failures. In addition to post- test reviews, at the conclusion of each HET test at an airport, Security Operations program managers provide TSA management at the airport a report compiling the results of the recent HET test and statistics on the quality of the covert test program at the airport. According to TSA documentation, these reports include a comparison of local FET test results against the results of HET tests that were conducted during that visit.\nTPF Report: On a monthly basis, according to TSA documentation, Security Operations also provides a classified spreadsheet report to FSDs that contains a high-level analysis of HET and FET covert test data collected for the fiscal year to date, as well as a copy of the most current test results in the TPF tool’s database. Security Operations program managers stated that allowing airports access to the entire database allows FSDs to compare their airport’s performance against counterparts in other regions and address any areas in which they are lagging. In our interviews with FSDs, we found that officials from all of the airports we spoke with used the TPF data to help manage TSOs. For example five FSDs told us they download the raw test data into local systems for use in their local processes for monitoring TSO performance.\nClassified monthly conference calls: According to TSA officials, Security Operations hosts monthly classified conference calls with local and regional TSA officials to discuss issues related to covert testing. Security Operations officials told us these discussions typically include the results of specific covert test rounds, methods for using covert tests results, and FSDs’ beneficial practices for carrying out covert testing at their airports.\nReporting to senior leadership and other stakeholders: Security Operations officials said they continue to use covert test results for monthly briefings to FSDs and TSA senior leadership. According to TSA documentation, these briefings include high-level analysis of regional covert test performance, as well as overall comparisons of detection rates for on-person, in-property, and checked baggage tests against the national averages. As previously discussed, TSA also uses FET test results as the basis of a performance measure reported quarterly to the Office of Management and Budget.\nFSDs we spoke with told us they find the feedback and reporting they receive from Security Operations program managers to be helpful. In particular, all 10 FSDs we spoke with told us they find both the HET test reports and accessibility to TPF data in the monthly spreadsheet report to be beneficial and useful. FSDs also noted that the HET reports help inform their assessments on individual and airport workforce performance and efforts to improve their airport’s screening operations overall.", "While Security Operations program officials perform some high-level analysis of TPF data for periodic reporting, they do not analyze all Security Operations-collected covert test data to identify potential national trends in screener performance that could constitute system-wide vulnerabilities. For example, according to officials and TSA documentation, Security Operations officials use FET and HET covert test data to describe broad trends in screening performance in monthly briefings to TSA management. However, the briefings do not include a breakdown of the different screening tasks and processes that may be most often associated with TSO failures nationally. In addition, although the TPF tool’s database contains information on the task, process, and factors associated with each TSO test failure, Security Operations does not typically include a comprehensive analysis of this information within the monthly covert test reports it provides to TSA leadership at airports. For example, based on our review of Security Operations’ monthly TPF reports, they identify which processes have resulted in the most failures, but do not identify which factors—knowledge, skill, or value—were the root cause of these failures. Moreover, none of this reporting reflects a broader analysis to identify whether failures or causes were associated with a certain size of airport or reflected across one or more regions.\nStandards for Internal Control in the Federal Government states that an agency should design its information systems to respond to the entity’s objectives and risks. Furthermore, agencies may use information from these systems to evaluate the agency’s performance in achieving key objectives. As discussed previously, Security Operations officials have performed similar types of analysis in the past with positive results. For example, when TSA developed the Enhanced Accessible Property Screening procedures in 2017, these actions were based (in part) on ad hoc analysis Security Operations conducted with national covert test data. At the time, Security Operations’ analysis showed that X-ray operators at checkpoints had problems determining the threat nature of certain categories of objects. This led to repeated failures in detection given the time and cognitive load requirements for interpreting those types of X-ray images. In response, TSA created or adjusted specific procedures based on the analysis of root causes of testing failures and the results of piloting new screening procedures at multiple sites to ensure effectiveness and efficiency could be sustained.\nSecurity Operations officials agreed that conducting a more comprehensive, national-level analysis, and utilizing more of the covert test data currently within the TPF tool’s database, would be useful in identifying system-wide vulnerabilities that could inform efforts to improve TSO performance. Security Operations officials told us that at present, they do not have a standard process to comprehensively analyze and report trends in TPF data across all airports. This is because the intent of the current program has been to make test data available to TSA airport and regional officials so they can identify factors affecting screener performance and take actions to remediate and improve any deficiencies. In addition, Security Operations officials cited a lack of resources available to dedicate to this activity, given that headquarters officials have been more focused on revising and improving their current covert test program. However, Security Operations’ TPF tool and database has enabled it to document and communicate detailed information on TSO performance, such as the different screening tasks (e.g., advanced imaging technology operation) and processes (e.g., resolving advanced imaging technology anomalies) where screeners encounter difficulties. Given the breadth of testing conducted and information collected, more comprehensive analysis of TPF data could help TSA identify and communicate important potential trends in the vulnerabilities that TSOs face across all airports.\nA comprehensive analysis of TSO performance at the national level beyond calculation of overall detection rates would provide Security Operations greater knowledge about the reasons for, and factors associated with, system-wide vulnerabilities due to TSO performance of checkpoint and checked baggage screening, which would better position TSA to address these security gaps. For example, having this information could allow Security Operations to provide more focused training and testing for these functions at the airport level. The information could also position TSA to allocate resources for high-priority issues across all airports.", "TSA officials at individual airports reported using different tools, techniques, and processes for conducting covert tests and using test data, but Security Operations does not document and disseminate this information. In our discussions with 10 FSDs and their management teams, officials identified a variety of tools, processes, and methods that were developed based on their experiences with covert tests and the resulting actions they took to utilize test data to improve TSO performance. Specifically, 5 of the 10 FSDs we spoke with said their teams developed some type of customized internal databases to aggregate all of their airports’ covert test results, other performance- related data, and any additional Inspection information. FSDs and their staff said such a tool helped present a holistic picture of TSO performance for training and development purposes. Likewise, 5 of the 10 FSDs we spoke with said that they use test results to develop TSO performance baselines and training plans with requirements that exceed TSA’s minimum standards for remediation. Additionally, 5 of 10 FSDs stated that they now include supervisory TSOs and/or TSA leadership officials at airports in remediation discussions with individual TSOs after covert tests take place to provide leadership officials with experience on how best to coach and develop staff.\nTSA officials we spoke with at airports and at the regional level said that individual airports are often a source for innovation with respect to executing covert tests and using test results, which has at times led to pilot efforts that were adopted at other airports either regionally or nationally. For example, officials from one TSA region told us that they were the first to develop and use performance scorecards (which incorporate covert test results) as an additional tool for improving screener performance. These scorecards were eventually adopted nationwide. Most of the FSDs we spoke with said they communicate with their counterparts at other airports to discuss covert test practices and beneficial methods for using test results at their respective airports. For example, officials from one airport we spoke with reported traveling to an airport in a different region to learn more about the team’s TSO remediation process, which involved using the results of covert testing, Threat Image Projections, and other assessments to create tailored corrective action plans for TSOs. The officials said that this process was an improvement from the one they used previously because it incorporated a greater variety of remediation actions, such as training courses or shadowing opportunities.\nAs discussed previously, Security Operations officials communicate with TSA officials at airports on their covert test programs during a monthly classified call with all FSDs and their teams. This allows Security Operations program managers to provide FSDs with an update on results from recent HET and FET tests, among other things. Security Operations program managers stated that during these calls, they encourage TSA officials not only to discuss particular issues or challenges they have faced with respect to covert testing at their airports, but also to highlight beneficial practices for conducting tests and using test results to improve TSO performance that they and their teams have self-identified and implemented. Therefore, these calls also serve as a forum for FSDs to discuss successful techniques for running covert tests and using test results. In our discussions with 10 FSDs, 8 out of 10 told us they have independently adopted beneficial practices used by other airports.\nSecurity Operations program managers are privy to beneficial practices discussed during their teleconferences with local and regional TSA officials, but they told us that they do not regularly document or disseminate this information to TSA officials at airports. Security Operations program managers explained that the call itself is adequate for TSA airport officials to share information, and that local or regional officials can follow up with one another if they want to discuss them further. However, while a monthly conference call may be helpful for informal sharing of practices, it does not capture the breadth of methods or practices used by some TSA airport officials. Moreover, according to headquarters officials, while conference calls provide an opportunity for FSDs to discuss beneficial practices, sharing is ad hoc and the level of detail provided about methods and practices can vary. Systematically documenting and disseminating these practices would provide TSA officials at airports more accurate and complete information about beneficial practices in use at airports nationwide, so that they could be more readily implemented at other airports.\nThe National Infrastructure Protection Plan states that in order to ensure that situational awareness capabilities keep pace with a dynamic and evolving risk environment, officials should improve practices for sharing information and applying the knowledge gained through changes in policy, process, and culture based on shared understanding of efforts to improve security and resilience. This plan also states that documenting and building upon beneficial practices is a key part of information sharing within a critical infrastructure risk management framework. Our interviews with FSDs revealed an array of tools, techniques, and processes for covert testing that TSA officials at airports developed to address local and regional needs. A process to systematically document and disseminate more accurate and complete information on these tools, techniques, and processes that captures the breadth of methods or practices used by some TSA airport officials could help TSA conduct better covert tests and more successfully use test results to improve TSO performance, as well as inform revisions to TSA’s national covert test program.", "Given the persistent threats to the aviation system, TSA must ensure that its covert testing program operates as effectively as possible to identify and address potential vulnerabilities in the checkpoint and checked baggage screening systems across the nation’s airports. TSA has strengthened the quality and rigor of its covert test programs since 2016, but additional steps are needed to better ensure that TSA targets the areas of highest risk in selecting attack scenarios for testing. Without using a risk-informed approach to selecting screening activities to test, TSA cannot ensure that it is targeting those aspects of TSA screening that pose the greatest known risks. In addition, without documenting its rationales behind how and why certain scenarios are selected for covert testing, TSA cannot demonstrate how its selections reflect identified risks in the aviation environment.\nNew processes for covert testing implemented by Security Operations and Inspection have identified important vulnerabilities in checkpoint and checked baggage screening for fiscal years 2016 and 2017. However, these results can only be useful if they meet internal standards for quality test results. While Inspection’s new process generally produced quality test results on screening vulnerabilities, Security Operations continues to face challenges with the quality of test results collected by TSA staff at local airports. Without taking steps to ensure that Security Operations collects more valid and usable information on vulnerabilities, including the root cause of test failures, TSA will not be positioned to reliably identify and address important security vulnerabilities. In addition, without documenting its methodology for comparing the results of covert tests, TSA cannot ensure that its quality assurance process is consistently applied and transparent.\nOnce vulnerabilities have been identified through covert testing, it is paramount that they are effectively and efficiently mitigated or addressed. Establishing the Security Vulnerability Management Process was a good step toward better tracking the vulnerabilities identified through covert tests and deploying resources to mitigate them, but key identified vulnerabilities have been stalled in the process and none have been closed using this process. This has largely been caused by the absence of timeframes and milestones for achieving mitigation and monitoring key activities in the process. Unless TSA incorporates these aspects into its vulnerability management guidance, it cannot ensure that it is effectively addressing security vulnerabilities that could result in potentially serious consequences for the traveling public. Additionally, while TSA shares some covert test information with TSA officials at airports, more comprehensive analysis of covert test information is needed to enhance TSA’s knowledge about the reasons for, and the factors associated with, TSO performance vulnerabilities that exist system-wide. Furthermore, although TSA officials at individual airports informally share information about beneficial practices they use to conduct covert tests and how they use test information, without systematically documenting and disseminating these practices, TSA cannot ensure that airport officials are fully informed about the different tools, techniques, and processes used by their colleagues.", "We are making the following nine recommendations to TSA: The Administrator of TSA should document its rationale for key decisions related to its risk-informed approach for selecting covert test scenarios, for both the Security Operations’ and the Inspection’s testing process. (Recommendation 1)\nThe Administrator of TSA should incorporate a more risk-informed approach into Security Operations’ process for selecting the covert test scenarios that are used for tests conducted by TSA officials at airports. (Recommendation 2)\nThe Administrator of TSA should assess the current covert testing process used by TSA officials at airports—including factors that may affect the covertness and consistency of the tests—to identify opportunities to improve the quality of test data, and make changes as appropriate. (Recommendation 3)\nThe Administrator of TSA should assess Security Operations guidance for applying root causes for test failures, and identify opportunities to clarify how they should be applied. (Recommendation 4)\nThe Administrator of TSA should document the methodology for using the results of covert testing conducted by headquarters staff as a quality assurance process for covert testing conducted by TSA officials at airports. (Recommendation 5)\nThe Administrator of TSA should establish timeframes and milestones for key steps in its Security Vulnerability Management Process that are appropriate for the level of effort required to mitigate identified vulnerabilities. (Recommendation 6)\nThe Administrator of TSA should revise existing guidance for the Security Vulnerability Management Process to establish procedures for monitoring vulnerability owners’ progress against timeframes and milestones for vulnerability mitigation, including a defined process for escalating cases when milestones are not met. (Recommendation 7)\nThe Administrator of TSA should develop processes for conducting and reporting to relevant stakeholders a comprehensive analysis of covert test results collected by TSA headquarters officials and TSA officials at airports to identify vulnerabilities in screener performance and common root causes contributing to screener test passes and failures. (Recommendation 8)\nThe Administrator of TSA should develop a standard process for systematically documenting and disseminating to airport Federal Security Directors beneficial practices for conducting covert tests and using test results. (Recommendation 9)", "We provided a draft of this report to DHS and TSA for review and comment. DHS provided written comments which are reprinted in appendix II. In its comments, DHS concurred with all 9 recommendations and described actions planned to address them. TSA also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Homeland Security, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8777 or russellw@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.", "This report addresses the Transportation Security Administration’s (TSA) covert testing for checkpoint and checked baggage screening. More specifically, the report (1) describes how TSA has changed its covert test processes since 2016 and analyzes the extent to which these processes are risk-informed; (2) analyzes the extent to which TSA covert tests for fiscal years 2016 through March 2018 produced quality information; and (3) analyzes the extent to which TSA has used the results of covert tests to address any identified security vulnerabilities.\nTo understand how both the Security Operations and Inspection offices changed their respective covert test processes since 2016, we reviewed agency documentation, interviewed agency officials, and observed 22 Security Operations and 4 Inspection covert tests at 5 different airports. In addition to Inspection testing, our observations included two types of testing overseen by Security Operations—Headquarters Evaluation Team (HET) testing and Field Evaluation Team (FET) testing. To gather information on how covert tests are carried out in different airport environments, we observed tests at four category X and one category I airports. We selected airports for observations on the basis of airport category and screener workforce (private vs. TSA-employed screeners). For all observations, we were able to observe TSOs performing checkpoint or checked baggage screening activities during tests. Following all observations, we observed post-test reviews and, when appropriate, interviewed TSA airport officials, including the Transportation Security Officers (TSO) and private sector screeners (collectively referred to as TSOs in this report) who were tested, about their experience with these tests.\nTo determine the extent to which Security Operations and Inspection testing is risk-informed, we reviewed program documentation and spoke with agency officials. Specifically, we reviewed operational guidance and test scenarios, which describe the overall intent of the test, the threat item, and method of execution (e.g., an explosive device concealed in a shoe carried through the checkpoint) to identify how program officials incorporated the components of risk—threat, vulnerability, and consequence—in their selection of threats and airports to test. We also reviewed the TSA risk assessments that would have been available to Inspection and Security Operations when planning which threats and airports to test for fiscal year 2017, namely TSA’s 2016 Transportation Sector Security Risk Assessment and TSA’s 2012 Current Airports Threat Assessment. The 2016 Transportation Security Sector Risk Assessment contained attack scenarios for the five transportation modes for which TSA is responsible, including domestic and international commercial aviation, as well as other mass transit systems, such highway and mass transit. For our analysis, we used those scenarios relevant to our scope— domestic commercial checkpoint and checked baggage screening. We compared the results of these assessments to the threat items and locations that Security Operations selected for tests in fiscal year 2017 and Inspection selected for tests in fiscal years 2016 and 2017. We evaluated each office’s process for making risk-informed decisions with Department of Homeland Security (DHS) risk management policies, which require that agencies use risk information and analysis to inform decision making, and that risk management methodologies should be transparent and properly documented.\nTo assess the quality of Security Operations data, we reviewed program guidance and interviewed program officials to understand how Security Operations uses HET test results to validate the quality of FET testing at local airports. We also reviewed a 2016 validation study of Security Operations’ test process conducted by the DHS Office of Science and Technology, and spoke with subject matter experts who conducted the study about their findings and recommendations related to improving the quality of test information. We concluded the study’s findings were reasonably sufficient to use as additional support for patterns we also observed during site visits. We were also informed by our HET and FET test observations, which included observations of 19 HET tests at 3 different airports, and 3 FET tests at 1 airport. We supplemented our understanding of how airports conduct FET tests through semi-structured telephone interviews with 10 different Federal Security Directors (FSD) and their staff. To select FSDs for interviews, we identified the airports at which TSA conducted more than the average number of HET covert tests in fiscal year 2017. We focused on the number of HET (as opposed to FET) tests because they are Security Operations’ quality assurance method for airport covert test programs, and we wanted to ensure FSDs had sufficient experience with these tests to provide us perspectives. From this group, we identified the airports with the highest and lowest pass rates for HET tests, and selected among these to reflect variation in several factors, including airport category, difference between HET and FET detection rates, and whether the airport had been tested by Inspection in fiscal years 2016 and 2017.\nFinally, to assess the quality of Security Operations’ testing, we calculated detection rates for its two types of testing—Headquarters Evaluations Team (HET) tests, in which Security Operations headquarters staff travel to airports to conduct tests, and Field Evaluations Team (FET) tests, which are conducted by staff at local airports. We assessed FET test results against Security Operations’ criterion stating that differences in HET and FET detection rates must be within a designated number of percentage points. We made these comparisons analyzing complete test results for fiscal year 2017 and the first 6 months of fiscal year 2018, over three 6-month periods in order to identify trends. We used for our analysis the12,000 fiscal year 2017 Security Operations TPF records documenting the results of individual covert tests, and an additional 3,600 records from fiscal year 2018. For our analysis, we calculated HET and FET detection rates (i.e., number of items successfully detected) for three screening paths: a checkpoint test with the item concealed on the tester, a checkpoint test with the item concealed in a carry-on bag, and a checked baggage test with the item concealed in the checked bag. In calculating these detection rates, we included only results for scenarios tested within the 18-month period that had both HET and FET tests, and we excluded any test results for scenarios involving enhanced screening. Also, in our calculation of the FET detection rate, we included FET test results for all airports, including those from smaller (category III and IV) airports, which HET teams generally do not visit. We chose to include FET results from all airports in our analysis because it better reflected the overall performance of airports on covert tests. In addition to comparing Security Operations’ quality assurance process against the program’s criteria, we assessed it against federal internal control criteria for documenting processes.\nTo assess the quality of Inspection testing, we reviewed program guidance to identify testing requirements, methods, and limitations. We also observed four different tests conducted at a Category X airport. In addition, we reviewed Inspection guidance to identify and assess requirements for analyzing and reporting covert test results, and reviewed completed reports to identify the extent to which Inspection followed these requirements. We met with Inspection technical experts to discuss Inspection processes for selecting a sample of airports for tests and for analyzing and compiling covert test findings.\nTo assess the extent to which Inspection and Security Operations address security vulnerabilities, we reviewed their efforts separately because each office utilized a different approach. To assess Inspection’s efforts, we focused on its use of the Security Vulnerability Management Process, an agency-wide process that Inspection designated in 2016 as the principal means by which it addresses its identified vulnerabilities. To obtain a more complete understanding of the extent to which this process has addressed Inspection vulnerabilities, we reviewed documentation related to the process (such as its charter) and other information pertaining to all vulnerabilities Inspection has submitted to the process, including those that were unrelated to checkpoint and checked baggage screening (e.g., cargo screening). We analyzed timeframes associated with the vulnerabilities reviewed under the process and the progress made toward closing nine Inspection-identified vulnerabilities. We assessed the vulnerability management process against standards for program management issued by the Project Management Institute, a not-for-profit association that provides global standards for, among other things, project and program management.\nGiven the focus of Security Operations’ testing on screener performance, the vulnerabilities it identified involved TSO failures on tests of specific procedures. To determine how Security Operations headquarters officials address vulnerabilities involving screener performance, we reviewed program documentation, including program guidance and periodic reporting of results, and interviewed program managers. To understand how the results of covert testing are used at the airport level to improve TSO performance and address other identified vulnerabilities, we conducted semi-structured interviews with 10 TSA FSDs stationed at airports across the United States, and with three TSA Regional Directors. We selected the latter based on whether the Regional Director had under his or her direction at least 1 of 10 FSDs we selected for interviews, and to reflect variety in geographic location. We assessed Security Operations’ and TSA officials at airports’ efforts to use covert test results to address vulnerabilities against federal internal control standards and criteria within the National Infrastructure Protection Plan.\nThis is the public version of a classified report that we issued on January 10, 2019. The classified report included an objective related to identifying the results of covert testing for fiscal years 2016 and 2017 and assessing the quality of this test information. DHS deemed covert testing results (including detection rates and identified vulnerabilities) to be classified information, which must be protected from loss, compromise, or inadvertent disclosure. Consequently, this report omits part of an objective identifying the results of covert testing. DHS also deemed some of information in our January report to be sensitive security information. Therefore, this report omits information describing TSA screening procedures, the results of agency risk assessments, and airport-level covert test results.\nThe performance audit upon which this report is based was conducted from September 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained from this work provides a reasonable basis for our findings and conclusions based on our audit objectives. We worked with DHS from February 2019 through April 2019 to prepare this unclassified, non- sensitive version of the original classified report for public release. This public version was also prepared in accordance with these standards.", "William Russell (202) 512-8777 or RussellW@gao.gov.", "In addition to the contact named above, Ellen Wolfe (Assistant Director), Mona Nichols Blake (Analyst in Charge), James Ashley, Chuck Bausell, Jason Blake, Michele Fejfar, Eric Hauswirth, Susan Hsu, Tom Lombardi, Minette Richardson, and Nina Thomas-Diggs made significant contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 1, 2, 2, 3, 3, 3, 1, 2, 2, 3, 3, 3, 2, 1, 1, 1, 1, 1, 2 ], "alignment": [ "h0_title", "", "", "h0_full", "", "", "", "", "", "", "", "", "h0_title", "h0_full", "h0_title", "h0_full", "", "", "h1_title", "h1_full", "", "", "", "", "", "h0_full h2_full h1_full", "", "", "", "", "" ] }	{ "question": [ "What is GAO's finding about the two offices' covert tests?", "What is specifically different between the two offices' test results?", "How can TSA improve the reliability of its test results in addressing vulnerabilities?", "How is TSA's Security Vulnerability Management Process working?", "How were the identified security vulnerabilities addressed through this process from 2015 to 2018?", "What did GAO find about TSA officials in resolving the vulnerabilities?", "Why is this problem happening?", "What could be the negative result of this loophole?", "How does TSA identify potential vulnerabilities at U.S. airports?", "What were the findings on deficiencies in TSA's covert testing process?", "What has TSA done in response?" ], "summary": [ "Both Inspection and Security Operations have implemented processes to ensure that their covert tests produce quality results. However, GAO found that only Inspection has established a new process that has resulted in quality test results.", "Specifically, for the two reports Inspection completed for testing conducted in fiscal years 2016 and 2017 using its new process, GAO found that the results were generally consistent with quality analysis and reporting practices. On the other hand, Security Operations has not been able to ensure the quality of its covert test results, and GAO identified a number of factors that could be compromising the quality of these results.", "Unless TSA assesses the current practices used at airports to conduct tests, and identifies the factors that may be impacting the quality of covert testing conducted by TSA officials at airports, it will have limited assurance about the reliability of the test results it is using to address vulnerabilities.", "In 2015, TSA established the Security Vulnerability Management Process to leverage agency-wide resources to address systemic vulnerabilities; however, this process has not yet resolved any identified security vulnerabilities.", "Since 2015, Inspection officials submitted nine security vulnerabilities identified through covert tests for mitigation, and as of September 2018, none had been formally resolved through this process.", "GAO found that in some cases, it took TSA officials overseeing the process up to 7 months to assign an office responsible to begin mitigation efforts.", "In part, this is because TSA has not established time frames and milestones for this process or established procedures to ensure milestones are met, in accordance with best practices for program management.", "Without doing so, TSA cannot ensure efficient and effective progress in addressing security vulnerabilities.", "TSA uses covert testing to identify potential vulnerabilities in checkpoint and checked baggage screening systems at U.S. airports.", "In 2015, TSA identified deficiencies in its covert testing process, and in 2017, the Department of Homeland Security Office of Inspector General's covert testing identified deficiencies in screener performance.", "Since these findings, TSA has taken steps intended to improve its covert test processes and to use test results to better address vulnerabilities." ], "parent_pair_index": [ -1, 0, -1, -1, 0, -1, 2, 3, -1, -1, 1 ], "summary_paragraph_index": [ 4, 4, 4, 5, 5, 5, 5, 5, 0, 0, 0 ] }
CRS_RL33466	{ "title": [ "", "Most Recent Developments", "The Act and Most Recent Amendments", "Congressional Activity after P.L. 100-4", "State Revolving Fund Program", "Nonpoint Pollution Management", "Adequacy of Plans", "Funding", "Program Changes", "Significance for TMDLs", "Total Maximum Daily Load (TMDL) Requirements", "Other Issues", "Stormwater Discharges", "Combined and Separate Sewer Overflows", "Wetlands", "Strategy Concerning Animal Feeding Operations", "Continuing Issue: Appropriations and the Federal Budget", "FY2007", "FY2006", "For Additional Reading" ], "paragraphs": [ "", "Appropriations for EPA's clean water and other programs for FY2007 were considered but not finalized in 2006. The President's budget requested $687.6 million for grants to capitalize clean water state revolving funds (SRFs) which fund local wastewater treatment projects, 22% less than FY2006 funding. On May 18 the House passed H.R. 5386 , providing EPA appropriations, and agreed to the clean water SRF funding level requested by the President. The Senate Appropriations Committee approved the same amount for the SRF program when it approved H.R. 5386 in June. Final action on H.R. 5386 and most other FY2007 appropriations bills for domestic agencies and departments did not occur before Congress adjourned sine die in December, thus delaying this legislative activity to the beginning of the 110 th Congress.\nIn 2003, EPA promulgated revised rules that govern waste discharges from large animal feeding operations to the nation's waters. Those revised rules were challenged by multiple parties, and in 2005, a federal court issued a ruling that upheld major parts of the rules, vacated other parts, and remanded still other parts to EPA for clarification. In June 2006, EPA proposed revisions to the rules in response to the court's decision and expects to promulgate revised regulations by June 2007.\nIn 2005, Congress enacted comprehensive energy policy legislation, H.R. 6 ( P.L. 109-58 ); one provision (Section 323) provides a permanent exemption from stormwater runoff rules for the construction of exploration and production facilities by oil and gas companies or the roads that service those sites. EPA promulgated a rule to implement this provision of P.L. 109-58 in June 2006.", "The Federal Water Pollution Control Act, or Clean Water Act, is the principal law concerned with polluting activity in the nation's streams, lakes, and estuaries. Originally enacted in 1948, it was totally revised by amendments in 1972 (P.L. 92-500) that gave the act its current form and spelled out ambitious programs for water quality improvements that are now being put in place by industries and cities. Congress made certain fine-tuning amendments in 1977 ( P.L. 95-217 ) and 1981 ( P.L. 97-117 ) and enacted comprehensive amendments in 1987 ( P.L. 100-4 ).\nThe act consists of two major parts: regulatory provisions that impose progressively more stringent requirements on industries and cities in order to meet the statutory goal of zero discharge of pollutants, and provisions that authorize federal financial assistance for municipal wastewater treatment construction. Industries were to meet pollution control limits first by use of Best Practicable Technology and later by improved Best Available Technology. Cities were to achieve secondary treatment of municipal wastewater (roughly 85% removal of conventional wastes), or better if needed to meet water quality standards. Both major parts are supported by research activities authorized in the law, plus permit and penalty provisions for enforcement. Programs are administered by the Environmental Protection Agency (EPA), while state and local governments have the principal day-to-day responsibility for implementing the law.\nThe last major amendments to the law were contained in the Water Quality Act of 1987 ( P.L. 100-4 ). These amendments culminated six years of congressional efforts to extend and revise the act and were the most comprehensive amendments to it since 1972. They recognized that, despite much progress, significant water quality problems persisted. Among its many provisions, the 1987 legislation (1) established a comprehensive program for controlling toxic pollutant discharges, beyond that already provided in the act, to respond to so-called \"toxic hot spots\"; (2) added a program requiring states to develop and implement programs to control nonpoint sources of pollution, or rainfall runoff from farm and urban areas, plus construction, forestry, and mining sites; (3) authorized a total of $18 billion for wastewater treatment assistance under a combination of the act's traditional construction grants program and a new program of grants to capitalize state revolving funds; (4) authorized or modified a number of programs to address water pollution problems in diverse geographic areas such as coastal estuaries, the Great Lakes, and the Chesapeake Bay; and (5) revised many of the act's regulatory, permit, and enforcement programs.", "Congressional oversight of water quality issues was limited immediately after enactment of P.L. 100-4 . Subcommittees held general oversight hearings, as well as several hearings on individual issues (wetlands protection, Chesapeake Bay programs, and toxics contamination of Great Lakes waters), but reserved extensive review and oversight until implementation had been underway for some time.\nEPA, states, industry, and other citizens continue to implement the 1987 legislation, including meeting the numerous requirements and deadlines in it. Three sets of issues have been the focus of attention regarding the pace and effectiveness of implementation: the toxic pollutant control provisions, nonpoint pollution management provisions, and the state revolving fund provisions to transfer wastewater treatment funding responsibility to the states after 1994. Attention has also focused on the cost-effectiveness of clean water requirements and flexibility of implementation.\nImplementation issues discussed below were the basis for legislation to reauthorize the Clean Water Act during the 103 rd Congress. Committees held hearings in 1993, and the Senate Environment and Public Works Committee reported a comprehensive reauthorization bill, S. 2093 , in May 1994. Legislation also was introduced in the House, but no further action occurred because of controversies specific to the act and the pending bills, as well as controversies over regulatory relief issues that became barriers to a number of bills in 1994.\nIn the 104 th Congress, the House moved quickly on Clean Water Act legislation, approving a comprehensive reauthorization bill in May 1995. H.R. 961 would have amended many of the regulatory and standards provisions of the law, required EPA to use extensive new risk assessment and cost-benefit analysis procedures, and increased flexibility with regulatory relief from current clean water programs. However, the Senate did not take up the Clean Water Act during the 104 th Congress; thus, no legislation was enacted.\n1997 marked the 25-year anniversary of the 1972 Clean Water Act amendments, which established the goals, objectives, and structure that continue to guide the law today. In the 105 th Congress, no major committee activity over the act occurred either in the House or the Senate. Since the 104 th Congress, attention has focused on individual program areas of the law; no comprehensive reauthorization legislation has been introduced. However, activity on bills dealing with specific water quality issues has occurred. Congress passed a bill to strengthen protection of coastal recreation waters through upgraded water quality standards and coastal waters monitoring programs ( P.L. 106-284 ) and also passed a bill reauthorizing several existing CWA programs (i.e., Chesapeake Bay, clean lakes, and the National Estuary Program; P.L. 106-457 ). Further, Congress passed a bill to authorize CWA grant funding for wet weather sewerage projects (included as a provision of P.L. 106-554 , FY2001 Consolidated Appropriations). The 107 th Congress approved the Great Lakes Legacy Act ( P.L. 107-303 ), which authorized $200 million for EPA to carry out projects to remediate sediment contamination in the Great Lakes. The 108 th Congress enacted legislation amending the act to extend the National Estuary Program through FY2010 ( P.L. 108-399 ).\nMore generally, following the September 11, 2001 terrorist attacks on the World Trade Center and the Pentagon, congressional attention has focused on security, preparedness, and emergency response issues. Among the many topics of interest is protection of the nation's water infrastructure facilities (both wastewater and drinking water) from possible physical damage, biological/chemical attacks, and cyber disruption. Policymakers are considering a number of legislative options in this area, including enhanced physical security, communication and coordination, and research. Physical security of wastewater treatment plant operations is one issue under consideration. In the 108 th Congress, the House passed legislation to provide $200 million in grants for security activities at wastewater treatment plants ( H.R. 866 ). A similar Senate bill was approved by the Senate Environment and Public Works Committee ( S. 1039 ). No further action occurred, due in part to concerns expressed by some that the legislation would not require that vulnerability assessments be mandatory and be submitted to EPA, as is the case with assessments of drinking water utilities required by the 2002 Bioterrorism Preparedness Act ( P.L. 107-288 ). The issue again received attention in the 109 th Congress.\nAlthough much progress has been made in achieving the ambitious goals established in the law 30-plus years ago to restore the maintain the chemical, physical, and biological integrity of rivers, lakes, and coastal waters, problems persist. Based on the limited water quality monitoring that is done by states, EPA reported in the 2000 National Water Quality Inventory Report that 39% of assessed river and stream miles and 45% of assessed lake acres do not meet applicable water quality standards and were found to be impaired for one or more desired uses. The types of remaining water quality problems are diverse, ranging from runoff from farms and ranches, city streets, and other diffuse sources, to metals (especially mercury), organic and inorganic toxic substances discharged from factories, sewage treatment plants, and nonpoint sources.\nThe Bush Administration has been reviewing a number of current clean water programs and rules but has proposed few new initiatives. In January 2003, the agency announced a Water Quality Trading Policy intended as an innovative approach to assist industry and municipalities in meeting Clean Water Act obligations. Trading allows one source to meet regulatory requirements by using pollutant reductions created by another source that has lower pollution control costs. The policy revised a May 2002 proposal which reflected lessons learned from a similar policy issued by the Clinton Administration in 1996. Water quality or effluent trading projects have occurred in the United States since the early 1980s.\nCongressional oversight of the act's implementation during this time has been wide-ranging, extending from review of the state and needs of the nation's wastewater infrastructure, to CWA enforcement, implementation of wetlands protection and regulatory efforts, and examination of various EPA policies and programs. As a result of the 2006 mid-term elections and changed leadership in the House and Senate, many observers anticipate that the 110 th Congress will pursue vigorous oversight of clean water and other environmental programs. The direction and agenda for such activities is uncertain.", "Meeting the nation's needs to build, upgrade, rebuild, and repair wastewater infrastructure is a significant element in achieving the Clean Water Act's water quality objectives. The act's program of financial aid for municipal wastewater treatment plant construction is a key contributor to that effort. Since 1972 Congress has provided more than $76 billion to assist wastewater treatment construction, but funding needs remain very high: an additional $181 billion nationwide for all types of projects eligible for funding under the act, according to the most recent Needs Survey estimate by EPA and the states, published in August 2003. In September 2002, EPA released a study called the Gap Analysis that assesses the difference between current spending for wastewater infrastructure and total funding needs (both capital and operation and maintenance). In that report, EPA estimated that, over the next two decades, the United States needs to spend nearly $390 billion to replace existing wastewater infrastructure systems and to build new ones. Funding needs for operation and maintenance (not eligible for Clean Water Act funding) are an additional $148 billion, the agency estimated. According to the Gap Analysis, if there is no increase in investment, there will be about a $6 billion gap between current annual capital expenditures for wastewater treatment ($13 billion annually) and projected spending needs. The study also estimated that, if wastewater spending increases by 3% annually, the gap would shrink by nearly 90% (to about $1 billion annually). At issue has been what should be the federal role in assisting states and cities, especially in view of such high projected funding needs.\nDebate over the nature of the nation's efforts regarding wastewater infrastructure was a central and controversial part of the 1987 amendments to the act. The amendments extended through FY1990 the traditional Title II program of grants for sewage treatment project construction, under which the federal share was 55% of project costs. The 1987 law initiated a program of grants to capitalize State Water Pollution Control Revolving Funds (SRFs), or loan programs, in a new Title VI. States are required to deposit an amount equal to at least 20% of the federal capitalization grant in the Fund established under Title VI. Under the revolving fund concept, monies used for wastewater treatment construction would be repaid by loan recipients to the states (repayment was not required for grants under the Title II program), to be recycled for future construction in other communities, thus providing an ongoing source of financing. The expectation in 1987 was that the federal contributions to SRFs would assist in making a transition to full state and local financing by FY1995. Although most states believe that the SRF is working well, early funding and administrative problems have delayed the anticipated shift to full state responsibility. Thus, SRF issues have been prominent on the Clean Water Act reauthorization agenda in recent Congresses.\nSRF monies may be used for certain types of financial activity, including loans for as much as 100% of project costs (at or below market interest rates, including interest-free loans), to buy or refinance cities' debt obligation, or as a source of revenue or security for payment of principal and interest on a state-issued bond. SRF monies also may be used to provide loan guarantees or credit enhancement for localities. Loans made by a state from its SRF are to be used first to assure progress towards the goals of the act and, in particular, on projects to meet the standards and enforceable requirements of the act. After states achieve those requirements of the act, SRF monies also may be used to implement nonpoint pollution management and national estuary programs.\nTable 1 summarizes wastewater treatment funding under Title II (traditional grants program) and Title VI (capitalization grants for revolving loan programs).\nOne issue of continuing interest is impacts on small communities. These entities in particular have found it difficult to participate in the SRF loan program, since many are characterized by narrow or weak tax bases, limited or no access to capital markets, lower relative household incomes, and higher per capita needs. They often find it harder to borrow to meet their capital needs and pay relatively high premiums to do so. Meeting the special needs of small towns, through a reestablished grant program, other funding source, or loan program with special rules, has been an issue of interest to Congress.\nCongressional oversight of wastewater/SRF issues has focused on several points, including the fact that many small communities have found it difficult to participate in the SRF loan program, and the lack of funds for high-cost categories of projects such as correcting combined sewer overflows. Although there has been some criticism of the SRF program, and debate continues over specific concerns (such as small community impacts), the basic approach is well supported in Congress and elsewhere. Congress used the clean water SRF as the model when it established a drinking water SRF in 1996 ( P.L. 104-182 ).", "The 1987 amendments added a new Section 319 to the act. It required states to develop and implement programs to control nonpoint sources of pollution, or rainfall runoff from farm and urban areas, as well as construction, forestry, and mining sites. Previously, they had largely focused on controlling point sources, while helping states and localities to plan for management of diverse nonpoint sources. Yet, as industrial and municipal sources have abated pollution, uncontrolled nonpoint sources have become a relatively larger portion of remaining water quality problems—perhaps contributing as much as 50% of the nation's water pollution. Thus, the addition of Section 319 to the act was intended to strengthen the law regarding this major contributor to water pollution, which previously had received limited attention. At issue today is what progress is being made to manage nonpoint source pollution and what additional efforts may be needed involving Section 319 or other public and private activities. Some observers are critical of the largely voluntary nature of the Section 319 program, consisting of \"all carrot but no stick,\" while others argue that the types of individual land management decisions that are needed to manage nonpoint source pollution cannot be regulated in the same ways that industrial sources are controlled.\nStates were required to identify waters not expected to meet water quality standards because of nonpoint source pollution and to implement plans for managing pollution from runoff. Federal grants totaling $400 million were authorized to cover as much as 60% of the costs of implementing a state's management plan.\nThe funding issue has become more urgent as states moved from assessment and plan development to management, since Congress intended that Section 319 funds be used primarily to implement nonpoint pollution controls on the ground. EPA has urged states to use a portion of monies that they receive under Section 106 of the act (water quality program assistance grants) for nonpoint source activities. But, doing so utilizes money otherwise needed for core state efforts, such as permit issuance, monitoring, enforcement, etc. Several concerns have been raised about the Section 319 program.", "Whether state plans have comprehensively addressed nonpoint pollution problems is a lingering question. Some environmental groups criticize EPA for providing inadequate guidance on methods, or management practices, to advance control of nonpoint sources beyond known problems and existing implementation steps, such as voluntary compliance and public education. Moreover, some believe that states should be required to repeat the nonpoint source assessments, which were one-time-only activities under the 1987 law, in order to reflect improvements in technical and scientific information.", "Precise estimates of the cost to manage nonpoint source pollution are not available, because so much depends on the site-specific nature of problems and solutions. However, in 1994 EPA estimated that current and planned spending by private sources, states, and cities under provisions of current law is between $750 million and $1.1 billion per year. Without adequate funding to implement state management plans, it is doubtful that much will be achieved under Section 319 to control nonpoint source pollution.\nBecause agricultural activities are known to be a significant source of nonpoint pollution nationwide, the adequacy of efforts to address these sources has received much attention. Questions have been raised about the EPA state grant program's efficacy and overlap with farm bill conservation funding, leading to proposed reductions in FY2004 and FY2005 appropriations for Section 319 funds. In particular, the White House Office of Management and Budget (OMB) found that EPA had not demonstrated results under the program and has urged the agency to shift its focus away from implementing projects in agricultural areas and toward implementing plans in impaired waters. State officials have been concerned that OMB is not fully aware of the extent to which Section 319 funds address a range of nonpoint pollution control needs beyond the agricultural sector.", "In the mid-1990s, EPA and states negotiated changes intended to give the 319 program a new framework by giving states more flexibility. As a result, in 1996, EPA issued revised guidance concerning state management of nonpoint source programs that is intended to recognize that federal and state processes need to be streamlined to increase program effectiveness and to speed progress towards solving nonpoint pollution problems. The revised guidance outlines nine key elements to be reflected in state programs (e.g., strong partnerships with stakeholders, explicit short- and long-term goals for protecting surface and ground waters). States that meet the nine criteria can be designated as leadership states, making them eligible for incentives such as multi-year grants, reduced amount and frequency of reporting, and self-assessment by states themselves. These incentives contrast with the previous program approach, in which states competed for grants and those that did not meet particular requirements received less grant money.", "Attention has focused on nonpoint source management efforts as a result of recent emphasis by EPA and states on meeting TMDL requirements (see \"TMDL Requirements,\" next). Scrutiny of nonpoint pollution problems and how they are being addressed has intensified as policymakers and program officials assess additional steps to continue progress towards the act's water quality goals. For several years, EPA has been explicitly linking implementation of Section 319 with TMDL activities. For example, in 2001, EPA published guidance saying that grants awarded under Section 319 should have a concentrated focus on the development and implementation of TMDLs for nonpoint sources of pollution, although funds will still be awarded to activities other than TMDLs. However, states and agricultural interests criticized the guidance as being too restrictive, and in August 2002, EPA modified the guidance which continues to encourage development of nonpoint source TMDLs but gives states more flexibility to do so, especially in areas that lack formally established TMDLs. Since FY2001, $100 million of Section 319 grant funds (which totaled $204 million in FY2006, for example) is being devoted annually to developing and implementing nonpoint source TMDLs.", "In the 1972 Clean Water Act, Congress recognized that, in many cases, pollutant controls implemented by industry and municipalities would be insufficient to attain water quality standards, due in part to pollutant contributions from unregulated sources. Thus, Section 303(d) of the Clean Water Act requires states to identify water segments that remain impaired even after application of pollution control technology and develop \"total maximum daily loads\" (TMDLs) that set the maximum amount of pollution that a water body can receive without violating water quality standards. If a state fails to do so, EPA is required to develop a priority list for the state and make its own TMDL determination. Most states have lacked the resources to do TMDL analyses, which involve complex assessment of point and nonpoint sources and mathematical modeling, and EPA has both been reluctant to override states and has also lacked resources to do the analyses. Thus, for many years there was little implementation of the provision that Congress enacted in 1972. At issue today is continuing controversy over implementation of this program which is intended to address uncontrolled sources of water quality impairment and efforts to revise the rules and requirements for it.\nIn recent years, national and local environmental groups have filed lawsuits in 38 states against EPA and states for failure to fulfill requirements of the act. Of the suits tried or settled to date, 22 have resulted in court orders requiring EPA to develop TMDLs expeditiously. EPA and state officials have been concerned about diverting resources from other high-priority water quality activities in order to meet the courts' orders. In 1996, EPA created an advisory committee to solicit advice on the TMDL problem. Recommendations from the advisory committee formed the basis of program changes that EPA proposed in August 1999. This proposal set forth criteria for states, territories, and authorized Indian tribes to identify impaired waters and establish all TMDLs within 15 years. It proposed more comprehensive assessments of waterways, detailed cleanup plans, and timetables for implementation.\nThe 1999 proposal was highly controversial because of issues such as burdens on states to implement a revised TMDL program and potential impacts on some agriculture and forestry sources which are not now subject to CWA regulations. The controversies also drew congressional attention, and 13 congressional hearings were held during the 106 th Congress by four separate House and Senate committees. Public and congressional pressure on EPA to revise or withdraw the TMDL proposal entirely was great. Several bills to modify EPA's TMDL proposals or delay implementation of final rules were introduced, but none was enacted.\nTMDL issues also were addressed in FY2001 appropriations bills. In July 2000, Congress approved an FY2001 Military Construction and emergency supplemental appropriations bill that included a provision to prevent EPA from spending any funds in FY2000 or FY2001 to finalize or implement new TMDL rules. President Clinton signed the bill, in spite of the TMDL restriction, which the Administration opposed ( P.L. 106-246 ). However, the EPA Administrator signed the new rules two days before the President signed the bill but delayed the effective date until October 2001, when the limitation in P.L. 106-246 would expire. EPA's signing of the rule before the rider took effect led to more criticism.\nThe FY2001 appropriations act providing funds for EPA, P.L. 106-377 , included report language mandating studies by the National Academy of Sciences (NAS) and EPA on the scientific basis of the TMDL program and on the potential costs to states and businesses of implementing the revised TMDL rules. The NAS report, examining the role of science in the TMDL program, was issued in June 2001. It did not specifically analyze the July 2000 revised regulations. The NAS panel concluded that scientific knowledge exists to move forward with the TMDL program and recommended that EPA and states use adaptive implementation for TMDL development. In many cases, the report said, water quality problems and solutions are obvious and should proceed without complex analysis. In other cases, solutions are more complex and require a different level of understanding and something like phased implementation. A House Transportation subcommittee held a hearing on the NAS report in June 2001. In August 2001, EPA issued a draft report on costs of the 2000 TMDL program. It estimated that average annual costs to states and EPA of developing TMDLs could be $63-$69 million, while implementation costs for pollutant sources could be between $900 million and $4.3 billion per year, depending on states' actions. The General Accounting Office (now the Government Accountability Office) reported in 2002 that inconsistent monitoring, data collection, and listing procedures used by states to identify impaired waters have hindered efforts to develop effective TMDL programs.\nThe Bush Administration announced in October 2001 that it would delay the effective date of the 2000 rule until April 30, 2003, to allow for further review. That announcement came after a federal court granted the Administration's request for a similar 18-month suspension of litigation which challenged the regulation (nearly a dozen interest groups sued EPA over various parts of the TMDL rule). A House Transportation and Infrastructure subcommittee held an oversight hearing in November 2001 concerning EPA's plans to revise the rule. Most recently, on March 19, 2003, EPA withdrew the July 2000 TMDL rule (68 Federal Register 13607). EPA officials said that additional time beyond May 2003 was needed to decide whether and how to revise the current program and that allowing the rule to take effect would have disrupted ongoing review efforts. In the interim and continuing for the present time, current program requirements under existing regulations issued in 1992 and court-sanctioned TMDL schedules remain in place.\nHaving withdrawn the 2000 rule, EPA has reportedly been considering other options, including initiating an entirely new rule, but no specific plans have been announced. In mid-2002, EPA developed a draft revised rule that it informally circulated among interest groups and federal agencies for many months, but no formal proposal has occurred. One EPA view, widely reported, is that a new rule is not essential, because EPA believes that states are and will continue to improve the pace at which TMDLs are established, even under existing rules. Most environmentalists say that, short of retaining the 2000 rule, the best action would be to leave the 1992 rules in place, because, despite flaws, those rules are preferable to a new rule that might significantly weaken the program. States, cities, and industry groups have urged EPA to develop a new rule with more flexibility than either the 1992 regulations or the 2000 revisions.", "A number of other issues affecting efforts to achieve the goals and objectives of the Clean Water Act continue to receive attention, as well.", "EPA has struggled since the 1970s to regulate industrial and municipal stormwater discharges in a workable yet comprehensive manner. In P.L. 100-4 , Congress established firm deadlines and priorities for EPA to require permits for discharges of stormwater that are not mixed or contaminated with household or industrial waste. EPA issued rules in November 1990 (21 months after the statutory deadline) that addressed Phase I of the program, detailing the process of applying for stormwater permits for industries, medium and large municipalities, and construction sites larger than 5 acres. The agency worked with an advisory committee of stakeholders beginning in 1994 to develop rules for regulating smaller stormwater dischargers, which were not covered by the 1990 rules. Rules for smaller dischargers (unregulated industries, small construction sites, and small cities), Phase II of the program, were issued in October 1999. The burden of complying with the rules continues to be an issue with many affected industries and municipalities, especially small cities, which faced compliance deadlines beginning in March 2003.\nStormwater issues were addressed in one provision of omnibus energy legislation in the 109 th Congress. As the March 2003 compliance deadline approached for Phase II small construction sites to comply with existing stormwater permit rules, EPA proposed a two-year extension of those rules for small oil and gas construction sites, to allow the agency to assess the economic impact on that particular industry. In March 2005, EPA again extended the deadline, until June 2006. During this time, Congress considered a legislative solution, which it enacted in Section 323 of H.R. 6 , the Energy Policy Act of 2005. It provides a permanent exemption from stormwater runoff rules for the construction of exploration and production facilities by oil and gas companies or the roads that service those sites.\nIndustry officials said that EPA's original stormwater rule created costly permitting requirements, even though the short construction period for drilling sites carries little potential for stormwater runoff pollution. The provision in H.R. 6 makes EPA's temporary delay permanent and makes it applicable to construction activities at all oil and gas development and production sites, regardless of size, including those covered by an earlier Phase I of the stormwater program. Opponents argued that the provision did not belong in the energy legislation and that there was no evidence that construction at oil and gas sites causes less pollution than other construction activities. Congress passed the conference report on H.R. 6 , with the oil and gas stormwater provision, in July 2005. President Bush signed it into law on August 8 ( P.L. 109-58 ). In June 2006, EPA promulgated a rule to conform the CWA to these provisions of P.L. 109-58 .", "A total of 772 municipalities have combined sewers where domestic sanitary sewage, industrial wastes, infiltration from groundwater, and stormwater runoff are collected. These systems serve approximately 40 million persons, mainly in older urban and coastal cities. Normally (under dry-weather conditions), the combined wastes are conveyed to a municipal sewage treatment plant.\nProperly designed, sized, and maintained combined sewers can be an acceptable part of a city's water pollution control infrastructure. However, combined sewer overflow (CSO) occurs when the capacity of the collection and treatment system is exceeded due to high volumes of rainwater or snowmelt, and the excess volume is diverted and discharged directly into receiving waters, bypassing the sewage treatment plants. Often the excess flow that contains raw sewage, industrial wastes, and stormwater is discharged untreated. Many combined sewer systems are found in coastal areas where recreational areas, fish habitat and shellfish beds may be contaminated by the discharges.\nIn 1994, following negotiations with key stakeholder groups, EPA issued a CSO permitting strategy. Cities were to implement nine minimum controls by January 1, 1997 (e.g., proper operation and maintenance programs for sewer systems and pollution prevention programs). The EPA strategy did not contain a deadline for issuance of permits or for controlling CSOs. Deadlines will be contained in plans developed by permitting authorities, which primarily are states. Controls are available and generally are based on combinations of management techniques (such as temporary retention of excess flow during storm events) and structural measures (ranging from screens that capture solids to construction of separate sewer systems). EPA officials stated in 1998 that only about one-half of the cities with combined sewers implemented the minimum measures called for in the 1994 strategy. EPA is now working with states to remind cities of their obligations to address CSO problems. However, a formal enforcement strategy is not contemplated.\nA more recent issue concerning some cities is the problem of overflows from municipal separate sanitary sewers (SSOs) that are not CSOs because they transport only sanitary wastes. Discharges of untreated sewage from these sewers occur from manholes, broken pipes and deteriorated infrastructure, and undersized pipes, and can occur in wet or dry weather. EPA estimates that there are about 18,000 municipalities with separate sanitary sewers, all of which can, under certain circumstances, experience overflows. No explicit EPA or statutory control policy currently exists. In 1995, EPA convened a stakeholders' group to discuss how to address those overflows that pose the highest environmental and public health risk first. On January 5, 2001, the Clinton Administration finalized regulations to improve the operation of municipal sanitary sewer collection systems, reduce the frequency and occurrence of overflows, clarify the existing CWA prohibition on SSO discharges, and clarify circumstances appropriate for enforcement action. The Clinton proposal was not finalized and remains under review by the Bush Administration.\nFunding for CSO and SSO projects is a major concern of states and cities. The most recent clean water needs survey estimating the cost of projects to meet objectives of the CWA found that the largest needs category, totaling $51 billion, is to address CSOs. EPA estimates that costs to restrict SSOs are $88.5 billion. In December 2000, Congress passed legislation, the Wet Weather Water Quality Act, authorizing a two-year $1.5 billion grant program to reduce wet weather flows from municipal sewer systems, both CSOs and SSOs. This bill was included in the FY2001 consolidated appropriations bill (Section 112 of Division B, P.L. 106-554 ), which codified EPA's CSO policy on sewer overflows (discussed above). Congress provided no appropriations for these wet weather grants during the two years of authorization (FY2002-FY2003).", "Public debate over the nation's wetlands has come to focus on questions of the effectiveness and costs of wetland resource protection efforts, rather than on whether such resources should be preserved. The permit program authorized by Section 404 of the Clean Water Act is one of the major federal programs that protects wetlands. However, environmentalists and others have criticized Section 404 as being inadequate to prevent the continuing loss of wetlands, due to statutory exemption of certain types of actions on farmlands and weak enforcement. Those wishing to develop wetlands maintain that existing laws are already an intrusion on private land-use decisions and that further federal involvement is unwarranted.\nHow best to protect remaining wetlands and regulate activities taking place in wetlands has become one of the most contentious environmental policy issues facing Congress and was a prominent element of clean water debate during the 103 rd and 104 th Congresses. Although there has been no recent legislative activity on Section 404, committee hearings were held on several issues arising from judicial decisions, administrative actions of interest, and implementation of current law. Particular attention has focused on issues related to a 2001 Supreme Court case which narrowed the government's regulatory jurisdiction over isolated waters, Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers (531 U.S. 159 (2001)). Since that ruling, some federal courts have interpreted SWANCC narrowly, thus limiting its effect on current permit rules, while a few have read the decision more broadly.\nOn February 21, 2006, the Supreme Court heard arguments in two more cases brought by landowners ( Rapanos v. United States ; Carabell v. U.S. Army Corps of Engineers ) seeking to narrow the scope of the Section 404 permit program. The Court's ruling was issued on June 19 ( Rapanos , v. United States , 126 S.Ct. 2208 (2006)). In a 5-4 decision, a plurality of the Court, led by Justice Scalia, held that the lower court had applied an incorrect standard to determine whether the wetlands at issue are covered by the CWA. Justice Kennedy joined this plurality to vacate the lower court decisions and remand the cases for further consideration, but he took different positions on most of the substantive issues raised by the cases, as did four other dissenting justices. Early judgments by legal observers suggest that the implications of the ruling (both short-term and long-term) are far from clear. Because the several opinions written by the justices did not draw a clear line regarding what wetlands and other waters are subject to federal jurisdiction, one likely result is more case-by-case determinations and continuing litigation. There also could be renewed pressure on the Corps and EPA to clarify the issues through an administrative rulemaking. The Senate Environment and Public Works Committee held a hearing on issues raised by the Court's ruling on August 1, 2006. Members and a number of witnesses urged EPA and the Corps to issue new guidance to clarify the scope of the ruling. Federal officials testifying before the committee said that they hope to do so, but they did not indicate when new guidance would be released.\nOn January 15, 2003, EPA and the Corps issued guidance to their staffs in the field for regulating in light of SWANCC and related cases. At the same time, the agencies issued an advanced notice of proposed rulemaking (ANPRM), seeking public comment on possible rule changes not yet proposed but which may be needed in response to the legal decisions. The agencies received more than 130,000 public comments on the ANPRM, most of them negative, according to EPA and the Corps. Since the 2001 ruling, House and Senate committees have held several hearings to examine issues and frustrations arising from government and judicial interpretations of the decision. In December 2003, EPA and the Corps announced that the Administration would not pursue development of rule changes concerning federal regulatory jurisdiction over isolated wetlands. The EPA Administrator said that the Administration wanted to avoid a contentious and lengthy rulemaking debate over the issue. Environmentalists and state representatives expressed relief at the announcement. Interest groups on all sides have been critical of confusion in implementing the 2003 guidance, which constitutes the main tool for interpreting the reach of the SWANCC decision. However, environmentalists remain concerned about diminished protection resulting from the 2003 guidance, while developers said that without a new rule, confusing and contradictory interpretations of wetland rules likely will continue.", "As noted previously, EPA's water quality reports identify agricultural activities as the leading contributor to water quality impairments nationwide. Animal feeding operations (AFOs) are only a subset of the agriculture category, but because more than half of the states specifically identify AFOs as contributing to impairments, public and policy attention has increased on how to minimize public health and environmental impacts of runoff from them. AFOs are agricultural facilities that confine livestock feeding activities, thus concentrating animal populations and waste. Animal waste is frequently applied to land for disposal and to utilize the nutrient value of manure to benefit crops. If not managed properly, however, it can pose risks to water quality and public health, contributing pollutants such as nutrients, sediment, pathogens, and ammonia to the environment. In 1999, EPA and the U.S. Department of Agriculture initiated a national AFO strategy to improve compliance and strengthen regulations that are intended to control adverse environmental impacts of these agricultural activities.\nClean water regulations, issued in the 1970s, required discharge permits for the largest AFOs, termed confined animal feeding operations (CAFOs). However, EPA acknowledged that compliance and enforcement of these permit rules was poor (less than one-third of covered facilities actually have permits) and that the regulations themselves were outdated. In December 2000, EPA proposed a rule to increase the number of AFOs required to obtain CWA permits and to restrict land application of animal wastes. In May 2001, a House Transportation and Infrastructure subcommittee held an oversight hearing on the proposal. Issues that Congress has addressed include impacts and costs imposed on the agricultural sector, especially small farmers, and how the proposed combination of regulatory and incentive-based measures in the 1999 National AFO Strategy would achieve control of agricultural runoff that adversely affects water quality.\nOn December 15, 2002, the EPA Administrator signed a final revised rule to regulate waste discharges from CAFOs. The final rule, which the agency was under court order to issue by December 2002, modified the Clinton Administration's 2000 proposal in a number of areas. The final rule retains much of the structure of the existing rule, such as regulatory thresholds and definitions, but includes requirements for development of nutrient management plans to better manage land application of manure. EPA estimated that 15,500 CAFOs will be regulated by the rule (compared with 26,000-39,000 under the proposal), at an annual compliance cost of $335 million (versus $850-$980 million under the proposal). Farm groups said that the regulations are generally workable and consistent with environmental initiatives in the 2002 farm bill ( P.L. 107-171 ), but environmental groups criticized the rule for inadequately addressing animal waste runoff problems. A January 2003 GAO report concluded that the rule will be ineffective unless EPA increases its oversight of state regulatory programs, which have primary responsibility for ensuring compliance by feedlot operators.\nIn February 2005, a federal court issued a ruling in a set of challenges to the CAFO rule ( Waterkeeper Alliance, American Farm Bureau, et al. v. EPA , 399 F.3d 486 (2d Cir. 2005)). The litigation involved challenges to the permitting scheme of the rule, the type of discharges subject to regulation, and the effluent limitations established in the rules. The court upheld major parts of the EPA rule, held in favor of some of industry's challenges, held in favor of several of environmentalists' challenges, and in some cases directed EPA to explain more fully why it did or did not do certain things with regard to specific provisions of the rule. It remanded the rule to EPA in light of the court's ruling. The court overturned the \"duty to apply\" part of the rule, which industry had challenged, that would require all CAFOs to apply for a permit. It also rejected parts of the rule that had been challenged by environmentalists as inadequate, regarding regulatory review of permits, inclusion of nutrient management plans in CAFO permits, and public participation requirements. The court also directed EPA to clarify its rationale for several technical parts of the 2003 regulations. In June 2006, EPA proposed revisions to the CAFO rules in response to the court's decision and expects to promulgate revised regulations by June 2007.", "Although the 1987 Clean Water Act amendments dealt extensively with financial aid issues, funding questions have continued to arise and be addressed in the context of appropriations.", "The President's FY2007 budget requested $687.6 million for clean water SRF capitalization grants, 22% less than was appropriated in FY2006 (see following section) and 37% below the FY2005 funding level. As in recent budgets, the Administration proposed no funding for congressionally designated water infrastructure grants, but it did seek a total of $40.6 million for Administration priority projects in Puerto Rico, Alaska Native villages, and at the U.S.-Mexico border. Advocates of the SRF program (especially state and local government officials) contended that the cuts would impair their ability to carry out needed municipal wastewater treatment plant improvement projects. Administration officials said that cuts for the SRF in FY2007 were necessary because Congress boosted funds above the requested level in FY2005 and FY2006. A group of state environmental officials contended that the budget unfairly targeted state and local environmental grants.\nOn May 18 the House passed H.R. 5386 ( H.Rept. 109-465 ), providing the requested level of $687.6 million for clean water SRF grants. The Senate Appropriations Committee approved the same funding level for clean water SRF grants when it reported H.R. 5386 on June 29 ( S.Rept. 109-275 ). However, the Senate did not act on this bill before the 109 th Congress adjourned in December 2006, thus delaying final action until early 2007. The amount included in both bills for these clean water grants is significant because, if enacted at that level in a final FY2007 measure, it would be first time since FY1997 that Congress has not appropriated more than was requested in the President's budget. Both bills included funds for congressionally earmarked water infrastructure project grants ($200 million in the House bill, $210 million in the Senate bill), which the Administration did not request.\nThe House-passed bill included $29.6 million for cleanup of contaminated sediments in the Great Lakes ($20 million less than requested), $204 million for Section 319 grants ($10 million more than requested), and $221.7 million for Section 106 state program administration grants (as requested). The Senate-reported bill included slightly different amounts for these programs: $30.6 million for cleanup of contaminated sediments in the Great Lakes, $200 million for Section 319 grants, and $218.7 million for Section 106 grants.\nDuring debate on H.R. 5386 , the House approved an amendment (by a 222-198 vote) to block EPA from spending funds to implement controversial 2003 policy guidance that limited Clean Water Act jurisdiction over isolated streams, wetlands, ponds, and other non-navigable intrastate waters. The guidance, issued jointly by EPA and the Army Corps of Engineers, was intended to interpret the scope of the act's jurisdiction following the 2001 Supreme Court SWANCC case (discussed above, see \" Wetlands \"). Supporters of the amendment said that the guidance goes beyond what the Supreme Court required in SWANCC , has allowed many streams and wetlands to be unprotected from development, and has been more confusing than helpful. Opponents predicted that the amendment would make EPA's and the Corps' job of regulating activities that affect wetlands more difficult than it already is.\nWhen the 109 th Congress adjourned in December 2006, it had not completed action on appropriations legislation to fund EPA (or on nine other appropriations bills covering the majority of domestic discretionary agencies and departments), thus carrying over this legislative activity into the 110 th Congress. Congress enacted a continuing resolution, P.L. 109-383 (the third such continuing resolution since the start of the fiscal year on October 1), providing funds for EPA and the other affected agencies and departments until February 15, 2007.", "In July 2005, the House and Senate approved legislation providing FY2006 appropriations for EPA ( H.R. 2361 , H.Rept. 109-188 ). President Bush signed the bill into law on August 2 ( P.L. 109-54 ). One of the most controversial issues in the bill concerned funding for clean water SRF grants. The final measure included $900 million for these grants—$170 million more than requested by the President for 2006. In its budget submission for FY2006, the Administration had requested $730 million for SRF grants, 17.5% less than the FY2005 appropriation and 45.6% below the FY2004 funding level, and said that cuts for the SRF in FY2006 were because Congress boosted funds above their requested level in FY2005. The White House said that it plans to invest a total of $6.8 billion in the clean water SRF program between FY2004 and FY2011, after which federal funding would end and the state SRFs would have an annual revolving level of $3.4 billion. If Congress were to appropriate more than EPA requests in any given year, the Administration said, that target will be met sooner, leading to reduced requests for the SRF in subsequent years until a planned phaseout in FY2011. State and local officials contended that the SRF reductions will impede their ability to meet clean water goals. The President's budget also requested no funds for congressionally earmarked water infrastructure projects, but did seek $70 million in funding for Administration priorities—U.S.-Mexico border projects and Alaska Native Villages projects.\nThe final measure as passed by Congress exceeded the Administration's request by providing $900 million for clean water SRF grants and $285 million for a total of 259 earmarked special projects. However, these totals were reduced slightly as a result of a provision in P.L. 109-54 requiring a 0.476% across-the-board rescission for all accounts in that bill, and were reduced further by another across-the-board rescission of 1.0% affecting all domestic programs except those for veterans that Congress included in a subsequent appropriations bill, P.L. 109-148 . As a result of the two required rescissions, the final FY2006 appropriations for clean water SRF grants is $886.8 million, and the total amount provided for earmarked water infrastructure project grants is $280.8 million.\nThe President's FY2006 budget included increases for some water quality programs (in particular, requesting $50 million for cleanup of Great Lakes contaminated sediment, up from $22 million in FY2005). The budget also included increases for some categorical clean water grant programs (Section 106 state grants for program administration, $23.6 million more than in FY2005; and Section 319 nonpoint source pollution management grants, $1.8 million more than in FY2005) and decreases elsewhere in order to fund other Administration priorities (such as elimination of Water Quality Cooperative Agreement grants, which support a variety of innovative permitting, management, and research projects and were funded at $17 million in FY2005). As enacted, P.L. 109-54 provided $30 million for cleanup of Great Lakes contaminated sediment. It included nonpoint source pollution grants at the FY2005 level and Section 106 grants slightly higher than in FY2005, but less than requested. The bill endorsed the Administration's request for no funding of Water Quality Cooperative Agreement grants. The final bill also included a House-passed provision to prohibit EPA from using funds to finalize or implement a draft policy proposed in November 2003 concerning sewage blending by municipal wastewater treatment plants.", "Goplerud, C. Peter. \"Water Pollution Law: Milestones from the Past and Anticipation of the Future.\" Natural Resources & Environment. v. 10, no. 2, fall 1995. pp. 7-12.\nLoeb, Penny. \"Very Troubled Waters.\" U.S. News & World Report , v. 125, no. 12, September 28, 1998: 39, 41-42.\nU.S. Congressional Budget Office. Future Investment in Drinking Water and Wastewater Infrastructure. Washington, November 2002. 58 p.\nU.S. Environmental Protection Agency. The National Water Quality Inventory: 2000 Report . Washington, September 2002. \"EPA-841-R-2-001.\"\nU.S. Government Accountability Office. Key EPA and State Decisions Limited by Inconsistent and Incomplete Data. (GAO/RCED-00-54) March 2000. 73 p.\n—— Water Infrastructure: Information on Financing, Capital Planning, and Privatization . (GAO-02-764) August 2002. 79 p.\n—— Improved EPA Guidance and Support Can Help States Develop Standards That Better Target Cleanup Efforts . (GAO-03-308) January 2003. 74 p." ], "depth": [ 0, 1, 1, 2, 1, 1, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 1, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title", "h1_full", "h0_full h2_title h1_title", "h0_full h2_full h1_full", "h1_full", "h0_title h2_full", "h2_full", "", "h0_full h2_full", "", "h0_full h2_full", "h0_full h2_full", "", "", "h2_full", "", "h1_title", "h1_full", "", "h0_full" ] }	{ "question": [ "What did Congress do to the Clean Water Act in 1987?", "How did EPA, states and others respond since then?", "What is at issue today?", "What entities have been criticized?", "What is a continuing issue?", "What are the three dominating issues in connection with?", "What does the first issue involve?", "What are long-standing concerns?", "What was the budget level requested by the President? and what was the Congress' response?", "How did Congress respond?", "How was the legislative activity carried out?", "What does the second issue involve?", "What have states done to reduce nonpoint pollution?", "What hinders the implementation of nonpoint source control measures?", "How will EPA speed up nonpoint source control?", "What is the third issue?", "What are some other issues important to implementation and attaining the goals of the act?", "How will these issues be overseen?" ], "summary": [ "Congress enacted the last major amendments to the Clean Water Act in 1987 (P.L. 100-4).", "Since then, the Environmental Protection Agency (EPA), states, and others have been working to implement the many program changes and additions mandated in the law.", "At issue today—more than 30 years after enactment of the core law—is what progress is being made to achieve its goals.", "In general, states and environmental groups fault EPA for delays in issuing guidance and providing assistance to carry out the law. EPA and others are critical of states, in turn, for not reaching beyond conventional knowledge and approaches to address their water quality problems. Environmental advocates have been criticized for insufficient recognition of EPA's and states' need for flexibility to implement the act. Finally, Congress has been criticized for not providing adequate resources to meet EPA and state needs.", "Appropriations for clean water programs, especially water infrastructure, are a continuing issue.", "Three issues have predominated recently in connection with implementation of the law.", "The first involves funding to construct municipal wastewater treatment plants under the state revolving fund (SRF) provisions of the 1987 amendments.", "Budgetary constraints on federal aid for wastewater treatment and large remaining funding needs are long-standing concerns.", "The President's FY2007 budget requested $688 million for these SRF grants, 22% less than FY2006 funding, and in May 2006 the House passed legislation providing the level requested by the President (H.R. 5386).", "The Senate Appropriations Committee approved the same level in June.", "Final action did not occur before the 109th Congress adjourned in December, thus carrying over this legislative activity to the beginning of the 110th Congress.", "The second issue involves progress in implementing the nonpoint pollution management provisions added in 1987.", "States have developed management programs describing methods that will be used to reduce nonpoint pollution, which may be responsible for as much as 50% of the nation's remaining water quality problems.", "Most observers agree that implementation of nonpoint source control measures is significantly hindered by limited resources.", "EPA has adopted program guidance intended to give states more flexibility and to speed up progress in nonpoint source control.", "The third issue is impacts of requirements under current law for states to develop total maximum daily loads (TMDLs) in order to address uncontrolled sources of impairment in waters that have not yet achieved water quality standards.", "In addition, other issues exist that are important to implementation and attaining the goals and objectives of the act. They include efforts to manage overflows of untreated wastewater from municipal sewer systems, and questions about the effectiveness and costs of the nation's wetlands protection efforts, particularly in relation to the wetlands permit program in Section 404 of the act.", "Congressional oversight of these issues in the 110th Congress is anticipated." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 0, -1, 2, 3, 2, -1, -1, 1, 1, -1, -1, 5 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2 ] }
CRS_R43113	{ "title": [ "", "U.S.-Cambodian Relations1", "High-Level Diplomacy", "Military Cooperation", "Cambodian Debt", "Cambodia and the Region", "Cambodia as ASEAN Chair", "Cambodia and Thailand", "Cambodia and Vietnam", "Cambodia and China", "Political Developments and Human Rights", "2013 National Elections", "Land Titling", "Trafficking in Persons", "The Khmer Rouge Tribunal", "Foreign Assistance", "U.S. Assistance", "Other Major Aid Providers", "Economic Conditions", "Chinese Investments" ], "paragraphs": [ "", "Although human rights concerns place limits on the depth of the U.S.-Cambodia relationship, a period of relative political stability in Cambodia that began in 2006, combined with U.S. regional security and strategic concerns, has led to a movement toward deeper bilateral ties. U.S. interests in the Kingdom of Cambodia include social, economic, and political development, trade and investment, regional security, civil society, and human rights. As China's economic and political influence has grown in Cambodia and the Lower Mekong Delta region, the Obama Administration has attempted to bolster U.S. ties with Cambodia and other countries in the region. A key challenge for U.S. policy toward Cambodia lies in combining and balancing efforts to engage the Kingdom on a range of fronts while promoting human rights and democracy. Some policy makers and experts contend that U.S. relations with Cambodia should be restricted until Prime Minister Hun Sen reverses a trend of deteriorating conditions for civil liberties and democratic institutions.", "According to some observers, Cambodia's close ties with China do not preclude improved relations with Washington, and Phnom Penh welcomes increased U.S. attention. The Obama Administration has taken tentative but meaningful steps toward strengthening U.S. ties with the Kingdom, particularly as Washington has sought to place greater foreign policy emphasis on East Asia. Hillary Clinton visited Phnom Penh in October 2010, the first visit by a U.S. Secretary of State in seven years, where she met with Prime Minister Hun Sen, King Norodom Sihamoni, opposition leader Mu Sochua, and others. During the trip, Secretary Clinton cautioned the Cambodians about becoming \"too dependent\" upon China. In June 2012, Cambodian Foreign Minister Hor Namong met with Clinton in Washington, DC, to discuss bilateral and regional issues.\nIn July 2012, Secretary Clinton participated in the U.S.-Association of Southeast Asian Nations (ASEAN) Ministerial Meeting in Phnom Penh, where she spoke about U.S. support for ASEAN, maritime disputes in the South China Sea, and six strategic \"pillars\" of U.S. engagement in the region: regional security cooperation, economic integration and trade, engagement in the Lower Mekong region, transnational threats, democratic development, and war legacies. The former Secretary of State met with Hun Sen and participated in the U.S.-ASEAN Business Forum held at Siem Reap, near the famous temples of Angkor Wat.\nIn November 2012, President Barack Obama traveled to Phnom Penh to attend the U.S.-ASEAN Leaders Meeting and the East Asia Summit (EAS). Obama was the first U.S. President to visit Cambodia. While in Phnom Penh, the President met briefly with Prime Minister Hun Sen—the usual protocol for a U.S. President on the sidelines of an EAS summit. During the meeting, Obama reportedly focused on human rights issues and urged the Cambodian leader to release political prisoners and allow opposition parties greater freedom. Human rights groups welcomed the call for improvements in Cambodia's human rights record, although some argued that the President should not have met Hun Sen at all.", "The U.S. government has devoted a small but sustained level of engagement with the Cambodian military, in part to maintain a degree of leverage in the Kingdom. U.S. military officials have expressed a desire for further cooperation with the Royal Cambodian Armed Forces (RCAF) as part of the Administration's policy of rebalancing toward Asia. U.S. military engagement in Cambodia includes naval port visits, military assistance, and joint exercises related to international peacekeeping, civic action and humanitarian activities, and maritime security. Washington began military contacts in roughly 2006 with a small International Military Education and Training (IMET) program worth $49,000 and a focus on counterterrorism cooperation. In the following years, two U.S. naval ships made port calls in Cambodia, the first in three decades, and U.S. military personnel launched training programs in counterterrorism and peacekeeping. Since 2010, U.S. and Cambodian military personnel have collaborated in bilateral and multilateral exercises. In 2012, the USS Blue Ridge visited Sihanoukville, Cambodia. Naval officers from both sides reportedly discussed joint exercises, coastal security, exploration and rescue, and other activities. In October 2012, U.S. and Cambodian naval forces participated in Cooperation Afloat Readiness and Training (CARAT) for the third year in a row, focusing on maritime security. In March 2013, the third annual Angkor Sentinel, a bilateral peacekeeping exercise held in Cambodia, took place in Kamong Speu.", "Cambodia owes the United States roughly $450 million (including $162 million in principal) for agricultural commodities provided by the U.S. Department of Agriculture to the Lon Nol government during the early 1970s. Cambodian officials have argued that many of the shipments never reached Cambodia, and asked the U.S. government to lower the interest rate on the debt and to return most of it (at least 70%) in the form of foreign aid. The U.S. government reportedly has already forgiven nearly $100 million, while U.S. officials have expressed a willingness to reschedule loan payments and return some payments as aid. However, U.S. officials have demanded that the Cambodian government first sign a bilateral debt agreement, acknowledging its obligations, and begin making payments before negotiations on debt terms begin. During their November 2012 meeting, President Obama remarked that his Administration would work to \"find an acceptable solution for both sides.\"", "Cambodia is integrated in the global system through foreign aid ties, the international NGO community, regional organizations, and foreign trade and investment. The Kingdom is heavily dependent upon foreign aid from Japan, the United States, Australia, and Europe. Since 1996, the World Bank, other international financial institutions, and Development Assistance Committee (DAC) countries have attempted to coordinate aid and set economic and political reform guidelines for the Cambodian government through the Consultative Group for Cambodia and later the Cambodia Development Cooperation Forum. Cambodia is a member of the Association of Southeast Asian Nations and served as the organization's rotating chair for the first time in 2012. Cambodia has significant trade relations with neighbors Thailand and Vietnam, while its largest export market is the United States.", "In 2012, Cambodia served a one-year rotating term as chair of ASEAN. Many observers believe that Cambodia's deference to China, its principal economic patron, undermined ASEAN unity at meetings of ASEAN and the East Asia Summit. At the July 2012 ASEAN Ministerial, Phnom Penh's support for China's position on territorial disputes in the South China Sea aggravated tensions within the regional organization, resulting in the first failure in ASEAN's 45-year history to issue a joint communiqué. The tensions largely centered on the objections of Cambodia, as chair of the proceedings and allegedly at China's behest, to including a statement about the standoff between China and the Philippines at Scarborough Shoal. Beijing opposes ASEAN's involvement in what it perceives to be bilateral issues.", "Cambodia and Thailand, which once ruled parts Cambodia, have a history of conflict, although they share cultural traits and have strong economic ties. The two countries have experienced outbreaks of border tensions in recent years. In 2008, the long-simmering dispute over the sovereignty of land surrounding the 11 th century Khmer Preah Vihear temple, which lies in Cambodia, reignited after the United Nations (UNESCO) granted the site World Heritage status. The Thai government opposed the declaration, since it bolstered Cambodia's claims, although most access to the temple passes through Thailand. Border clashes between Thai and Cambodian troops have flared several times since 2008, resulting in over three dozen deaths, including Thai and Cambodian soldiers and civilians. Yingluck Shinawatra, Thailand's Prime Minister since 2011, has sought to repair ties with Cambodia. In April 2013, the International Court of Justice began hearings on the dispute.", "Relations between the Cambodian communists (Khmer Rouge) and the Vietnamese Communist Party (VCP) included mutual suspicion and periods of acrimony, culminating in the Vietnamese invasion and occupation of Cambodia in 1979-1989. The VCP provided support to some members of the current Cambodian leadership who had defected from the Khmer Rouge. Hun Sen, who served as Prime Minister (1986-1993) and Foreign Minister in the Vietnam-backed Peoples Republic of Kampuchea (see T extbox , below), has maintained close diplomatic, economic, and military relations with Hanoi. In April 2013, Cambodian and Vietnamese officials signed an agreement on defense cooperation, focusing on training, joint naval patrols, and other activities. Many Cambodians regard Vietnam with wariness stemming from the country's control over parts of the Kingdom prior to the French colonial period (1887-1953) and during the occupation of the 1980s. Some opposition leaders have criticized Hun Sen for cooperating with Hanoi in demarcating disputed border areas, asserting that he is ceding land to Vietnam.", "The People's Republic of China (PRC), once a major provider of military support to the Khmer Rouge, has become the leading foreign economic benefactor in the Kingdom of Cambodia. Some observers contend that Cambodia's foreign policies are heavily influenced by China, as evidenced by the Kingdom's support of China's positions during the 2012 ASEAN meetings. Other analysts believe that Hun Sen values and seeks relations with multiple foreign powers.\nChinese economic interests are playing a growing role in Cambodia's development. The PRC is a major source of development assistance, largely in the form of concessional loans, Chinese-built infrastructure, and investment packages. In November 2012, PRC Premier Wen Jiabao met Prime Minister Hun Sen in Phnom Penh, promising to boost ties in many economic areas. In April 2013, China and Cambodia reportedly signed economic agreements that included $500 million in PRC soft loans and $48 million in grants during Hun Sen's meeting with new PRC Premier Li Keqiang in Beijing. Hun Sen was the first foreign leader to meet with Premier Li.\nBeijing has provided loans, trucks, helicopters, aircraft, uniforms, and training to the Cambodian Armed Forces. China reportedly sent two military delegations to Cambodia in 2012 and signed defense cooperation agreements with Phnom Penh in 2012 and 2013. The 2012 accord, worth a reported $17 million, included the construction of military training and medical facilities.", "During the past decade, Cambodia has made fitful progress in some areas of U.S. interest and concern, including the conduct of elections, the development of a vibrant civil society, the protection of labor rights, bringing some Khmer Rouge leaders to justice, and improving public health. After a period of relative stability and prosperity, Hun Sen and the Cambodian People's Party (CPP) appear to enjoy popular support, particularly in rural areas. A public opinion survey conducted in Cambodia by the International Republican Institute in early 2013 found that 79% of respondents felt that the country was going in the right direction, with many of them pointing to new roads, schools, and clinics as reasons for such optimism. Growing corruption and the trade and use of drugs were viewed as major national problems. During the past several years, the political system has become less democratic and civil liberties such as free speech and assembly have been encroached upon. Although political opposition groups may gain parliamentary seats in the national elections by forming a united front and tapping into voter discontent among urban voters, youth, and marginalized groups, the CPP's hold on power seems assured for now.\nHun Sen has bolstered his political strength through a combination of electoral victories, influence over the broadcast media and judiciary, legal and extra-legal political maneuvers, intimidation of opponents, patronage, and economic threats. Some critics argue that while electoral processes have improved, Hun Sen possesses unfair campaign advantages through his control over the broadcast media and harassment of political opponents, critics, and civil society actors. Although the press is somewhat freer to criticize the government, the print media reaches a relatively small proportion of the population.\nThe Prime Minister has silenced political opponents through defamation and other lawsuits. Under a penal code that went into effect in December 2010, persons can be charged with defamation for the expression of views that \"affect the dignity\" of individuals, public officials, and government institutions and the crime of incitement for public speech and writings that create \"serious turmoil in society.\" Governance is marred by corruption and many observers suspect that the CPP has played a role in many unresolved, politically motivated killings. The National Democratic Institute described Cambodia as a country that has \"made some progress in building democratic institutions and practices, particularly with a strong and vocal civil society.\" However, the \"long-standing dominance of the ruling Cambodian People's Party … over all aspects of governance … has limited transparency of government activities, stifled dissent and opposition, and suppressed free speech and access to information.\"\nIn October 2012, the Phnom Penh Municipal Court sentenced independent radio broadcaster, government critic, and land rights activist Mam Sonando to 20 years in prison for insurrection. Many Cambodian observers and human rights groups considered the charges to be lacking in evidence and politically motivated. In March 2013, following international pressure, Sonando's charge was replaced by a minor one and he was released.\nSome experts argue that the space for civil society in Cambodia is shrinking. For example, in February 2013, the Cambodian government attempted to pressure lawyers not to give media interviews without the prior approval of the national bar association. Demonstrations in the capital have been outlawed except in an officially designated \"freedom park\" away from state buildings and the parliament. There also have been instances of the government detaining or firing upon protestors in various disputes.", "In the 2008 national elections, the two opposition parties, the Sam Rainsy Party led by Sam Rainsy and the Human Rights Party headed by Kem Sokha, won a total of 29 seats. The two royalist parties, the FUNCINPEC party and the Norodom Ranariddh Party, led by Prince Norodom Ranariddh, attained four seats combined. In 2012, the CPP won local elections by a wide margin—1,592 communes out of a total of 1,633, with the Sam Rainsy Party and the Human Rights Party winning the remainder of the communes. In 2012, the Sam Rainsy Party and the Human Rights Party merged to form a single opposition party, the National Rescue Party (NRP), with Sam Rainsy as president and Kem Sokha as vice-president.\nMany observers believe the July 2013 national elections will likely mark another milestone in Hun Sen's evolving political power in Cambodia. Although a united democratic opposition may gain seats in Parliament, the CPP is expected to hold onto its large majority. The royalists, once a near-equal political force under FUNCINPEC, no longer constitute a challenge to the CPP.\nExperts are concerned that the 2013 elections will not be fair or credible. The 2008 national elections, in which the CPP won 90 out of 123 seats in the National Assembly, were perceived by some foreign election monitors as largely honest. Some irregularities were reported, although they did not appear to affect the outcome of the election or distort the will of the electorate. However, Hun Sen's political strength has further increased since 2008, giving rise to fears that he will ignore calls to ensure that the 2013 elections are conducted properly. Among major concerns are the prohibition of opposition leader Sam Rainsy from running in the contest, the expulsion of opposition lawmakers from the National Assembly, inaccurate voter lists, and the perceived bias of the National Election Committee (NEC).\nSam Rainsy, a Cambodian politician for over two decades and major opposition voice, lived in self-imposed exile in France from 2009 to July 2013. He has been convicted of a number of charges since 2005, including defamation and destroying public property, and was sentenced in absentia to a total of 11 years in prison. These charges were widely regarded as politically motivated. In November 2012, the National Election Committee declared that although the National Rescue Party would be allowed to participate in the national elections, its leader, Sam Rainsy, would not, on the grounds that he was a convicted criminal. State Department spokesperson Victoria Nuland stated: \"… the exclusion of a leading opposition leader calls into question the legitimacy of the whole democratic process in Cambodia.\"\nFollowing international pressure, on July 15, 2013, King Norodom Sihamoni pardoned Sam Rainsy at the request of Prime Minister Hun Sen. Sam Rainsy returned to Cambodia on July 19, less than 10 days before the July 28 elections. He reportedly was greeted by large and enthusiastic crowds in Phnom Penh. Although the pardon may have removed some legal obstacles to his participation in politics, the NEC concluded that Sam Rainsy was still ineligible to vote and run as a candidate in the national elections.\nOn June 5, 2013, the National Assembly Permanent Committee expelled 29 lawmakers, including 27 opposition legislators, from Parliament, asserting that their status was no longer valid due to their decision to resign from their parties and join new ones, such as the National Rescue Party. Opposition Members argued that the Permanent Committee's move was unconstitutional and intended to weaken the recently united opposition. The U.S. government issued a statement expressing deep concern over the action, supporting \"a political process that includes the full participation of all political parties on a level playing field,\" and urging the National Assembly leadership to allow all elected members to \"fulfill their commitment to serve the Cambodian people.\" The Chheang Vun, chairman of the parliament's foreign affairs commission, rejected the U.S. statement as \"unacceptable\" and defended the legality of the Permanent Committee's decision.\nSome analysts warn that incomplete and flawed voter lists threaten the legitimacy of the national elections. A report by the National Democratic Institute and two Cambodian NGOs found that the quality of voter lists has declined. Voter registration fell from 88% in 2008 to 83% of the electorate in 2013. Over 10% of voters who thought they were registered were not, and over 10% of people registered could not be found. Democracy groups allege that the National Election Committee is too closely linked to the CPP and have expressed concerns over recruitment of its membership. The NEC Secretary General, Tep Nytha, responded to criticism by stating that the NEC is independent and that its selection process was done in accordance with the law and the approval of Parliament.", "As the Cambodian economy has developed, tens of thousands of Cambodians—many of them living in squatter colonies—have been displaced as government, business, and foreign entities, often in collusion, have confiscated their land and homes, sometimes forcibly, for agricultural, mining, logging, tourism, and urban development projects. Some groups claim that over 400,000 Cambodians have been affected by such evictions since 2003. An estimated two-thirds of Cambodians lack proper deeds to the property on which they live. Many land titles were destroyed during the Khmer Rouge era, and many citizens lack knowledge of the law or the means to enforce it. In the past year, Cambodians have engaged in dozens of protests against forced resettlement or the lack of adequate compensation for their property. Over 200 people reportedly were arrested in protests over land rights in 2012.\nIn 2012 and early 2013, Hun Sen announced that he would grant land titles to nearly half a million farmers, place a moratorium on land concessions, and return some property intended for development back to the people. However, critics say that the land titling scheme is not comprehensive; it does not affect urban areas or collective property belonging to indigenous peoples. They add that the process lacks transparency and accountability and is influenced by powerful interests. Furthermore, disputes continue, often resulting in arrests and violence by the government. Some observers contend that the announcement was a political move. Hun Sen reportedly warned some villagers that they would not receive titles to their properties under the new policy if he were not reelected. In June 2013, the Prime Minister announced that the titling program would be suspended until after the national elections.", "Some experts argue that Cambodia has made significant strides in addressing trafficking in persons. The State Department has recognized Cambodia's efforts in combatting trafficking, although improvements reportedly have stalled. For three consecutive years, the Office to Monitor and Combat Trafficking in Persons placed Cambodia in the \"Tier 2\" category, meaning that the government does not fully comply with minimum standards in accordance with the Trafficking Victims Protection Reauthorization Act (TVPA), but it is making significant efforts to do so. However, in 2013, Cambodia's status fell to \"Tier 2 Watch List\" due to the country's inability to maintain progress.\nAccording to the State Department's Trafficking in Persons Report and other sources, Cambodia is a source, transit, and destination country for human trafficking, which reportedly is furthered by corrupt government officials in Cambodia and Thailand. Cambodians have been victims of sex trafficking, domestic servitude, debt bondage, and forced labor in surrounding countries, including the trafficking of men to work under slave-like conditions on fishing vessels. Despite improvements in the past decade, particularly in the child sex trade within the country, the Cambodian government has \"failed to make progress in holding trafficking offenders and child sex tourists accountable.\" In the past year, government efforts were inadequate in protecting and assisting victims and prosecuting and convicting offenders, and government officials were often complicit or contributed to a climate of impunity.", "The Extraordinary Chambers in the Courts of Cambodia (ECCC), an international court with international and Cambodian judges and prosecutors, began proceedings in 2006 to try Khmer Rouge leaders and others responsible for grave violations of national and international law, such as crimes against humanity. The ECCC is financed through a U.N.-administered international trust fund and bilateral donations. The top foreign donors, in order of contributions, are Japan, Australia, the United States, Germany, France, and the United Kingdom. Japan has contributed $78.7 million since 2006. International donors pledged $35 million for operating costs in 2013. The tribunal reportedly has been hampered by interference from the Cambodian government and corruption by Cambodian court officials, resignations by some international judges, and unexpected costs and delays. Since the beginning of operations, the court has spent over $179 million, and has faced annual budget shortfalls which have resulted in unpaid salaries to Cambodian judges and staff.\nThe United States government withheld assistance to the ECCC from 2006 to 2008 due to doubts about the court's independence. In 2008, the State Department announced that the court met international standards, and began providing contributions through the U.N. trust fund. Between 2008 and 2012, the United States contributed nearly $17 million to the tribunal. The U.S. government also has provided financial support to the Documentation Center of Cambodia (DC-Cam), an archive, library, and public service center related to Khmer Rouge atrocities. Under current congressional restrictions, foreign operations appropriations may be made available to the ECCC only if the Secretary of State certifies that the United Nations and the Government of Cambodia are taking credible steps to address allegations of corruption and mismanagement within the tribunal.\nFive Khmer Rouge leaders have been charged with crimes against humanity and war crimes. Kaing Guek Eav (known as Comrade Duch), Pol Pot's \"chief executioner,\" ran the infamous Toul Sleng (S-21) prison in Phnom Penh, where an estimated 14,000 Cambodians were killed. Nuon Chea was the Khmer Rouge's second-in-command. Ieng Sary was the former foreign minister. Ieng Sary's wife, Ieng Thirith, was the regime's Minister of Social Affairs. Khieu Samphan, the chief of state, was in charge of the Communist regime's radical economic policies. In 2010, Kaing Guek Eav was sentenced to 35 years in jail (minus time already served), which many Cambodians considered to be too lenient. In February 2012, the court rejected his appeal and increased his term to life in prison. Of the remaining four defendants, all of whom were in their 80s at the beginning of 2013, Nuon Chea and Khieu Samphan have been in poor health and Ieng Thirith has been declared mentally unfit for trial and freed. Ieng Sary died in March 2013, before the completion of his trial.\nCambodian and international human rights groups have advocated expanding the scope of prosecutions to include more Khmer Rouge officials. However, Prime Minister Hun Sen has opposed expanding the number of indictments, arguing that it would undermine \"national reconciliation.\" Although Hun Sen had defected from the Khmer Rouge in 1977 and fled to Vietnam, some analysts argue that he is reluctant to widen the scope of the trials due to his former connections with Khmer Rouge military officials. Cambodian court officials have blocked the indictments of five additional suspects recommended by international members of the ECCC, maintaining that they were \"not either senior leaders or those who were most responsible\" during the Khmer Rouge period.", "Cambodia relies heavily upon foreign aid, which is equal to more than half of its government budget. Civil society groups are also heavily dependent upon foreign funding. The largest providers of traditional aid or overseas development assistance (ODA), in order of the amount of ODA, are Japan, the United States, Australia, Germany, and France. Development Assistance Committee (DAC) countries combined provided an average of $640 million per year between 2009 and 2011.", "Cambodia is the fourth-largest recipient of U.S. foreign aid in Southeast Asia after Indonesia, the Philippines, and Vietnam, and the second-largest beneficiary per capita after Timor-Leste. The Kingdom received $76 million in U.S. assistance in FY2012, including the following aid accounts and programs (see Table 1 ):\nDevelopment Assistance : democratic elections, civil society, mass communications, trafficking in persons, agricultural productivity, environmental preservation; Economic Support Funds (ESF) : Khmer Rouge Tribunal (ECCC); Foreign Military Financing (FMF) : English-language training, military equipment, vehicle maintenance and logistical management training, maritime security; Global Health : HIV/AIDS, tuberculosis, malaria, maternal and child health, family planning and reproductive health, access to health care, nutrition; International Military Education and Training (IMET) : English-language, leadership training, maritime security; Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) : Explosive remnants of war (ERW) clearance, border security; and Global and Regional P rograms : Global Climate Change Initiative, East Asia and Pacific trafficking-in-persons.\nIn 2009, then-Secretary of State Hillary Clinton launched the Lower Mekong Initiative (LMI), a regional foreign assistance effort through which the United States aims to promote cooperation and capacity building in the areas of education, health, women's issues, regional infrastructure, and the environment. LMI participants are Burma (Myanmar), Cambodia, Laos, Thailand, and Vietnam. In 2012, the Obama Administration announced that, as part of the rebalancing policy in the Asia Pacific region, it would provide $50 million over three years for LMI programs. Among other aims, the LMI provides support to the Mekong River Commission (MRC) in an effort to help address the environmental effects of hydropower projects, many of them backed by Chinese companies, along the region's main tributary. The MRC is an inter-governmental agency whose mission is to promote the sustainable development of the Mekong River and collaboration on the management of shared water resources.\nCambodia is one of the world's most heavily afflicted countries in terms of the numbers of unexploded ordnance (UXO) or explosive remnants of war (ERW), including landmines, cluster munitions, and bombs, as a result of U.S. bombing during the Vietnam War, the Vietnamese invasion, and civil wars during the 1970s and 1980s. There have been an estimated 27,000 UXO/ERW casualties since 1992, and 64,000 since 1979. U.S. assistance to Cambodia includes support for removing UXO/ERW and related training and Leahy War Victims Fund programs for prostheses, physical rehabilitation, and related training, employment, and support to non-governmental organizations (NGOs). The Kingdom reportedly has reduced the casualty rate from 900 per year in 2005 to under 200 in 2012, with the help of international aid.\nFrom 1998 to 2007, the U.S. Congress prohibited direct or government-to-government assistance to Cambodia in order to pressure Prime Minister Hun Sen into fully restoring democracy, but allowed U.S. assistance to NGOs and some humanitarian programs to continue. Congress lifted the ban in 2007 due in part to improving democratic procedures. Assistance remains largely channeled through NGOs, in part \"reflecting USAID's commitment to building a vital civil society in Cambodia.\" Some policy makers have called upon the U.S. government to restrict and reduce foreign assistance to Cambodia if the Secretary of State deems the July 2013 national elections as not credible and competitive.", "Japan has been an important source of infrastructure and other assistance and investment. Australia's strong ties to Cambodia stem from its involvement in the U.N. Transitional Authority in Cambodia (1992-1993). Australian ODA has aimed to promote sustainable development and focused on child and maternal health and rural poverty. By other measures, China, which is not an OECD member or DAC country, is the largest provider of foreign aid to Cambodia, reportedly providing over $200 million annually during the past several years. China has been a major source of loans, infrastructure construction, investment, and development assistance to the Kingdom. Some human rights groups have criticized foreign aid donors for providing ODA despite the Cambodian government's lack of progress in improving governance and fighting corruption. Furthermore, many analysts argue that Chinese assistance has significantly reduced the effectiveness of other aid donors attempting to pressure Cambodia to make advances in the areas of rule of law, democracy, and human rights.", "Cambodia is one of the poorest countries in Asia. The Kingdom has experienced steady economic growth during the past decade and a half, largely driven by expansions in agriculture, construction, the garment sector, and tourism. GDP growth was estimated to be 6.4% in 2012 and is forecast to be 6.9% in 2013. However, income inequality, which remains high, has been increasing. Continuing obstacles to faster and more balanced development and greater foreign investment include poor education and public health, low government capacity, weak legal and financial institutions, inadequate infrastructure, and official corruption.\nThe United States is the largest overseas market for Cambodian goods, accounting for about half of the Kingdom's garment exports. There are about 600 clothing factories that employ approximately 400,000 workers in the Kingdom. Bilateral trade fell by 20% between 2007 and 2009, but has since rebounded. In 2011, U.S.-Cambodian trade surpassed the levels of before the global recession. In 2012, bilateral trade was worth $2.9 billion, including $2.7 billion in U.S. imports of Cambodian goods, mostly apparel, and $226 million in U.S. exports to the Kingdom. The largest U.S. export item was vehicles.\nIn 1996, Cambodia and the United States signed a bilateral trade agreement (BTA), which provided for reciprocal \"normal trade relations\" tariff treatment. In July 2006, Cambodia signed a Trade and Investment Framework Agreement (TIFA) with the United States. Cambodia acceded to the WTO in October 2004. As a member of ASEAN since 1999, the Kingdom is committed to participating in the ASEAN Free Trade Area (AFTA) in 2015. Cambodia is also a party to the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade area including the 10 nations of ASEAN and 6 other Asia-Pacific countries, which is under negotiation.\nPrincipal foreign investors in Cambodia include China, Malaysia, South Korea, Thailand, the United States, and Vietnam. According to one report, China has become Cambodia's largest investor with approximately $9 billion in cumulative investment ($1.19 billion in 2011). U.S. cumulative investment reportedly totals $1.3 billion. The United States invested $144 million in the country in 2011, triple the amount of 2010.\nTourism accounts for 350,000 Cambodian jobs and 12% of gross domestic product, according to the Tourism Minister. Cambodians hope that offshore oil production will eventually provide a boon to government revenues and the economy. A number of multinational and national companies, including Chevron, are working in the Gulf of Thailand to develop oil reserves, estimated at 500 million barrels. However, the estimated start date of oil production has been delayed from 2013 to 2017.\nIn addition to low labor costs, many Cambodian garment factories have developed a reputation for good labor practices, largely because of a U.S.-Cambodia agreement, enacted in 1999, that rewarded progress in labor conditions with increased access to the U.S. market. As part of the agreement, in 2001, the International Labor Organization (ILO) was brought in to monitor and promote good labor practices in the Kingdom. It continues to do so under the program Better Factories Cambodia with funding from the Royal Government of Cambodia, the Garment Manufacturers' Association in Cambodia, the U.S. Department of Labor, the World Bank, the Australian Agency for International Development, and international buyers.\nLabor relations have shown some signs of strain in recent years. Cambodian workers are free to form their own unions and have the right to strike, although a majority of unions are affiliated with the CPP, and independent labor leaders and strike organizers sometimes have been harassed by employers. In February 2013, an estimated 20,000 workers across a number of foreign-owned textile factories in an industrial area in southeastern Cambodia went on strike for better working conditions and higher wages. Other strikes also occurred in other regions throughout the year.", "Although some Cambodians have expressed appreciation of China's role in their country's development, others have complained of its adverse social, environmental, and other effects. According to some estimates, China has become Cambodia's largest investor, concentrated in such areas as garments, agriculture, and mining. Although the United States is Cambodia's largest export market for apparel, China leads in foreign investment in the sector. Chinese companies are also helping to develop Cambodia's infrastructure and basic industry, reportedly building a rail line, sea port, and steel plant worth $11 billion. Other projects include road construction, hydropower, and irrigation. In December 2012, Cambodian and Chinese oil companies announced plans to build the Kingdom's first oil refinery in Kampot province, to be completed in 2013.\nDomestic demand for energy and Chinese investment have fueled dam construction in Cambodia and other countries along the lower Mekong and other rivers, alarming environmentalists and people who rely upon the waterways for their livelihood. Three Chinese-backed dams have been built in the Kingdom, three are under construction, and more reportedly are planned. These hydropower projects are largely financed and constructed by Chinese banks, companies, and workers, often on terms that are unfavorable to Cambodia, according to critics. Ownership of most Chinese dams is based upon a \"build-operate-transfer\" arrangement. During a period of Chinese operation, which may last from 30 to 45 years, Cambodia pays the Chinese company for power generated by the dam.\nSome experts contend that such dams endanger or disrupt fish supplies, soil conditions, drinking and irrigation water, wildlife and aquatic species, and ecological balances. They add that there is very little transparency or public input regarding the conception, construction, and environmental assessments associated with these projects. Similar dams built in Laos and Vietnam reportedly also have had damaging effects on Cambodia, which lies downstream. Proponents of the dams argue that China is filling a void made by the withdrawal of the World Bank and other developed countries from hydropower projects in the region for reasons related to feasibility and environmental, social, and political costs. They argue that these facilities supply energy for development, reduce reliance on oil, and help expand electricity in rural areas.\nCambodian economic development and foreign (particularly Chinese) demand for hardwood threaten to deplete Cambodia's forests and have spurred illegal logging. Stronger environmental policies in some neighboring countries, such as Thailand, have added pressure on the Cambodian timber market. In 2012, a Cambodian environmental activist and an investigative journalist who had exposed illegal logging were killed under suspicious circumstances in separate incidents. Another reporter who had uncovered timber smuggling involving a well-connected local businessman was arrested. In May 2012, the Cambodian government suspended the granting of land to domestic and foreign companies in a move to curb forced evictions and illegal logging." ], "depth": [ 0, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 1, 2, 2, 1, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h4_title", "h4_full", "h0_full", "", "h4_full", "", "", "", "", "h2_full h1_full", "h2_full", "", "", "", "h4_title h3_title", "h3_full", "h4_full", "h3_full h4_title", "h4_full" ] }	{ "question": [ "What limits the scope of the bilateral relationship between the U.S. and Cambodia?", "Why has the Obama Administration taken steps to broaden engagement with Cambodia?", "What are the interests of the U.S. in Cambodia?", "In what ways has U.S. military engagement with Cambodia increased?", "What is the key challenge for U.S. policy toward Cambodia?", "What progress has Cambodia made in the past decade?", "What was impaired at the same time?", "How was the political power structured?", "How did Hun Sen bolster his political strength?", "What did observers believe?", "What were their major concerns?", "How does the U.S. aid Cambodia financially?", "What are the program areas?", "How does the U.S. play the role of the largest foreign market for Cambodian goods?", "What is China's role in Cambodia?", "What do some maintain about the effect of Chinese assistance?", "How did China influence Cambodian foreign policy?" ], "summary": [ "The United States and the Kingdom of Cambodia have been expanding their once-limited ties for a number of years, although U.S. concerns about Cambodia's human rights record still limit the scope of the bilateral relationship.", "The Obama Administration has taken steps to broaden engagement with Cambodia, partly in response to China's growing diplomatic and economic influence in Cambodia and the Lower Mekong Delta region.", "U.S. interests in Cambodia include promoting development, trade and investment, regional security, civil society, democracy, and human rights.", "U.S. military engagement with Cambodia has increased as well. These include naval port visits, military assistance, and joint exercises related to international peacekeeping, humanitarian activities, and maritime security.", "A key challenge for U.S. policy toward Cambodia lies in balancing efforts to engage the Kingdom on many fronts while promoting democracy and human rights.", "During the past decade, the Kingdom has made fitful progress in some areas of U.S. concern, including the conduct of elections, the development of civil society, labor rights, bringing some Khmer Rouge leaders to justice, public health, and counterterrorism measures.", "However, during the past several years, the political system has become less democratic and civil liberties have been curtailed.", "Although political opposition groups may gain parliamentary seats in the July 28, 2013 national elections by forming a united front and tapping into voter discontent among urban and marginalized groups, Prime Minister Hun Sen's continued hold on power seems assured.", "Over the past decade and a half, Hun Sen has bolstered his political strength through a combination of electoral victories, influence over the broadcast media and judiciary, legal and extra-legal political maneuvers, intimidation of opponents and critics, patronage, and economic threats.", "Many observers believe that the fairness of the national elections were seriously undermined prior to election day.", "Among the major concerns were the prevention of opposition leader Sam Rainsy from participating in politics or running in the elections, the expulsion of opposition lawmakers from the National Assembly, inaccurate voter lists, and the alleged lack of neutrality of the National Election Commission.", "The United States provides significant foreign aid to Cambodia, one of the poorest countries in Asia, largely through non-governmental organizations. The Kingdom received $76 million in U.S. assistance in FY2012.", "Program areas include public health, agricultural development, environmental preservation, military training, maritime security, elections, civil society, and removal of explosive remnants of war.", "The United States is the largest foreign market for Cambodian goods, buying about half of the Kingdom's garment exports.", "China has been a principal source of loans, infrastructure development, investment, and foreign aid to the Kingdom.", "Some experts maintain that Chinese assistance has significantly reduced the effectiveness of traditional aid donors in attempting to pressure Phnom Penh to make advances in the areas of rule of law, democracy, and human rights. Some groups have expressed concerns about the adverse effects of China's development projects on the local environment. Other observers also contend that Beijing has influenced Cambodian foreign policy.", "During its chairmanship of the Association of Southeast Asian Nations (ASEAN) in 2012, Cambodia was seen as acceding to Beijing's desire to block attempts to raise the issue of maritime security in regional fora, to the consternation of the United States and other ASEAN nations." ], "parent_pair_index": [ -1, -1, -1, 2, -1, -1, -1, 1, -1, -1, 1, -1, 0, -1, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-18-24	{ "title": [ "Background", "Statutes and Regulations", "National Firearms Act of 1934, as Amended", "Gun Control Act of 1968, as Amended", "Internet Firearm Marketplaces", "Prior Reporting on Internet Firearms Sales", "ATF Takes Various Actions to Enforce Firearm Regulations Related to Prohibited Firearm Transactions Facilitated by the Internet", "ATF Does Not Distinguish between In-Person Sales and Sales Facilitated by the Internet when Enforcing Firearms Statutes and Regulations", "ATF Developed an Internet Investigations Center to Help Identify Individuals Unlawfully Transferring Firearms Using the Internet", "ATF Enforces Firearms Laws through Regulatory Inspections of Licensed Firearms Dealers to Detect Prohibited Firearms", "ATF Law-Enforcement Operations Investigate Firearm-Related Crimes, Including Those Facilitated by the Internet", "Agents Purchased Two Firearms on the Dark Web, but Covert Attempts to Illegally Purchase Firearms on the Surface Web Were Unsuccessful Agents Successfully Purchased Two Firearms on the Dark Web", "All of Our Attempts to Illegally Purchase Firearms from Private Sellers on the Surface Web Were Unsuccessful", "Agency Comments", "Appendix I: Methods for Performing GAO Covert Testing", "Scope", "Methodology for Dark Web Covert Testing", "Methodology for Surface Web Covert Testing", "Appendix II: Examples of Illegal Firearms Sales Facilitated by the Internet", "Appendix III: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments" ], "paragraphs": [ "ATF is one of several DOJ law-enforcement components, including the Federal Bureau of Investigation (FBI) and the Drug Enforcement Administration (DEA), responsible for fighting violent crime. ATF is the lead agency charged with enforcing federal firearms laws and regulating the firearms industry. ATF is also responsible for investigating criminals and criminal organizations that use firearms, arson, or explosives in violent criminal activity.\nATF investigates and combats violent crime related to firearm trafficking, criminal possession and use of firearms, and the diversion of firearms from legal commerce. This work includes law-enforcement operations and intelligence gathering and analysis. For example, special agents investigate reports of prohibited individuals acquiring or attempting to acquire firearms from private sellers in order to avoid background checks that would otherwise be required if purchasing through an FFL. According to ATF officials, intelligence analysts may help agents by gathering information from the public social-media profiles of individuals under investigation. In addition, ATF investigates reports of individuals engaging in the business of dealing firearms without a license, thereby circumventing background-check, record-keeping, and other requirements.", "The National Firearms Act of 1934 (NFA) and the Gun Control Act of 1968 (GCA) are the primary federal laws that regulate the manufacture, sale, distribution, and possession of firearms. There are no laws that specifically regulate firearms transactions facilitated by the Internet. Rather, firearms transactions facilitated by the Internet are subject to the same legal requirements and regulations as traditional firearms sales.", "The NFA defines the specific types of firearms and components subject to the provisions of the act based on the firearm’s function, design, configuration, or dimensions. For example, the NFA applies to machine guns, short-barreled rifles, short-barreled shotguns, and silencers. The NFA requires these firearms and components to be registered with ATF. The lawful transfer of firearms and components subject to the NFA generally requires ATF approval, a process that involves the submission of application forms, fingerprints, and photographs to ATF, as well as payment of a transfer tax. Transfers outside of this ATF-approval process are generally illegal.", "The GCA, the main federal statute applicable to firearms such as handguns, shotguns, and rifles, requires all persons engaged in the business of manufacturing, importing, or dealing in firearms to become an FFL through ATF. The GCA defines a person “engaged in the business” as a dealer of firearms as someone who “devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms.” The definition excludes individuals who make “occasional” sales or purchases to enhance a personal collection or for a hobby or who sell all or part of a personal collection of firearms. The GCA requires that FFLs maintain records of all their gun sales. These records are used, among other purposes, to trace a firearm recovered by law-enforcement officials from its first sale by the manufacturer or importer through the distribution chain to the first retail purchaser, in order to provide law-enforcement agencies with investigative leads.\nAs amended by the Brady Handgun Violence Prevention Act, the GCA generally requires FFLs to contact the FBI’s National Instant Criminal Background Check System (NICS) prior to transferring a firearm to a nonlicensed individual. During a NICS background check, the buyer provides the FFL with appropriate identification, such as a valid driver’s license. The FFL submits descriptive data, including the buyer’s name and date of birth, to NICS, which searches three national databases containing criminal history and other relevant records to determine whether federal or state law prohibits the person from receiving or possessing a firearm. The transfer may proceed if NICS informs the FFL that it has no information indicating that the transfer would be in violation of law, or if 3 business days have elapsed without notification that the transfer would violate the law. The GCA prohibits individuals from knowingly making a false statement intended to deceive FFLs with respect to any fact material to the lawfulness of the sale, such as a person claiming that he or she is the actual buyer of a firearm and not acquiring the firearm on behalf of another person, when in fact he or she is purchasing the firearm with the intent to transfer it to a prohibited person. This type of transaction is often referred to as a “straw purchase.”\nIn addition, the GCA establishes the categories of persons generally prohibited from shipping, transporting, receiving, or possessing firearms and ammunition. Specifically, persons are prohibited from shipping, transporting, receiving, or possessing a firearm if they (1) have been convicted of a felony; (2) are a fugitive from justice; (3) are an unlawful user of or addicted to any controlled substance; (4) have been committed to a mental institution or judged to be mentally defective; (5) are aliens illegally or unlawfully in the United States, or certain other aliens admitted under a nonimmigrant visa; (6) have been dishonorably discharged from the military; (7) have renounced their U.S. citizenship; (8) are under a qualifying domestic violence restraining order; or (9) have been convicted of a misdemeanor crime of domestic violence. In addition, federal law prohibits persons under felony indictment from shipping, transporting, or receiving a firearm.\nIndividuals who are not engaged in the business of dealing in firearms may not legally sell firearms to other unlicensed individuals under certain circumstances. For example, a transaction between unlicensed individuals would be illegal if the seller knows or has reasonable cause to believe that the buyer is legally prohibited from possessing firearms or is a resident of a different state than the seller. If the seller is not aware of these circumstances, the seller may transfer the firearm to the buyer without any record-keeping or background-check requirements.\nNonprohibited, nonlicensed individuals may legally purchase firearms through an FFL or through individual private sales with residents of the same state. Regardless of whether an FFL is involved in an Internet- facilitated firearm purchase, if a seller knows or has a reasonable cause to believe that the prospective recipient is prohibited from possessing firearms, the seller must not transfer the firearm. See figure 1.\nAs outlined in figure 1, the Internet can facilitate legal purchases either through FFLs or through nonlicensed private sellers. For purchases through an FFL, an individual orders a firearm online, and generally completes the transaction process in person. The FFL submits the required paperwork to ATF. A background check is processed directly by NICS or through a state government that checks NICS. Unless denied by the background check, the transaction is completed. If the individual is purchasing the firearm from an FFL in another state, the original FFL will transfer the firearm to an FFL in the state the buyer resides in to complete the transaction. If both the buyer and seller are residents of the same state, transfers between private nonlicensed parties facilitated by the Internet without the involvement of an FFL may be lawful. The firearm may be transferred in person between the buyer and the seller, or, if the firearm is a shotgun or rifle, it may be mailed intrastate between the individuals. The seller has no record-keeping obligations, and no NICS background check is performed on the buyer. However, a nonlicensed individual is usually prohibited from directly transferring a firearm to a person who the transferor knows or had reasonable cause to believe is residing in another state. In addition, it is usually illegal for any nonlicensed individual to transport into or receive in the state where he resides any firearm purchased or otherwise obtained outside that state. Therefore, interstate transactions between two nonlicensed individuals are likely to be illegal unless an FFL becomes a party to the transaction. For a legal transaction between residents of different states, the seller must send the firearm to an FFL in the buyer’s state. The FFL submits the paperwork, a background check is processed, and, unless denied by the background check, the FFL transfers the firearm to the buyer.", "Potential gun buyers can view firearm advertisements and make purchases from the following categories of websites: major retailers, online retailers, online auctions and marketplaces, online classified listings, online forums and social media networks, and Dark Web websites. According to ATF reports, major retailers and online retailers meet the definition of firearm dealers and therefore must be FFLs in order to operate. To see how purchases may be facilitated by various Internet marketplaces, see figure 2.", "GAO, DOJ, and the Congressional Research Service (CRS), as well as a gun-control advocacy group, have reported on the issue of Internet firearm sales since the early 2000s. In 2001 we reported the results of our undercover inquiries to private individuals who advertised firearms online. We attempted to purchase firearms from two of these individuals. Both individuals were willing to complete the transactions in person, though we did not complete the sales.\nAlso in 2001, as part of a larger report on reducing gun violence, DOJ identified issues related to firearms sales facilitated by the Internet. Among the issues outlined in the report was the possibility prohibited individuals may use the Internet to acquire firearms. The report also stated that the Internet may facilitate illegal sales by individuals selling firearms commercially without a license. The report stated that enforcement mechanisms must be established to prevent prohibited individuals from obtaining firearms through the Internet and to make sure that both FFLs and nonlicensed sellers follow existing law when conducting sales through the Internet. The report noted that ATF was working to establish a unit to identify and respond to criminal violations involving the Internet and other new computer technology and worked with other federal law-enforcement agencies to establish enforcement mechanisms to prevent prohibited individuals from obtaining firearms through the Internet and to make sure both FFLs and nonlicensed sellers follow existing law when conducting sales through the Internet.\nIn 2012, CRS reported on Internet firearm and ammunition sales. The report outlined the extent to which federal law regulates the sale of firearms via the Internet, which is not treated as legally distinct from sales not facilitated by the Internet. CRS noted that this situation has raised concerns about the possibility of increased violation of federal firearm laws and about challenges that law-enforcement agencies may face when attempting to investigate violations of these laws.\nAdditionally, a prior report by an advocacy group explored how the Internet may facilitate firearm sales to prohibited individuals. However, the report described how prohibited individuals may use the Internet to find firearms for sale and then to conduct face-to-face transactions. The report did not demonstrate how prohibited individuals may have firearms mailed directly to them, thus circumventing the FFL purchase process, or otherwise break the law. Representatives from the investigative organization that performed this work stated that they did not break the law when performing their testing.", "", "As we noted above, there are no specific statutes or regulations pertaining to Internet firearms transactions. Hence, ATF does not distinguish between private firearms transactions taking place in person versus those that use the Internet to facilitate the sale. Licensed and nonlicensed sellers use the Internet to facilitate firearm sales in a variety of ways. Major retailers with a federal firearms license enable customers to browse available firearms on their websites but require transactions to be made in person at the store. Online retailers with a federal firearms license advertise firearms online and transfer the firearm to the purchaser through either a storefront that qualifies as an FFL or another FFL in the buyer’s state. Online auction and marketplace websites, online classifieds, and online forums also facilitate sales between buyers and both licensed and nonlicensed sellers. Depending on the website, potential buyers can search for firearms nationwide or narrowed down to city or zip code. According to ATF, searching capabilities can affect whether transactions among nonlicensed individuals are more likely to occur in person or through an FFL as well as the potential for illegal activity to occur.\nA private sale between two nonlicensed individuals would have an unlawful component if, for example, (1) the seller knows or has reasonable cause to believe that the buyer is legally prohibited from possessing firearms or is a resident of a different state; (2) the seller is engaged in the business of dealing in firearms without a license; or (3) the item is an NFA-restricted weapon. ATF officials who oversee Internet- related investigations said that it is not possible to monitor private firearms transactions coordinated over the Internet as they take place. Federal law does not require the seller in a private firearm transaction to conduct a background check or otherwise process paperwork through ATF.", "According to ATF officials, in 2012 the agency created a national center for Internet-related investigations, now known as the Internet Investigations Center (Center). ATF officials noted that, as an example of its activities, field agents who perform work involving the Internet will coordinate with the Center to ensure they have the necessary training to operate online in an undercover capacity. The Center has access to a variety of tools to facilitate Internet investigations. Much of the Center’s software that is used to analyze online content for investigations is free and open source. For example, according to ATF officials, using free open-source software allows analysts to glean information from public websites without violating users’ privacy rights.\nATF officials stated that the Center investigates buyers and sellers who use the Internet to facilitate illegal firearms transactions. The officials with the Center noted that these investigations are generally reactive, meaning that the Center initiates them after receiving a tip or a request from a field agent. For example, in November 2014 the Center received a tip from a person who was selling firearms on an online firearms marketplace and was suspicious of a prospective buyer attempting to obtain a pistol without involving an FFL. The Center identified the prospective buyer and engaged in an undercover operation in which the individual agreed to provide the undercover agent with components designed to turn pistols and rifles into fully automatic firearms in exchange for a pistol and cash. The undercover agent and the buyer met in person and completed the transaction. ATF agents arrested the buyer at the scene, and he was later sentenced to 33 months in prison.\nATF officials said the agency frequently receives tips about nonlicensed sellers engaging in the business of firearms. For example, ATF investigated a nonlicensed seller who posted more than 280 firearms for sale on multiple online firearms marketplaces; purchased at least 54 firearms; and sold at least 51 firearms at a profit. The seller, who was also found to have made straw purchases for other buyers, was sentenced in August 2010 to 2 years in prison. For additional examples of ATF enforcement actions involving sales facilitated by the Internet, please see appendix II.\nAccording to ATF officials, the Center also performs investigative work on the Dark Web, which requires knowledge of the Internet and investigative techniques. For example, ATF analysts must understand virtual currency, such as Bitcoin values. They must also know what sellers are charging for their products, because prices on the Dark Web “skyrocket” due to the criminal nature of the merchandise. In addition, the analysts learn common terms associated with firearm culture, in order to communicate with users engaged in criminal activity.\nATF officials with the Center also noted that investigations might involve both the Surface Web and the Dark Web. For example, to identify an anonymous user on the Dark Web, the Center works to establish the user’s “digital footprint” on the Surface Web. In some cases, users might conduct illegal activity on the Dark Web but might then go to the Surface Web, such as a social-networking website with chat forums on a wide variety of topics, and discuss their illegal activity. From there, analysts can link the user to other social-media accounts, where the user may post a photo showing a street sign or other characteristics to help investigators narrow the user’s location. The ATF officials with the Center noted that posts on some websites contain meta-data, which includes geo-coding that helps the analysts identify where posts originated.\nATF issued the Firearms and Internet Transactions Intelligence Assessment Report in April 2016 to provide information and analysis in the area of online firearm sales, including both legal and illegal transactions. The report highlighted several key findings about how firearm transactions are facilitated by the Internet. Specifically, the ATF analysis of the online marketplaces for firearms demonstrated the ease with which individuals can choose to circumvent the generally applicable law in this arena. Within the report, ATF detailed a market analysis of firearms transactions, including Surface Web and Dark Web marketplaces. Firearms transactions that occur on the Dark Web are more likely to be conducted in person or via the mail or common carrier, versus through an FFL. Additionally, the report noted that it appears that the price of a firearm increases as the transaction becomes more covert or when parties attempt to subvert laws and regulations. According to ATF staff, they plan to update the report when there is a significant shift in Internet gun trafficking. The ATF officials with the Center said they have not determined the frequency with which updated reports will be issued but they do not plan to update it annually.", "To enforce the NFA, GCA, and related firearms regulations, ATF carries out a variety of regulatory activities. For example, ATF monitors the firearms industry from manufacture and importation through retail sale. Specifically, ATF Industry Operations Investigators determine whether FFL applicants are qualified to engage in firearms commerce through routine inspections and regulatory oversight. Industry Operations Investigators also routinely inspect FFLs to ensure continued compliance with statutes and regulations. ATF officials stated that investigators conduct compliance inspections of FFLs—who must renew their licenses every 3 years. ATF conducts these inspections at least once during the 3- year licensing period. Additionally, ATF officials stated that as part of each inspection, officers will review all sales transactions an FFL has made in the last 12 months and analyze the data for aberrant patterns. Based on a review of DOJ Office of Inspector General documentation and our own observations during an FFL inspection, we determined that, during these inspections, ATF performs an inventory of the FFL’s firearms and checks it against the FFL’s inventory to ensure that firearm transactions reconcile with the firearm inventory; reviews the FFL’s records of background checks for purchases processed through NICS; checks the prior year’s Firearms Transaction Record forms, which document acquisition and disposition information that ATF uses to trace firearms involved in crimes; and reviews sales records to ensure that the FFL has recorded appropriate tax information.\nWhile ATF investigators routinely monitor firearms transactions of FFLs, the agency does not monitor private firearms transactions among nonlicensed individuals. As noted above, private sales among nonlicensed individuals who are residents of the same state are not subject to record-keeping or background-check requirements, so ATF does not have a means by which to monitor these sales as they take place.", "One aspect of the enforcement work undertaken by ATF agents is to investigate reports of individuals engaging in the business of dealing in firearms without a license. According to agency officials with the ATF Violent Crime Intelligence Unit, as part of these investigations, agents gather information about a suspect’s firearm transactions. On the basis of the activity detected, agents will determine whether the extent of the sales history is significant enough to warrant further action.\nIn fiscal years 2014–2016, ATF made 322 arrests for engaging in the business of dealing in firearms without a license. These figures represent all arrests, as ATF does not identify or track whether transactions were facilitated by the Internet. During the same time, ATF also made 53 arrests for charges related to the unlawful interstate transfer of firearms, 204 arrests for charges related to the sale of firearms to a prohibited person, and 12,586 arrests for charges related to the possession of a firearm by a prohibited person. These arrests may include but are not limited to Internet-related investigations. According to documentation provided by ATF, 89 percent of the defendants in these arrests received a conviction. See table 1.", "Our agents successfully purchased two firearms from sellers we located on a Dark Web marketplace as a result of seven total attempts. ATF officials stated that the Dark Web is completely anonymous and is designed to facilitate criminal activity online. Further, an ATF report states that most used firearms are sold via the online auctions, online marketplaces, and on the Dark Web as compared to the Surface Web. In the seven attempts, our agents did not disclose any information indicating they were prohibited from possessing a firearm. In the five attempts where we did not ultimately purchase a firearm, the prospective seller stopped responding to our inquiries, stated the firearm was no longer for sale, refused to use an escrow account for payment, or experienced technical problems using the Dark Web marketplace. The first weapon that we purchased was an AR-15 rifle, which is a semiautomatic firearm. The serial number on the firearm was obliterated. The Dark Web seller shipped the dismantled weapon directly to the undercover address provided by our agent. It is unlawful for any person to possess or ship in interstate commerce a firearm which has had the importer’s or manufacturer’s serial number removed, obliterated, or altered, if the individual had such knowledge about the serial number. Additionally, because the firearm was shipped across state lines, the seller may not have been a resident of the same state as our agent. We did not confirm whether the seller notified the shipping company that the package contained a firearm. Any of these circumstances—removing a serial number, selling to a resident of a different state, or failing to properly notify the shipping company that the shipment contained a firearm—if proven, would likely violate federal law. A photo of the weapon can be seen in figure 3.\nThe second weapon we purchased was an Uzi, which is an Israeli-made semiautomatic firearm, and was advertised as a fully automatic firearm. See photo in figure 4.\nIf the firearm meets the NFA’s definition of a machine gun, the seller’s prior possession of the Uzi, and the shipment to our agent, likely violated federal law. Generally, only machine guns that were lawfully possessed prior to May 19, 1986, may continue to be possessed and transferred, with ATF approval, if they are registered in accordance with the NFA.\nWe are referring information regarding our two Dark Web purchases to applicable law-enforcement agencies to inform any ongoing investigations for any further action they deem appropriate.", "Our covert testing involving GAO agents attempting to purchase firearms illegally on the Surface Web were unsuccessful. Specifically, private sellers on Surface Web gun forums and in classified ads were unwilling to sell a firearm to our agents that self-identified as being prohibited from possessing a firearm. In our 72 attempts to purchase firearms from private sellers on the Surface Web, 56 sellers refused to complete a transaction once we revealed that either the shipping address was across state lines or that we were prohibited by law from owning firearms. The scenarios we applied to the purchases were derived from provisions in the GCA. The five scenarios disclosed status information that would disqualify our agents from purchasing a firearm. For example, in one scenario we stated that we were a convicted felon; in another scenario, we informed the seller that we had a dishonorable discharge from the military. In these 56 attempts, 29 sellers refused because they would not ship a firearm and 27 refused after we presented the scenario. Furthermore, in five of these attempts, the accounts we set up on several forums were frozen by the websites, which prevented us from using them after we disclosed our prohibited status or requested interstate shipment and attempted to make a purchase.\nIn the 11 remaining attempts, we encountered private sellers that appeared to have scammed us, or attempted to scam us, after we disclosed our prohibited status or asked to avoid using an FFL. In two of these instances, we made a payment and never received the firearm or a refund. In the remaining nine attempted scams, our agents determined that the seller may not be legitimate and therefore did not complete the purchase. For example, in one attempt, the agent conducted investigative research on the seller and found evidence suggesting that the seller may be involved in online fraud. As a result, the agent did not follow through with the purchase attempt. ATF does not have jurisdiction over fraud cases so, when it encounters such circumstances, the agency may refer the case to the Joint Support and Operations Center or to local or state law-enforcement agencies or may encourage the victim to file a police report. The results of our attempts on the Surface Web are summarized in figure 5.", "We provided a draft of this report to ATF and DOJ on October 31, 2017, for review and comment. ATF provided technical comments, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Deputy Director of ATF and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Seto Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov, or Wayne McElrath at (202) 512-2905 or mcelrathw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "", "For our covert attempts to buy firearms on the Internet, we performed tests on both the Dark Web and the Surface Web to compare and contrast how transactions are completed. For the tests, our agents employed undercover identities and accessed online marketplaces where firearms were advertised for sale. In both Dark Web and Surface Web testing, the agents contacted sellers that posted ads online, and attempted to complete firearm purchases. For our testing, we did not proactively attempt to purchase firearms from Federal Firearm Licensees (FFL), focusing our efforts on private sellers. We counted an attempt as successful if we received a firearm. We counted an attempt as a failure if we contacted the seller and expressed interest in purchasing the advertised firearm and the seller refused to complete the purchase, or if the seller failed to respond after initial contact was made. In some instances on the Surface Web, after we contacted a seller and described our prohibited status, we were “banned,” or prohibited from accessing the gun forum or classified ad website. Additionally, in two instances, our agents were apparently “scammed” in that we remitted payment for a firearm we did not receive, or our agents otherwise identified indicators that the firearm would not be shipped. The results of our testing are for illustrative purposes only and are not generalizable.\nPrior to beginning our testing, to understand how prohibited individuals may use the Internet to purchase firearms or firearm components, we reviewed Department of Justice (DOJ) and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) published reports, including adjudicated criminal cases. We also met with third-party groups with knowledge of the firearms industry, including state law-enforcement agencies, a purveyor of commercial website that host online firearm classified advertisements, a gun-control advocacy group, a firearm-industry organization, and an academic research center, to learn about online firearm marketplaces, criminal pathways to illegally purchase or sell firearms, and enforcement responses.\nAdditionally, we reviewed reports by a gun-control advocacy group to understand how prior similar work in this area was performed. We learned through our review and our subsequent interviews with individuals who performed this work that no federal laws were broken when this testing was conducted. Accordingly, to demonstrate how the Internet may facilitate illegal firearm transactions, we decided our agents would complete the firearm purchases.", "Agents also accessed firearm advertisements on a Dark Web marketplace and attempted to purchase firearms or firearm components from nonlicensed private sellers. Agents focused on one Dark Web marketplace for this stage of testing. Our agents performed a preliminary test to assess the feasibility of purchasing a firearm on the Dark Web. This attempt was successful, so our agents proceeded with additional planned attempts to purchase additional firearms on the Dark Web. Testing ended once a firearm was successfully purchased and received by our agents, with a total of seven attempts completed. For these covert tests, we did not disclose any information about our presumed prohibited status. We also focused our efforts on purchasing a firearm that appeared to be restricted by the National Firearms Act of 1934 (NFA).", "To perform Surface Web testing, our agents accessed public gun forums and other classified ads where private nonlicensed sellers listed firearms for sale. These forums and classified ads were identified from our meetings with ATF and third-party entities, and a review of available documentation. We considered the following factors when selecting online classified websites: hosted nationwide or regional ads, quantity of ads, variety of firearms available, and accessibility of website.\nRecently posted ads on these sites were selected if they fell within a designated price range, and were for transactions between private nonlicensed individuals.\nThe purpose of our Surface Web purchase attempts was to determine whether private sellers would knowingly sell a firearm to an individual prohibited from possessing one, as outlined by the Gun Control Act of 1968 (GCA). Our agents used one of five scenarios based on a provision of the GCA when attempting to purchase a firearm. The scenarios involved overtly explaining why our agent was prohibited from possessing a firearm. The scenarios based on the GCA covered the following: a felon avoiding a background check, an individual with a domestic-violence background or a restraining order against him or her, an individual who unlawfully uses controlled substances (or is an an individual who was dishonorably discharged from the military, and an individual who has renounced his or her citizenship or is otherwise an unlawful alien.\nBefore we began testing, we determined that we would run each scenario iteratively until we successfully completed a purchase, we exhausted the number of applicable ads, or we capped out our predetermined cap of 15 purchase attempts, with a total of 75 attempts to be made in total. However, due to investigative decisions, we only employed 72 attempts.\nWe conducted this performance audit from July 2015 to November 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We conducted our related investigative work in accordance with the standards prescribed by the Council of the Inspectors General on Integrity and Efficiency.", "As noted above, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) does not track statistics on firearm enforcement actions that involve illegal transactions facilitated by the Internet. However, ATF officials provided several examples of closed, adjudicated cases where the agency took enforcement action against individuals who were using the Internet to facilitate illegal transactions. The following summaries provide examples of the type of investigative and enforcement work ATF agents perform:\nOne individual was indicted in February 2015 for being a felon in possession of firearms and for possessing a machine gun. In November 2014, ATF’s Internet Investigation Center (the Center) received a tip from the ATF Tip Line; a legitimate seller was suspicious of a buyer who was attempting to obtain a firearm without involving a Federal Firearm Licensee (FFL) and suggested the seller could obliterate the serial numbers. The Center identified the prospective buyer as a convicted felon. The individual agreed to provide the undercover agent with a Glock auto sear—which, when attached to a firearm makes it a fully automatic weapon—and firearm components that could be used to transform an M-16 style rifle into a machine gun. In exchange, the undercover agent would provide the individual with a Glock pistol and $300 cash. The individual and an undercover agent completed the transaction and the individual was immediately arrested. The individual’s criminal history included a recent prior felony gun-possession conviction. The individual pleaded guilty to being a felon in possession of a firearm and to the illegal transfer or possession of a machine gun, and was sentenced to 33 months imprisonment and 36 months of supervised release.\nIn 2009, one individual was indicted on six counts of federal criminal violations, including one count for engaging in the business of firearms without a license. According to the indictment, from approximately January 1, 2005, to May 8, 2008, while serving as an FBI agent, the individual purchased multiple firearms from various sources including private sellers, local stores, and sellers he dealt with over the Internet. He posted at least 280 firearms for sale on a legitimate firearm website, some of which were multiple listings of the same item in the event that interested bidders did not meet his target price. During this period, he purchased at least 54 firearms and sold at least 51 firearms. He profited from all the sales, collecting more than $118,000 in gross receipts. The individual was also indicted on four counts of causing a firearms dealer to maintain false records, which related to his purchasing firearms for third parties (straw purchases). In addition, the individual was indicted on one count of providing ATF with a false document listing the firearms he bought and sold; agents recovered a more-extensive and more-descriptive list. The individual was found guilty on all counts in April 2010, and was sentenced in August 2010 to 2 years in federal prison.\nAccording to an affidavit from an ATF Special Agent, an individual offered silencers, pistols, and rifles for sale on the Dark Web, as well as nationwide shipping. The ATF Center “proactively targeted” the individual’s vendor name “through various methods of analysis,” identified numerous Internet forum and social-media profiles associated with the individual, and ultimately discovered his true identity. The Center referred “an investigative lead” and the corresponding evidence and analysis to the respective ATF Field Division. According to the affidavit, the Special Agent conducted a controlled purchase through one of the Dark Web marketplaces, reviewed U.S. Postal Service security video and observed the individual mail the firearm, and executed arrest and search warrants. The individual pled guilty to one count of causing a firearm silencer to be delivered by the U.S. Postal Service without proper notification, and was sentenced to 6 months in federal prison and 3 years of supervised release.\nIn October 2013, an individual was indicted for illegal exportation, shipment, and delivery of firearms and firearm components that were sold on a Dark Web site. The man shipped a handgun concealed in a video game system to a buyer in Sydney, Australia. Australian Federal Police intercepted the package and alerted ATF, which began an investigation. During the investigation, the individual shipped a 9 mm pistol with an obliterated serial number to the United Kingdom, various assault-rifle parts to Australia, and a .22-caliber pistol with an obliterated serial number and a weapon magazine to Sweden. Each firearm was disassembled and concealed in a broken electronic device. The individual pleaded guilty and was sentenced to 2 years imprisonment and 2 years of supervised release.\nIn February 2015, an individual was indicted for dealing in firearms without a license and selling firearms to residents of other states. The individual sold firearms via two Dark Web sites and shipped them to buyers in the United States and internationally. In an attempt to hide his identity, the man placed false return-address labels on the packages, used aliases to send the packages, and packed the firearms so that they appeared to be computer hard drives. The individuals agreed to sell handguns to undercover ATF agents posing as gun buyers and then shipped the guns from Alabama to Nebraska and New Jersey. The individual was found guilty and sentenced in November 2015 to 51 months in prison and 36 months supervised release.", "", "", "In addition to the contact named above, Dave Bruno (Assistant Director), Dean Campbell, Julia DiPonio, Robert Graves, and Kristen Timko made key contributions to this report. Other contributors include Marcus Corbin, Colin Fallon, Maria McMullen, James Murphy, Anna Maria Ortiz, Julie Spetz, and Helina Wong." ], "depth": [ 1, 2, 3, 3, 2, 2, 1, 2, 2, 2, 2, 1, 2, 1, 1, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "", "h0_title", "", "h0_full", "", "", "h2_title h1_full", "h2_full h1_full", "", "h0_title h1_title", "", "h1_full", "h0_full", "h0_full", "", "", "" ] }	{ "question": [ "What is ATF responsible for?", "How does the Internet facilitate its firearm sales?", "How are the Surface Web and the Dark Web accessed differently?", "How does ATF investigate individuals who use the Internet to facilitate illegal firearms transactions?", "What did ATF officials with the Center also note?", "What attempts did GAO agents make to purchase firearms?", "What were the outcomes of these attempts?", "What specifically did they purchase?", "What did GAO do afterwards?", "What did tests performed on the Surface Web show?", "How did the attempts agents made to purchase firearms go?", "How were GAO agents prevented from making the purchases?" ], "summary": [ "The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is responsible for investigating criminal and regulatory violations of firearms statutes and regulations that govern firearms transactions, including sales that are facilitated by the Internet.", "Two components of the Internet may be used to facilitate Internet firearm sales: the Surface Web and the Dark Web.", "The Surface Web is searchable with standard web search engines. The Dark Web contains content that has been intentionally concealed and requires specific computer software to gain access.", "ATF created the Internet Investigations Center (Center) to investigate buyers and sellers who use the Internet to facilitate illegal firearms transactions. The Center uses several tools to provide investigative support to ATF, which has resulted in the arrests of individuals using the Internet to facilitate illegal firearm purchases.", "ATF officials with the Center also noted that investigations might involve both the Surface Web and the Dark Web. For example, to identify an anonymous user on the Dark Web, the Center works to establish a user's “digital footprint” on the Surface Web.", "GAO agents attempted to purchase firearms from Dark Web and Surface Web marketplaces. Agents made seven attempts to purchase firearms on the Dark Web.", "In these attempts, agents did not disclose any information about whether they were prohibited from possessing a firearm. Of these seven attempts, two on a Dark Web marketplace were successful.", "Specifically, GAO agents purchased and received an AR-15 rifle and an Uzi that the seller said was modified so that it would fire automatically.", "GAO provided referral letters to applicable law-enforcement agencies for these purchases to inform any ongoing investigations.", "Tests performed on the Surface Web demonstrated that private sellers GAO contacted on gun forums and other classified ads were unwilling to sell a firearm to an individual who appeared to be prohibited from possessing a firearm.", "Of the 72 attempts agents made to purchase firearms on the Surface Web, 56 sellers refused to complete a transaction: 29 sellers stated they would not ship a firearm and 27 refused after the disclosure of the undercover identities' stated prohibited status.", "Furthermore, in 5 of these 72 attempts, the accounts GAO set up were frozen by the websites, which prevented the agents from using the forums and attempting to make a purchase." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, 0, 0, -1, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 8, 8, 8, 8, 9, 9, 9 ] }
GAO_GAO-14-382T	{ "title": [ "Background", "The Current Status and Cost of Space Systems Acquisitions", "Recent Actions DOD Believes Will Improve Space System Acquisition Processes, and Continuing Barriers to Program Oversight and Management", "DOD Continues to Take Actions it Believes Will Improve Acquisition Oversight", "DOD Continues to Face Barriers to Program Oversight and Management", "DOD Is Considering and Adopting Significant Changes to Space Systems Acquisitions", "Potential Changes to Acquiring New DOD Space Systems", "Recent and Upcoming Changes to the Evolved Expendable Launch Vehicle Program", "Contacts and Acknowledgements", "Related GAO Products" ], "paragraphs": [ "Over the last decade, DOD has been managing many challenging space systems acquisitions. A long-standing problem for the department is that program costs have tended to increase significantly from original cost estimates. In recent years, DOD has overcome many of the problems that had been hampering program development, and has begun to launch many of these satellites. However, the large cost growth of these systems continues to affect the department. Figure 1 compares the original cost estimates with current cost estimates for some of the department’s major space acquisition programs.\nThe gap between the estimates in figure 1 represents money that the department was not planning to spend on these programs, and did not have available to invest in other efforts. The gap in estimates is fairly stable between fiscal years 2014-2018, a result of the fact that most programs are mature and in a steady production phase. This figure does not include programs that are still in the early stages of planning and development.\nIn past reports, we have identified a number of causes of acquisition problems. For example, in past years, DOD has tended to start more weapon programs than is affordable, creating a competition for funding that focuses on advocacy at the expense of realism and sound management. DOD has also tended to start its space programs before it has the assurance that the capabilities it is pursuing can be achieved within available resources and time constraints. There is no way to accurately estimate how long it would take to design, develop, and build a satellite system when key technologies planned for that system are still in relatively early stages of discovery and invention. Finally, programs have historically attempted to satisfy all requirements in a single step, regardless of the design challenges or the maturity of the technologies necessary to achieve the full capability. DOD’s preference to make larger, complex satellites that perform a multitude of missions has stretched technology challenges beyond current capabilities in some cases.\nOur work has recommended numerous actions that can be taken to address the problems we identified. Generally, we have recommended that DOD separate technology discovery from acquisition, follow an incremental path toward meeting user needs, match resources and requirements at program start, and use quantifiable data and demonstrable knowledge to make decisions to move to next phases. We have also identified practices related to cost estimating, program manager tenure, quality assurance, technology transition, and an array of other aspects of acquisition program management that could benefit space programs. DOD has generally concurred with our recommendations, and has undertaken a number of actions to establish a better foundation for acquisition success. For example, we reported in the past that, among other actions, DOD created a new office within the Undersecretary of Defense for Acquisition, Technology and Logistics to focus attention on oversight for space programs and it eliminated offices considered to perform duplicative oversight functions. We have also reported in the past that the Air Force took actions to strengthen cost estimating and to reinstitute stricter standards for quality.", "Most of DOD’s major satellite programs are in mature phases of acquisition, and some of the significant problems of past years, such as cost and schedule growth, are not currently as prevalent. Table 1 describes the status of the space programs we have been tracking in detail.\nWhile many programs have overcome past problems, some of the major space programs have encountered significant challenges in the last year and some delays in development and production. For example:\nThe Air Force’s Space Fence program office is developing a large ground-based radar that is expected to improve on the performance of and replace the Air Force Space Surveillance System, which became operational in 1961 and was recently shut down. The Space Fence radar will emit radio frequencies upward to space, from ground-based radar sites, to detect and track more and smaller Earth-orbiting objects than is currently possible, and provide valuable space situational awareness data to military and civilian users. The Air Force had originally planned to award a contract for Space Fence systems development in July 2012, but due to internal program reviews and budget re-prioritizations, this date has been delayed to May 2014. In addition, the number of radar sites planned has been reduced from two to one, though DOD plans to have an option under the system development contract to build a second site if needed.\nIn April 2013, DOD proposed canceling the Missile Defense Agency’s Precision Tracking Space System (PTSS) because of concerns with the program’s high-risk acquisition strategy and long-term affordability. PTSS was intended to be a satellite system equipped with infrared sensors that would track ballistic missiles through their emitted heat. The planned satellite system would consist of a constellation of nine satellites in orbit around the earth’s equator. We reported in July 2013 that the decision to propose canceling the PTSS program was based on an evaluation of the acquisition, technical, and operational risks of the PTSS program. Specifically, DOD’s evaluation assessed the PTSS cost, schedule, technical design, and acquisition strategy to identify whether risks could challenge the program’s ability to acquire, field, and sustain the system within planned cost and schedule constraints. The evaluation also determined that the PTSS program had significant technical, programmatic, and affordability risks. The program officially ceased operations in October 2013.\nThe Air Force has nearly completed its analysis of alternatives to determine the direction for space based environmental monitoring, which will be a follow-on program for the Defense Meteorological Satellite Program (DMSP). Through this analysis, the Air Force analyzed various options that included, but were not limited to, a traditional procurement of a weather satellite similar to the existing DMSP satellites, or a disaggregated approach using small satellites and hosted payload opportunities. According to the Air Force, the study was completed in the fall of 2013 and is awaiting final approval.\nThe MUOS program plans to launch a third satellite in January 2015, which represents a delay of 6 months due to a production issue on the third satellite. Specifically, the third satellite failed system- and subsequent unit-level testing after rework last year and the program determined the root cause to be a manufacturing deficiency on a component critical for the operation of the satellite’s ultra-high- frequency legacy communications payload. The program is replacing the component. According to the MUOS program office, the program is on track to meet the launch schedule of subsequent satellites, which is important because most of the communications satellites that MUOS is replacing are past their design lives. Synchronizing deliveries of MUOS satellites with compatible Army Handheld, Manpack, Small Form Fit (HMS) terminals remains a challenge. Currently over 90 percent of the first satellite’s on-orbit capabilities are being underutilized because of terminal program delays. Consequently, military forces are relying on legacy communication terminals and are not able to take advantage of the superior capabilities offered by the MUOS satellites. Operational testing and initial fielding of MUOS-capable HMS terminals is planned for fiscal year 2014, with a production decision expected in September 2015.", "We have reported in the past that DOD and Congress are taking steps to reform and improve the defense acquisition system, and in the past year additional actions have been taken towards these goals.", "In November 2013, DOD published an update to its instruction 5000.02, which provides acquisition guidance for DOD programs. With this update, DOD hoped to create an acquisition policy environment that will achieve greater efficiency and productivity in defense spending. Air Force officials noted that, for satellite programs, there are two major changes that they believe will improve the acquisition process. First, the instruction was changed to formally allow satellite programs to combine two major program milestones, B and C, which mark the beginning of the development and production phases, respectively.Force, satellite programs have typically seen a great deal of overlap in the development and production phases, mainly because they are buying small quantities of items. They are often not able to produce a prototype to be fully tested because of the high costs of each article, so the first satellite in a production is often used both for testing and operations. Air Force officials believe that this change to the acquisition guidance will allow for streamlining of satellite development and production processes, and provide more efficient oversight without sacrificing program requirements. GAO has not assessed the potential effects of this change. In the past, we have reported that committing a program to production According to the Air without a substantive development phase may increase program cost and schedule risks, and we plan to look at the impacts of this change as it begins to be implemented.\nA second change made this year, according to Air Force officials, is the requirement that DOD programs, including space programs, undergo independent development testing. While development testing for DOD programs is not new to this policy revision, now the testing organization will be an independent organization outside the program office. For space programs, this organization will be under the Program Executive Officer for Space, and will report their findings directly to that office, providing what the Air Force believes will be an independent voice on a program’s development status. The Air Force is confident that these changes will provide benefits to program oversight, although because these are recent changes, we have not yet assessed their potential for process improvements.\nIn addition, DOD is adopting new practices to reduce fragmentation of its satellite ground control systems, which adds oversight to a major development decision. Last year we reported that DOD’s satellite ground control systems were potentially fragmented, and that standalone systems were being developed for new satellite programs without a formal analysis of whether or not the satellite control needs could be met with existing systems. In the National Defense Authorization Act for Fiscal Year 2014, Congress placed more oversight onto this process by requiring a cost-benefit analysis for all new or follow-on satellite systems using a dedicated ground control system instead of a shared ground This new requirement should improve oversight into control system.these systems’ development, and may reduce some unnecessary duplication of satellite control systems. According to Air Force officials, the first program to go through this process was the Enhanced Polar System, and all future satellite programs will include this cost-benefit analysis in their ground system planning. In addition, the Act directed DOD to develop a DOD-wide long-term plan for satellite ground control systems.\nAdditionally, the Defense Space Council continues with its architecture reviews in key space mission areas. According to Air Force officials, the Council is the principal DOD forum for discussing space issues, and brings together senior-level leaders to discuss these issues. These architecture reviews are to inform DOD’s programming, budgeting, and prioritization for the space mission area. The Council has five reviews underway or completed in areas such as overhead persistent infrared, satellite communications, space situational awareness, and national security space launches. They are also initiating a study of how DOD can assess the resilience of its space systems. DOD also recently held a forum on resiliency that included participation from senior leaders from several groups within DOD and the Intelligence Community to create a work plan towards resolution of critical gaps in resiliency.\nMany of the reforms that are being initiated may not be fully proven for some years, because they apply mainly to programs in early acquisition stages, and most DOD space systems are currently either in the production phase or late in the development phase. We have not assessed the impact of actions taken this year, but we have observed that the totality of improvements made in recent years has contributed to better foundations for program execution.", "While DOD has taken steps to address acquisition problems of the past, significant issues above the program level will still present challenges to even the best run programs. One key oversight issue is fragmented leadership of the space community. We have reported in the past that fragmented leadership and lack of a single authority in overseeing the acquisition of space programs have created challenges for optimally Past studies acquiring, developing, and deploying new space systems.and reviews have found that responsibilities for acquiring space systems are diffused across various DOD organizations, even though many of the larger programs, such as the Global Positioning System and those to acquire imagery and environmental satellites, are integral to the execution of multiple agencies’ missions. This fragmentation is problematic because the lack of coordination has led to delays in fielding systems, and also because no one person or organization is held accountable for balancing governmentwide needs against wants, resolving conflicts and ensuring coordination among the many organizations involved with space systems acquisitions, and ensuring that resources are directed where they are most needed. Though changes to organizations and the creation of the Defense Space Council have helped to improve oversight, our work continues to find that DOD would benefit from increased coordination and a single authority overseeing these programs.\nA program management challenge that GAO has identified, which stems from a lack of oversight, is that DOD has not optimally aligned the development of its satellites with associated components, including ground control system and user terminal acquisitions. Satellites require ground control systems to receive and process information from the satellites, and user terminals to deliver that satellite’s information to users. All three elements are important for utilizing space-based data, but development of satellites often outpaces the ground control systems and the user terminals. Delays in these ground control systems and user terminals lead to underutilized on-orbit satellite resources, and thus delays in getting the new capabilities to the warfighters or other end- users. In addition, there are limits to satellites’ operational life spans once launched. When satellites are launched before their associated ground and user segments are ready, they use up time in their operational lives without their capabilities being utilized. Synchronization of space system components will be an important issue for DOD in considering disaggregating space architectures, as the potential for larger numbers and novel configurations of satellites and ground systems will likely require the components to be synchronized to allow them to work together in the most effective way possible. As mentioned earlier, DOD is taking steps in response to improvements mandated by the Congress. But it will likely be difficult to better synchronize delivery of satellite components without more focused leadership at a level above the acquisitions’ program offices. For example, budget authority for user terminals, ground systems, and satellites is spread throughout the military services, and no one is in charge of synchronizing all of the system components, making it difficult to optimally line up programs’ deliveries.", "Fiscal pressures, past development problems, and concerns about the resiliency of satellites have spurred DOD to consider significant changes in the way it acquires and launches national security satellites.", "Significant fiscal constraints, coupled with growing threats to DOD space systems—including adversary attacks such as anti-satellite weapons and communications jamming, and environmental hazards such as orbital debris—have called into question whether the complex and expensive satellites DOD is fielding and operating are affordable and will meet future needs. For example, a single launch failure, on-orbit anomaly, or adversary attack on a large multi-mission satellite could result in the loss of billions of dollars of investment and a significant loss of capability. Additionally, some satellites, which have taken more than a decade to develop, contain technologies that are already considered obsolete by the time they are launched.\nTo address these challenges, DOD is considering alternative approaches to provide space-based capabilities, particularly for missile warning, protected satellite communications, and environmental monitoring. According to DOD, the primary considerations for studying these approaches and making decisions on the best way forward relate to finding the right balance of affordability, resiliency, and capability. These decisions, to be made over the next 2 to 3 years, have the potential for making sweeping changes to DOD’s space architectures of the future. For example, DOD could decide to build more disaggregated architectures, including dispersing sensors onto separate platforms; using multiple domains, including space, air, and ground, to provide full mission capabilities; hosting payloads on other government or commercial spacecraft; or some combination of these.\nOur past work has indicated that some of the approaches being considered have the potential to reduce acquisition cost and time on a single program. For instance, we have found that DOD’s initial preference to make fewer large and complex satellites that perform a multitude of missions has stretched technology challenges beyond existing capabilities, and in some cases vastly increased the complexities of related software. In addition, developing extensive new designs and custom-made spacecraft and payloads to meet the needs of multiple users limits DOD’s ability to provide capabilities sooner and contributes to higher costs. Last year, we reported that one potential new approach, hosted payload arrangements in which government instruments are placed on commercial satellites, may provide opportunities for government agencies to save money, especially in terms of launch and operation costs, and gain access to space.\nAs new approaches, such as disaggregation, are considered, the existing management environment could pose barriers to success, including fragmented leadership for space programs, the culture of the DOD space community, fragmentation in satellite control stations, and disconnects between the delivery of satellites and their corresponding user terminals. For instance, disaggregation may well require substantial changes to acquisition processes and requirements setting. But without a central authority to implement these changes, there is likely to be resistance to adopting new ways of doing business, particularly since responsibilities for space acquisitions stretch across the military services and other government agencies. Moreover, under a disaggregated approach, DOD may need to effectively network and integrate a larger collection of satellites—some of which may even belong to commercial providers. We have reported that ground systems generally only receive and process data from the satellites for which they were developed. They generally do not control and operate more than one type of satellite or share their data with other ground systems. To date, however, DOD has had difficulty adopting modern practices and technologies for controlling satellites as well as difficulty in coordinating the delivery of satellites with the user terminals that must be installed on thousands of ships, planes, and ground-based assets. These are conditions that are difficult to change without strong leadership to break down organizational stove-pipes and to introduce technologies or techniques that could enable DOD to better integrate and fuse data from a wider, potentially more disparate, collection of satellites.\nIn light of suggestions that disaggregation could potentially reduce cost and increase survivability, the Senate Committee on Armed Services mandated that we assess the potential benefits and limitations of disaggregating key military space systems, including potential impacts on total costs. To date, we have found that the potential effects of disaggregation are conceptual and not yet quantified. DOD has taken initial steps to assess alternative approaches, but it does not yet have the knowledge it needs to quantify benefits and limitations and determine a course of action. DOD officials we spoke with acknowledge the department has not yet established sufficient knowledge on which to base a decision. While DOD has conducted some studies that assessed alternative approaches to the current programs of record, some within the department do not consider these studies to be conclusive because they were either not conducted with sufficient analytical rigor or did not consider the capabilities, risks, and trades in a holistic manner. For example, according to the Office of the Secretary of Defense’s Office of Cost Assessment and Program Evaluation, a recent Air Force study that assessed future satellite communications architectures contained insufficient data to support the conclusion that one architectural approach was more resilient than others, and the cost estimates it contained did not consider important factors, such as ground control and terminal costs, in calculating the implications of changing architectures.\nTo build consensus in the department, and to conduct a more rigorous analysis of options, DOD is currently in the process of conducting additional studies that will consider future architectures. Included in these studies are Analyses of Alternatives for future missile warning, protected satellite communications, and space based environmental monitoring capabilities.considering are approaches that keep the current system, evolve the current system, and disaggregate the current system into more numerous, but smaller and less complex, satellites. DOD has nearly finished the space-based environmental monitoring study and expects to finish the other two in either this fiscal year or next.\nAmong the range of alternatives these analyses are Moreover, as DOD continues to build knowledge about different acquisition approaches, it will be essential to develop an understanding of key factors for decisions on future approaches that could impact the costs, schedules, and performance of providing mission capabilities. Some considerations for moving to a new or evolved architecture may include the following:\nCommon definitions of key terms, such as resiliency and disaggregation, across all stakeholders, and a common measurement of these terms in order to compare architectural alternatives.\nThe true costs of moving to a new architecture, including transition costs for funding overlapping operations and compatibility between new and legacy systems and non-recurring engineering costs for new- start programs, among others.\nPotential technical and logistical challenges. For example, with hosted payloads, our past work has found that ensuring compatibility between sensors and host satellites may be difficult because of variable interfaces on different companies’ satellites. In addition, scheduling and funding hosted payload arrangements may be difficult because the timeline for developing sensors may be much longer than that of commercial satellites.\nImpacts to supporting capabilities, such as ground control and operations and launch availability, and long-standing challenges we have identified regarding how these have been managed.\nReadiness of the acquisition workforce and industrial base to support a new architecture.\nGiven that DOD is in the early stages of assessing alternatives, our ongoing work is continuing to identify potential benefits and limitations of disaggregation and examine the extent to which these issues are being factored into DOD’s ongoing studies. We look forward to reporting on the results of this analysis this summer.", "DOD has made some changes to the way it buys launch services from its sole-source provider, and plans to allow other companies to compete with that provider for launch services in the near future. DOD’s Evolved Expendable Launch Vehicle (EELV) program is the primary provider of launch vehicles for U.S. military and intelligence satellites. Since 2006, the United Launch Alliance (ULA) has been the sole-source launch provider for this program, with a record of 50 successful consecutive government missions. From 2006 through 2013, DOD had two types of contracts with ULA through which ULA provided launch services for national security space launches. DOD utilized this dual-contract structure to achieve flexibility in launch schedules and to avoid additional costs associated with frequent launch delays.\nIn the last few years, though the dual contract structure met DOD’s needs for unprecedented mission success and flexible launch capability, predicted costs continued to rise for launch services. In response to these cost predictions, DOD revised its acquisition strategy to allow for a “block buy” of launch vehicles, where DOD would commit to multiple years of launch purchases from ULA, with the goal of stabilizing production and decreasing prices. In addition, and partially in response to GAO recommendations, DOD gathered large amounts of information on ULA’s cost drivers to allow DOD to negotiate significantly lower prices under the contracting structure. In December 2013, DOD signed a contract modification with ULA to purchase 35 launch vehicle booster cores over a 5-year period, 2013-2017, and the associated capability to launch them. According to the Air Force, this contracting strategy saved $4.4 billion over the predicted program cost in the fiscal year 2012 budget. We recently reported on some of the changes included in this new contract from the prior contracts.\nIn addition to this change in the way DOD buys launch vehicles, DOD is also in the process of introducing a method for other launch services companies to compete with ULA for EELV launches. Since 2006, when ULA began as a joint venture between then-competitors Boeing and Lockheed Martin, the EELV program has been managed as a sole source procurement, because there were no other domestic launch companies that could meet the program’s requirements. With the recent development of new domestic launch vehicles that can meet at least some EELV mission requirements, DOD plans to make available for competition up to 14 launches in fiscal years 2015-2017. Any launch company that has been certified by DOD to launch national security space payloads will be able to compete with ULA to launch these missions. DOD is currently finalizing their plan for this competition, including what requirements will be placed on the contractors and how they will compare proposals from the contractors.\nBased on our discussions with DOD officials, they plan to use a best value approach for this competition, in which price is not the only consideration. DOD will likely consider several factors when comparing proposals for launch services for the 14 booster core competition between ULA and new entrants, including price, mission risk, and satellite vehicle integration risks. DOD could require competitive proposals to be structured in several ways. If DOD requires proposals to contain both fixed-price and cost reimbursement features for launch services and capability, respectively, similar to the way it currently contracts with ULA, there could be benefits to DOD and ULA, but potential burdens to new entrants. For example, DOD is familiar with this approach and has experience negotiating under these terms, and ULA is familiar with DOD’s requirements given ULA’s role as the EELV’s sole launch provider. But use of a cost type contract may negate efficient contractor business practices and cost savings due to government data requirements under this type of approach, and it may give ULA a price advantage because DOD already funds launch capability for ULA. Alternatively, if DOD implements a fixed-price commercial approach to launch proposals with fewer data reporting requirements, DOD could lose insight into contractor cost or pricing, but may receive lower prices from new entrants due to these fewer data reporting requirements. DOD could also require a combination of elements from each of these approaches, or develop new contract requirements for this competition. We examined some of the benefits and challenges of the first two approaches, either of which can DOD facilitate competitive launch contract awards, in a recent report.expects to issue a draft request for proposal for the first of the competitive missions, where the method for evaluating and comparing proposals will be explained, in the spring of 2014.\nThe planned competition for launch services may have helped DOD negotiate the lower prices it achieved in its December 2013 contract modification, and DOD could see further savings if a robust domestic launch market materializes. DOD noted in its 2014 President’s Budget submission for EELV that after the current contract with ULA has ended, it plans to have a full and open competition for national security space launches. Cost savings on launches, as long as they do not come with a reduction in mission successes, would greatly benefit DOD, and allow the department to put funding previously needed for launches into programs in the development phases to ensure they are adequately resourced.\nIn conclusion, DOD has made significant progress in solving past space systems acquisition problems, and is seeing systems begin to launch after years of development struggles. However, systemic problems remain that need to be addressed as DOD considers changes to the way it acquires new systems. This is particularly important if DOD decides to pursue new approaches that could require changes in longstanding processes, practices, and organizational structures. Even if DOD decides not to pursue new approaches, these problems must still be tackled. In addition, challenging budget situations will continue to require tradeoffs and prioritization decisions across programs, though limited funds may also provide the impetus for rethinking architectures. We look forward to working with Congress and DOD in identifying the most effective and efficient ways to sustain and develop space capabilities in this challenging environment.\nChairman Udall, Ranking Member Sessions, this completes my prepared statement. I would be happy to respond to any questions you and Members of the Subcommittee may have at this time.", "For further information about this statement, please contact Cristina Chaplain at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this statement and related work include Art Gallegos, Assistant Director; Pete Anderson; Virginia Chanley; Erin Cohen; Desiree Cunningham; Brenna Guarneros; Kristine Hassinger; Laura Hook; Rich Horiuchi; Jeff Sanders; and Roxanna Sun.", "Introducing Competition into National Security Space Launch Acquisitions. GAO-14-259T. (Washington, D.C.: March 5, 2014).\nThe Air Force’s Evolved Expendable Launch Vehicle Competitive Procurement. GAO-14-377R. (Washington, D.C.: March 4, 2014).\nGlobal Positioning System: A Comprehensive Assessment of Potential Options and Related Costs is Needed. GAO-13-729. (Washington, D.C.: September 9, 2013).\nSpace: Defense and Civilian Agencies Request Significant Funding for Launch-Related Activities. GAO-13-802R. (Washington, D.C.: September 9, 2013).\nMissile Defense: Precision Tracking Space System Evaluation of Alternatives, GAO-13-747T. (Washington, D.C.: July 25, 2013).\nSatellite Control: Long-Term Planning and Adoption of Commercial Practices Could Improve DOD’s Operations. GAO-13-315. (Washington, D.C.: April 18, 2013).\nSpace Acquisitions: DOD Is Overcoming Long-Standing Problems, but Faces Challenges to Ensuring Its Investments Are Optimized. GAO-13-508T. (Washington, D.C.: April 24, 2013). 2013 Annual Report: Actions Needed to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-13-279SP. (Washington, D.C.: April 9, 2013).\nDefense Acquisitions: Assessments of Selected Weapon Programs. GAO-13-294SP. (Washington, D.C.: March 28, 2013).\nLaunch Services New Entrant Certification Guide. GAO-13-317R. (Washington, D.C.: February 7, 2013).\nSpace Acquisitions: DOD Faces Challenges in Fully Realizing Benefits of Satellite Acquisition Improvements. GAO-12-563T. (Washington, D.C.: March 21, 2012).\nEvolved Expendable Launch Vehicle: DOD Is Addressing Knowledge Gaps in Its New Acquisition Strategy. GAO-12-822. (Washington, D.C.: July 26, 2012). 2012 Annual Report: Opportunities to Reduce Duplication, Overlap, and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. (Washington, D.C.: February 28, 2012).\nSpace Research: Content and Coordination of Space Science and Technology Strategy Need to Be More Robust. GAO-11-722. (Washington, D.C.: July 1, 2011).\nSpace and Missile Defense Acquisitions: Periodic Assessment Needed to Correct Parts Quality Problems in Major Programs. GAO-11-404. (Washington, D.C.: June 24, 2011).\nSpace Acquisitions: Development and Oversight Challenges in Delivering Improved Space Situational Awareness Capabilities. GAO-11-545. (Washington, D.C.: May 27, 2011).\nSpace Acquisitions: DOD Delivering New Generations of Satellites, but Space System Acquisition Challenges Remain. GAO-11-590T. (Washington, D.C.: May 11, 2011).\nEvolved Expendable Launch Vehicle: DOD Needs to Ensure New Acquisition Strategy Is Based on Sufficient Information. GAO-11-641. (Washington, D.C.: September 15, 2011).\nSpace Acquisitions: Challenges in Commercializing Technologies Developed under the Small Business Innovation Research Program. GAO-11-21. (Washington, D.C.: November 10, 2010).\nGlobal Positioning System: Challenges in Sustaining and Upgrading Capabilities Persist. GAO-10-636. (Washington, D.C.: September 15, 2010).\nBriefing on Commercial and Department of Defense Space System Requirements and Acquisition Practices. GAO-10-315R. (Washington, D.C.: January 14, 2010).\nDefense Acquisitions: Challenges in Aligning Space System Components. GAO-10-55. (Washington, D.C.: October 29, 2009).\nSpace Acquisitions: Uncertainties in the Evolved Expendable Launch Vehicle Program Pose Management and Oversight Challenges. GAO-08-1039. (Washington, D.C.: September 26, 2008).\nSpace Acquisitions: DOD Needs to Take More Action to Address Unrealistic Initial Cost Estimates of Space Systems. GAO-07-96. (Washington, D.C.: November 17, 2006).\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 1, 2, 2, 1, 2, 2, 1, 1 ], "alignment": [ "h3_full h1_full", "h0_full h3_full", "h2_title h1_full", "h1_full", "h2_full h1_full", "h3_full h2_title", "h3_full h2_full", "h2_full", "", "" ] }	{ "question": [ "What is the progress of most of DOD's major satellite acquisition programs?", "What happened, though, to a few of the major space programs?", "What are some examples of these setbacks??", "What steps have Congress and DOD taken to improve oversight and management of space systems acquisitions?", "How will the policy change provide an independent voice on programs' development?", "What are the significant oversight and management challenges facing DOD?", "Why is DOD unable to align the delivery of space system components?", "What has led DOD to consider efforts that could change the way it acquires and conducts space activities?", "What is DOD considering doing?", "What has GAO found about DOD?", "What are the other changes DOD has made in terms of launch services?", "What does DOD spend billions of dollars each year on?", "What beset DOD's space programs?", "What is the situation of these programs now?", "What actions have DOD taken to improve management and oversight of space program acquisitions?" ], "summary": [ "Most of the Department of Defense's (DOD) major satellite acquisition programs are in later stages of acquisition, with the initial satellites having been designed, produced, and launched into orbit while additional satellites of the same design are being produced.", "A few other major space programs, however, have recently experienced setbacks.", "For example: the Missile Defense Agency's Precision Tracking Space System, which was intended to be a satellite system to track ballistic missiles, has been cancelled due to technical, programmatic and affordability concerns; the Air Force's Space Fence program, which is developing a ground-based radar to track Earth-orbiting objects, continues to experience delays in entering development; and the first launch of the new Global Positioning System satellites has been delayed by 21 months.", "Congress and DOD continue to take steps they believe will improve oversight and management of space systems acquisitions. In the past year, for example, DOD has updated its major acquisition policy with the goal of improving efficiency and productivity in defense spending.", "Among other things, the policy change adds a requirement for independent development testing for DOD acquisition programs, which officials believe will provide an independent voice on programs' development.", "However, DOD still faces significant oversight and management challenges, including (1) leadership of a space community that is comprised of a wide variety of users and stakeholders with diverse interests and (2) alignment of the delivery of satellites with corresponding ground systems and user terminals. For instance, in some cases, gaps in delivery can add up to years, meaning that a satellite is launched but not effectively used for years until ground systems become available.", "One reason DOD has been unable to align the delivery of space system components is because budgeting authority for the components is spread across the military services.", "While most DOD major space system acquisitions have overcome development challenges and are currently being produced and launched, past problems involving large, complicated systems, coupled with the recent fiscal climate of reduced funds, has led DOD to consider efforts that could signal significant changes to the way it acquires and conducts space activities.", "DOD is considering moving away from its current approach in satellite development—building small numbers of large satellites over a decade or more that meet the needs of many missions and users—toward a more disaggregated architecture involving less complex, smaller, and more numerous satellites.", "GAO has found that DOD does not yet have sufficient information to make decisions on whether to disaggregate, but it is in the process of gathering that information.", "In addition, in response to predictions of dramatic increases to the price of launching its satellites, coupled with restrained budgets, DOD has made changes to the way it procures launch vehicles, and is moving forward with plans to allow competition for launch services—a significant shift from past ways of doing business. According to the Air Force, other recent steps in launch acquisitions, including gaining significant insight into launch services cost drivers, have enabled it to achieve significant savings.", "Each year, DOD spends billions of dollars to acquire space-based capabilities that support military and other government operations.", "The majority of DOD's space programs were beset by significant cost and schedule growth problems during their development.", "Most programs are now in production, however, and acquisition problems are not as widespread and significant as they were several years ago.", "In prior years, GAO has identified a number of actions DOD is taking to improve management and oversight of space program acquisitions. Facing constrained budgets and concerns about the resiliency of its satellites, DOD is considering potential changes to how it acquires space systems." ], "parent_pair_index": [ -1, 0, 1, -1, 0, -1, 2, -1, 0, -1, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0 ] }
GAO_GAO-14-577	{ "title": [ "Background", "Establishment of Joint Bases", "Implementation of Joint Basing", "Installation-Support Functions", "Joint Base Officials Have Reported Varying Levels of Progress in Consolidating Functions, but Cited Limited Opportunities and Challenges from Consolidation Efforts", "Joint Base Officials Reported Varying Levels of Progress in Consolidating Installation- Support Functions", "Joint Base Officials Reported Limited Opportunities to Consolidate Some Support Functions and Workforces", "Officials Reported Challenges in Consolidation Efforts That Resulted in Inefficiencies or Inequities", "Joint Basing Has Produced Some Benefits, but Officials Reported They Are Unable to Achieve Greater Efficiencies and Potential Cost Savings without Additional Direction", "Joint Bases Have Reported Some Progress and Benefits in Addressing Joint Basing Goals", "Reduced Redundant Funded Positions", "Reduced Redundant Contracts or Increased Contract Efficiencies", "Merged or Consolidated Redundant Procedures", "Additional Consolidation Benefits", "Lack of Direction Has Hindered Joint Base Progress in Achieving Goals", "Conclusions", "Matter for Congressional Consideration", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Survey on Consolidation of Joint Base Operations", "SECTION 1: Functional Area", "SECTION 2: Function Responsibility", "SECTION 3: Consolidation of Installation-Support Function", "Appendix III: BRAC Commission Recommendation on Joint Basing (Including Elements of DOD’s Recommendation to the Commission)", "Appendix IV: Status of Reported Consolidation at Each of the 11 Joint Bases", "Appendix V: Locations of Joint Bases", "Appendix VI: Comments from the Department of Defense", "Appendix VII: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "DOD consolidated 26 service-specific stand-alone installations into 12 joint bases to take advantage of opportunities for efficiencies.1 for a list of joint bases, their locations, and the identification of which military service is the supporting component that delivers installation support.\nFigure 1 is an interactive map that depicts the locations of the 11 joint bases and Joint Region Marianas. The map (see interactive instructions) also features individual maps of each of the joint bases and joint region. See appendix V for the printed version of each map.", "In January 2008, OSD issued guidance to implement the joint basing initiative. The guidance established a comprehensive framework to consolidate installation-support functions while meeting mission requirements. It also created a Joint Management Oversight Structure to establish the lines of authority for handling disputes and directed the transfer of installation-support authority and real property to the supporting component. Further, the guidance requires that the military services at each joint base enter into a memorandum of agreement to define the relationships between the components; to detail the transfer of real property and funding to the supporting component; and to require the establishment of the Joint Base Partnership Council, which is a group consisting of representation from the major supported component(s) and the tenants on the base. The council’s role includes helping at the joint base level to resolve any disputes that arise between the supporting and supported components. The agreements generally require the Joint Base Partnership Council to annually review any financial effects from the agreements, and to triennially review each agreement.\nOSD guidance requires that each joint base have a Joint Base Commander from the supporting component, and a Deputy Joint Base Commander who is generally from the supported component.\nThe Joint Base Commander has the authority and responsibility for effectively using available resources for planning, organizing, directing, coordinating, and controlling the delivery of installation support as detailed in each joint base’s memorandum of agreement.\nAdditionally, OSD guidance required that all civilian authorizations providing installation support from the supported component will become part of the supporting component, under the supporting components’ civilian personnel management system. Some joint bases incorporated military positions from the supported component into the joint base structure. These positions generally were identified in the agreements for each joint base and now perform installation-support duties for the Joint Base Commander.", "DOD’s 2008 guidance originally identified and defined 47 common installation-support functions to be aligned under the authority of the Joint Base Commander, subject to certain exceptions. According to OSD officials, individual installation-support functions have been reviewed on a case-by-case basis and removed from the list. We reviewed 42 installation-support functions as part of our survey; see table 2 for a list of those functions.", "Joint base officials reported varying levels of progress in consolidating installation-support functions, several limitations that inhibited consolidation, and challenges resulting from consolidation efforts that created inefficiencies and inequities. DOD guidance outlined more than 40 specific, common installation-support functions at joint bases to be aligned under the authority of the Joint Base Commander, unless the According to relevant memorandums of agreement provide otherwise.key federal practices for consolidation, federal agencies need to plan to monitor and to evaluate their efforts to identify areas for improvement. Overall, we found that the 11 joint bases had reported partially consolidating 80 percent of the functions for which the joint base commander had some responsibility, but the extent of consolidation varied from one joint base to another and among the various installation- support functions. Our analysis of information gathered from the survey and interviews showed that the joint bases reported having limited opportunities to consolidate some functions, such as those unique to a single military service’s mission (e.g. airfield operations and port services) and those managed by a military service’s headquarters such as legal- support services. Furthermore, joint base officials reported several challenges resulting from consolidation, such as multiple military service inspections and employees being disadvantaged in competing for promotion opportunities, resulting from service-specific personnel policies. DOD has not comprehensively evaluated installation-support functions to determine whether they are all still appropriate for consolidation. Also, DOD has not taken steps to address any inefficiencies and inequities arising from consolidation, or assessed any actions that can be taken to facilitate consolidation and address any negative effects in these circumstances. Without a comprehensive evaluation of the suitability of installation-support functions for consolidation—and without guidance to address any negative consequences that emerge from consolidation—individual joint bases will still be expected to merge support functions, which may result in ongoing inefficiencies and inequities.", "Joint base officials whom we surveyed and interviewed reported variations in the extent to which installation-support functions were consolidated. None of the 11 joint bases we surveyed or the Joint Region Marianas reported that they have consolidated all installation support functions identified in DOD’s 2008 Joint Basing Implementation Guidance. DOD’s guidance identified and defined more than 40 specific installation-support functions to be aligned under the authority of the Joint Base Commander, unless the relevant agreement provides otherwise. In written comments to our 2012 report on joint basing and during the course of this review, OSD reaffirmed its expectations that Joint Base Commanders are to merge their management structures, operating procedures, financial systems, and staffs to consolidate installation- support functions.\nFor the 11 joint bases that we surveyed, our analysis indicated that of the potential 462 installation-support functional areas (42 common functions at each of the 11 joint bases) to be transferred to the supporting component, Joint Base Commanders had some responsibility for 438, or about 95 percent, of those support functions. Our analysis showed that the joint bases reported that they have at least partially consolidated 350 (about 80 percent) of the 438 installation-support functional areas for which the joint base commander had some responsibility. About 4 percent of the installation-support functions that are included in the 80 percent were consolidated prior to joint basing via agreements between the military services. According to our analysis, most instances of consolidation prior to joint basing (16 out of 18) occurred at Joint Base Andrews-Naval Air Facility Washington. Figure 2 illustrates the status of consolidation based on our analysis of survey responses and other supporting documentation.\nConsolidation varied greatly by location among the 11 joint bases.example, our analysis of survey responses and other supporting documentation showed that Joint Base Langley-Eustis had reported some level of consolidation in 52 percent of its functions, whereas three other joint bases had some consolidation in approximately 90 percent or more of the functions. Figure 3 illustrates the status of consolidation for each installation based on our analysis of survey responses and other supporting documentation.", "Joint base officials reported that there were limited opportunities to consolidate some installation-support functions, and that the workforces used by the military services to provide support services—as well as geography—can affect consolidation efforts. The officials stated that they may not be able to fully consolidate some functions because these functions are unique to one military service’s mission or the function is mainly managed by a military service’s headquarters. Also, joint base officials stated that limited opportunities exist to consolidate workforces because of the differences in the original types of workforces—military, civilian, and contractor—that were in place prior to joint basing. As part of our review, we are reporting our analyses of responses to our survey questions and examples provided during interviews with joint base and military service officials. We did not independently assess the extent to which consolidation occurred as identified by survey respondents and by officials during interviews.\nOur survey and interview data showed the support functions that provided the least amount of opportunity for consolidation generally are unique to a single military service’s mission, or are mainly managed by a military service headquarters, including those that have the need to follow military service-specific requirements and procedures.\nSupport functions unique to military service mission. Our analysis of survey results and other supporting documentation, as illustrated in figure 4, showed that installation-support functions reported to be consolidated at the fewest joint bases tended to have military service-specific or mission-specific characteristics. According to officials, these functions offered limited opportunities to consolidate because they were unique to the missions of the individual military services. In most instances, these functions either did not transfer to the supporting component as part of joint basing because the function was considered to be mission-related rather than part of installation support or did not have a counterpart in the other military service. For example:\nPort services. We found that one, or 25 percent, of the four joint bases that have a port and included port services as part of the joint base commander’s responsibility had reported consolidating this function. The one base that did consolidate was a location where the Navy was a supported component and did not have an operational mission. The three bases that did not consolidate were locations where there was only one service with the function (so there was not a need to consolidate).\nSmall-arms range management. We found that three, or 38 percent, of the eight joint bases where the joint base commander had responsibility for small-arms range management had reported consolidating this function. For all three of the joint bases that had consolidated this function, this function tended to be installation support rather than directly tied to a mission requirement. Officials for the other five joint bases that did not consolidate this function reported that they had not done so because the Army was exempt at four of the bases from consolidating this function and there was only one service with this function at the other base (so there was not a need to consolidate).\nAirfield operations. We found that four, or 44 percent, of the nine joint bases where the joint base commander had some responsibility for airfield operations had reported consolidating this function. The Air Force was the supporting component for three of the joint bases while the Navy was supporting for the other one. Officials for the other five joint bases reported that they had not consolidated this function because the Air Force had variances to consolidating the function at two of the bases and there was only one service with this function at the other three bases (so there was not a need to consolidate).\nSupport functions managed by military service headquarters. Our analyses of survey results and other supporting documentation found some functions were limited in the amount of overlapping activities that could be consolidated because the functions remained largely managed by a military service headquarters, or officials executing these functions were required to follow specific military service requirements or procedures. In our survey, 45 percent of 438 joint base officials reported that their consolidation efforts had been hindered by military service- specific requirements, practices, or policies. For example: Information technology system management. Joint base officials reported that opportunities to merge or consolidate information technology systems were limited since the military services operate separate information technology systems with distinct email and operational requirements, as well as maintain service-specific databases. According to our analysis, 34 percent of 438 functional area respondents stated that they had not merged or consolidated information technology systems. DOD has two department-wide initiatives underway to standardize some information technology and services, called the Joint Information Environment and Enterprise Email service. As DOD implements these initiatives, opportunities for further consolidation may emerge.\nAdvisory services. Joint base officials reported that Equal Opportunity Employment services offered limited opportunities for consolidation beyond the intake of complaints. According to officials whom we interviewed, equal opportunity complaints are filed against specific military department Secretaries, and the formal grievance of any complaint must follow the procedures of the particular military department where the individual filing the complaint either works or serves. For instance, these officials told us that an employee of the supported component, such as a service member or civilian (a position that did not transfer to the supporting component as part of the installation-support workforce), would submit a complaint through the local equal opportunity office, which is part of the supporting component. However, these officials also indicated that the grievance would then transfer back to the supported component since it must follow that service’s procedures. Therefore, in the officials’ opinions, responsibility for equal opportunity may not have been suitable for transfer in joint basing.\nLegal support services. Joint base officials indicated that the level of consolidation for this installation-support function is very limited, even though nine of the 11 joint bases reported consolidating some portion of the function. Joint base officials reported that each service must adhere to the Uniform Code of Military Justice for courts-martial and nonjudicial punishment, but the ways in which each service carries out military justice are substantially different. For example, according to these officials, it would be very difficult for Air Force personnel to conduct an Army court-martial or nonjudicial punishment and vice versa. As a result, in the opinion of these officials, this aspect of the legal support services cannot be further consolidated at the joint bases.\nOfficials from Joint Region Marianas were not part of our survey, but we interviewed them to discuss their efforts to consolidate support services. Officials indicated that some functions were easier to consolidate than others, and they stated that they have made some progress. However, the officials reported that at times conflicting service practices have also hindered their efforts. For example, the officials stated that they have not been able to fully consolidate the chaplain services function because of differences in how religious programs are managed by the Navy and Air Force. The Navy requires that tithes and offerings be sent to charitable organizations, whereas the Air Force allows tithes and offerings to be reinvested in chapel facilities.\nOur survey also showed that 59 of 438 respondents (13 percent)—in comments about functions for which the joint base commander had some responsibility—reported that there were additional opportunities to consolidate installation-support functions that have not been pursued. The respondents who reported additional opportunities to consolidate provided a varied range of response details. Of those respondents who provided detailed responses, we found the following examples. Officials from one joint base stated that additional consolidation could occur in the pest-control function by expanding in-house capabilities and eliminating contract services, but did not elaborate as to why further consolidation had not been pursued at the time of the survey. In another example, officials from a different joint base stated that additional consolidation could occur in the pavement-clearance function by analyzing the function and selecting the most cost-effective method between in-house and contract work, as it would allow for completely centralized management of resources. Furthermore, we asked survey respondents if they had any additional comments pertaining to the consolidation of their installation- support functions. Our survey results showed that 70 out of 438 respondents (16 percent) provided comments. Generally, the comments mirrored the issues raised throughout this report. For example, some reported that certain support functions offered limited opportunities for consolidation because of geography and others cited differences in military service policies and procedures that hindered consolidation efforts.\nWe also found that, according to survey responses, in some instances workforces used by the military services to provide installation-support services prior to joint basing limited opportunities to consolidate some installation-support functions. The military services can differ in which workforce—military, civilian, or contractor—they employ to provide installation support. In our survey, we asked to what extent, if any, differences in installation-support workforces caused hindrances to consolidation. In our survey results, 182 of 438 respondents (approximately 42 percent) reported that differences in workforces used by the individual military services hindered their ability to consolidate installation-support functions. Figure 5 illustrates the percent of functions in which officials reported hindrances in consolidating due to differences in workforces.\nThe seven joint bases with the highest percent of functions reporting significant or moderate consolidation hindrances because of differences in workforces are listed in table 3.\nIn interviews and written responses to our survey, Air Force officials stated that they may use a mix of military and civilian personnel to provide a specific installation-support function, whereas the Army may have outsourced the provision of the same support function to contractors. Also, we found in interviews and in written responses to our survey that the Navy at times, used a regionalized civilian workforce to provide some installation-support services for stand-alone Navy bases in the region. In the survey’s written responses, we also found examples in which respondents stated that some consolidation efforts were hindered by the types of workforces used. For example,\nOfficials at Air Force-led Joint Base Charleston reported that consolidation efforts have been limited by personnel shortfalls in the procurement services function. Prior to joint basing, the Navy provided much of the procurement services for Naval Weapons Station Charleston, through regional service centers rather than at the installation. For this reason, according to these officials, no local civilian workforce transferred to the Air Force. The joint base received approval to hire more Air Force civilians to carry out the function. However, many of the approved positions were eventually cut in 2012 as part of the military departments’ response to the DOD effort to cap the number of civilian positions department-wide.\nOfficials at Air Force-led Joint Base Elmendorf-Richardson reported that they have not been able to consolidate the facility-sustainment function because of how the Army and Air Force provided installation support prior to joint basing. The Army outsourced delivery of this function to contractors at Fort Richardson, whereas the Air Force provided this function in-house at Elmendorf Air Force Base. According to the officials, the Air Force will likely maintain the contracts for the Richardson side of the base because of insufficient military and civilian manpower available to insource the function. These officials reported that, at the same time, the Air Force will continue to provide the function in-house for the Elmendorf side of the base as there is currently no authorization to conduct public-private competitions, which are required before contracting out for functions currently performed by DOD civilians.\nOfficials at Air Force-led Joint Base Langley-Eustis reported that they had not been able to consolidate the utilities function because of privatization of some support services. The Army privatized water, wastewater, electricity, and natural gas on the Fort Eustis side of the base. These officials stated that because of privatization, when responsibility for the utilities function transferred to the joint base, the joint base officials could not consolidate the Fort Eustis side with the in-house provision of utility services that occurred on the Langley Air Force Base side of the base.\nIn our survey, we also asked joint base officials about other hindrances to consolidation. Our content analysis of survey data showed that the most- often cited hindrance was geography, with 111 out of 438 respondents (25 percent) citing geography as a hindrance. The five joint bases with the highest percent of functions in which officials that cited geography as a hindrance are listed in table 4.\nAccording to respondents from Joint Base Langley-Eustis, opportunities to consolidate support functions, such as information technology services management, real property management and engineering services functions are limited because of the geographical separation between Langley Air Force Base and Fort Eustis—approximately 18 miles. In addition, some bases that may share some common fence line can also be hindered by geography. For example, officials at Joint Base Lewis- McChord stated that Fort Lewis and McChord Air Force Base entrances are separated by about 5 miles of interstate highway. Having to navigate the interstate to travel between the two entrances can be a problem because of traffic according to officials at both locations. The Army has proposed constructing a gate on the joint base between the two locations, but has not completed this action. In addition, McChord Airfield is separated from the rest of the joint base by a public road, making it necessary to clear security a second time when traveling from the base to the airfield.\nAlthough cited to a much lesser extent than geography, 28 of the 438 respondents reported that personnel shortages (6 percent) and 19 of the 438 respondents reported budget or funding limitations (4 percent) hindered consolidation efforts. For example, officials from Joint Base Charleston reported that the base does not have enough personnel to adequately provide services in the pest-control function, and that a workforce study is needed to determine the appropriate size of the function. In another example, officials from Joint Base McGuire-Dix- Lakehurst reported that current fiscal limitations as well as a hiring freeze have, in part, hindered the base’s ability to consolidate the real property management and engineering services function.\nOSD officials stated that there is currently not a process to evaluate installation-support functions on a regular basis (annually or otherwise) and that they have not systematically identified common limitations to consolidation and what actions, if any, can be taken to address such limitations. We found DOD has eliminated—on a case-by-case basis— three installation-support functions from consolidation from the original list of 47, but has not similarly comprehensively evaluated whether the remaining functions are still suitable for consolidation. As noted above, joint base officials have identified limited opportunities to consolidate some areas of installation support. Furthermore, DOD has not systematically identified how consolidation can be limited by, for example, different types of workforces used to provide installation-support services or geography, and what actions, if any, could potentially help facilitate consolidation in these situations or any others that may be identified. Our prior work on federal agency consolidation efforts found that consolidation initiatives can be immensely complex, politically charged, and costly and are not quick, easy, or automatic ways of producing desired change. In addition, key federal practices for consolidation state that federal agencies need to plan to evaluate and monitor efforts to identify areas for improvement. Further, reporting on consolidation activities can help key decision makers within the agencies to obtain feedback for improving OSD and military service both policy and operational effectiveness.officials discussed that their approach to date has been to give the program time to mature but said they now believe a review would be beneficial because some functions may not easily be consolidated and there may be common limitations to consolidation that can be addressed through policy improvements. However, they did not elaborate as to when they would conduct such a review or provide specifics on how they planned to do so. Without comprehensively evaluating whether installation-support functions are still suitable for consolidation and without identifying and addressing limitations reported by the joint bases, such as those related to workforces and geography, DOD may not be able to fully consolidate all installation-support functions.", "Joint base officials whom we surveyed and interviewed reported that at times consolidation of installation-support functions created challenges resulting in unintentional inefficiencies or inequities. According to key federal practices for consolidation, federal agencies need to evaluate their efforts to identify areas for improvement, and obtain feedback for improving both policy and operational effectiveness.\nOur analysis identified that of the 350 out of 438 responses about functions that were partially consolidated, 224 officials (64 percent) reported challenges resulting from consolidation. See figure 6 for a breakout of the responses of the functions in which officials reported some challenges with consolidation.\nOur analyses of interview and written survey responses found instances in which respondents stated that some challenges resulting from consolidation resulted in inefficiencies. For example:\nMultiple inspections. Officials whom we interviewed as well as those who provided written survey responses reported that some functions were subject to multiple inspections. For example, officials at Navy-led Joint Base Pearl Harbor-Hickam reported that Air Force officials continue to inspect emergency management exercises although the Navy, as the lead component, is responsible for emergency management on the base and carries out similar inspections. In addition, officials at Army-led Joint Base Lewis-McChord reported confusion among Air Force military units about whether they had to follow Air Force or Army environmental requirements, practices, and policies while conducting inspections. Furthermore, officials whom we interviewed at Joint Base Lewis-McChord stated that both the Army and the Air Force are inspecting the joint base’s child development centers, though the Army, as the lead component, is responsible for managing the centers, including inspections. However, Air Force officials stated they are also conducting their own inspections because of their concern that the centers meet Air Force standards of service for providing child care, even though joint bases have agreed to provide a common level of service for installation-support functions.\nMultiple Data Requirements. Officials at Air Force-led Joint Base Langley-Eustis reported that staff from the physical-security function must use two distinct systems for processing personnel-security investigations—one for Army personnel and one for Air Force personnel—because of differences in the systems. In another example, Army-led Joint Base Lewis-McChord reported that the lack of transferring personnel files locally between the Army and Air Force has caused the Army to rebuild employee files and submit criminal background checks more than once for staff in the children and youth- services function, potentially wasting funds by recreating what already exists.\nOur analysis of interview information found instances in which respondents stated that challenges resulting from consolidation also resulted in inequities. For example:\nLimited promotion opportunities. According to joint base officials, in some instances the transfer of civilian personnel from one military service to another may have created inequities, in that civilians transferring from another military department may have lost some benefits of seniority, which may have disadvantaged them in competing for promotion opportunities. For example, former Army civilian employees at the Air Force-led Joint Base San Antonio reported limited career opportunities because their total service time as DOD employees was not recognized by the Air Force, and their job classifications, in some cases, were downgraded when their positions were transferred to the joint base. The former Army employees reported that the military departments do not credit years of employment from another department. As a result, they cannot compete for promotions or other Air Force positions that may require a minimum number of years of service as eligibility criteria for promotion. In addition, joint base officials whom we interviewed commented that they believe military service practices of preferentially hiring internal applicants in response to DOD’s civilian hiring freeze have prevented these former Army employees from qualifying or being competitive for vacant Army positions because they are now Air Force employees.\nLimited training opportunities. According to joint base officials, consolidation has resulted in differences in training for some installation-support personnel. For example, Air Force officials at the Army-led Joint Base Lewis-McChord reported that consolidation has eliminated some training opportunities for uniformed airmen, and expressed concern that airmen at Joint Base Lewis-McChord are not receiving training comparable to that which they would receive if they were stationed at a stand-alone Air Force installation. This situation is primarily because of the consolidation of installation-support functions under Army processes—which are largely civilian and contractor driven—whereas at a stand-alone Air Force base many installation-support functions are performed by airmen.\nWe found that neither OSD nor the military services have addressed these consolidation challenges that may have resulted in inefficiencies and inequities. Specifically, feedback on inefficiencies and inequities have not been incorporated into policy improvements, such as additional guidance, to help the joint bases resolve confusion about which service- specific guidance should be followed to avoid challenges such as multiple inspections, multiple data requirements, and concerns about limited promotion and training opportunities. Our survey results identified that about 59 percent of respondents stated that they did not think additional guidance from OSD or the military services would improve the level of consolidation of their installation-support functions. However, officials from the joint bases, military service headquarters, and OSD stated in interviews that additional guidance is necessary to address consolidation challenges.\nOSD and military service officials stated that they have not comprehensively identified the extent to which the joint bases have consolidated installation-support functions, including any common challenges associated with consolidation that may have resulted in negative consequences as described above. OSD and military service officials stated that their approach to date has been to give the program time to mature but said they now believe policy actions may be needed to help address challenges resulting from consolidation. Without having comprehensively identified any common challenges associated with consolidation, OSD is unlikely to develop policy solutions, such as guidance, to assist the joint bases in addressing them. In one instance in which joint base officials identified a common challenge associated with consolidation—multiple inspections related to installation support—OSD officials acknowledged the issue and stated that they were taking action to address it. Joint base officials stated in interviews that they have raised concerns at OSD’s annual joint base program-management meetings about which service-specific guidance to follow when conducting inspections of installation-support functions on joint bases. OSD officials told us that while a policy solution is not currently available to resolve this issue, they are working to update a DOD instruction for inspections that will address the issue at joint bases. However, in the absence of policy solutions, such as additional guidance to mitigate other common challenges resulting from consolidation efforts, including multiple data requirements for installation-support functions and concerns about limited promotion and training opportunities for installation-support staff, joint bases may be unable to avoid or reduce any inefficiencies and inequities resulting from consolidating installation-support functions.", "results of their collaborative efforts. Further, key federal practices state that agencies can improve efficiency by reexamining programs and related processes or organizational structures to determine whether they effectively and efficiently achieve the mission. Without a collaborative evaluation of the joint basing program to determine if the stated goals of the program are still appropriate and subsequent direction to include the monitoring and evaluation of the achievement of program goals, it will be difficult for DOD to determine the extent to which the joint basing initiative is achieving its intended goals.", "Joint base officials reported that they have made some progress in achieving greater efficiencies and cost savings, which are the goals of the joint base program, as well as attained additional benefits. In our November 2012 report, we found that DOD does not have a fully developed method for accurately collecting information on cost savings and efficiencies achieved specifically as a result of joint basing. As a result, to gain insight into the degree to which DOD has gained efficiencies and cost savings, our survey asked respondents to identify the extent to which they have (1) reduced redundant funded positions; (2) reduced redundant contracts or increased contract efficiencies; and (3) merged or consolidated redundant procedures.", "Our analysis of survey responses and other supporting documentation showed that 53 of 438 respondents (12 percent) stated that they were able to reduce redundant funded positions (excluding contractors) related to joint basing. Figure 7 illustrates our analysis.\nOur analysis of survey data indicated that joint bases experienced reductions in funded positions, which respondents attributed to efforts to reduce redundancy. For example, officials from Joint Base Little Creek- Fort Story reported that the base was able to reduce four staff positions in the morale, welfare, and recreation function because they were redundant. In another example, officials from Joint Base Anacostia- Bolling reported that base was able to reduce two positions in the physical security function. In other instances, the respondents did not attribute reductions to joint basing, but rather attributed them to other reasons, such as service-level programmatic decisions. For instance, officials from Joint Base Charleston noted that a housing manager retired shortly after the joint base’s establishment, and the Air Force abolished the position because of personnel cuts unrelated to joint basing.\nMany of the respondents who reported no reductions did not provide detailed explanations. Of those who provided a reason for no reduction, many reported there were no redundancies in installation-support positions or there was an increased workload requiring extra positions. For instance, officials from Joint Base Andrews-Naval Air Facility Washington reported that the refuse collection and disposal function was consolidated prior to joint basing, so no positions were available to consolidate. In another example, officials from Joint Base McGuire-Dix- Lakehurst reported an increased workload in the facilities sustainment function because of aging facilities and a lack of funding, making consolidation unlikely to result in fewer personnel. Also, officials from Joint Base Elmendorf-Richardson reported that no redundant positions were reduced in the physical security function because of no decrease in workload following consolidation.\nJoint base officials whom we interviewed provided some reasons for why the reduction of redundant funded positions was limited. For example, officials from Joint Base Langley-Eustis told us that it would have been difficult to consolidate the functions of the two former bases because of differences in the mix of personnel who provided installation support. They said that at Fort Eustis the Army had transitioned almost entirely to private contracts for installation support, and had eliminated most of its related civilian workforce. Therefore, in their view, there were no opportunities to reduce redundant funded positions. In another example, officials from Joint Base Lewis-McChord said the Air Force transferred few civilian positions to the Army, the supporting component, because prior to joint basing the Air Force used uniformed airmen to provide installation-support services at McChord Air Force Base.", "Our analysis of survey responses and other supporting documentation showed that 111 of 438 respondents (25 percent) stated that they had a reduction of redundant contracts or increased contract efficiencies related to joint basing. Figure 8 illustrates our analysis.\nOfficials from Joint Base McGuire-Dix-Lakehurst reported that they were able to consolidate eight separate telephone contracts in the information technology services management function into a single contract for the joint base, which they reported saved about $650,000. In another example, officials from Joint Base Charleston reported that two custodial contracts existed—one for the Air Force and one for the Navy—and that these contracts have been combined into a single joint base contract, which according to the officials, resulted in efficiencies in contract administration by eliminating the need for multiple contract administrators. In a third example, officials from Joint Base Myer-Henderson Hall reported the consolidation of contracts for facility fire and alarm inspection and maintenance in the fire and emergency services function—from three to one. In another example, officials from Joint Base Anacostia-Bolling reported that they were able to eliminate a contract in the public affairs function that was used to provide the supported component’s base newspaper prior to joint basing.\nMany of the respondents who reported no reductions or no increased efficiencies did not provide a detailed explanation. Of those who provided a reason for no reduction or increased efficiencies, the reasons included simply that there were no redundant contracts. In other instances an installation-support function was not provided via contract, so consolidation was not applicable. For example, officials from Joint Base Andrews-Naval Air Facility Washington reported there were no reductions in the small-arms range management function because there were no contracts were in place for the function— it is handled by military and civilian personnel.\nJoint base officials whom we interviewed provided some reasons for why reduction of redundant contracts or achieving greater contract efficiencies was limited. For example, officials from Joint Base San Antonio stated that federal contracting preferences complicate the task of consolidating all custodial services under a single contract. Officials from Joint Base Langley Eustis cited geography as a factor affecting the bases’ ability to reduce redundant contracts. They told us the distance between Langley Air Force Base and Fort Eustis is approximately 18 miles, and thereby would likely increase a contract’s cost because of a wider area of required service.", "Our analysis of survey responses and other supporting documentation showed that 105 out of 438 respondents (24 percent) stated they were able to merge or consolidate redundant procedures related to joint basing. Figure 9 illustrates our analysis.\nOfficials from Joint Base Charleston reported that the base reduced the work of two newspapers and separate news coverage into one newspaper and website. In another example, officials from Joint Base Pearl Harbor-Hickam reported that the base eliminated Air Force procedures for grounds maintenance, which is part of the grounds maintenance and landscaping function, in favor of standardizing the procedures under the Navy, the supporting component. In another example, officials from Joint Base McGuire-Dix-Lakehurst reported that requirements processing for base telephone services under the information technology services management function were consolidated from three offices into one.\nOf those respondents who provided a reason for no merger or consolidation of redundant procedures, a frequently cited reason was that there were no redundant procedures to merge or consolidate. For example, officials from Joint Base Anacostia-Bolling reported that there were no redundant procedures in the custodial services, emergency management, and facility sustainment functions. In another instance, officials from Joint Base Andrews-Naval Air Facility Washington reported no redundant procedures in the emergency management function because the Navy did not have an emergency management function prior to consolidation. In another example, officials from Joint Base McGuire- Dix-Lakehurst reported no merger or consolidation of redundant procedures in the emergency management function because there was not an emergency management function at Fort Dix or Naval Engineering Station Lakehurst.", "In our analysis of 350 of 438 survey responses in which officials stated they had consolidated functions, 213 of 350 respondents (61 percent) reported benefits from consolidation of support functions. Figure 10 illustrates our analysis.\nOur analysis of survey data found that benefits included improvements in the delivery of installation-support services and the sharing of information and practices across military services. Respondents reported that as a result of some of these improvements, they believe customer satisfaction increased. Also, in many instances functional area officials reported increased efficiencies, but did not elaborate as to what the efficiencies were or how they were achieved. The following examples are specific to joint bases, and illustrate that, according to base officials, DOD’s current approach to joint basing has produced some benefits.\nImproved service delivery. Officials from Air Force-led Joint Base Langley-Eustis reported that the fire chiefs at Fort Eustis are satisfied with the increased performance of maintenance services on firefighting vehicles as the Air Force maintains vehicles at a much higher level than the levels provided by the Army prior to joint basing. In another example, officials from Joint Base Pearl Harbor-Hickam reported that the base’s intramural sports program is larger, providing more games and better competition, which service members enjoy. Improved information sharing. Officials from Joint Base Charleston reported that a primary benefit in the family housing function is the ability to share best practices between two privatization deals—one used by the Air Force and one used by the Navy prior to joint basing—to better service the local community. In another example, officials from Joint Base Elmendorf-Richardson reported that consolidation has provided soldiers and airmen with the opportunity to work and operate in a nondeployed joint environment as part of the law enforcement patrols function, which has allowed for a better understanding of each military service’s mission. In a third example, officials from Joint Base Myer-Henderson Hall reported that consolidation of the physical security function helped increase awareness of activities affecting the base’s control point because of access and information that was not previously available to the individual bases prior to joint basing.\nJoint base officials whom we interviewed also reported some benefits from consolidating installation-support functions and additional benefits from working closely with other military services. For example, Air Force officials at the Army-led Joint Base Lewis-McChord told us they were able to save approximately $280,000 per month in training fees by leveraging their joint base relationship with the Army to use local Army facilities in Washington State for Air Force training flights. Prior to the establishment of the joint base, the Air Force used its own facilities farther away in Arizona for these flights. In an additional example, Army officials at the Air Force-led Joint Base San Antonio said the Air Force adopted the Army Family Action Plan, which the Army operated for soldiers and their families at Fort Sam Houston, to expand the process, which allows service members to submit concerns about quality of life issues to the base command staff to all service members residing in the joint base area. In another example from Joint Base San Antonio, an Air Force official stated that the base was able to take advantage of in-house Air Force welding expertise to repair damage to the main gate of the Fort Sam Houston area of Joint Base San Antonio rather than contract for the maintenance, which would have been done prior to joint basing and this resulted in quicker repairs and avoidance of contract fees.\nIn our interviews with officials from Joint Region Marianas, officials indicated that they had been able to take some actions to gain efficiencies, such as reducing from five to one the number of cell-phone contracts used to provide cell phones to military and civilian personnel.\nThey also pointed out that they are in the process of evaluating approaches to consolidate housing to provide better visibility to service members on Guam regarding available housing options on the island. According to the officials, this effort will result in reducing the need for duplicative housing managers.", "Joint base and military service officials whom we interviewed said OSD has not provided them with direction on how to achieve greater efficiencies and cost savings as the goals of joint basing, including reporting requirements and milestones. OSD officials told us that they have not collaborated with the military services to evaluate whether the goals of achieving greater efficiencies and generating cost savings are still appropriate. According to key federal practices, when federal organizations collaborate they can define common outcomes, establish strategies, and develop mechanisms to monitor, evaluate and report the results of their collaborative efforts. Moreover, key change management practices state that it is essential that top government and agency leaders are committed to consolidation and play a lead role in executing it by setting the direction, pace, and tone as well as providing a clear, consistent rationale for doing so. These practices also state that establishing implementation goals and milestone dates, and tracking progress toward those goals helps agency officials pinpoint performance shortfalls and suggest midcourse corrections, including any needed adjustments to the organization’s future goals and milestones. Further, key federal practices state that agencies can improve efficiency by reexamining programs and related processes or organizational structures to determine whether they effectively and efficiently achieve the mission.\nOSD officials whom we interviewed indicated that they have not evaluated the joint basing program to determine whether it is meeting the goals of the 2005 BRAC Commission recommendation or if the goals of achieving greater efficiencies and generating cost savings are still appropriate for the program today and looking forward. In written comments to our 2012 report on joint basing, OSD stated that DOD’s approach to joint basing was to be patient with obtaining savings and efficiencies, maintaining that joint basing was a relatively new initiative and implementation issues were still being resolved. The officials reaffirmed they were taking this approach during the course of our review. According to the Secretary of Defense’s justification for joint basing reproduced in the 2005 BRAC Commission Report, joint basing would allow DOD to take advantage of opportunities to reduce duplication of efforts. DOD stated that the resulting reduction of overall manpower and facilities requirements would help generate savings by paring unnecessary management personnel and achieving greater efficiencies through economies of scale. However, as we found in prior work, OSD did not have a developed method for accurately collecting information on costs, savings, and efficiencies achieved specifically from joint basing, and had not developed a plan to guide joint bases in achieving cost savings and efficiencies. Therefore, it is difficult to ascertain the progress that joint bases have made in achieving the goals for joint basing.\nWhen asked about any challenges associated with consolidation of installation-support functions, some survey respondents reported that consolidation increased the need for additional resources in their functional area. For example, Joint Base Charleston officials reported that the size of the joint base and the diversity of missions have greatly increased the need for additional resources for restoration and modernization of facilities and has also resulted in decreased customer satisfaction. In another example, Joint Base Little Creek-Fort Story officials reported that an increase of unaccompanied housing facilities was not met with a staff increase to help support the additional facilities. Also, Joint Base Pearl Harbor-Hickam officials reported that the requirements for the physical security function increased following the joint base’s establishment, but no additional personnel were gained, thus increasing staff workload. However, OSD officials whom we interviewed told us respondents may have attributed the consolidation of functions as driving an increased need for resources, when other factors may have been the reason. For instance, the OSD officials stated that higher performance standards for installation support at joint bases may have caused an increase in workload. Although OSD has provided joint bases with a memo that acknowledges a reduced funding environment and encourages Joint Base Commanders to ensure that mission partners continue to collaboratively determine priorities for applying resources, OSD officials told us that they have not modified the goals for the joint base program in light of the current fiscal environment. They stated that joint bases have been designed to look for efficiencies and cost savings in providing installation support, and are therefore better positioned than other installations to withstand budget cuts and operate with lower budgeted resources.\nOur survey data showed that some progress had been made in the joint bases’ ability to reduce redundant funded positions; reduce redundant contracts or find contract efficiencies; and merge or consolidate redundant procedures to gain efficiencies and produce cost savings. According to joint base and military service officials whom we interviewed, the joint bases would benefit from more direction on how to pursue initiatives in a systematic way to achieve these goals or to report on the achievement of these goals. The officials said OSD has left it up to individual joint base leadership to determine how to manage and operate the joint bases, including the extent to which they pursue efficiencies. As a result, joint base and military service headquarters officials whom we interviewed stated that in an environment when priority is placed on getting the mission done with fewer resources, the investment of resources to pursue initiatives or conduct studies to determine the feasibility of efforts to cut redundancies and gain efficiencies has not always been a priority. The officials said that without more direction, the extent to which joint basing commanders pursued these types of initiatives was left to their discretion. Furthermore, the officials noted the degree to which joint bases looked for opportunities to gain efficiencies and cost savings depended on the commitment of the officials involved as well as the level of support and commitment they received from their service headquarters, rather than guided by overarching goals, plans, milestones, and reporting requirements.\nOSD officials stated that they had not conducted a mid-program review for joint basing and believe this type of review is a good management practice and may be beneficial at this stage in the joint basing program, in part because of concerns about the lack of understanding regarding the goals for the program as well as direction on how to achieve such goals. However, the officials noted that they do not yet have detailed plans for such a review. Without a collaborative evaluation of the joint basing program by OSD and the military services to determine if the stated goals of the program are still appropriate and continue to be priorities for DOD—and without clear communication on any revised goals and additional direction on how to achieve such goals, including reporting requirements and milestones—it will be difficult for DOD to demonstrate that the joint basing program has effectively and efficiently achieved its goals.", "DOD’s 11 joint bases and one joint region have been fully operational since 2010, yet progress to consolidate installation-support functions at the 11 we surveyed varied by location as well as support function. According to survey respondents, some functions offer limited, if any, opportunities for consolidation, including those that are primarily military service, mission-specific—such as managing a small-arms range—and those that must adhere to military service-specific policy and procedures such as legal support services. DOD has eliminated some functions from consolidation on a case-by-case basis, but has not comprehensively reviewed the entire list of functions to determine whether additional functions should be removed from consolidation. Moreover, joint base officials have reported challenges from consolidation of installation- support functions, such as multiple inspections and limited civilian personnel promotion opportunities. OSD has not taken steps to address the challenges that, according to joint base officials, have resulted in inefficiencies and inequities. Without a comprehensive evaluation of the suitability of installation-support functions for consolidation and guidance to address any identified challenges that emerged from consolidation, individual joint bases may experience inefficiencies and inequities in consolidating these functions.\nFurthermore, DOD has not yet demonstrated that merging 26 bases to consolidate installation-support functions into 12 joint bases has yielded the results it forecast when it proposed this initiative to the 2005 BRAC Commission as a means to reduce duplication of efforts that would in turn generate cost savings and increase efficiencies. The joint base officials, in their responses to survey questions and during interviews, did not report significant achievements in reaching these goals. DOD has data that indicate the joint bases are obligating less funding than they would have obligated as stand-alone bases, but it is not clear to what extent these savings are attributable to the consolidation of installation support functions. Furthermore, it is not clear to what extent savings and efficiencies are still the goals of this program. Joint base officials indicated that they are unclear to what extent these goals are still appropriate and to what extent they are required to pursue additional opportunities to meet these goals. DOD has not collaborated with the military services to reevaluate whether the goals of joint basing are still appropriate or provided direction to the joint bases for meeting program goals, including milestones and reporting requirements for the achievement of these goals. As a result, joint base commanders are responsible for determining to what extent they will pursue initiatives to reduce redundancy and achieve potential cost savings or efficiencies, and the extent to which such initiatives have been pursued varies by joint base. Key practices from efficiency initiatives state that a primary approach an agency can take to determine whether a program is effectively and efficiently achieving its goals is to periodically reexamine it. Furthermore, key change management practices state that it is essential for top leadership to set the direction, pace, and tone of organizational change. Until DOD evaluates its current approach to joint basing and determines whether the stated goals of the program are still appropriate and continue to be priorities—and without direction provided to the joint bases to pursue the goals and report on the ability to meet these goals—it will be difficult for DOD to determine whether the joint basing program is meeting its purpose.", "To help ensure DOD’s approach to joint basing achieves the goals as outlined by DOD in its justification for the 2005 BRAC recommendation and leverages additional opportunities to reduce duplication of effort that could in turn generate cost savings and increased efficiencies, Congress should consider directing the Deputy Under Secretary of Defense (Installations and Environment), in collaboration with the military services and joint bases, to evaluate the purpose of the program and determine whether the current goals, as stated in the 2005 BRAC Commission recommendation, are still appropriate, or whether goals should be revised; communicate these goals to the military services and joint bases, and adjust program activities accordingly; provide direction to the joint bases on requirements for meeting program goals, including determining reporting requirements and milestones; and determine any next steps for joint basing, including whether to expand it to other installations.", "To assist the joint bases in achieving additional opportunities to consolidate installation-support functions, we recommend that the Secretary of Defense direct the Deputy Under Secretary of Defense (Installations and Environment), in coordination with the military services and joint bases, to take the following two actions:\nEvaluate the 44 support functions identified in DOD’s guidance for joint base implementation to determine which functions are still suitable for consolidation. Subsequently, identify and make any changes that are appropriate to address limitations reported by the joint bases in consolidating installation-support functions, such as limitations related to workforces and geography.\nTake policy actions, as appropriate—such as issuing additional guidance—to address any challenges resulting in inefficiencies and inequities regarding efforts to consolidate installation-support functions including, at a minimum, those identified in this report.\nTo ensure DOD’s approach to joint basing aligns with the intent of the 2005 BRAC recommendation and DOD’s current position on the intent of joint basing, we recommend that the Secretary of Defense direct the Deputy Under Secretary of Defense (Installations and Environment), in collaboration with the military services and joint bases, to take the following two actions:\nEvaluate the purpose of the program and determine whether DOD’s current goals of achieving greater efficiencies and generating cost savings for the joint basing program, as stated in the 2005 BRAC Commission recommendation, are still appropriate or whether goals should be revised, and communicate these goals to the military services and joint bases and then adjust program activities accordingly.\nSubsequent to the evaluation above, provide direction to joint bases on their requirements for meeting the joint base program’s goals. DOD’s leadership should work with the military services to determine what reporting requirements and milestones should be put in place to increase support and commitment for the program’s goals.", "We provided a draft of this report to DOD for review and comment. In its written comments, DOD concurred with one of the four recommendations, partially concurred with one, and did not concur with two. Given DOD’s disagreement with the two recommendations, we have added a matter for congressional consideration to this report. Further details are discussed below. DOD’s comments are summarized below and reprinted in their entirety in appendix VI. In addition, DOD provided technical comments that have been incorporated as appropriate.\nIn its comments, DOD stated that the department and GAO have fundamentally different approaches in viewing how DOD should manage the 12 joint bases, and noted that the report’s recommendations imply that the joint bases are OSD-run entities that should be addressed through new DOD policies. DOD stated that it believes that although joint bases involve added complexities from crossing traditional service lines, they are ultimately service-run bases similar to all other installations. Additionally, DOD noted that the military departments already have the responsibility, as well as sufficient authority and incentives, to deliver effective and efficient installation support across all their installations, including joint bases. We believe that the report reflects an understanding that the joint base management structure consists of shared responsibility and authority between OSD and the military departments to manage the joint base program. This point is highlighted by the fact that we designed our audit work, including our survey and interviews, to focus on the perspectives of joint base and military service officials. Nonetheless, the Joint Basing Implementation Guidance assigns responsibilities to the Undersecretary of Defense for Acquisitions, Technology, and Logistics to establish overarching guidance, procedures, and policy, in coordination with appropriate OSD organizations, and to mediate any support agreement disputes between the components that are not resolved by the Joint Management Oversight Structure. We also cited an example in the report where OSD indicated that it was working to issue policy to resolve military service inconsistencies, identifying that OSD is providing such oversight. Furthermore, DOD provided an example of OSD’s involvement in the management and oversight of the joint bases in its written comments on the report, citing a Deputy Under Secretary of Defense for Installation and Environment policy memo on the subject of joint bases and the supply, storage, and distribution of munitions. As a result, we continue to view the management of the joint bases as a shared responsibility between OSD and the services, and believe the recommendations directed to both are appropriate.\nDOD concurred with the first recommendation to evaluate the 44 installation-support functions identified in DOD’s guidance for joint base implementation to determine which functions are still suitable for consolidation, and to subsequently identify and make any changes that are appropriate to address limitations, such as workforce policies and geography, reported by the joint bases in consolidating the support functions. DOD also stated that it had already removed some installation- support functions from joint basing because they were not compelled for inclusion as part of the BRAC recommendation, and otherwise did not offer opportunities for savings or consolidation. We acknowledge in the report that OSD has reviewed individual installation-support functions on a case-by-case basis, and has removed three from the original list of 47 functions to be consolidated. However, during the course of our review, and as stated in the report, OSD officials told us that there was no process in place to evaluate the remaining 44 installation-support functions on a regular basis. We discussed this with military service and OSD officials in early April 2014. In its letter, DOD stated that in April 2014, the Senior Joint Base Working Group principals tasked their staffs to identify which installation support functions and performance standards were not providing value to the joint bases’ various military missions, and to explore whether these functions and standards should continue to be included in joint basing. DOD did not provide time frames for completing such actions. If implemented as intended, these actions should meet the intent of the recommendation.\nDOD partially concurred with the second recommendation to take policy actions, as appropriate, such as issuing additional guidance, to address challenges resulting in inefficiencies and inequities in consolidating installation-support functions. DOD stated that it is mindful of challenges in implementing and operating joint bases, and agreed that policy actions can address some challenges. However, DOD stated that it does not agree that these challenges require OSD-level policies, citing instead the existing responsibilities and authorities already assigned to the military departments and the Joint Management Oversight Structure. We recognize the responsibilities and authorities of the military departments. Accordingly, the recommendation is for OSD, in coordination with the military services and joint bases, to take policy actions to help address any challenges resulting in efficiencies and inequities from consolidation of installation-support functions at the joint bases. As stated in the report, and noted above, the Joint Basing Implementation Guidance assigns responsibilities to OSD to mediate any support agreement disputes between the components that are not resolved by the Joint Management Oversight Structure. We also describe the responses of joint base officials to our survey questions about any need for additional guidance from OSD and the military services, as well as the interview statements from joint base, military service headquarters, and OSD officials, who all stated that there is a need for such guidance. The report also includes an example of a challenge that required action from OSD to help resolve: OSD issued guidance in May 2014 that was based on a concern raised more than 2 years earlier in February 2012 to resolve contradictions in military service- level guidance, which had created certain duplicative service-level inspections on joint bases. DOD also stated in its letter that its Joint Management Oversight Structure is the process by which the military departments can formally request OSD assistance to change joint or DOD policies. However, joint base officials expressed frustration about the lack of progress and slowness of OSD and the Joint Management Oversight Structure process to address challenges resulting from consolidation, particularly regarding issues where the military departments are unable to identify solutions on their own. Further, some survey respondents and officials we interviewed at the joint bases and military service headquarters stated that they wanted additional guidance from OSD or the military services, or both, to resolve contradictions between service-level policy where needed or, in some cases, to provide clearer direction. As a result, we continue to believe that the recommendation is valid and should be implemented.\nDOD did not concur with the third recommendation that OSD, in collaboration with the military services, evaluate the purpose of the program and determine whether DOD’s current goals of achieving greater efficiencies and generating cost savings for the joint basing program, as stated in the 2005 BRAC Commission recommendation, are still appropriate or should be revised, and to communicate these goals to the military services and joint bases and then to adjust program activities accordingly. DOD stated in its comments that the goal of joint basing remains to increase the efficiency of delivering installation support at the 12 joint bases as described in the BRAC Commission’s recommendation number 146. However, as noted in the report, OSD has not evaluated the joint basing program to determine this or whether the goals are appropriate for the program today and looking forward.\nFurther, DOD stated in its written comments that the 12 joint bases have generated savings. Specifically, DOD stated that the joint bases had obligated $255 million less in fiscal year 2012 compared to what these previously stand-alone bases would have obligated, and did so with 1,600 fewer personnel. While we agree that DOD’s estimates show that the joint bases are obligating less, these reductions in obligations cannot be attributed solely to the consolidation of installation-support functions at the joint bases, as OSD acknowledges. We discussed these estimates with OSD officials in July 2014 after we received their agency comments on a draft of this report where these numbers were included. OSD officials explained that their methodology for calculating savings from joint bases consists of comparing the joint bases’ current fiscal year obligations with a baseline amount—the cost to provide installation support at the 26 previously stand-alone installations that constitute the joint bases—which is updated every fiscal year to reflect changes in mission requirements and inflation, among other factors. However, this approach is unable to distinguish savings from efficiencies obtained through consolidation of installation-support services at the joint bases or from other factors that also contributed to lower obligations. For instance, OSD officials said fiscal year 2012 savings were also attributable to factors such as the military departments’ response to DOD’s efforts to cap the number of civilian positions. In addition, DOD stated in its letter that the joint bases’ fiscal year 2013 obligations were $830 million less than if they were still separate installations. DOD stated that this was a combination of savings and reduced expenditures caused by the Budget Control Act and fiscal year 2013’s sequestration actions, as well as from joint basing. However, OSD cannot determine how much of the $830 million in reduced obligations in fiscal year 2013 is attributable to budget cuts or efficiencies gained through the consolidation of installation support functions at the joint bases. Further, OSD cannot explain how sequestration-driven budget cuts have led to joint basing efficiencies.\nAlso, as stated in the report, joint base officials told us they are unclear to what extent achieving greater efficiencies and cost savings are still appropriate for the goals of joint basing, and to what extent they are required to pursue additional opportunities beyond the consolidation of installation-support functions in the joint base memorandums of agreement to achieve these goals. Joint base and military service headquarters officials said that in an environment when priority is placed on getting the mission done with fewer resources, the investment of resources to pursue initiatives or conduct studies to determine the feasibility of efforts to cut redundancies and gain efficiencies has not always been a priority. We believe that the continued confusion at the joint bases over the goals of the program, as well as cost savings estimates that reflect uncertainty as to the extent consolidation of installation-support functions drives savings as compared to simply cutting the budget, indicate a continuing need to review the goals of the program and communicate them to the military services and joint bases, as recommended.\nDOD did not concur with the fourth recommendation that OSD, in collaboration with the military services, provide direction to joint bases on their requirements for meeting the joint base program’s goals and work with the military services to determine reporting requirements and milestones to be put in place to increase support and commitment for the program’s goals. In its comments, DOD stated that the joint bases have been fully operational since October 2010 and have proven they can deliver measurable and tangible savings across the installation-support portfolio. As such, DOD stated that it does not believe OSD should establish program milestones. However, DOD’s assertion that the joint bases have proven they can deliver tangible savings is based on a method of calculating savings that cannot distinguish savings attributable to consolidation of installation-support functions at the joint bases from savings attributable to other factors, including sequestration-driven budget cuts, as noted above.\nDOD further stated that it does not agree OSD should provide additional direction towards meeting the program’s goals because the joint base commanders and military departments are in the best position to balance efficiency with effectiveness and that directing additional consolidations circumvents their ability to make these decisions. In addition, DOD stated that establishing milestones implies joint bases are still in an implementation phase, and noted that OSD has transitioned from managing joint base implementation to a steady-state oversight role.\nThe report does not call for OSD to make additional consolidations; rather, the recommendation states that OSD, in collaboration with the military services, should provide additional direction to the joint bases on how to achieve the goals of the program. Moreover, we agree that the military services are in the best position to balance efficiency with effectiveness when managing and operating installations, which is one reason we sent our survey to the joint bases to solicit their views. However, as stated in the report and noted above, joint base and military service headquarters officials told us that in an environment when priority is placed on getting the mission done with fewer resources, the investment of resources to pursue initiatives or conduct studies to determine the feasibility of efforts to cut redundancies and gain efficiencies has not always been a priority. As such, the officials indicated that the degree to which joint bases looked for opportunities to gain efficiencies and cost savings depended on the commitment of the officials involved as well as the level of support and commitment they received from their service headquarters, because overarching goals, plans, milestones, and reporting requirements have not been established.\nWithout OSD establishing goals and milestones to be achieved across the joint bases, there is a risk that emphasis or priority will not be given to this pursuit.\nFurthermore, DOD stated that it advocates treating joint bases no differently than other Army, Navy, and Air Force installations, and noted the only unique quality of joint bases is the sizeable joint presence they support. Although DOD indicated that joint bases are similar to all other installations, as stated in the report, 64 percent of survey respondents reported challenges stemming from consolidation of installation-support functions—consolidations unlikely to occur on stand-alone installations. Moreover, joint bases are required to meet certain different installation- support standards that are, at times, higher than those on a stand-alone installation. Meeting these standards can require additional resources or prioritization that other installations may not face. DOD did not explain how joint bases can have support standards and challenges that are unique to joint basing while still being considered the same as all other installations. Given (1) that joint bases face unique challenges, and (2) that joint base and military service officials said it is unclear as to the extent initial joint basing goals are still appropriate as well as the extent they are required to pursue cost savings and efficiencies, additional direction would help joint bases better understand the current and ongoing goals of joint basing. Therefore, we believe the recommendation is still warranted.\nFor the reasons cited above, we continue to believe that OSD should collaborate with the military services, especially in light of OSD’s assertions that joint bases have generated savings, to (1) evaluate the purpose of the program and determine whether the current goals, as stated in the 2005 BRAC Commission recommendation, are still appropriate; (2) communicate the goals to the military services and joint bases, and then adjust program activities accordingly; (3) provide direction to the joint bases on requirements for meeting program goals, including reporting requirements and milestones; and (4) determine any next steps for joint basing, including whether to expand it to other installations. If joint basing may result in savings, particularly at the level that OSD asserts, then DOD may want to consider expanding joint basing to other installations. Further, key change management practices state that it is essential that top government and agency leaders are committed to consolidation and play a lead role in executing it by setting the direction, pace, and tone as well as providing a clear and consistent rationale for doing so. These practices also state that establishing implementation goals and milestone dates, and tracking progress toward those goals, helps agency officials pinpoint performance shortfalls and suggest midcourse corrections, including any needed adjustments to the organization’s future goals and milestones. Consequently, and given DOD’s disagreement with our recommendations that OSD collaborate with the military services and joint bases to evaluate the purpose of the program and determine whether DOD’s current goals of achieving greater efficiencies and generating cost savings for the joint basing program are still appropriate and subsequently provide direction to joint bases on their requirements for meeting the joint base program’s goals, we have added a matter for congressional consideration to this report. Our intent is to help ensure DOD’s approach to joint basing achieves the goals as outlined by DOD in its justification for the 2005 BRAC recommendation and leverages additional opportunities to reduce duplication of effort that could in turn generate cost savings and increase efficiencies.\nWe will send copies to the appropriate congressional committees, the Secretary of Defense, the Secretaries of the Army, Navy, and Air Force, and Commandant of the Marine Corps; and the Office of Management and Budget; and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII.", "For this review, we conducted site visits at a nongeneralizable sample of four joint bases: one Navy led, one Army led, and two Air Force led. We selected these bases to ensure representation from each of the military services, and to include bases that share and do not share a physical boundary. Information collected during these site visits provided insight about initiatives undertaken and outcomes experienced at these locations. We also obtained and analyzed documents and conducted interviews, as described later in this section. Furthermore, we conducted a web-based survey of 11 of the 12 joint bases. Our web-based survey did not include Joint Region Marianas because it is a joint region rather than a joint base, and is subject to different expectations for the consolidation of installation-support, but we interviewed officials from Joint Region Marianas. Those surveyed at the 11 joint bases included representatives affiliated with 462 installation-support functional areas (42 each at each of the joint bases) as well as the 11 Joint Base Commanders (or their designated representative), and we obtained a response rate of 100 percent.\nTo conduct our web-based survey, we sent to each joint base the electronic links to 43 questionnaires, one questionnaire for each of the 42 installation-support functions identified for consolidation per the Department of Defense’s (DOD) Joint Base Implementation Guidance and one questionnaire asking a single open-ended question to capture additional comments from each Joint Base Commander. In consultation with DOD we excluded two installation-support functions from the survey (facilities new footprint and real property leases) because DOD officials indicated that they did not have performance management data and survey participants may not be able to fully respond to the questions. For the list of installation-support functions that we included in our survey, see table 5 below. The survey contained 16 main questions and several follow-up questions. It was designed to obtain information, using closed- and open-ended responses, about progress in consolidating functions, factors that hinder consolidation, and outcomes from consolidation such as any benefits, challenges, or reductions in duplication (defined as reductions in redundancy) in three areas—personnel other than contractors, base operating contracts, and procedures and policies. The survey also asked about the need for additional or modified guidance from one or more of the military services or Office of the Secretary of Defense (OSD) and if there were any additional opportunities to consolidate that had not yet been implemented. See appendix II for a copy of the survey questions.\nTo administer the survey, we provided unique survey log-in information for each function to the Joint Base Commander’s office. That office was then responsible for disseminating the information to the appropriate lead service component’s subject-matter expert for each of the functional areas. While the survey was provided to the lead component’s subject- matter expert, each base had the opportunity to incorporate views and comments from the supported component(s). For joint bases that did not have a given function (e.g., port operations), the joint base representative simply indicated that the function did not exist and no further questions were asked or answered.\nOur analysis of the survey responses included descriptive statistics from closed-ended responses and content analysis of open-ended responses. We reviewed the closed-ended responses to ensure accuracy of information for six key survey questions: (Q2) “Is any part of this support function currently the responsibility of the Joint Base Commander?”, and (Q3) “Since your joint base established the terms of the Joint Base Memorandum of Agreement (MOA), has any part of this support function been consolidated?”, and questions 9 through 12 (see Appendix II for the complete wording of these questions). For these questions, we compared the closed-ended response to the open-ended elaborations to ensure that the closed-ended response accurately represented the respondent’s meaning. When there was a mismatch we also checked the base’s MOA and supplemental Joint Base Implementation Guidance, if applicable. In some cases, we modified the closed-ended response to match the response in the open-ended elaboration or the MOA (e.g., if a respondent answered “yes” to the closed-ended question about the function being consolidated but then clearly indicated in the elaboration space “this function has not been consolidated”). For example, these cases related to changing: (1) “no” responses to “not applicable” when a function was not present at the joint base; (2) “not applicable” responses to “no” when the Joint Base Implementation Guidance excepted the installation-support function in some instances from being transferred to the Joint Base Commander; and (3) “no” responses to “yes” when the installation- support function had been consolidated prior to joint basing. Inconsistent responses were identified through a content analysis of the open-ended survey questions, in which two GAO analysts independently reviewed the responses and coded them into several categories, such as “consolidated prior to joint basing”, “reports no reduction”, and “reductions but not directly related to joint basing.”\nWhen the coding was completed, both analysts reviewed every code made by the other analyst and indicated whether they agreed or disagreed with the code. Then, the analysts met to discuss their coding determinations and reached agreement on any differences. Because we made changes to the closed-ended survey responses for the key questions above based on our analysis of the open-ended responses and the base MOAs, the results for those questions are not the raw survey responses; they are the combined result of the original survey responses and our analyses of those survey responses. We have worded the results in our report carefully to accurately represent that fact. Additionally, two analysts independently summarized the responses to open-ended questions that were not elaborations of closed-ended questions (e.g., Question 6 regarding other factors that might have hindered the ability of the base to consolidate a function) through the same content analysis process described above. We believe the data analyzed are sufficiently reliable for the purposes of this report.\nWe sent e-mail notifications to base points of contact beginning on January 13, 2014. We then sent a cover e-mail with the log-in information for the questionnaire beginning on January 14, 2014, and asked the bases to complete the questionnaire within one month. To encourage respondents to complete the questionnaire, we sent e-mail message reminders and log-in information approximately two weeks, three weeks, and five weeks after the initial questionnaire was sent; we also extended the deadline for completion. We also sent customized emails and made follow-up phone calls to the base points of contact to maximize the response rate from all functions and to clarify responses for key individual questions. We closed the survey on March 19, 2014. We achieved a 100 percent response rate from all base functions and commanders.\nTo minimize errors that might occur from respondents interpreting our questions differently than we intended, we pretested the questionnaire with knowledgeable representatives from four joint bases.pretests, we asked the officials to complete the questionnaire as we observed the process and noted potential problems (two sessions were conducted in-person and by phone, two were conducted only by phone).\nDuring these We then discussed the questions and instructions with the officials to check whether (1) the questions and instructions were clear and unambiguous, (2) the terms used were accurate, (3) the questionnaire was unbiased, (4) the questionnaire did not place an undue burden on the officials completing it, and (5) to identify potential solutions to any problems identified. We also submitted the questionnaire for review by an independent GAO survey specialist, OSD officials, and senior staff from one additional joint base. We modified the questionnaire based on feedback from the pretests and reviews, as appropriate.\nBecause we collected data from every joint base rather than a sample of bases, there was no sampling error. However, the practical difficulties of conducting any survey may introduce errors, commonly referred to as nonsampling errors. For example, differences in how a particular question is interpreted, the sources of information available to respondents, how the responses were processed and analyzed, or the types of people who do not respond can influence the accuracy of the survey results. We took steps in the development of the survey, the data collection, and the data analysis to minimize these nonsampling errors and to help ensure the accuracy of the answers that were obtained. For example, a social science survey specialist designed the questionnaire, in collaboration with GAO staff with subject-matter expertise. Then, as noted earlier, the draft questionnaire was pretested to ensure that questions were relevant, clearly stated, and easy to comprehend. The questionnaire was also reviewed by external experts and an additional GAO survey specialist. From these pretests and reviews, we made revisions as necessary to reduce the likelihood of nonresponse and reporting errors on our questions. Our analysts answered respondent questions and resolved difficulties that respondents had in answering our questions. We examined the survey results and performed computer analyses to identify inconsistencies and other indications of error and addressed such issues. A second, independent analyst checked the accuracy of all computer analyses to minimize the likelihood of errors in data processing. To obtain additional narrative and supporting context, survey respondents were given multiple opportunities to provide additional open-ended comments throughout our survey. Data were electronically exported from the web survey software into a statistical program for analyses. No manual data entry was performed, thereby removing an additional potential source of error. We examined the survey results and performed computer analyses to identify inconsistencies and other indications of error (e.g., open-ended responses conflicting with closed-ended responses), and addressed such issues as necessary.\nTo determine the extent to which officials have reported consolidating their installation-support functions, we reviewed DOD’s 2008 Joint Basing Implementation Guidance to identify DOD’s expectations for consolidation. Next, we analyzed data obtained through the survey and information from interviews with officials from the Joint Region Marianas and the joint bases and compared the results of our analysis to DOD’s expectations for consolidation. To determine why consolidation had or had not occurred as intended and to identify any reported factors that have hindered consolidation and challenges that have resulted from consolidation efforts, we analyzed information obtained through our survey and interviewed joint base officials. We evaluated DOD’s efforts to address reported hindrances to consolidation and challenges that have resulted from consolidation efforts with key federal practices for consolidation identified in our prior work on federal agency consolidation efforts. We did not independently assess the extent to which consolidation occurred as identified by survey respondents and by officials during interviews.\nTo determine the extent to which officials have reported meeting the goals of joint basing to achieve greater efficiencies and cost savings as stated in the 2005 BRAC recommendation, we reviewed documents and guidance from OSD, the military services, and individual joint bases. We reviewed survey results and information collected from interviews and compared them to key federal practices for consolidation of management functions and to key practices agencies can take to improve efficiency as identified in our prior work. federal practices for consolidation, such as establishing implementation goals and milestone dates, and tracking progress toward those goals.\nGAO-06-15 and GAO-11-908. officials; members of the Joint Base Working Group that represents the Army, Navy, Air Force, and Marine Corps headquarters; as well as officials from the Army Installation Management Command, the Air Force Civil Engineer Center, and the Naval Installations Command. We also interviewed officials at the following locations:\nAir Force Air Education and Training Command, Texas\nAir Force Air Mobility Command, Illinois\nNavy Region Naval District Washington; Washington, District of Joint Base Anacostia-Bolling, Washington, District of Columbia Joint Base Langley-Eustis, Virginia Joint Base Lewis-McChord, Washington Joint Base San Antonio, Texas Joint Expeditionary Base Little Creek-Fort Story, Virginia Joint Region Marianas, Guam\nNavy Region Hawaii U.S. Pacific Air Forces, Hawaii We conducted this performance audit from July 2013 to September 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The questions that we asked in our survey on consolidation of joint base operations are shown below. The percents in parentheses indicate the percent of the functional area respondents who chose that particular answer or that our analysis of open-ended responses and other supporting documentation for the joint bases indicated were the correct answers. The number in parentheses next to a closed-ended question (e.g., “N=462”) indicates the number of respondents who were eligible to answer that question and is the denominator of the percents reported for that question. See Appendix I for details of the analyses that led to the results reported here.", "[When a respondent for a specific functional area logged on, the name of the functional area was displayed along with the definition of the function taken from the May 2013 Cost and Performance Visibility Framework Handbook. When the Joint Base Commander’s office logged on, the following question was displayed.] If the Joint Base Commander or his/her representative has any comments about this questionnaire or about your joint base’s consolidation of installation-support functions, please type them in the box below.", "2. Is ANY part of this support function currently the responsibility of the Joint Base Commander (JBC)? Check only one answer. (N=462)\nYes (94.8%) No (1.9%) N/A - this base does not have this function (3.2%)", "3. Since your joint base established the terms of the Joint Base Memorandum of Agreement (MOA), has ANY part of this support function been consolidated? Check only one answer. (N=438)\nYes (75.8%) No (19.4%) Not applicable (4.1% ) Don’t know (.2%) Blank (.5%)\nPlease explain your answer in the box below. 4. How much, if at all, did the preexisting model of providing this support function (e.g., military personnel, civilian personnel, contract personnel) hinder the ability of your joint base to consolidate this support function? Check only one answer. (N=438)\nSignificantly (15.8%) Moderately (14.6%) Slightly (11.2%) Not at all (47.9%) Not applicable (6.4%) Don’t know (3.4%) Blank (.7%)\nPlease explain your answer in the box below.\nPlease explain your answer in the box below. 5. How much, if at all, do military service-specific requirements, practices, or policies hinder the ability to consolidate this support function? Check only one answer. (N=438)\nSignificantly (17.8%) Moderately (11.9%) Slightly (15.5 %) Not at all (46.1 %) Not applicable (6.4%) Don’t know (1.6 %) Blank responses (.7%) 6. What other factors, if any, have hindered the ability of your joint base to consolidate this support function (e.g., geography, use of contractors, impact to mission, etc.)? 7. Have there been any benefits resulting from the consolidation of this support function (e.g., adoption of streamlined practices, increased efficiency, increased customer satisfaction, etc.)? Check only one answer. (N=350)\nYes (60.9%) No (34.0%) Don’t know (4.9%) Blank (.3%)\nPlease describe the benefit(s) in the box below. 8. Have there been any challenges resulting from the consolidation of this support function (e.g., increased burden on staff, decreased efficiency, decreased customer satisfaction, etc.)? Check only one answer. (N=350)\nYes (64.0%) No (33.1%) Don’t know (2.9%)\nPlease describe the challenge(s) in the box below. 9. Since your joint base established the terms of the Joint Base MOA, has there been ANY reduction of redundant funded positions—excluding contractors—(i.e., authorized positions that were determined to be duplicative or unnecessary after transfer of total obligation authority, because they included the similar roles and responsibilities) required to perform this support function? Check only one answer. (N=438)\nYes (12.1%) No (40.4%) Not applicable (40.6%) Don’t know (6.4%) Blank (.5%) 9.a. Please describe the reduction(s) and the reason for the reduction(s) in the box below. 9.b. How many redundant authorized positions have been eliminated? 9.c. Please explain in the box below. 10. Since your joint base established the terms of the Joint Base MOA, has there been ANY reduction of redundant contracts or any increased contract efficiencies (i.e., contracts for the provision of the same support service that were determined to be duplicative, or where consolidation of the contract resulted in improvements, for example, leveraging economies of scale) used to perform this support function? Check only one answer. (N=438)\nYes (25.3%) No (24.4%) Not applicable (43.8%)\nDon’t know (5.9%) Blank (.5%) 10.a. Please describe the reduction(s) or efficiencies in the box below. 10.b. How many redundant contracts, if any, have been eliminated? 10.c. Please explain in the box below. 11. Since your joint base established the terms of the Joint Base MOA, has there been ANY merger or consolidation of Information Technology (IT) systems related to performing this support function (e.g., networks, databases, etc.)? Check only one answer. (N=438)\nYes (25.3%) No (34.2%) Not applicable (32.4%) Don’t know (7.5%) Blank (.5%) 11.a. Please describe the merger/consolidation(s) in the box below. 11.b. Please explain in the box below. 12. Since your joint base established the terms of the Joint Base MOA, has there been ANY merger or consolidation of redundant procedures (i.e., procedures that were determined to be duplicative or unnecessary) used to perform this support function? Check only one answer. (N=438)\nYes (24.0%) No (25.6%) Not applicable (44.5%) Don’t know (5.5%) Blank (.5%) 12.a. Please describe the merger/consolidation(s) in the box below. 12.b. Please explain in the box below. 13. Are there specific areas where additional or modified guidance from one or more of the military services would improve the consolidation of this function? Check only one answer. (N=438)\nYes (26.3%) No (60.3%) Don’t know or no opinion (12.8%) Blank (.7%)\nPlease describe the change(s) in the box below. 14. Are there specific areas where additional or modified guidance from the Office of the Secretary of Defense (OSD) would improve the consolidation of this function? Check only one answer. (N=438)\nYes (26.7%) No (58.2%) Don’t know or no opinion (14.2%) Blank (.9%)\nPlease describe the change(s) in the box below. 15. If there are any additional opportunities to consolidate this installation-support function that have not yet been implemented, please describe them in the box below. 16. If you have any additional comments related to the consolidation of this support function since your joint base established the terms of the Joint Base MOA, please type them in the box below.", "Appendix III: BRAC Commission Recommendation on Joint Basing (Including Elements of DOD’s Recommendation to the Commission)", "Legend:  = Some part of the function is consolidated;  = no part of the function is consolidated; n/a = Joint base does not have the function or the function was not the joint base commander’s responsibility.\nMissing or unknown data.", "This appendix contains information presented in figure 1 in a noninteractive format.", "", "", "", "In addition to the contact named above, Laura Durland, Assistant Director; Chaneé Gaskin, Susan Langley, Amanda Manning, Joshua Margraf, Stephanie Moriarty, Richard Powelson, Tida Reveley, Michael Silver, Amie Steele, Sarah Veale, and Michael Willems made key contributions to this report.", "DOD Joint Bases: Management Needed to Achieve Greater Efficiencies. GAO-13-134. Washington, D.C.: November 15, 2012.\nBRAC 2005 Results. GAO-12-513T. Washington, D.C.: March 8, 2012.\nExcess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.: September 19, 2011.\nMilitary Base Realignments and Closures: Review of the Iowa and Milan Army Ammunition Plants. GAO-11-488R. Washington, D.C.: April 1, 2011.\nGAO’s 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011.\nHigh-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 2011.\nDefense Infrastructure: High-Level Federal Interagency Coordination Is Warranted to Address Transportation Needs beyond the Scope of the Defense Access Roads Program. GAO-11-165. Washington, D.C.: January 26, 2011.\nMilitary Base Realignments and Closures: DOD Is Taking Steps to Mitigate Challenges but Is Not Fully Reporting Some Additional Costs. GAO-10-725R. Washington, D.C.: July 21, 2010.\nDefense Infrastructure: Army Needs to Improve Its Facility Planning Systems to Better Support Installations Experiencing Significant Growth. GAO-10-602. Washington, D.C.: June 24, 2010.\nMilitary Base Realignments and Closures: Estimated Costs Have Increased While Savings Estimates Have Decreased Since Fiscal Year 2009. GAO-10-98R. Washington, D.C.: November 13, 2009.\nMilitary Base Realignments and Closures: Transportation Impact of Personnel Increases Will Be Significant, but Long-Term Costs Are Uncertain and Direct Federal Support Is Limited. GAO-09-750. Washington, D.C.: September 9, 2009.\nMilitary Base Realignments and Closures: DOD Needs to Update Savings Estimates and Continue to Address Challenges in Consolidating Supply- Related Functions at Depot Maintenance Locations. GAO-09-703. Washington, D.C.: July 9, 2009.\nDefense Infrastructure: DOD Needs to Periodically Review Support Standards and Costs at Joint Bases and Better Inform Congress of Facility Sustainment Funding Uses. GAO-09-336. Washington, D.C.: March 30, 2009.\nMilitary Base Realignments and Closures: DOD Faces Challenges in Implementing Recommendations on Time and Is Not Consistently Updating Savings Estimates. GAO-09-217. Washington, D.C.: January 30, 2009.\nMilitary Base Realignments and Closures: Army Is Developing Plans to Transfer Functions from Fort Monmouth, New Jersey, to Aberdeen Proving Ground, Maryland, but Challenges Remain. GAO-08-1010R. Washington, D.C.: August 13, 2008.\nDefense Infrastructure: High-Level Leadership Needed to Help Communities Address Challenges Caused by DOD-Related Growth. GAO-08-665. Washington, D.C.: June 17, 2008.\nDefense Infrastructure: DOD Funding for Infrastructure and Road Improvements Surrounding Growth Installations. GAO-08-602R. Washington, D.C.: April 1, 2008.\nMilitary Base Realignments and Closures: Higher Costs and Lower Savings Projected for Implementing Two Key Supply-Related BRAC Recommendations. GAO-08-315. Washington, D.C.: March 5, 2008.\nDefense Infrastructure: Realignment of Air Force Special Operations Command Units to Cannon Air Force Base, New Mexico. GAO-08-244R. Washington, D.C.: January 18, 2008.\nMilitary Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased. GAO-08-341T. Washington, D.C.: December 12, 2007.\nMilitary Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve. GAO-08-159. Washington, D.C.: December 11, 2007.\nMilitary Base Realignments and Closures: Impact of Terminating, Relocating, or Outsourcing the Services of the Armed Forces Institute of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007.\nMilitary Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency. GAO-08-121R. Washington, D.C.: October 26, 2007.\nDefense Infrastructure: Challenges Increase Risks for Providing Timely Infrastructure Support for Army Installations Expecting Substantial Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007.\nMilitary Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More Than 100 Armed Forces Reserve Centers. GAO-07-1040. Washington, D.C.: September 13, 2007.\nMilitary Base Realignments and Closures: Observations Related to the 2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007.\nMilitary Base Closures: Projected Savings from Fleet Readiness Centers Are Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29, 2007.\nMilitary Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16, 2007.\nMilitary Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166. Washington, D.C.: January 30, 2007.\nMilitary Bases: Observations on DOD’s 2005 Base Realignment and Closure Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July 18, 2005.\nMilitary Bases: Analysis of DOD’s 2005 Selection Process and Recommendations for Base Closures and Realignments. GAO-05-785. Washington, D.C.: July 1, 2005.\nMilitary Base Closures: Observations on Prior and Current BRAC Rounds. GAO-05-614. Washington, D.C.: May 3, 2005.\nMilitary Base Closures: Updated Status of Prior Base Realignments and Closures. GAO-05-138. Washington, D.C.: January 13, 2005.\nMilitary Base Closures: Assessment of DOD’s 2004 Report on the Need for a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17, 2004.\nMilitary Base Closures: Observations on Preparations for the Upcoming Base Realignment and Closure Round. GAO-04-558T. Washington, D.C.: March 25, 2004." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 2, 1, 2, 3, 3, 3, 3, 2, 1, 1, 1, 1, 1, 1, 2, 2, 2, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "h0_full", "h1_full", "", "h0_full h1_full", "h0_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "h0_full" ] }	{ "question": [ "How did the GAO evaluate the DOD?", "Why were the joint bases recommended?", "How was the estimate changed?", "How was the GAO directed to watch the DOD?", "What does this report address?", "What information was utilized to complete this report?", "Why was Joint Region Marianas excluded from the report?", "What action does the GAO recommend Congress to take?", "Why is the GAO giving recommendations to Congress?", "What recommendations did the DOD concur with?", "How does the GAO view their evaluations?" ], "summary": [ "GAO designated DOD support infrastructure as a high-risk area to address efficiency challenges.", "In 2005, DOD recommended to the Base Realignment and Closure (BRAC) Commission combining 26 installations into 12 joint bases to generate efficiencies and cost savings, initially estimated to be $2.3 billion.", "In 2009, DOD reduced this estimate to $273 million.", "GAO was mandated to assess DOD's progress in consolidating common services across joint bases.", "This report addresses the extent to which officials reported consolidating installation-support functions, and meeting joint basing goals to achieve greater efficiencies and cost savings.", "GAO conducted a survey of 11 joint bases, and reviewed applicable guidance.", "GAO did not survey Joint Region Marianas because it was subject to different expectations.", "Congress should consider directing DOD to evaluate joint basing goals, provide direction on requirements to meet the goals, and determine next steps for joint basing.", "GAO included this matter because DOD did not concur with GAO's recommendations to conduct such an evaluation and provide direction, in part because DOD stated joint bases have achieved savings.", "GAO also recommended DOD evaluate which installation-support functions remain suitable for consolidation, with which DOD concurred, and take policy actions to address challenges, with which DOD partially concurred, noting its existing processes to address challenges.", "GAO continues to believe its findings and recommendations are valid as discussed in this report." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 4, 4, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 0, 0, 4, 4, 4, 4 ] }
GAO_GAO-15-633	{ "title": [ "Background", "Medicare Part D Benefit and Payment Structure", "CMS Oversight of Part D", "Part D RAC Program", "CMS Undertook Various Activities to Establish the Part D RAC Program, but Unclear Expectations and Unrealistic Project Timelines Hampered Implementation", "CMS Implemented the Part D RAC Program by Establishing a Statement of Objectives and Conducting a Solicitation Process to Select a Contractor", "CMS Said It Implemented Three Additional PPACA Requirements for the Part D RAC Program", "Unclear Expectations and Unrealistic Project Timelines Hampered RAC Program Implementation", "CMS Has Not Completed Annual Evaluations of the Part D RAC but Has Conducted Other Oversight of the RAC’s Performance", "CMS Has Not Completed Any Annual Evaluations of the RAC Since the RAC Contract Was Signed, but Evaluation for 2014 Is in Progress", "CMS Has Conducted Other Oversight of the RAC’s Performance, Including Inspecting Its Work Products and Reviewing Its Audit Findings", "CMS Collected Less than $10 Million in Improper Payments as of May 2015, in Part Because of Challenges in Determining and Conducting Audit Activities", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Comments from the Department of Health and Human Services", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Since 2006, CMS has contracted with private companies, referred to as plan sponsors, to provide outpatient prescription drug plans for Medicare beneficiaries. In 2014, there were 3,455 prescription drug plans offered nationwide. Every time a Medicare beneficiary fills a prescription covered under Part D, the sponsor must submit a prescription drug event (PDE) record to CMS. These records include drug cost and payment information that enables CMS to administer and monitor the Part D benefit. Plan sponsors are required to have comprehensive compliance programs that include a plan to safeguard the program from fraud, waste, and abuse.", "Plan sponsors are required to offer plans that provide a minimum set of benefits to beneficiaries—the standard benefit—or an actuarially equivalent benefit. Beneficiaries pay monthly premiums and cost sharing—such as coinsurance—for drug purchases. The amount of cost sharing varies over the course of the year as beneficiaries move through the phases of the benefit. As shown in figure 1, the standard benefit in 2014 featured a $310 deductible and an initial coverage period during which beneficiaries pay coinsurance of 25 percent of the cost for prescription drugs until they reach the initial coverage limit of $2,850. After the initial coverage period, beneficiaries enter a coverage gap, during which beneficiaries pay a large share of drug costs. After reaching the catastrophic threshold, beneficiaries pay a small share of total drug costs. Under Part D, certain individuals are also entitled to a low-income subsidy, through which they pay reduced premiums and generally have zero or nominal cost sharing.\nIn addition to the subsidy for certain low-income individuals, Medicare also provides Part D plans with direct subsidy payments and reinsurance payments. The direct subsidy is a monthly prospective capitated payment to plans adjusted for the health status of beneficiaries expected to enroll, among other things. Reinsurance payments are monthly subsidies Medicare pays to plans that cover 80 percent of plans’ estimates for beneficiaries that incur costs above the catastrophic threshold.", "CMS has a goal to reduce improper payments in the Medicare Part D program and conducts a number of activities to protect the integrity of the program—that is, to ensure that payments are made correctly the first time and to identify, investigate, and recoup payments made in error. CMS’s Center for Program Integrity oversees Part D program integrity. Within the Center for Program Integrity, the Division of Plan Oversight and Accountability is responsible for administering the Part D RAC program. The Division of Plan Oversight and Accountability coordinates its efforts with components in CMS’s Center for Medicare and the Office of Acquisition and Grants Management.", "The Part D RAC is required under PPACA to conduct post-payment reviews to identify improper payments in the Part D program. In addition, the RAC is required to conduct three additional activities: ensure that each Part D prescription drug plan has an antifraud plan in effect and review the effectiveness of each plan; examine Part D prescription drug plans’ claims for reinsurance payments to determine whether costs were incurred in excess of the costs allowed; and review Part D prescription drug plans’ estimates for the enrollment of high-cost beneficiaries and compare to the numbers of high-cost beneficiaries actually enrolled.\nThe RAC uses a CMS-approved audit methodology to identify potential improper payments, takes steps to have its work validated by another contractor, and provides plan sponsors with an opportunity to appeal its findings, prior to CMS collecting any confirmed improper payments. The RAC may use data from CMS and the HHS Office of Inspector General, such as CMS’s Medicare Exclusion Database or the Office of Inspector General’s List of Excluded Individuals/ Entities, among other sources, and compare those data to Medicare Part D claims data that plan sponsors submit in PDE records to identify potential improper payments. The RAC reviews all contracts that fall within a particular year for a particular plan sponsor unless directed to do otherwise by CMS, and may identify potential improper payments on PDE records within 4 years of the plan sponsor’s current plan year. After the RAC has identified potential improper payments in PDE records, a data validation contractor confirms the results and works with the RAC to resolve any discrepancies, for example in the amount of improper payments identified or the number of PDE records containing potential improper payments. Once the RAC’s results are finalized, the results are sent to the plan sponsor to give it an opportunity to appeal the RAC’s results, that is, to request a reconsideration of the identified potential improper payments and provide additional documentation to support its request. After all appeals are considered and final decisions are made, CMS collects improper payments from plan sponsors. The RAC is paid on a contingency fee basis from amounts recovered, as required by law. This payment is a percentage of the improper payments that CMS collects after the appeals process has been completed.", "CMS implemented the Part D RAC program in January 2011 by undertaking various activities, including establishing a statement of objectives and conducting a solicitation process to select a RAC to identify improper payments. CMS officials told us the agency addresses additional PPACA requirements for the Part D RAC program through other activities it conducts. However, unclear expectations about the work the Part D RAC would conduct and unrealistic timelines regarding project milestones hampered Part D RAC program implementation.", "CMS implemented the Part D RAC program in January 2011 by undertaking various activities, such as establishing a statement of objectives, conducting a solicitation process to select a contractor, and awarding a Part D RAC contract. CMS’s statement of objectives described the outcomes that CMS required a Part D RAC to achieve, such as developing a methodology to identify improper payments. Prospective contractors were to use this statement of objectives to design a performance work statement to describe how they would conduct their work to achieve those objectives. According to CMS officials, the majority of CMS contracts include a statement of work that describes how contractors should conduct their work. However, CMS officials decided that prospective contractors for the Part D RAC program would design their own performance work statements instead because CMS officials said they wanted to give industry the opportunity to shape the program.\nAfter CMS created the statement of objectives, it solicited contractors to serve as the Part D RAC using the General Services Administration’s Federal Supply Schedule. Although using the Federal Supply Schedule limited the number of potential contractors that could respond to CMS’s solicitation and from which CMS could choose, CMS officials said the agency chose this solicitation method because it was a streamlined approach to generate interest from contractors already approved to work for the federal government. According to CMS officials, CMS received two proposals from potential contractors, and only one of them was found to be technically acceptable. CMS officials said that they reviewed the potential contractors’ performance work statement and assessed their experience with Medicare Part D and knowledge of Medicare Part D statutes and regulations, along with other qualifications. CMS selected the only contractor whose proposal, including its performance work statement, the agency considered technically acceptable. While this contractor did not have any previous federal experience, CMS determined that its recovery audit experience in the private sector was sufficient. In January 2011, when CMS awarded a contract to the contractor selected to serve as the Part D RAC, the contractor’s performance work statement became part of the contract. As such, the performance work statement established requirements and set expectations for the work the RAC would perform and how the work would be conducted.\nThe RAC’s initial contract period was for 1 base year with four 1-year options for extension, although CMS extended the base period of the contract eight times over a 2-year period through contract modifications. The base period was originally through January 2012; however, it was extended through December 2013. At that time, CMS and the RAC agreed in a contract modification to revise the performance period to reflect a 3-year base period, two 12-month option periods, and a separate nearly 13-month option for administrative and appeals activities. CMS and the RAC exercised the first option period of the modified contract, which ran from January through December 2014, and then the second and final option period, which ends December 31, 2015.\nCMS officials said they plan to obtain the RAC services on the open market using a full and open competitive solicitation and select a contractor to begin serving as the Part D RAC under new contract terms in January 2016. CMS officials also said the 2016 Part D RAC contract will include a statement of work.", "According to CMS officials, the RAC cannot perform activities to address the three additional PPACA requirements for the Part D RAC program, and therefore CMS conducts activities that address these requirements. CMS officials told us that the RAC cannot perform activities to address the additional requirements because the fee that CMS is statutorily required to pay the RAC is based on improper payments identified by the RAC, and there is no allowance under the statute for payment for other work done by the RAC.\nHowever, CMS conducts certain activities that, according to CMS officials, address the three PPACA requirements:\nEnsure that each Part D plan has an antifraud plan in effect and review the effectiveness of each plan—According to CMS officials, the agency meets this requirement by conducting program compliance audits of plan sponsors, which include a review of the sponsors’ antifraud plans. According to CMS officials, 96 percent of beneficiaries are enrolled in Part D plans that have been reviewed within a 5-year period as part of these compliance audits. In addition, CMS conducted a pilot study from September 2013 to February 2014 to review the effectiveness of five plan sponsors’ antifraud plans. CMS officials said the findings from this study will be used to inform and, if necessary, improve CMS’s reviews of sponsors’ antifraud plans as part of its compliance audits.\nExamine Part D plans’ claims for reinsurance payments to determine whether costs were incurred in excess of the reinsurance costs allowed—According to CMS officials, the agency meets this requirement through its reconciliation of Part D plans’ reinsurance estimates to their actual costs. As CMS has noted, Part D plans legitimately incur costs in excess of allowable reinsurance costs during the catastrophic coverage period of the Part D benefit. CMS pays prospective reinsurance payments to Part D plans, based on the plans’ estimates of reinsurance costs, and reconciles these prospective reinsurance payments to the plans’ actual reinsurance costs on an annual basis.\nReview Part D plans’ estimates for the enrollment of high-cost beneficiaries and compare to the numbers of high-cost beneficiaries actually enrolled—According to CMS officials, the agency meets this requirement through its reconciliation of Part D plans’ reinsurance estimates to their actual costs. These officials said that although Part D plans do not submit actual estimates for the enrollment of high-cost beneficiaries to CMS, the plans’ estimates of the number of beneficiaries who will reach the catastrophic threshold affect plans’ reinsurance estimates, which are examined as part of the reconciliation process, as noted above.", "CMS’s challenges in setting expectations about the work the Part D RAC would conduct and establishing the length of time required for CMS and the RAC to reach project milestones hampered Part D RAC program implementation. CMS’s expectations for the work the RAC would perform were unclear because although CMS incorporated the terms of work set out in the performance work statement into the RAC’s contract without making any changes to the performance work statement, CMS later proposed audit work for the RAC to pursue that differed from the work described in the performance work statement. For example, the initial RAC audit process outlined in the performance work statement broadly focused on reviews of all PDE records to eliminate duplicate payments, to validate the accuracy of information in required PDE data fields and edit checks, and to validate the information in direct and indirect remuneration reports and PDE records by comparing it to additional documentation received from the plan sponsors. However, CMS officials proposed that the RAC focus its initial audit work only on providers that were excluded from the Medicare program yet had written or filled prescriptions that were paid for by CMS, and this became part of a contract modification in February 2012. A senior official with the RAC said that the RAC expected to conduct the audit process described in its performance work statement and did not learn until after the first contract year that the initial audit work would be narrowly scoped and proposed by CMS.\nIn addition, CMS required the RAC to follow processes for determining audit work and validating audit findings that differed from the processes set out in the performance work statement. For example, after CMS selected the initial audit work the RAC would conduct, CMS required the RAC to obtain CMS approval before it began work on subsequent audits. CMS also required a data validation contractor to review and validate the RAC audit findings. However, these steps were not included in the processes outlined in the performance work statement, and a senior official with the RAC said the RAC did not learn that CMS had adopted processes that required these steps until the end of the first contract year. The senior official with the RAC said the additional steps significantly lengthened the time it took to select audit topics and conduct audits, and reduced the number of audits the RAC was able to perform.\nCMS officials said they proposed that the RAC perform work and follow processes that were not in the performance work statement because they recognized during the first year of the contract that the RAC had less expertise in Medicare Part D regulations and the Part D benefit than was necessary. For example, CMS officials said that the RAC required significant assistance in developing its audit methodology because it lacked staff with adequate knowledge of Medicare Part D. According to these officials, in some cases it was necessary for CMS to develop audit methodology on the RAC’s behalf, and in other cases, CMS needed to revise the RAC’s methodology to eliminate numerous false positives— payments that the RAC incorrectly determined were overpayments— identified by the data validation contractor. CMS officials also said that they incorporated into the audit work CMS guidance, policies, and other internal processes in order to help ensure that the audit work was reasonable and viable.\nCMS officials said that once they recognized it was necessary to take a more prescriptive approach to directing the RAC’s work, they began developing a statement of work for the RAC, which was intended to replace the performance work statement. This statement of work included the processes that the RAC should follow to obtain CMS approval for new audit topics and to conduct audits. CMS sent the Part D RAC the initial draft statement of work in December 2011, but it was not finalized until 2 years later in December 2013. CMS officials said that prior to finalizing the statement of work, CMS provided guidance to the RAC about its expectations for the work the RAC was to perform through contract modifications. However, a senior official with the RAC said that throughout this period, the RAC did not have a clear understanding about CMS’s expectations regarding the work it should perform.\nIn addition to not setting clear expectations for the work the Part D RAC would perform, the agency also did not establish realistic timelines regarding the length of time required for CMS and the RAC to reach project milestones. The Part D RAC contract and implementation timeline, which CMS reviewed, did not adequately reflect the time needed to meet certain goals. (See fig. 2 for a comparison of the projected and actual timelines of key implementation activities.) For example, the RAC was required to ensure its information technology systems comply with the agency’s information system security guidelines before CMS would grant it the authority to operate. The implementation timeline projected that the RAC would receive its authority to operate within 3 months of the contract award. However, the RAC did not receive its authority to operate until about 8 months after the contract was awarded. CMS officials told us that it typically takes up to a year for a new contractor to obtain its authority to operate.\nFurthermore, CMS did not begin collecting improper payments and the Part D RAC did not begin receiving contingency fees until more than a year after projected in the 2011 Part D RAC contract. The Part D RAC contract projected CMS would collect improper payments and the RAC receive contingency fees by January 2012, the end of the original base period of the contract. Instead, CMS began collecting improper payments more than 1 year later, in February 2013. The RAC did not begin receiving contingency fees until April 2013, 16 months later than projected. The RAC was required to cover its operating expenses until audits could begin, but a RAC official said that the RAC had not expected the projected implementation deadlines to be incorrect by more than a year. In response to concerns RAC officials raised about expenses the RAC incurred during perceived delays in receiving contingency fees, CMS officials said they made several modifications to the Part D RAC contract. For example, CMS waived key personnel requirements and extended the base period of the contract eight times.\nSince CMS faced challenges setting expectations about the work the Part D RAC would conduct and about the length of time required for CMS and the RAC to reach implementation milestones for the Part D RAC program, the RAC did not have a clear understanding about the work it should perform, and CMS did not recover improper payments for Part D until a year later than projected. Consistent with FAR requirements, agencies should clearly define requirements for services. Furthermore, well-defined requirements are critical to ensuring the government gets what it needs from service contractors, as reported in our August 2011 review of opportunities to build strong foundations for better services contracts. While requirements for a project can change at any point, officials must aggressively manage changes in requirements to avoid a negative effect on project results.", "Since the Part D RAC contract was executed in January 2011, CMS has not completed any annual evaluations of the RAC’s performance. CMS is currently in the process of finalizing an evaluation of the RAC’s 2014 contract year performance. CMS has conducted other oversight of the RAC by establishing quality assurance procedures, such as progress meetings, inspection of deliverables, and audit finding review and acceptance.", "CMS has not completed any annual evaluations of the Part D RAC’s performance since the RAC contract was signed in January 2011. A senior official with the RAC said that despite the RAC’s requesting annual evaluations, CMS had not conducted annual evaluations since the beginning of the contract and did not explain to the RAC why it did not conduct these evaluations. In March 2015, CMS officials acknowledged that they should have completed annual evaluations and said the agency has been behind in its evaluations of some of its contractors, including the RAC. CMS officials said they started an evaluation of the RAC’s contract year 2014 performance in December 2014. In May 2015, CMS officials finished the initial evaluation of the RAC’s 2014 performance and provided the evaluation to the RAC for review and comment. The RAC has 60 days to submit a rebuttal to the agency’s evaluation, prior to CMS completing the evaluation. CMS officials said that the agency would not likely evaluate the RAC’s performance prior to 2014, but did not indicate its plans for performance evaluation of the 2015 contract year.\nIn addition to not having completed an annual evaluation of the RAC, CMS has not established performance standards with measurable targets against which to evaluate the RAC’s performance. A senior official with the RAC said that in addition to requesting evaluations, the RAC requested performance standards with targets, but has not received them. CMS officials said that the January 2014 statement of work included performance standards for the RAC, such as deadlines for submitting deliverables and error rate targets for audit work—that is, the target percentage of incorrect determinations of potential improper payments the RAC should not exceed. However, CMS did not create a target for how often the RAC must meet deadlines for submitting deliverables. Also, CMS officials acknowledged that the error rate target was a threshold used to determine how much time the data validation contractor would be given to conduct its work. Therefore, it is not a direct performance standard with targets for the RAC. While performance standards with targets do not exist for the Part D RAC, they do exist for other Medicare RACs. For example, the Medicare Parts A and B RACs have targets of 100 percent compliance in both maintaining private health information security and responding to written correspondence within 30 calendar days of receipt.\nMultiple federal standards and our prior work contain requirements and suggestions for conducting regular performance evaluations and developing performance measures, which would have provided CMS and the RAC with a basis for evaluating the RAC’s performance. In March 2013, the Office of Management and Budget issued a memorandum establishing targets in fiscal years 2013 through 2015 to improve compliance in conducting annual performance evaluations, with a target of 100 percent compliance in fiscal year 2015. The FAR requires federal performance-based contracts to include measurable performance standards and a method for assessing contractor performance against performance standards, as well as to clearly define requirements for services. According to federal internal control standards, federal agencies should conduct monitoring activities to assess the quality of performance over time and ensure that the findings of audits and other reviews are resolved promptly. According to our prior work, performance measurement systems should include not only the collection of data on various metrics, but also a designation of specific performance measures, with realistically achievable performance targets against which to measure progress. Since CMS had not completed annual contractor performance evaluations of the RAC using performance standards with measurable targets, CMS did not have a clear basis for assessing RAC performance in identifying improper payments and did not provide the RAC with targets against which the RAC could compare its performance.", "While CMS has not conducted annual contractor performance evaluations, it has conducted other oversight by establishing quality assurance procedures through contract modifications, including a statement of work. CMS first established certain quality assurance procedures in April 2012, through a contract modification, to ensure compliance with the contract. The quality assurance procedures included progress meetings, inspection of deliverables, and audit finding review and acceptance. CMS revised its quality assurance procedures in the statement of work effective January 1, 2014. The new quality assurance procedures included monitoring RAC performance using measures including, but not limited to, demonstration of ongoing dialogue or meetings with the appropriate and necessary parties; requiring the RAC to “maintain the highest degree of quality” for all activities performed throughout the period of performance of the contract; and monitoring contractor performance using measures including, but not limited to, completeness and accuracy of data analysis and all deliverables.\nHowever, these performance measures do not include targets, as called for in federal standards and our prior work.\nCMS took steps to oversee the RAC’s activities using these quality assurance procedures. For example, CMS officials said they conducted biweekly meetings with the RAC and held ad hoc meetings, as needed. CMS has also conducted oversight through audit finding review and acceptance. A data validation contractor reviews the RAC’s findings, and with the RAC, it resolves any discrepancies that were found between the review results and the RAC’s initial findings. CMS officials said that the data validation contractor reviews 100 percent of the RAC’s findings, in part because of concerns CMS had about the quality of the RAC’s initial audit work.\nIn addition to this ongoing oversight, in June 2014 CMS sent the RAC a letter titled “Areas of Concern for the RAC Part D Contract” to inform the RAC of concerns CMS program staff had about the overall performance of the contract. In the letter, CMS cited the quality assurance procedures in the statement of work as the source of its performance expectations for the RAC. CMS identified the following concerns about the RAC’s audit work: Incorrect templates and materials being used by the RAC to communicate with plan sponsors;\nQuality issues with identifying potential improper payments and preparing documents for data validation during audit work; and\nFormatting errors and erroneous information in letters to be sent to plan sponsors.\nWhile the RAC acknowledged that some of the concerns were valid, the RAC also disagreed with other concerns CMS raised. The RAC acknowledged that among other things, concerns CMS raised about some of the formatting errors and erroneous information were valid. However, the RAC rebutted some of CMS’s concerns. For example, the RAC noted that there was no measurable target for evaluating the RAC’s performance for one issue CMS raised. Specifically, CMS stated in the “Areas of Concern” letter that the agency had identified about 14,000 PDE records that the RAC had incorrectly determined to be potential improper payments, but did not state what would be an appropriate error rate. Since CMS did not set a maximum acceptable error rate, the RAC did not have an established target against which it could measure its work, and CMS did not have an established target with which to compare the RAC’s performance. Without performance standards with targets, CMS is unable to adequately assess the quality of the RAC’s performance in determining improper payments.\nThe RAC also noted in its response to CMS’s Areas of Concern letter that CMS was assessing the RAC’s performance on some of its audit work— identifying potential improper payments for excluded providers—using expectations that were not in place at the time the RAC was conducting the work. CMS stated in the second letter replying to the RAC’s response that while it understood that the performance expectations referenced in the Areas of Concern letter were not directly in effect when the RAC was conducting the audit work, CMS’s expectation was that all contractors would implement and maintain a standard of quality control at all times during their period of performance. When asked about the fact that performance expectations were established after the RAC’s audit work was conducted, CMS officials told us that these concerns stemmed from expectations originally set in contract modifications and later formalized in the statement of work. However, our analysis of the contract modifications in place at the time of the RAC’s work under question did not find contract language indicating how the RAC’s performance would be evaluated, or measurable targets establishing a standard of quality control.", "From January 2011 through May 2015, for five audit issues, CMS both authorized the RAC to conduct audit activities and pursued improper payment collections. Audit issues include two elements: (1) areas within the Part D program that should be considered for audits; and (2) the year or years for which PDE records are being audited. The five audit issues CMS approved addressed three types of issues: (1) excluded providers, (2) unauthorized prescribers, and (3) inappropriate refills of certain drugs regulated by the Drug Enforcement Administration under the Controlled Substances Act.\nCMS had collected less than $10 million in improper payments as of May 2015 for the five approved audit issues. CMS authorized the RAC to conduct audit activities that identified about $19.8 million in potential improper payments, and has collected about $9.7 million as of May 2015. Of the remaining approximately $10.1 million, $7.3 million in potential improper payments has been determined to be proper, for example, because the plan sponsor provided additional information verifying the amount of the Part D claim; $45,000 in potential improper payments has been identified as being uncollectible for various reasons, such as the plan sponsor’s contract was terminated before audit activity took place; and $2.8 million in improper payments remain that have not yet been collected, not yet determined to be proper, or not yet identified as being uncollectible. (See table 1 for each of the five approved audit issues for which CMS pursued collections, the amount CMS approved for the RAC to conduct audit activities, and the status of potential improper payments identified.)\nFrom the beginning of the contract in January 2011 until the statement of work became effective on January 1, 2014, CMS and the RAC faced challenges in determining audit issues on which to conduct work. As noted above, CMS did not initially authorize the RAC to begin conducting the audit work that the RAC had proposed and outlined in the performance work statement that became part of the contract. Instead, the first audit issue CMS approved the RAC to conduct was an audit of excluded providers for plan year 2007, which CMS suggested and which was included in a contract modification in February 2012. By the time the statement of work became effective on January 1, 2014, CMS had suggested that the RAC conduct audit work on three audit issues: excluded providers for plan year 2007, excluded providers for plan years 2008 through 2011, and unauthorized prescribers for plan years 2009 through 2011. During that same time, CMS denied four of the six audit issues the RAC proposed. Of the remaining two audit issues, CMS later denied one issue and approved the other. CMS denied issues for various reasons; for example, one audit issue was denied because the improper payments identified were outside the 4-year period prior to a plan sponsor’s current plan year, which is the time limit for identifying improper payments.\nAfter CMS and the RAC agreed to a new process for identifying, reviewing, and approving audit issues, which became effective on January 1, 2014, the RAC faced challenges in applying Part D regulations and CMS rules to develop audit methodologies. The statement of work CMS and the RAC agreed to included a new process by which the RAC would submit new audit issues for CMS’s consideration. Figure 3 outlines the process the RAC and CMS follow to submit, evaluate, and decide on new audit issues. Under this process, CMS officials said, under some circumstances the RAC can resubmit an audit issue for a particular plan year once it has been denied. For example, CMS may deny the methodology the RAC used and ask the RAC to resubmit the audit issue using a different audit methodology.\nSince the new process took effect, the RAC has faced challenges in applying regulations and CMS rules to audit methodologies, resulting in CMS denials. For example,\nCMS denied the RAC’s proposal to audit hospice care beneficiaries’ PDE records because CMS guidance published in March 2014, 3 days after the RAC made the proposal, prevents CMS from performing hospice audits associated with Medicare Part D potential improper payments prior to May 1, 2014. CMS noted in its denial that a retrospective audit would not be pursued at the time because previous CMS guidance was ambiguous and there were no objective criteria for plan sponsors to apply in determining whether the beneficiaries were eligible for Medicare Part D.\nCMS denied the RAC’s proposal to audit deactivated prescribers in plan years 2010 through 2012 in part because the RAC’s audit methodology included using a field in the PDE record that plan sponsors were not required to submit until January 1, 2013.\nCMS officials said they provide the RAC with assistance in developing audit issues; nevertheless, CMS has not approved any audit issues submitted since the new process took effect. CMS officials said they hold regular phone conversations between the RAC and program officials with subject matter expertise from several CMS program offices, and provide feedback to the RAC after an audit issue is submitted. However, since the new process took effect in January 2014, the RAC has proposed nine audit issues, and CMS has not approved any of them. (See table 2 for each of the nine denied audit issues.)\nChallenges faced by CMS and the RAC have resulted in few audit issues being approved and therefore a small amount of improper payments being identified and collected relative to CMS’s estimates of improper payments in Medicare Part D. In more than 4 years, initial CMS and RAC challenges in determining the audit work to conduct and later RAC challenges in determining how to apply regulations and rules to audit issues have resulted in CMS’s approving 1 of the 15 audit issues the RAC proposed, and no approvals for issues submitted since the new audit issue process took effect. The RAC can only resubmit an audit issue under some circumstances, once it has been denied, so a denial not only results in lost time and effort, but also may result in a lost opportunity to identify and collect potential improper payments. In addition, the RAC may only identify potential improper payments on PDE records within 4 years of the plan sponsor’s current plan year. Therefore, as each year passes, another prior plan year can no longer be audited by the RAC.\nBoth CMS and the RAC are charged with reducing Medicare Part D improper payments. CMS has a goal to reduce improper payments in Medicare Part D, according to the fiscal year 2016 Annual Performance Plan and Report. The RAC’s mission is to reduce Medicare improper payments through the efficient detection and collection of improper payments, using a methodology that maximizes recoveries as well as meets all regulatory requirements, according to CMS’s statement of objectives for the RAC. In addition, federal internal control standards state that agencies should have effective and efficient processes in place that enforce management’s directives and that these processes are monitored. The $9.7 million in improper payments that CMS has collected since 2011 is a relatively small amount compared to CMS’s estimated improper payments in Medicare Part D of $1.9 billion in 2014 alone. If the process for identifying, reviewing, and approving new audit issues was more efficient in developing appropriate issues, the process would likely have resulted in more issues being approved each year of the RAC contract and more improper payments being identified and collected.", "Given Medicare’s vulnerability to improper payments, it is important to develop a RAC program that effectively identifies and recovers those improper payments. The effectiveness of the RAC program, which began in January 2011, has been hindered by various challenges faced by both CMS and the RAC that resulted in relatively little in improper payment collections. The first RAC contract is ending on December 31, 2015, and CMS is contemplating how to solicit contractors for the next RAC contract. Among CMS’s considerations is obtaining RAC services on the open market using a full and open competitive solicitation. As CMS considers its upcoming solicitation for the next contract period, it has an opportunity to address the challenges it and the RAC faced during the first contract. Establishing clear work statements, realistic timelines, and an improved process for identifying, reviewing, and approving audit issues would provide more assurance that audit work can be conducted more effectively and efficiently through the next RAC contract. Additionally, conducting annual performance evaluations against measurable targets would allow CMS to regularly assess the effectiveness of a RAC contractor and identify and address any areas for improvement. Setting in place these improvements would significantly increase the likelihood of identifying and collecting more improper payments in the Part D program.", "As CMS prepares to solicit the next RAC contract(s), we recommend that the Administrator of CMS take the following three actions to improve the agency’s RAC program operations and contractor oversight:\nEnsure that work statements included in solicitations for contract proposals and the executed contract(s) set clear expectations about the work CMS intends the RAC to perform and that time frames are established that reflect the time needed to reach milestones.\nConduct annual evaluations of the RAC’s performance against measurable performance standards to provide a clear basis on which CMS and the RAC can assess RAC performance in identifying improper payments.\nReview the agency’s process for identifying, reviewing, and approving new audit issues to identify process improvements that will help ensure the efficient development of appropriate audit issues (i.e., reduce audit issue denials and increase audit issue approvals) and thereby maximize the collection of improper payments.", "We provided a draft of this report to HHS for comment, and its comments are reprinted in appendix I. HHS also provided technical comments, which we incorporated as appropriate. We shared portions of the draft report with the current Part D RAC; the contractor provided oral technical comments, which we incorporated as appropriate.\nIn commenting on this report, HHS agreed with our three recommendations. HHS stated that it plans to select a contractor to serve as the Part D RAC under new contract terms in January 2016. For this Part D RAC, HHS stated that it will address our recommendations by setting clear expectations, reasonable timelines, and measurable performance standards, as well as developing improved processes for reviewing new audit topics by strengthening the collaboration between CMS’s policy experts, PDE review experts, and data analytics experts, as well as the Part D RAC’s team of analysts. In its comments, HHS also noted additional steps it has taken to strengthen Part D program integrity, such as enrolling prescribers of Part D drugs in Medicare by January 2016, and subjecting these prescribers to the screening procedures used for other Medicare providers. HHS also created a web-based tool to allow CMS, law enforcement, and plan sponsors to share information and coordinate actions against high-risk pharmacies.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Administrator of the Centers for Medicare & Medicaid Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix II.", "", "", "Kathleen M. King, (202) 512-7114 or kingk@gao.gov.", "In addition to the contact named above, Karen Doran (Assistant Director), Muriel Brown, Christine Davis, Peter Mangano, Roseanne Price, Mandy Pusey, and Jennifer Whitworth made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "", "", "h3_full", "h0_full h4_full", "h4_full", "", "h0_full", "h1_full", "h1_full", "h1_full", "h3_full h2_full h4_full", "h3_full h2_full", "", "", "", "", "", "" ] }	{ "question": [ "How was the Part D RAC program carried out?", "How did the CMS limit the implementation of the Part D RAC program?", "How does this fail to follow federal requirements?", "What was the result of this failure?", "How was the Part D RAC being monitored as of May 2015?", "How was this against existing standards?", "How did the CMS react to the oversight?", "How did the CMS proceed with the needed evaluations?", "What benefits would proper assessment periods have?", "What procedures has the CMS complied with?", "How is this implemented?", "How was the CMS behind in May 2015?", "What effect has improper payments had?", "Why has audit work in the RAC not been improved?", "How could more audit work have been approved?", "What was the relevance of Medicare Part D in 2014?", "What errors contributed to the amount spent?", "Why was the RAC program in Part D created?", "What does the RAC receive for their work?", "What was the GAO asked to review?", "What did the GAO examine to review the program?", "What preexisting information was used for the review?", "What new information did the GAO collect?" ], "summary": [ "The Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) implemented the Part D recovery audit contractor (RAC) program in January 2011 by undertaking various activities, including establishing a statement of objectives and conducting a solicitation process to select a RAC to identify improper payments.", "However, CMS's challenges in setting expectations about the work the Part D RAC would conduct and establishing the length of time required for CMS and the RAC to reach project milestones hampered Part D RAC program implementation.", "Consistent with federal contracting requirements, agencies should clearly define requirements for services.", "As a result of CMS's challenges in setting expectations and establishing realistic timelines as it implemented the RAC program, the RAC did not have a clear understanding about the work it should perform, and CMS recovered improper payments for Part D more than a year after it had projected.", "As of May 2015, CMS had not completed any annual evaluations of the Part D RAC, but an initial evaluation of the RAC's contract year 2014 performance was in progress, and the agency had conducted other oversight of the RAC's performance.", "Federal internal controls and contracting standards and GAO's prior work contain requirements and suggestions for conducting regular performance evaluations and developing performance measures.", "In March 2015, CMS officials acknowledged that the agency should have completed annual evaluations and noted that CMS has been behind schedule in conducting evaluations of some its contractors, including the RAC.", "In May 2015, CMS officials finished the initial evaluation of the RAC's 2014 performance and provided the evaluation to the RAC for review and comment.", "An annual performance evaluation would provide CMS with a clear basis for assessing RAC performance in identifying improper payments and provide the RAC with targets against which the RAC could compare its performance.", "While CMS has not completed annual evaluations, it has established quality assurance procedures to conduct oversight of the RAC.", "For example, CMS uses a separate contractor to review and validate 100 percent of the RAC's audit findings, in part because of concerns about the quality of the RAC's work.", "As of May 2015, CMS had collected less than $10 million in improper payments, and had not approved the RAC to perform new audit work since March 2014.", "Both CMS and the RAC are charged with reducing Medicare Part D improper payments, and federal internal control standards call for agencies to have effective and efficient processes to meet agency goals.", "However, as a result of CMS's and the RAC's challenges in determining audit work to conduct and the RAC's challenges in developing audit methodologies, CMS has approved 1 of the 15 audit proposals from the RAC since the beginning of the contract in 2011 and has collected a limited amount of improper payments relative to the estimated $1.9 billion in improper payments in Part D in 2014.", "With a more effective and efficient process for identifying, reviewing, and approving appropriate new audit work, more audit work would likely have been approved each year of the RAC contract, resulting in more improper payments being identified and collected.", "In 2014, the federal government spent $58 billion on Medicare Part D, the voluntary, outpatient prescription drug coverage program.", "An estimated $1.9 billion of this total was improper payments--including overpayments or underpayments that may be due to errors, such as the submission of duplicate claims for the same service.", "In January 2011, CMS began a RAC program in Part D that was intended in part to identify and recoup improper payments, as required under the Patient Protection and Affordable Care Act.", "The RAC is paid a contingency fee from amounts recovered.", "GAO was asked to review CMS's Part D RAC program implementation, oversight, and results.", "GAO examined (1) how CMS has implemented the Part D RAC program and any challenges it faced during implementation; (2) the extent to which CMS has overseen the RAC's audit activities; and (3) the results of the RAC's work to date and any challenges CMS and the RAC faced in identifying and collecting improper payments.", "To do this, GAO analyzed the RAC contract and audit documents, and federal statutes and regulations on Part D and federal contracting.", "GAO also interviewed CMS and RAC officials." ], "parent_pair_index": [ -1, -1, 1, 2, -1, 0, 0, 2, -1, -1, 5, -1, -1, -1, 2, -1, 0, -1, 2, -1, -1, 1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0, 1, 1, 1, 1 ] }
CRS_RL31134	{ "title": [ "", "Prior Use of Investment Subsidies as Fiscal Stimulus", "The Form of Investment Subsidies as Fiscal Stimulus", "When Is Fiscal Policy Needed?", "What Fiscal Stimulus Is Most Effective?", "Empirical Evidence on the Effectiveness of Investment Incentives", "", "The Optimal Design of Business Tax Subsidies", "Bang for the Buck", "Type of Business Tax Cut: Corporate Rate vs. Investment Subsidy", "Temporary vs. Permanent Subsidies", "Incremental Subsidies", "Consequences of Permanent Tax Changes on the Allocation of Capital", "Effects on the Stock Market", "Conclusion" ], "paragraphs": [ "I n the 111 th Congress, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) contained a tax cut for business: temporary 50% bonus depreciation (which allows half of the cost of business equipment investment to be deducted when incurred). That provision extended bonus depreciation, enacted for 2008 in the 2008 stimulus, through 2009. Subsequent legislation retroactively extended the provision through 2010 ( P.L. 111-240 ). At the end of December, 2010, a comprehensive tax bill, P.L. 111-312 , extended bonus depreciation through 2011 and increased the share expensed, as of September 8, to 100%. it provided for 50% bonus depreciation for 2012. Discussed but not enacted were proposals to extend the period of time a loss can be carried back (offsetting prior year taxes and resulting in immediate tax savings) from two to five years. A carryback provision was provided for small business (along with some other small business provisions. P.L. 111-312 also extended the Bush tax cuts, including lower rates on capital gains and dividends, which originated as part of a business-related economic stimulus. Most of these provisions were made permanent by P.L. 112-240 , the American Taxpayer Relief Act of 2012; bonus depreciation was extended through 2013.", "Bonus depreciation originated in 2002, when a variety of corporate tax cut proposals were considered as stimulus proposals. Increased interest in providing business tax cuts to stimulate the economy followed the terrorist attacks of September 11, 2001, which heightened concerns about an economic slowdown. Among the tax proposals that were discussed in the 107 th Congress were a corporate rate cut and an investment credit. An investment credit could be considered on either a temporary or a permanent basis. On October 24, 2001, the House passed H.R. 3090 , which included temporary partial expensing (for three years), a provision similar to an investment credit. The bill also contained some other provisions, including a repeal of the corporate alternative minimum tax and an extension of net operating loss carrybacks.\nProposals developed in the Senate contained business tax cuts as well. The Finance Committee chairman's plan included several tax cuts for business: allowing 10% of investments placed in service to be expensed, an increase in expensing dollar limits for small businesses, and some other provisions. The Finance Republican's plan would have provided 30% expensing and repealed the corporate alternative minimum tax, but without refunding accumulated credits immediately as was the case in H.R. 3090 . The 10%, one year, expensing provision was included in the version of H.R. 3090 that was approved by the Senate Finance Committee on November 8, 2001. This bill did not pass the Senate; however, Majority Leader Daschle proposed a streamlined bill (using H.R. 622 as a vehicle) that would include a 30% one year expensing provision. A final version of H.R. 3090 approved in early March of 2002 included the House expensing provision (two years at 30%). This provision was referred to as bonus depreciation.\nFurther action to address business (and investment) tax cuts occurred in the 108 th Congress. At the beginning of 2003, President Bush proposed corporate tax relief in the form of an exclusion for dividends and a step up in basis. This proposal would have provided tax reductions for corporate income to the investors rather than the firm. The effects would probably be similar to corporate rate cuts in the long run, but may have different effects in the short term. In particular, such cuts might be more likely to be translated into spending because they would be received directly by individuals. In H.R. 2 , enacted in May 2003, a provision allowing a 15% maximum tax rate on both dividends and capital gains was enacted; the provision was originally to be effective through 2008. The 2003 legislation also increased the bonus depreciation rate to 50% and extended it through 2004.\nBonus depreciation expired at the end of 2004. As the economy recovered, interest in short run stimulus measures diminished. Short run stimulus again became a topic of concern in the aftermath of Hurricane Katrina. Dividend relief and lower capital gains rates were extended in legislation passed in 2006, through 2010, although not on the grounds of short-term stimulus.\nRecent problems in the mortgage markets and concerns about the economy prompted new interest in fiscal stimulus. The stimulus proposal adopted in February 2008 ( P.L. 110 - 185 ) included two major components: an individual income tax rebate and a temporary bonus depreciation similar to that enacted for 2002-2004 (at 50%). Bonus depreciation has been extended and expanded in recent legislation. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) extended bonus depreciation through 2010; provisions further extended bonus depreciation (in P.L. 111-240 and P.L. 111-315 ), expanded it to 100% for 2011 in P.L. 111-315 which returned to 50% expensing through 2012. As noted above, P.L. 112-240 extended bonus depreciation for an additional year.", "This report discusses issues associated with the use of business tax subsidies as a fiscal stimulus. First, is fiscal policy appropriate? Second, how successful are subsidies likely to be and what form might they take to be most effective? Finally, what other consequences might flow from the use of business tax subsidies, especially if they are to be permanent?\nInvestment subsidies have typically been provided through an investment tax credit. The investment tax credit was originally introduced in 1962 as a permanent subsidy, but it came to be used as a counter-cyclical device. It was temporarily suspended in 1966-1967 (and restored prematurely) as an anti-inflationary measure; it was repealed in 1969, also as an anti-inflationary measure. The credit was reinstated in 1971, temporarily increased in 1975 and made permanent in 1976. After that time, the credit tended to be viewed as a permanent feature of the tax system. At the same time, economists were increasingly writing about the distortions across asset types that arose from an investment credit. The Tax Reform Act of 1986 moved toward a system that was more neutral (within the limits of empirical estimates of depreciation) and repealed the investment tax credit while lowering tax rates.\nInvestment subsidies can also be provided through accelerated depreciation, but these measures tend not to be used for counter-cyclical purposes. At least one reason for not using accelerated depreciation for temporary, counter-cyclical purposes is because such a revision would add considerable complexity to the tax law if used in a temporary fashion, since different vintages of investment would be treated differently. An investment credit, by contrast, occurs the year the investment is made and, when repealed, only requires firms with carry-overs of unused credits to compute credits. An exception to the problem with accounting complexities associated with accelerated depreciation is partial expensing, that is allowing a fraction of investment to be deducted up front and the remainder to be depreciated. This partial expensing approach also is neutral across all assets it applies to, but the cash flow effects are more concentrated in the present (and revenue is gained in the future). A temporary partial expensing provision, allowing 30% of investments in equipment to be expensed over the next two years, was included in H.R. 3090 in 2002 and expanded to 50% and extended through 2004 in tax legislation enacted in 2003. It expired in 2004. The 2008 stimulus proposal ( P.L. 110 - 185 ) returned to bonus depreciation as a stimulus.\nHistorically, corporate rate changes have tended not to be used for counter-cyclical purposes. The interest in corporate tax rate cuts in 2002 appears associated with arguments about the effects of tax changes on stock markets. (A similar argument was made for dividend and capital gains tax cuts.)\nThe repeal of the corporate alternative minimum tax, included in an earlier version of H.R. 3090 in 2001, is similar to a corporate tax rate in some respects, but its effects on marginal investments are uncertain and could possibly discourage investment.\nA net operating loss carryback provides tax benefits in the same way as a rate cut, but does not stimulate investment, except to the extent it makes the firm able to use other stimulus provisions such as bonus depreciation. It benefits less profitable firms, while a rate reduction benefits more profitable ones (or at least firms with tax liability).", "Many economists expressed uncertainty about the desirability of an additional fiscal stimulus during the 2002-2003 period and while many economists supported a stimulus more recently in 2008, some uncertainty remained. Moreover, economists have, in general, become more skeptical of fiscal policy as a counter-cyclical tool, particularly through the mechanism of tax cuts. Because of lags in decision-making and administrative lags in getting tax cuts to individuals, a fiscal stimulus enacted through a tax cut can be poorly timed. Finally, in an open economy with flexible exchange rates some of the fiscal stimulus can be offset through a decline in net exports, as increased interest rates attract capital from abroad and bid up the price of the dollar.\nConcerns about the path of the economy in 2007 and 2008 led to proposals for a fiscal stimulus, including support from the chairman of the Federal Reserve Board, as long as the stimulus occurs quickly. Although the economy was not determined to be in recession at that point, slow growth was projected and investment incentives as well as individual tax rebates were under consideration. The final proposal included temporary bonus depreciation for 2008.\nThe economy remained in recession at the beginning of 2009. The serious problems with the current economy led to much wider support among economists for a major fiscal stimulus, and a second, larger stimulus plan ( P.L. 111-5 ) was adopted, which included a provision to extend bonus depreciation through 2009. Although the economy resumed growing in mid-2009, unemployment has remained high. Some small stimulus proposals enacted during 2010 included, in September, a retroactive extension of bonus depreciation through 2010. As the Bush tax cuts were set to expire and concerns were raised about the effects on the economy; P.L. 111-312 extended the Bush tax cuts through 2012 and extended bonus depreciation through 2012. The share expensed was also increased to 100% for 2011, retroactive to early September 2010.\nProjections are for unemployment to remain relatively high, and there is some possibility of another slowdown; thus fiscal expansion, and business tax cuts, may continue to be an issue.", "The objective of a fiscal stimulus is to increase spending, and fiscal policies can differ in the extent to which they induce spending. Although a fiscal stimulus delivered through direct spending has a relatively straightforward effect, a fiscal stimulus delivered via a personal tax cut tends to have a more muted effect on the economy because only part of it will be spent. The smaller the share spent, the smaller the stimulus, although for most types of tax cuts, the presumption is that much of the tax reduction will be spent. There are, however, theoretical reasons to believe that higher-income individuals will spend a smaller fraction of a tax cut, and empirical evidence to support that view. Indeed the propensity to save makes capital gains tax cuts, which have been under discussion, questionable candidates for stimulating aggregate demand. There is also a fear that consumers who feel uncertainty about the future will not spend a tax cut.\nNote that there is a tension between short-run and long-run fiscal policy. Measures that increase consumption are expansionary in the short run, but may detract from growth in the long run because deficit finance causes aggregate savings to fall (unless the economy is at such a low rate of employment that the stimulus induces sufficient output to offset the loss in savings). That is, government spending and tax reductions financed by deficits tend to crowd out investment. However, if the policy could be in a form that would stimulate investment spending, this negative effect on long run growth might be avoided. Government investment spending, such as spending on infrastructure, is one possibility that could provide a short-run stimulus without detracting much from long-term growth (and can even enhance long-term growth if the productivity of the government investment is greater than the productivity of private investments). However, it is often difficult to enact and implement such spending in a timely fashion. Another policy aimed at expanding investment is a subsidy to private investment spending: if the revenue loss (which adds to the deficit) were spent on investment, there would be no crowding out. There is, however, a caveat: if the type of business subsidy is one that is permanent and not neutral in the long run, the economy will also sustain a permanent loss in efficiency from the misallocation of capital.\nThe success of such a policy hinges on the effectiveness of investment subsidies in inducing spending. It is difficult to determine the effect of a business tax cut, and particularly the timing of induced investment. A business tax cut is aimed at stimulating investment largely through changes in the cost (or price) of capital. If there is little marginal stimulus or if investment is not responsive to these price effects in the short run, then most of the cut may be saved: either used to pay down debt or paid out in dividends. Some of the latter might eventually be spent after a lag. That is, if a tax cut simply involved a cash payment to a firm, most of it might be saved, particularly in the short run. Business tax cuts (of most types) also have effects on rates of return that increase the incentive to invest, and it is generally for that reason that investment incentives have been considered as counter-cyclical devices.\nWhy, then, might a business tax cut be considered, and how might alternative tax cuts be evaluated? First, this report considers the empirical evidence, which might determine whether a business subsidy should be considered at all. It then discusses the \"bang for the buck,\" which determines how much of each dollar of cost might be spent. Then it discusses other advantages or disadvantages.", "Despite attempts to analyze the effect of the investment tax credit, considerable uncertainty remains. Time series studies of aggregate investment using factors such as the tax credit (or other elements that affect the tax burden on capital or the \"price\" of capital) as explanatory variables tended to find little or no relationship. A number of criticisms could be made of this type of analysis, among them the possibility that tax subsidies and other interventions to encourage investment were made during periods of economic slowdown. A recent study using micro data found an elasticity (the percentage change in investment divided by the percentage change in the user cost of capital) for equipment of -0.25. A widely cited study by Cummins, Hassett, and Hubbard used panel data and tax reforms as \"natural experiments\" and found effects that suggest a price elasticity of -0.66 for equipment.\nThis last estimate is a much higher estimate than had previously been found and reflects some important advances in statistical identification of the response. Yet, it is not at all clear that this elasticity would apply to stimulating investment in the aggregate during a downturn when firms have excess capacity. That is, firms may have a larger response on average to changes in the cost of capital during normal times or times of high growth, when they are not in excess capacity. Certainly, the response might be expected to be smaller in low-growth periods.\nAn additional problem is that the timing of the investment stimulus may be too slow to stimulate investment at the right time. If it takes an extensive period of time to actually plan and make an investment, then the stimulus will not occur very fast compared to a cut in personal taxes that stimulates consumption. Indeed, the stimulus to investment could even occur during the recovery when it is actually undesirable.\nSome evidence suggests that the temporary bonus depreciation enacted in 2002 had little or no effect on business investment. A study of the effect of temporary expensing by Cohen and Cummins at the Federal Reserve Board found little evidence support for a significant effect. They suggest several potential reasons for a small effect. One possibility is that firms without taxable income could not benefit from the timing advantage. In a Treasury study, Knittel confirmed that firms did not elect bonus depreciation for about 40% of eligible investment, and speculated that the existence of losses and loss carry-overs may have made the investment subsidy ineffective for many firms, although there were clearly some firms that were profitable that did not use the provision. Cohen and Cummins also suggested that the incentive effect was quite small (largely because depreciation already occurs relatively quickly for most equipment), reducing the user cost of capital by only about 3%, that planning periods may be too long to adjust investment across time, and that adjustment costs outweighed the effect of bonus depreciation. Knittel also suggests that firms may have found the provision costly to comply with, particularly because most states did not allow bonus depreciation.\nA study by House and Shapiro found a more pronounced response to bonus depreciation, given the magnitude of the incentive, but found the overall effect on the economy was small, which in part is due to the limited category of investment affected and the small size of the incentive. Their differences with the Cohen and Cummins study reflect in part uncertainties about when expectations are formed and when the incentive effects occur.\nCohen and Cummins also report the results of several surveys of firms, where from two-thirds to more than 90% of respondents indicated bonus depreciation had no effect on the timing of investment spending.\nA study by Hulse and Livingstone found mixed results on the effectiveness of bonus depreciation, which they interpret as weakly supportive of an effect.\nOverall, bonus depreciation did not appear to be very effective in providing short-term economic stimulus. It is possible, however, that a stimulus during current times could be more successful.", "", "This section considers several issues surrounding the optimal design of business tax subsidies.", "It follows from a principal rationale for choosing an investment subsidy (to prevent longer run loss of productivity due to deficit finance) that policymakers would seek the most powerful incentive per dollar of revenue loss. Three issues arise in evaluating the ratio of induced spending to revenue loss: the general type of tax incentive, whether policymakers can increase the incentive per dollar of revenue loss by making the subsidy temporary , and whether policymakers can be successful by restricting the subsidy to marginal investment.", "Generally, an investment credit (or other subsidy confined to investment, such as accelerated depreciation) has more \"bang for the buck\" than a corporate rate cut (or dividend relief) because it does not reduce taxes on the flow of income to existing capital assets. The size of both the absolute amount and the difference between an investment credit and a corporate rate cut depend on the durability of the investment. As derived in Appendix A , a corporate rate cut has an effectiveness compared with an investment credit, given economic depreciation, based on the ratio:\n(g+d)/(r+d)\nwhere g is the normal growth rate, r is the after tax rate of return, d is the economic depreciation rate. Setting g and r to 0.025 and 0.05, respectively, this measure suggests a 69% ratio for structures (assuming d equals .03) and a 88% ratio for equipment (assuming an average depreciation rate of 0.15). As d gets very large, the value approaches 100% and as it gets very small, the value approaches 50%. Thus, a corporate rate cut will stimulate from almost two-thirds to less than 90% as much investment per dollar of revenue loss as an investment subsidy directed at the same type of investment. Note also that the superior performance of the investment credit relative to the corporate rate cut is less pronounced for short-lived assets. This effect occurs because investment is larger relative to the existing capital stock because of the need to replace the stock more frequently. Corporate assets also include non-reproducible capital (e.g., land) that receives a tax reduction with no investment increase, which also reduces the stimulus per dollar of revenue loss. The relative size of the stimulus also depends on the ratio of growth to return and on pre-existing subsidies; at the extreme, with expensing, the corporate rate cut will have no effect.\nAt the same time, short-lived assets may have a somewhat larger absolute \"bang for the buck,\" for an investment credit since the size of the stimulus per dollar of revenue loss is e/(1-uz), where e is the investment demand elasticity and z is the present value of tax depreciation (which is larger for short-lived assets). For the typical equipment investment, if e is -0.25, each dollar of revenue loss from an investment credit produces 35 cents of investment. For structures (assuming the same elasticity), the increase is 28 cents. Even at the high elasticities estimated at -0.66 these increases would not be dollar for dollar: the equipment investment would increase by 92 cents and the structures by 74 cents. (Note, however, that the elasticities could vary across assets, and in particular could be smaller for structures.)\nAnother aspect of an investment credit vs. a corporate rate cut is the degree of certainty about the subsidy. If businesses fear that lower corporate rates will subsequently be raised, they will have less of an incentive to invest. Indeed, a perception that corporate rates could be increased could actually have negative effects on investment (as discussed below). Investment credits, however, are allowed at the time of the investment and are certain, since tax benefits would be highly unlikely to be retroactively disallowed.\nSome other types of corporate tax changes can be likened more to an investment subsidy or to a rate reduction. An acceleration of depreciation (allowing costs of investments to be deducted more quickly), or allowing expensing (deducting the entire cost when the expenditure is made) for some fraction of investments is like an investment credit. A repeal of the alternative minimum tax provides a benefit for existing assets, but mixed effects on investment, since the marginal tax burden on investments under the minimum tax can be greater than or less than the burden under the regular tax. For firms permanently on the minimum tax, the tax burden on new investment is actually smaller than the tax burden under the regular tax, so that repealing the minimum tax would actually discourage investment in this case. A modification of the minimum tax by allowing accelerated depreciation methods (lives are already equated or virtually equated) would be like an investment subsidy for firms that remain under the alternative minimum tax but could have mixed effects if the change caused firms to switch to the regular tax. It would be less likely to discourage investment than a repeal of the tax. Expanding the net operating loss carry-back periods (or investment tax credit carry-back periods if such a credit were enacted) has a large cash flow effect which is like a corporate rate cut, but it would also allow more firms to benefit more fully from investment subsidies and existing accelerated depreciation.\nNote that dividend relief is similar to a rate cut in that it affects the return to current investment. If provided to individuals in the form of an exclusion or lower rate rather than to the firm as a deduction, the incentive may be lessened since there is no direct and immediate effect on the firm. Capital gains relief for individuals is even less effective because provides benefits for income accumulated in the past as well as current income.", "Because investment subsidies act through changes in price, there have been attempts to increase the \"bang for the buck.\" Two methods have been proposed (and could be combined). The first is to make the investment tax credit temporary. Theoretically, a temporary investment subsidy, like the investment credit, would have a more pronounced effect on investment in the short run than a permanent one, and, of course, would cost much less. Like a temporary sale, demand should shift and firms should move planned investment spending forward. It is, however, very hard to find good empirical evidence of this effect, in part because the same problems that have plagued earlier empirical studies remain, among them the fact that temporary subsidies have been enacted during a downturn. And, assuming that investment is only shifted, the crowding out issue still remains.\nAnother of the difficulties with temporary subsidies is that in order for them to have a more powerful effect that permanent subsidies, investors have to believe that such subsidies will, indeed, be temporary. Although the bonus depreciation enacted in 2002, was allowed to expire, it was extended and expanded in 2003, and historical experience teaches otherwise: temporary subsidies have a tendency to become permanent.\nAs noted above, the empirical evidence suggests that even a temporary subsidy was not very effective as an economic stimulus, although the reasons for that are not entirely clear and studies face many difficulties. It is possible that such a stimulus would be more effective currently without the overhang of losses from a recession.\nNote that a temporary corporate rate cut will have the opposite effect relative to a permanent rate cut: it will have little effect on new investment. In fact, a temporary rate cut could discourage certain types of investment because, due to accelerated depreciation, deductions are larger in the early part of an investment's life than should be the case to reflect economic depreciation, where as they are too small in the later part.", "In the past, policymakers have also looked into the possibility of incremental investment subsidies that would focus more of the effect on the margin. Such a subsidy was discussed at the beginning of President Clinton's Administration.\nA subsidy could be more focused on the margin by applying it only to investment in excess of a fixed base. A temporary incremental subsidy is feasible, but it is virtually impossible to design a permanent incremental subsidy. This is a complicated issue, which is discussed in considerable detail in a CRS study written at that time.", "A final issue in choosing a subsidy is the potential effect on the allocation of capital. A lower corporate tax rate may (up to a point) increase economic efficiency because currently corporate income is taxed more heavily than other types of capital income. A corporate rate is also neutral across different types of assets. Moreover, a corporate tax rate reduction cannot go to the point that investments are subject to negative tax rates.\nAn investment credit, however, has the potential for distorting investment (because it favors short lived assets and is generally applied only to certain categories of investment). It can also easily produce negative tax rates. Moreover, with the present value of depreciation so high because of low inflation rates, and the tax rate much lower than in the past, historical levels of investment credits will produce negative tax rates.\nConsider five-year property, which accounts for about 44% of investment. Depending on the time of year the investment is made, it is estimated that the present value of depreciation deductions assuming a 7% nominal discount rate (reflecting a 5% real return and a 2% inflation rate) is between 0.86 and 0.89 per dollar of investment. To avoid negative tax rates any investment credit that does not have a basis adjustment (that is, depreciation is allowed on the entire investment not just the cost net of the credit) cannot exceed 3.85% at the higher present value and 4.9% at the lower value. With a basis adjustment, the credit can range between 5.59% and 7%. The zero tax rate is reached when the present value of tax depreciation deductions multiplied by the tax rate plus the credit exceed the tax rate times the investment.\nIf a 10% investment credit without a basis adjustment were enacted, these assets would have a marginal effective tax rate of -122% to -196%, that is, a negative effective tax rate. (The computation of effective tax rates is explained in Appendix B .)\nAccelerated depreciation methods can be designed to be more neutral, and there are several types of investment subsidies that are relatively neutral at least across the assets they apply to (including partial expensing, allowing credits only for investment in excess of depreciation, or varying credits with asset durability). However, the largest distortion that has typically occurred is between assets eligible for credits or accelerated depreciation and assets that are not eligible, primarily equipment in the former case and structures in the latter case. (Partial expensing in H.R. 3090 is restricted to equipment but is not permanent.)", "Some arguments have been made in the past that the effect of a business tax change might help the economy by raising the stock market price. It is not clear what consequences a rise in the stock market induced by tax changes might have as an independent influence on the economy, although such a rise might help to maintain consumer confidence in the economic outlook.\nSome simple calculations of this effect have been discussed based on comparing tax rates. For example, cutting the corporate tax rate from 35% to 25% (a very large cut), which would lead to an increase of around 15% based on the ratio of (1-t)/(1-t), where t is the new tax rate of 0.25 and t is the old tax rate of 0.35. This calculation is based on a rational expectations view of the world (rather than any empirical measures of the supply and demand responses in the stock market that some economists would prefer to use). Even so, this analysis is a partial equilibrium one that does not take account of three important effects: the expected adjustment of the capital stock in response to change, adjustment costs of such changes, and the possibility of higher interest rates. These are discussed in turn.\nConsider a simple adjustment process where a geometric adjustment path occurs. In that case, beginning at time zero, the rate of return t years into the future given a fixed after tax rate of return r will be:\np(t) = r/(1-t) +[ r/(1-t)-r/(1-t)]e -g t\nand the after tax rate of return be:\nr(t) = p(t)(1-t)\nIf this expression is integrated (summed), after being discounted at rate r, from time zero to infinity (the same approach that produces the original 15% price increase), the increase in the stock market price will be [(1-t)/(1-t)][r/(r+g)]. If g is, say, equal to r, then the initial effect on the stock market will be only half as big. This value will also begin to fall as time goes on until it returns to its original value.\nSecondly, the value will be reduced if the firm faces adjustment (temporary loss of productivity due to alteration of the productive processes).\nHow quickly this adjustment path occurs and the magnitude of adjustment costs is something that relatively little is known about in an empirical sense, but it will clearly reduce, perhaps significantly, the initial increase in value.\nThe second problem with the analysis of stock market effects is that it not only assumes no adjustment costs but assumes there are no other effects in the economy that might alter the rate at which earnings are discounted. But the interest rate will almost certainly rise. Indeed, in a simple world, with only one asset and a fixed savings rate (even ignoring the resource claims on the deficit by assuming the revenue is made up elsewhere), a tax cut simply increases the after tax rate of return, and raises the discount rate just enough to offset the rate cut. The result is that there would be no effect on the stock market. This criticism is perhaps a more serious one which could greatly reduce any potential effect on the stock market. But, without a general equilibrium analysis, such an effect cannot be estimated.\nIndeed, it could be argued that the future tax cuts are causing the stock market values to decrease by increasing future interest rates (and also discouraging investment for the same reason).\nNote that, according to this type of analysis, the effect of an investment credit on the stock market can either raise or lower stock prices. While profits rise in the short run, in the long run the value of financial assets relative to the physical value of the firm's assets falls. If the investment credit were 10%, for example, the asset value would fall by 10%. With two opposing forces in play, the initial effect on the stock market is uncertain according to rational expectations theory, which may be one of the reasons that some analysts have proposed a rate cut rather than an investment credit.\nFor those economists who doubt that a rational expectations approach is the best method of predicting the effects on the stock market in the short run, however, the inclination would be to expect an initial rise in the stock market from either policy as more investors choose to buy stocks. The magnitude of these effects is, however, difficult to determine, but is likely not to be very large relative to the other short-run swings in the market. Such a view would suggest that considerations of the stock market not play an important role in evaluating alternative counter-cyclical tax instruments.", "This analysis suggests that a business tax subsidy may not necessarily be the best choice for fiscal stimulus, largely because of the uncertainty of its success in stimulating aggregate demand. If such subsidies are used, however, the most effective short-run policy is probably a temporary investment subsidy. Permanent investment subsidies, while more effective than corporate rate cuts in the short run, will distort the allocation of investment in the long run.\nAppendix A. Measuring \"Bang for the Buck\"\nThe rental price of capital, with an investment credit (without a basis adjustment) is:\n(1)\nwhere c is the price of capital, r is the after tax rate of return to corporate investment, u is the corporate tax rate, d is the economic depreciation rate, z is the present value of depreciation deductions and k is the investment tax credit. Take logs and differentiate this expression with respect to k, assuming an initial rate of the credit of zero, the following expression for the percentage change in the cost of capital is obtained:\n(2)\nDenote the elasticity of investment with respect to the price of capital as\n(3) ,\nwhere e is the elasticity and I is investment. By substituting (2) into (3) and rearranging, obtained is:\n(4)\nThis incentive can also be related to the revenue cost, which is , hence the ratio of stimulus per dollar of revenue loss is . This stimulus is bigger for shorter lived assets (assuming the elasticities are the same).\nCompare the effect of a rate reduction. Differentiating (1) with respect to u we obtain, dividing by c and substituting into (4), the effect on investment of a rate reduction is obtained:\n(5)\nHow does this compare with revenue? The only way to make a fair comparison between an investment credit that appears only in the first year and applies to new investment, and a rate reduction that lasts over the entire life of the investment but also benefits existing capital is to compare investment per present value of revenue cost. The present value of the cost of an investment credit if investment grows at rate g and is discounted at rate r is . The effect on today's investment per present value of revenue loss is therefore . Taxable income is the rental price of capital c (the marginal product of capital) times the capital stock minus the flow of depreciation. The flow of depreciation per unit of investment today, in a steady state, is the same as the present value of depreciation formula discounted at the growth rate rather than the rate of return. Thus the cost of a rate reductions is du (cK - Izg) where zg is the depreciation formula discounted at the growth rate g. Since I equals the effect on today's investment per present value of revenue loss is:\nTherefore the ratio of the cost of an investment credit to the cost of a corporate rate reduction is somewhat complicated, but when depreciation is economic depreciation, the ratio simplifies to:\n(5)\n[where CoIC = Cost of Investment Credit, CoCRC = Cost of Corporate Rate Cut].\nAppendix B. Measuring Marginal Effective Tax Rates\nA marginal effective tax rate is determined by a discounted cash flow analysis, where the internal rate of return with and without taxes is compared. This type of measure can take into account all of the timing effects, which are the crucial features of certain tax preferences, including accelerated depreciation and deferral of taxes on capital gains until realization.\nIn the case of a depreciating asset, the relationship between pre-tax return and after tax return in the corporate sector is determined by the rental price formula:\n(6)\nwhere is the pre-tax real return, is the after tax discount rate of the firm, d is the economic depreciation rate, u is the statutory tax rate of the firm (equal to the corporate tax rate for corporate production and equal to the individual tax rate for non-corporate production), z is the present value of depreciation deductions for tax purposes, k is the investment tax credit rate, and m is the fraction of k that reduces the basis for depreciation purposes. The value of depreciation is discounted at the nominal discount rate, , where is the rate of inflation. This formula applies to investments in equipment and structures that are subject to depreciation. The effective tax rate is measured as ." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 1, 2, 3, 3, 3, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h1_full", "h3_full h2_full", "h2_full", "h2_full", "h2_full", "", "h3_title", "h3_title", "h3_full", "h3_full", "h3_full", "h3_full", "h3_full", "" ] }	{ "question": [ "How were tax cuts affected by the 2009 American Recovery and Reinvestment Act and the 2012 American Taxpayer Relief?", "What is the most important part of the business tax cuts?", "Why were business tax cuts affected in 2002 and 2001?", "How did the bonus depreciation affect future years?", "What else have depreciations been a part of?", "What tax proposals were discussed in 2002?", "How did tax cuts affect equipment in March 2002?", "Why is the efficacy of fiscal policy questioned?", "What are some negatives of deficit financing of tax cuts and solutions to those potential issues?", "Why is increasing investment spending not used as a strategy?", "How has evidence from statistical studies changed?", "What do these studies show about response times?", "What were the results of the previous 2002 stimulus measure?", "How does an investment subsidy compare to a corporate rate cut?", "How can you quantify this comparison?", "What types of investment subsidies are used?", "What is the effect of investment credits being temporary?", "What is the effect of investment credits being permanent?", "What kinds of negative tax rates could be produced?", "Why were corporate tax rate cuts argued for?", "Why might these arguments be based upon incorrect facts?", "How will this report be updated?" ], "summary": [ "Business tax cuts were part of the economic stimulus, included in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), provisions that were subsequently extended (in P.L. 111-240 and P.L. 111-315) by the American Taxpayer Relief Act of 2012, P.L. 112-240.", "The most important provision is bonus depreciation, which extends to the end of 2013.", "Bonus depreciations provisions were enacted in 2002, as increased interest in providing business tax cuts to stimulate the economy followed the terrorist attacks of 2001, which heightened concerns about an economic slowdown.", "Interest in this issue continued, including proposals by President Bush for reductions in taxes on corporations through temporary dividend relief, which were enacted in May 2003. The temporary bonus depreciation expired at the end of 2004. Dividend relief was extended through 2010 in legislation passed in 2006.", "Temporary bonus depreciation was also part of a recent fiscal stimulus package adopted in 2008 (P.L. 110-185) and 2009 (P.L. 111-5) and has subsequently been extended and expanded.", "Among the tax proposals discussed at that time were a corporate rate cut and an investment subsidy.", "A March 2002 tax cut contained temporary partial expensing (bonus depreciation) for equipment.", "Some economists doubt the efficacy of fiscal policy in general even when a stimulus is needed, especially in an open economy and given the difficulties of achieving proper timing.", "Also, deficit financing of a tax cut has potential negative long run effects because it crowds out investment; a stimulus designed to increase investment spending (rather than consumption spending) would, if successful, reduce that negative effect.", "Investment subsidies had largely been abandoned as counter-cyclical devices over the last two decades, in part because of lack of evidence from statistical studies relating investment spending to the cost of capital.", "Some recent empirical evidence has found some larger effects, at least with some studies, although not enough to suggest that all of the tax cut is spent (especially with corporate rate reductions).", "Moreover, the average behavioral response identified in these studies may be larger than responses during a downturn when many firms have excess capacities, and planning lags may make investment responses poorly timed.", "Recent studies of the 2002 temporary investment stimulus tended to find it a relatively ineffective stimulus measure.", "An investment subsidy has more \"bang-for-the-buck\" than a corporate rate cut (or dividend relief), since the latter benefits existing as well as new capital.", "A corporate rate cut is estimated to produce as little as two-thirds of the investment induced by an investment credit with an equivalent revenue loss.", "The historically most common investment subsidy is the investment credit, although the same effect could be achieved with accelerated depreciation or partial expensing.", "A temporary investment credit should be more effective than a permanent one, and a temporary investment credit could also be made incremental. (It is not possible to structure a permanent incremental credit.)", "One disadvantage of a permanent investment credit is that it distorts the allocation of investment and can easily produce negative tax rates.", "A 10% investment credit would produce negative tax rates in excess of 100% for short-lived assets.", "Arguments were made for a corporate tax rate cut because of estimated large effects on the stock market.", "These calculations are overstated because they do not account for the adjustment process and of interest rate increases. Given the uncertainty about the size of stock market effects or their beneficial effect on the economy, there is a case for not considering stock market effects an important factor in choosing an investment subsidy.", "This report will be updated to reflect major legislative developments." ], "parent_pair_index": [ -1, 0, -1, 0, 0, -1, -1, -1, -1, -1, 2, 3, 3, -1, 0, -1, -1, -1, 4, -1, 6, -1 ], "summary_paragraph_index": [ 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3 ] }
GAO_GAO-18-461	{ "title": [ "Background", "State Involvement in Interstate Pipeline Inspections, While Not Extensive, Can Enhance Oversight Activities", "Interstate Agent Agreements Can Bolster Oversight in Participating States", "PHMSA’s Other Means of State Participation in Interstate Inspections Have Not Been Used Extensively", "Temporary Interstate Agreements", "Joint Inspections", "PHMSA Used a Regional Workload Analysis to Allocate Inspection Resources, but Has Not Assessed Future Resource Needs", "PHMSA Has Allocated Increased Inspection Resources Based on Regional Workload", "PHMSA Lacks an Inspection Workforce Plan That Assesses Future Resource Needs for Interstate Pipeline Inspections", "Conclusions", "Recommendation", "Agency Comments", "Appendix I: States That Have Applied and Have Not Been Accepted for Interstate Agent Status", "Appendix II: Comments from the Department of Transportation", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgements" ], "paragraphs": [ "The U.S. pipeline network includes both interstate and intrastate pipelines, the vast majority of which fall into the latter category: Interstate pipelines: Interstate pipelines are primarily large-volume transmission pipelines that carry gas or hazardous liquid–sometimes over hundreds of miles—to communities and large-volume users (e.g., factories). At the start of 2017, there were about 340,000 miles of interstate transmission pipelines nationwide. Newly tapped domestic gas and oil deposits have resulted in an increase in the existing pipeline infrastructure to transport natural gas and oil.\nIntrastate pipelines: Intrastate pipelines are primarily composed of gas distribution and some transmission pipelines that transport natural gas pipelines to residential, commercial, and industrial customers. As of 2015, there were about 2.2 million miles of distribution pipelines nationwide. In addition, an estimated 18,000 miles of federally regulated gathering pipelines carry natural gas or hazardous liquids from production areas to processing facilities where the product is refined before continuing in transmission pipelines.\nAt the federal level, PHMSA is responsible for developing regulations for domestic interstate and intrastate natural gas and hazardous liquid pipelines. Its regulatory programs are focused on ensuring safety in the design, construction, operation, and maintenance of pipelines. Inspectors from PHMSA’s five regional offices and states are responsible for inspecting nearly 3,000 companies that operate 2.7 million miles of pipelines.\nEach year, PHMSA uses its Risk Ranking Index Model (RRIM) as one input to determine its annual inspection priorities. RRIM categorizes each of the nation’s pipeline systems regulated by PHMSA into high, medium, and low-risk tiers. Pipeline risk are proposedbased on a combination of categories, such as the type of pipeline material and time since last inspection. PHMSA’s guidance specifies that high-risk pipelines should be inspected at least once every 3 years, medium-risk pipelines every 5 years, and low-risk pipelines every 7 years. PHMSA’s goal each year is to inspect, at a minimum, pipeline systems where the time since last inspection meets or exceeds the PHMSA guidance for the tier.\nUnder federal pipeline safety laws, states may assume inspection and enforcement responsibilities for intrastate gas and hazardous liquid pipelines, which are primarily natural gas distribution pipelines. States assume that responsibility by annually certifying their state pipeline safety program to PHMSA, which PHMSA must validate. As part of a state’s certification, states must establish pipeline laws similar to federal pipeline safety regulations for intrastate pipelines, but may also impose more stringent pipeline safety regulations. PHMSA reimburses certified state agencies up to 80 percent of the total cost of operating their pipeline safety program through an annual grant.\nPHMSA may permit certified states to participate in interstate inspections through three types of agreements. (See fig.1): Interstate agent agreement: At PHMSA’s discretion, certified states may enter into an interstate agent agreement for either their natural gas program, hazardous liquid program, or both on an annual basis. As of April, 2018, nine state pipeline agencies hold these agreements. On PHMSA’s behalf, these agencies assume inspection responsibilities for the range of interstate inspection activities, as agreed upon by PHMSA and prioritized by PHMSA during the agency’s annual inspection planning process. States may also propose and conduct additional inspections as they believe necessary. While state inspectors can identify violations, PHMSA is ultimately responsible for enforcement of interstate pipeline regulations and uses a range of enforcement tools from Warning Letters to more stringent Notices of Probable Violation with either proposed compliance orders or proposed civil penalties.\nTemporary interstate agreement: These agreements allow PHMSA to request a state that has had its certification validated by PHMSA to perform interstate pipeline inspections on a temporary basis. According to PHMSA guidelines, these agreements are used typically for new construction inspections, but may include assistance such as inspection of specific operators, witness to repairs or testing, or investigation of incidents. Since 2010, PHMSA has entered into temporary interstate agreements with six states.\nJoint inspection: The Pipes Act of 2016 included a requirement for PHMSA to allow certified states to participate in the inspection of an interstate pipeline safety facility, if requested by the state pipeline safety agency. As of April, 2018, no states have requested to participate in joint inspections.", "", "According to PHMSA regional officials we met with, interstate agents conduct high-quality inspections of interstate pipelines and provide an important supplement to the federal inspection workforce. PHMSA regional officials generally agreed that interstate agents have well-trained staff and leverage their local knowledge to enhance interstate pipeline inspections within their state. Additionally, interstate agents, if authorized by PHMSA, may conduct inspections of interstate pipelines within their state more frequently than PHMSA. For instance, officials in one PHMSA region noted that an interstate agent in their jurisdiction ensured each interstate operator was inspected once every 2 years, regardless of PHMSA’s risk ranking. Similarly, in two of 5 regions that have interstate agents, PHMSA regional officials stated that they needed interstate agents to supplement their current allocation of federal inspectors. For instance, in one region, PHMSA officials said that if interstate agent agreements were discontinued, the region would need to hire 3 to 4 additional inspectors. In another region, officials said that interstate agents provided the equivalent of 5 to 10 additional inspectors. Officials in one PHMSA region said that, although the region could absorb the interstate agent workload if needed, doing so would lead to less extensive inspections because there would more pipelines to inspect with fewer federal inspectors.\nInterstate agents may also enhance pipeline safety oversight within their state by going above and beyond the annual interstate inspection activities required under their agreement with PHMSA. Specifically, as part of the annual inspection planning process, PHMSA’s regional offices work with interstate agents to develop an annual inspection plan. While interstate agents must prioritize PHMSA’s inspection priorities, such as participation in new construction inspections and PHMSA-led systems inspections, they can also propose additional inspections of interstate pipelines within their state. Officials in half of the nine states with interstate agent agreements stated that they proposed and obtained PHMSA’s approval for additional interstate pipeline inspections that would not otherwise have been included in PHMSA’s annual inspection plan. For instance, PHMSA’s Western Region reported that between January 1, 2015 and December 31, 2016 Washington State’s pipeline safety agency—which holds an interstate agent agreement—proposed and conducted 13 inspections beyond those identified in PHMSA’s inspection plans.\nDuring these additional inspections conducted by interstate agents, state officials have identified violations of pipeline safety regulations. Some violations, including the four illustrative examples below, were deemed serious enough that PHMSA imposed civil penalties.\nIn 2015, the Connecticut Department of Energy and Environmental Protection inspected an interstate pipeline that traverses the state. During the inspection, Connecticut inspectors found the pipeline operator had failed to employ properly qualified welders in constructing a section of the pipeline. As a result, PHMSA issued a civil penalty of $26,200 to the pipeline operator. In response to the findings, the operator ensured its welders were properly qualified and replaced the 14 welds completed by improperly qualified welders.\nIn 2014, the New York Department of Public Service’s Pipeline Division inspected an interstate pipeline that traverses the state. During that inspection, New York inspectors identified violations related to the operator’s corrosion-control practices. Inspectors also found that the operator failed to prepare, and follow, a manual for conducting operations and maintenance activities, as well as for emergency response. As a result, PHMSA issued a civil penalty of $61,900. In response to the findings, the operator took action to address the corrosion control-related violations and revised its operations and maintenance manual.\nIn 2011, the New York Department of Public Service’s Pipeline Division inspected an interstate pipeline that traverses the state. During that inspection, a New York inspector identified violations related to corrosion-control practices. As a result, PHMSA issued a civil penalty of $78,900. PHMSA also issued a Compliance Order, requiring the operator to remediate the identified violations, or face an additional civil penalty.\nIn 2014, Arizona’s Corporation Commission’s Pipeline Safety Section inspected two interstate gas transmission lines that traverse the state. During the inspection, PHMSA and Arizona inspectors found that the operator had committed probable violations by not properly odorizing its pipeline, and providing insufficient information to the public about its pipeline odorization methods. As a result, PHMSA issued a Notice of Probable Violation, proposed civil penalties totaling $162,700, and issued a Proposed Compliance Order.\nAlthough state involvement in interstate inspections can enhance oversight, officials from almost all of our selected states that do not currently have an interstate agent agreement expressed little interest in pursuing such an agreement. Specifically, some officials in we spoke with plan to focus their limited resources on intrastate pipeline safety oversight activities. For example, although Texas has over 50,000 miles of interstate pipeline, officials in that state have focused exclusively on intrastate inspection activity, citing the heavy workload of their inspection staff, as well as challenges in recruiting and retaining additional inspectors. In another instance, California’s state pipeline safety agency responsible for hazardous liquid oversight voluntarily withdrew from the interstate agent program in 2013, citing staffing shortages stemming from a difficult economic climate.\nAlthough PHMSA’s current policy stance does not prohibit the agency from entering into a formal interstate agent agreement if the circumstances warrant, the agency prefers that state agencies enter into temporary interstate agreements. PHMSA officials explained that, historically, PHMSA has used interstate agents to supplement federal inspection resources and that the current nine interstate agents supplement the federal workforce by approximately 10–15 inspectors. PHMSA officials stated that they do not intend to discontinue current interstate agent agreements, but due in part to a recent staff increase the agency has sufficient staff to meet its inspection needs without adding additional interstate agents. PHMSA officials also told us that intrastate pipelines pose the highest safety risk to states and, consequently, state pipeline safety agencies should focus their efforts on intrastate pipeline oversight rather than participating in interstate pipeline inspections. During the last 7 years, four states that applied for an agent agreement— New Hampshire, Virginia, Maryland, and Nevada—were not accepted by PHMSA for these reasons. (See app. I.) In 2013, PHMSA decided not to renew another state pipeline safety agency’s interstate agent agreement, citing the state agency’s inability to staff its program properly, among other things.", "", "While temporary interstate agreements provide an opportunity to participate in interstate pipeline oversight, officials from some state agencies told us that the agreement’s limited scope and ad hoc nature can create obstacles to state participation. For instance, in states without an interstate agent agreement, state inspectors’ day-to-day work focuses exclusively on intrastate pipeline oversight activities. In the event PHMSA requested assistance with certain interstate inspections, state inspectors may be unfamiliar with the interstate pipeline systems and operators. As a result, some state officials said that their inspectors may have a steep learning curve when conducting inspections under a temporary interstate agreement. However, PHMSA officials disagreed that most interstate agent states would have such steep learning curve because they currently inspect intrastate transmission pipelines; the regulations for interstate and intrastate pipelines are for the most part identical. Another obstacle some state officials identified relates to the fact that state pipeline safety agencies may not have sufficient inspection staff available, when needed, to participate in ad hoc interstate inspections.\nDue to the limited state role and competing priorities, state pipeline safety agencies rarely enter into temporary interstate agreements. According to officials in five of the 6 states that have that have entered into temporary interstate agreements, the agreements were used for limited, ad hoc inspections that were initiated by PHMSA. The sixth temporary interstate agreement was initiated by PHMSA in lieu of the Virginia pipeline safety agency’s 2017 application for an interstate agent agreement for natural gas. PHMSA offered to enter into a longer-term, temporary interstate agreement, which would permit the state agency to inspect the installation of two large interstate pipeline systems. The state agency accepted the temporary interstate agreement, which may be extended annually until the completion of the pipeline construction. To meet its new interstate inspection obligations, the state agency told us it hired two additional inspectors. According to state officials, those two inspectors will be dedicated to intrastate pipeline inspection, which will allow two of the state agency’s more experienced inspectors to conduct interstate pipeline inspections.\nCurrent interstate agents do not consider temporary interstate agreements to be an adequate substitute for an interstate agent agreement. According to officials we spoke with that are currently interstate agents, an interstate agent agreement allows state agencies and their inspectors to develop a strong understanding of operators and pipelines within their state. A few state officials stressed that the greatest benefit of interstate agent status was the ability to leverage their local knowledge—such as the proximity and familiarity with interstate pipelines within their states—to allow for quick responses to public concerns and pipeline incidents. PHMSA officials emphasized that temporary interstate agreements are not intended to replicate an interstate agent agreement; instead, these agreements are designed to provide PHMSA the flexibility to request targeted, short-term assistance from state pipeline safety agencies with interstate pipeline inspections.", "Joint inspections offer states the most limited role in interstate pipeline inspections and may be entered into only if the state meets certain conditions. In response to the requirement in the PIPES Act, PHMSA created joint inspections and established certain criteria for state participation. For instance, to ensure that participation in joint inspections does not compromise intrastate pipeline safety, PHMSA only allows state inspectors to participate if the state agency has accomplished the required minimum number of inspection days during the preceding calendar year. PHMSA also requires state agencies to bear the cost of participating in joint inspections—including travel and inspection time for the state inspectors—rather than allowing states to include this activity in their annual pipeline safety program grant reimbursement. According to PHMSA officials, this requirement is designed to focus limited federal funds intended to support states’ intrastate pipeline safety programs.\nWhile it is too early to know whether states will participate in joint inspections over the long term, no states have participated to date. Despite general agreement among some state pipeline safety officials that collaborating with PHMSA on interstate pipeline inspections could be beneficial, they noted that PHMSA’s criteria reduces the incentive to participate. For instance, a few of the state officials we spoke to generally expressed concern over the requirement that states bear the entire cost of their participation. Additionally, state officials perceive the current joint inspection policy as restricting state inspectors to an observer role. However, PHMSA officials we spoke with noted that the role of state inspectors can vary based on the levels of training and knowledge among state inspectors. PHMSA officials told us they intend to clarify this role for states.", "", "From fiscal year 2012 to 2017, PHMSA’s funding increased by nearly 40 percent, allowing the agency to hire additional pipeline inspectors. Specifically, PHMSA’s funding increased from $110 million in fiscal year 2012 to $154 million in fiscal year 2017. PHMSA’s inspection and enforcement division received the majority of the increased funding, allowing that division to hire additional staff. From fiscal year 2012 through 2017, the number of inspectors hired increased by over 25 percent, from 107 to 147 across the five PHMSA regions. (See fig. 2).\nIn recent years, PHMSA has improved its analysis of the number of pipeline inspectors needed to address the inspection workload in each region. Before 2014, PHMSA allocated inspectors evenly across the agency’s five regions. Since 2014, PHMSA has used a regional workload analysis to allocate its interstate inspectors. Unlike the previous analysis, the regional workload analysis takes into account federal inspector workload, pipeline construction, and the amount of pipeline mileage in areas where the consequences of an accident are greater (such as populated and environmentally sensitive areas) to help ensure that PMHSA has appropriate resources in each region. For example, PHMSA’s central region received a greater percentage of inspectors than most other regions to help oversee a number of new pipeline construction projects. (See table 2). According to PHMSA officials, the regional workload analysis has resulted in a better match between workforce staffing and needs.", "While PHMSA has improved how it allocates its current inspection staff among the regions, the agency lacks a forward-looking workforce plan for interstate pipeline inspections. Workforce planning helps agencies take a strategic, forward-looking approach to put the right people with the right skills in the right places at the right time. We have previously identified leading practices for effective strategic workforce planning. These approaches may vary with each agency’s particular needs and mission, but share certain principles. These may include: identifying skills and competencies to fill critical workforce gaps and the strategies needed to recruit them; developing specific strategies that are tailored to address gaps in number, deployment, and alignment of human capital; and monitoring and evaluating the agency’s progress toward its human capital goals.\nHowever, PHMSA has not developed a plan that systematically identifies the anticipated interstate pipeline inspection workload or the number of inspection staff needed to meet that workload. In light of the diminishing role that interstate agents currently provide in bolstering PHMSA’s inspection workforce, a plan for conducting future interstate pipeline inspections should also account for the reduction in resources and expertise state inspectors can potentially provide.\nAccording to PHMSA officials, they have not developed a workforce plan for interstate pipeline inspections because the agency’s focus has been on allocating and training the recently hired inspectors and ensuring that pipeline inspections are completed. Further, the lack of an inspector workforce plan may be symptomatic of a wider-ranging workforce planning issue. A November, 2017 DOT Inspector General (IG) report found that PHMSA had not developed a comprehensive workforce plan since 2005 and recommended that PHMSA develop such a plan. PHMSA agreed with the recommendation and anticipates completing the plan by the end of December 2018. Of note, PHMSA’s 2005 workforce plan did not include an analysis of federal and state inspectors needed for interstate pipeline inspections. In the absence of a workforce plan for interstate inspections, PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective pipeline oversight.", "PHMSA has an important role in overseeing interstate pipelines and operators to ensure pipeline safety, and the agency’s partnership with interstate agents has proven beneficial in fulfilling that role. Recent increases in funding have allowed PHMSA to increase its own inspection workforce and reduce its reliance on state agents. However, the agency does not have an inspection workforce plan to ensure that it is making the correct decisions regarding its mix of federal inspectors versus state resources. Therefore, it does not have reasonable assurance that it will be able to provide adequate oversight of interstate pipelines going forward.", "PHMSA should develop a workforce plan for interstate pipeline inspections that is consistent with leading practices in workforce planning, which should include a consideration of the additional resources and safety oversight that state pipeline officials can provide. (Recommendation 1)", "We provided DOT with a draft of this report for review and comment. In its comments, reproduced in appendix II, the Department of Transportation concurred with our recommendation. The Department of Transportation also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to relevant congressional committees, the Secretary of Transportation, and other interested parties. In addition, this report will also be available at no charge on GAO’s website at http://www.gao.gov If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "In the past 7 years, four additional state pipeline safety agencies have applied for interstate agent agreements:\nNew Hampshire: In 2014, the state legislature passed a law requiring the state’s pipeline safety agency to apply for interstate agent status on an annual basis. State pipeline safety officials cited New Hampshire inspectors’ local knowledge of interstate pipelines, as well as concerns over the frequency of PHMSA’s interstate pipeline inspection activity, as reasons for seeking an agreement. To date, PHMSA has not accepted the state agency’s annual applications for interstate agent status citing an increase in the federal inspection workforce, a preference for states to focus on intrastate pipeline oversight, and the ability for state agencies to participate in interstate inspections through other means, such as temporary interstate agreements.\nVirginia: In 2016, the Virginia General Assembly passed legislation requiring the state pipeline safety agency to apply for interstate agent status for natural gas. The state agency applied the following year, citing the need to conduct construction inspections of the Virginia section of two large interstate natural gas transmission pipelines. PHMSA did not accept the state agency’s application, citing increasing federal inspection resources as well the agency’s lack of full authority over its intrastate gas operators. Instead, PHMSA provided the state agency a temporary interstate agreement, renewable on an annual basis, to conduct the desired inspections.\nMaryland: Maryland’s pipeline safety agency applied for interstate agent status in 2014 in response to public concern over proposed construction of a new interstate pipeline. PHMSA did not accept the agency’s application for interstate agent status, citing an increase in federal resources and PHMSA’s preference that the state agency focus its inspection efforts on intrastate pipelines. According to state agency officials, public interest has waned and the state has no plans to reapply.\nNevada: Nevada’s pipeline safety agency applied for interstate agent status in 2011. According to state pipeline safety officials, they did so to help retain staff, rather than as a result of pipeline safety concerns. PHMSA did not accept the agency’s request, citing a preference only to enter into new interstate agreements when additional state support was needed, as well as the preference for states to focus on intrastate pipeline facilities. According to state officials, they do not plan to reapply.", "", "", "", "In addition to the contact named above, Sara Vermillion (Assistant Director), Nick Nadarski (Analyst-in-Charge), Mike Duane, David Hooper, Delwen Jones, Malika Rice, and Kelly Rubin made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 3, 3, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full h2_full h1_full", "h0_title h2_title h3_title", "h0_full h3_full h2_full", "h0_title", "h0_full", "h0_full", "h2_title h1_title", "h2_full h1_full", "h1_full", "", "", "h3_full", "", "", "", "", "" ] }	{ "question": [ "What are the potential effects of state involvement in interstate pipeline inspections?", "What are annual interstate agent agreements?", "How has one of these inspections proceeded previously?", "What are temporary interstate agent agreements?", "What is the benefit of these temporary agreements over the annual ones?", "What is the downside of these temporary agreements over the annual ones?", "Why were joint inspections established?", "Why are states apprehensive about the joint inspections?", "What was the PHMSA reaction to this concern?", "How has PHMSA addressed their current and future needs?", "How did the PHMSA workforce expand from 2012 to 2017?", "How did PHMSA place this workforce?", "How has PHMSA failed to consider their future workforce?", "Why is it likely future analysis could be beneficial?", "Why is a lack of future analysis detrimental to PHMSA?", "What are the safety responsibilities of PHMSA?", "What are the oversight responsibilities of PHMSA?", "Has PHMSA changed their related workforce?", "How are states reimbursed for their work with pipelines?", "How did the GAO come to create this review?", "What does this report address?", "What information did the GAO use to address these points?" ], "summary": [ "State involvement in interstate pipeline inspections can enhance oversight, although the three types of agreements that the Pipeline and Hazardous Materials Safety Administration (PHMSA) uses to allow state participation are not used extensively.", "Annual interstate agent agreements —held by 9 states—allow states to participate in all inspection activities and can bolster interstate pipeline oversight.", "For instance, an inspection conducted in 2014 by New York state officials led to $61,900 in federal civil penalties.", "Temporary interstate agreements —used in 6 states to date—allow PHMSA to request states to participate in specific interstate pipeline inspections.", "PHMSA officials said these agreements provide the agency greater flexibility.", "Some current interstate agents GAO interviewed said that temporary interstate agreements are useful, but are not substitutes for interstate agent status because states do not participate in the full range of inspections.", "Finally, PHMSA as authorized by federal law recently established joint inspections allowing states to request to participate in interstate inspections.", "However, state officials were concerned that their role is limited and that they must bear the full cost to participate.", "PHMSA officials said they intend to clarify the state inspector role in joint inspections and acknowledged that federal grants cannot be used by states to support joint inspection activities.", "PHMSA allocated recently hired inspectors based on regional workload, but has not assessed future resource needs.", "From fiscal years 2012 to 2017, PHMSA's appropriations increased over 40 percent, allowing the agency to expand its inspector workforce by about 25 percent.", "PHMSA allocated the additional inspectors across the agency's five regions based on workload. For example, PHMSA's central region received a greater percentage of inspectors than other regions to help oversee a number of new pipeline construction projects.", "However, PHMSA has not planned for future workforce needs for interstate pipeline inspections. In particular, it has not assessed the resources and benefits that states can provide through the three types of agreements.", "Leading practices for workforce planning indicate that such forward-looking analyses are essential for effective workforce planning.", "Without such analyses, PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective oversight of interstate pipelines.", "PHMSA oversees the safety of interstate and intrastate natural gas and hazardous liquid pipelines.", "PHMSA certifies states to oversee intrastate pipelines, and some states also act as PHMSA's “agents” to supplement the federal inspection workforce for interstate pipelines.", "In recent years PHMSA has signaled a move away from using interstate agent agreements. Recent funding increases have enabled PHMSA to hire additional federal inspectors.", "States may receive annual grants to reimburse up to 80 percent of the cost of their pipeline safety activities.", "Congress included a provision in statute for GAO to review the federal and state responsibilities and resources used to inspect interstate pipelines.", "This report addresses (1) how state participation has affected interstate pipeline oversight and (2) PHMSA's assessment of the resources needed to conduct interstate pipeline inspections.", "GAO reviewed relevant laws and PHMSA guidance on state participation in these inspections; analyzed the most recent 6 years of PHMSA funding and inspector staffing data; and interviewed pipeline safety officials from PHMSA and 22 states selected based on level of participation in interstate inspections." ], "parent_pair_index": [ -1, -1, 1, -1, 3, 3, -1, 6, 7, -1, -1, 1, -1, 3, 3, -1, -1, 1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1 ] }
CRS_R44256	{ "title": [ "", "Introduction", "Rules Governing Use of Force", "Fourth Amendment \"Objective Reasonableness\"", "Deadly Force Under Tennessee v. Garner", "All Uses of Force Under Graham v. Connor", "Scott v. Harris's Free-Form Approach", "Deadly Force", "Non-Deadly Force", "Tasers", "Pepper Spray", "Remedies for Use of Force", "Federal Criminal Civil Rights Statute (18 U.S.C. §242)", "Screws v. United States and the Specific Intent Requirement", "Circuit Courts' Interpretation of Section 242", "Federal Civil Rights Claims (42 U.S.C. §1983)", "Qualified Immunity", "Municipal Liability", "\"Pattern or Practice\" Suits (42 U.S.C. §14141)", "Reforming Police Use of Force", "Excessive Use of Force Prevention Act of 2015 (H.R. 2052)", "Police Accountability Act of 2015 (H.R. 1102)", "National Statistics on Deadly Force Transparency Act of 2015 (H.R. 306)196", "Police Reporting Information, Data, and Evidence Act of 2015 (PRIDE Act) (S. 1476, H.R. 3481)", "President's Task Force on 21st Century Policing", "Other Reform Proposals" ], "paragraphs": [ "", "By the very nature of their job, law enforcement officers are tasked with using physical force to restrain individuals and protect themselves and others from harm. Police officers must stop and seize violent suspects, serve search warrants in hostile environments, and maintain the peace and safety of the communities in which they serve. As then-Justice Rehnquist observed, \"[p]olicemen on the beat are exposed, in the service of society, to all the risks which the constant effort to prevent crime and apprehend criminals entails: Because these people are literally the foot soldiers of society's defense of ordered liberty, the State has an especial interest in their protection.\" However, a number of recent high-profile police shootings and other law enforcement-related deaths have reignited the debate about how much force police should wield in a democratic society that values both law and order and the personal liberty of each of its citizens under law.\nThe shooting of Michael Brown by a Ferguson, Missouri police officer in the summer 2014 served as a flashpoint for this debate, but it is just one in a spate of recent law enforcement-related deaths. These deaths, and others, have prompted a call for legal accountability against the officers involved in these killings, but also, more broadly, for systemic police reform on both the federal and state level. President Obama responded by establishing the Task Force on 21 st Century Policing in December 2014 to develop best policing practices and recommendations. The task force's final report issued in May 2015 offered a set of policy recommendations focused on training, investigations, prosecutions, data collection, and information sharing. Similarly, the House Judiciary Committee held a hearing on policing strategies on May 19, 2015, and various measures have been introduced in the 114 th Congress to address both use of force tactics and data collection by state and local police departments. The public, too, has been thoroughly engaged on this issue. \"Black Lives Matter,\" a movement that sprung up in response to the Treyvon Martin shooting and other police-related deaths, has recently released an initiative called \"Campaign Zero,\" which contains a set of policy proposals to limit police use of excessive force, including a call for a national standard governing the use of deadly force and better reporting requirements on instances of excessive force by law enforcement officers.\nThese reforms prompt the perennial debate concerning the role of Congress in addressing police reform, especially on the local level, where many of these deaths have occurred. Certain segments of the law enforcement community and its supporters have argued that regulating local police is best left to the province of state and local governments, and that a one-size-fits-all approach would hamper local experimentation. Proponents of reform have countered that federal intervention is warranted as state and local governments and police departments have not adequately held their officers legally accountable for the improper use of force.\nInsofar as constitutional violations are concerned, there is historical precedent for congressional intervention. Shortly after the Civil War, Congress enacted two federal statutes—one criminal and one civil—to provide legal remedies for newly freed African Americans who were being deprived of their civil rights. On the civil side is 42 U.S.C. Section 1983, which provides individuals with a civil cause of action to recover damages for the deprivation of such rights. On the criminal side is 18 U.S.C. Section 242, which makes it a federal crime to willfully deprive someone of his constitutional rights. Of more recent vintage (1994) is 42 U.S.C. Section 14141, which permits the Department of Justice (DOJ) to sue local police departments that engage in a \"pattern or practice\" of constitutional violations, including the use of excessive force.\nTo provide legal context for this debate, this report will address three overarching questions: (1) what are the constitutional rules governing an officer's use of force; (2) what role has Congress played in providing a remedy for a violation of these rules; and (3) what are the potential reforms to these rules and remedies?", "The first question that must be addressed is what rules govern police use of force. Because the majority of recent law enforcement-related deaths have arisen in the context of street encounters with police (rather than pre- or post-trial detention), this report will focus almost exclusively on the Fourth Amendment right to be free from unreasonable seizures, which governs such encounters.", "The Fourth Amendment guarantees \"the right of the people to be secure in their persons, houses, papers, and effects, from unreasonable searches and seizures.\" While this provision is best known for providing restraints on government searches and surveillance and the procedures under which they may be conducted, in a series of cases beginning in the 1980s the Supreme Court interpreted the Fourth Amendment as the primary federal legal restraint on excessive force. Prior to these cases, the lower circuit and district courts largely applied the substantive component of the Due Process Clause to all claims of excessive force, deadly or otherwise. However, in Tennessee v. Garner and Graham v. Connor , the Court grounded all excessive force claims in the Fourth Amendment's right to be free from unreasonable seizures.", "In the 1985 case Tennessee v. Garner , the Court assessed whether Tennessee's deadly force statute—which, like those of other states at the time, permitted police to use deadly force to shoot a fleeing felon—passed constitutional muster. In that case, police were responding to a reported burglary when an officer at the scene saw a young African American male fleeing the back of the house, apparently unarmed. In an effort to prevent his escape, the officer yelled for the suspect to halt and, when he failed to do so, shot him in the back of the head as he was climbing over a fence. The shot was fatal.\nThe victim's family brought a civil suit under Section 1983 for the alleged violation of the deceased's constitutional rights. The federal district and circuit courts both held that the officer had acted in good faith on Tennessee's use of force statute, which provided that \"[i]f, after notice of the intention to arrest the defendant, he either flee or forcibly resist, the officer may use all the necessary means to effect the arrest.\" In a 6-3 decision authored by Justice White, the Supreme Court reversed and held that the use of deadly force against a fleeing felon is unconstitutional.\nWith little discussion of prior excessive force cases, Justice White noted that the use of deadly force is a \"seizure\" under the Fourth Amendment that must be \"reasonable,\" the touchstone of all Fourth Amendment protections. To determine a seizure's reasonableness, a reviewing court must \"balance the nature and quality of the intrusion on the individual's Fourth Amendment interests against the importance of the governmental interests alleged to justify the intrusion.\" On the individual's side of the ledger, the Court noted that the \"intrusiveness of a seizure by means of deadly force is unmatched.\" On the government's side, the Court highlighted the government's various law enforcement interests, including arresting suspects peacefully without putting the public at risk. Balancing these interests, the Court ultimately held that the \"use of deadly force to prevent the escape of all felony suspects, whatever the circumstances, is constitutionally unreasonable.\" Rather than furthering the goals of the criminal justice process, Justice White noted that killing a suspect ensures that this system will never be put in motion as the government cannot bring a deceased person to justice. While rejecting the application of deadly force against an individual for merely committing a felony, the opinion went on to describe when such force is permissible:\nWhere the officer has probable cause to believe that the suspect poses a threat of serious physical harm, either to the officer or to others, it is not constitutionally unreasonable to prevent escape by using deadly force. Thus, if the suspect threatens the officer with a weapon or there is probable cause to believe that he has committed a crime involving the infliction or threatened infliction of serious physical harm, deadly force may be used if necessary to prevent escape, and if, where feasible, some warning has been given.\nNote that Garner arose in the context of the use of deadly force. Four years later, the Court in Graham v. Connor addressed whether this same rule should extend to the use of non -deadly force.", "In Graham v. Connor , police officers pulled over an individual suspected of shoplifting. In response to his erratic behavior, one of the officers forcefully slammed him on the hood of a police cruiser and threw him headfirst into the car. The suspect sustained significant injuries and sued the police for excessive force under Section 1983.\nResolving a dispute in the lower federal courts about whether the Fourth Amendment applied outside the context of deadly force, the Supreme Court held that \" all claims that law enforcement officers have used excessive force—deadly or not—in the course of an arrest, investigatory stop, or other 'seizure' of a free citizen should be analyzed under the Fourth Amendment and its 'reasonableness' standard.\" Writing for the Court, Chief Justice Rehnquist observed that \"[t]he test of reasonableness under the Fourth Amendment is not capable of precise definition or mechanical application.\" Instead, \"its proper application requires careful attention to the facts and circumstances of each particular case, including the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight.\" These three factors have taken on considerable importance in use of force jurisprudence in the lower courts.\nAdditionally, Chief Justice Rehnquist described the interpretive lens through which excessive force cases must be viewed. First, the \"'reasonableness' of a particular use of force must be judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight.\" Second, the \"calculus of reasonableness must embody allowance for the fact that police officers are often forced to make split-second judgments—in circumstances that are tense, uncertain, and rapidly evolving—about the amount of force that is necessary in a particular situation.\" Finally, the reasonableness inquiry must be an objective one: \"the question is whether the officer's actions are 'objectively reasonable' in light of the facts and circumstances confronting them, without regard to their underlying intent or motivation.\" \"An officer's evil intentions,\" the Court concluded, \"will not make a Fourth Amendment violation out of an objectively reasonable use of force; nor will an officer's good intentions make an objectively unreasonable use of force constitutional.\" This last interpretive rule adheres to the traditional Fourth Amendment principle that an officer's subjective intent will not invalidate otherwise lawful conduct.\nBased on Garner and Graham , lower courts consistently applied the following tests: if deadly force was used, the court would assess whether the suspect posed a threat to the safety of the officers or others; if non-deadly force was used, a reviewing court would assess the three factors from Graham . However, in the 2007 case Scott v. Harris , the Court rejected these multi-factor tests and reiterated that the Fourth Amendment's more general free-form reasonableness test should apply.", "In Scott , the officers concluded a high-speed car chase by ramming the back of the suspect's bumper with a police cruiser, sending the suspect off the road, where he crashed and was rendered a quadriplegic. Bringing a Section 1983 claim, the plaintiff argued that because the police technique constituted deadly force that Garner should control the analysis. Rejecting this approach, Justice Scalia, writing for an 8-1 Court, observed that \" Garner did not establish a magical on/off switch that triggers rigid preconditions whenever an officer's actions constitute 'deadly force.' Garner was simply an application of the Fourth Amendment's 'reasonableness' test to the use of a particular type of force in a particular situation.\"\nIn his analysis, Justice Scalia surprisingly did not cite to Graham or the three Graham factors, and instructed that courts must instead \"slosh [their] way through the factbound morass of 'reasonableness.'\" The Scott Court did note, however, that one factor to take into consideration was the relative culpabilities of the suspect and innocent bystanders. Weighing the totality of the circumstances, the Court ultimately held that \"[a] police officer's attempt to terminate a dangerous high-speed car chase that threatens the lives of innocent bystanders does not violate the Fourth Amendment, even when it places the fleeing motorist at risk of serious injury or death.\"\nSome have come to criticize the Scott ruling as overly \"simplistic\" and have argued that it fails to provide appropriate guidance for future use of force cases. Specifically, the ruling might not give officers in the field sufficient instruction on what level of force is reasonable in a particular situation. As one commentator noted, Scott \"may serve as an incentive for agencies to re-write their policies in more general terms, avoiding specific preconditions for the use of deadly force.\" This could potentially deprive officers of much needed instruction when in the field. The Scott ruling could also deprive juries of adequate instruction on what constitutes excessive force. As one post- Scott district court has noted:\n[D]eadly force is simply a type of excessive force. No separate legal standard applies to cases involving deadly force. Like any other excessive force claim, cases involving deadly or potentially deadly force should be evaluated under the Graham reasonableness test. Here, as in Scott , the Court has no need to decide as a matter of law whether the police used deadly force. Accordingly, the Court need only craft a charge which will help a jury decide whether the force used in this case was reasonable under all the circumstances.... The Court will not instruct the jury as to the definition of deadly force or the specific circumstances under which deadly force is or is not reasonable.\nAs the Eighth Circuit noted in a pre- Scott case, failing to adequately explain the difference between deadly and non-deadly force could confuse juries:\nThe problem with giving only the more general excessive-force instruction is that it may mislead the jury as to what is permissible under the law. One can easily imagine a jury, having been given only the general standard, concluding that an officer was \"objectively reasonable\" in shooting a fleeing suspect who posed no threat to the officer or others.\nAs will be discussed in the next section, lower courts have interpreted this line of excessive force cases in divergent ways: some still rely on the multifactor tests of Garner and Graham , while others have held that Scott 's free-form test should control.", "One of the most prominent issues surrounding police use of force has been use of deadly force against unarmed suspects. Some have raised concerns that officers are resorting to deadly force too quickly or without sufficient justification.\nAlthough police use of deadly force, like all uses of force, is a fact-intensive inquiry that depends on the specifics of each particular case, a few trends can be noted. First, police are generally permitted to employ deadly force when the suspect is carrying a deadly weapon in what is perceived by the officer to be a threatening manner. For example, in Montoute v. Carr , the Eleventh Circuit held that the suspect's possession of a sawed-off shotgun posed a risk of serious physical harm to the officer or others, justifying the use of deadly force. Similarly, the Fourth Circuit in the 2013 case Ayala v. Wolfe upheld the deadly use of force against a robbery suspect who pulled a firearm from his waistband as he was being frisked by police.\nSecond, even where a suspect turns out to not have a firearm, the courts have held that officers are still justified in using deadly force if they reasonably believed the suspect was carrying a gun. For instance, the Eleventh Circuit upheld the use of force against a fleeing suspect who had just physically assaulted an officer and appeared to be reaching under his seat for an undisclosed object, although no weapon was found in the car after the incident. In another case, the Fourth Circuit upheld the shooting of a man believed to be reaching for a firearm, but which turned out to be a can of shoe polish, even though the only evidence of such possession was a citizen's report of it, corroborated by the officer's own observation.\nThird, the courts have generally been unwilling to second-guess officers in the field and will approve the use of force in wide-ranging contexts. Indeed, one federal court noted that \"[t]his standard contains a built-in measure of deference to the officer's on-the-spot judgment about the level of force necessary in light of the circumstances of the particular case.\" This deference results in rules such as the one that officers are not required to use less intrusive force if the use of force in question was reasonable under the Fourth Amendment. In upholding this rule, the Ninth Circuit argued \"'[r]equiring officers to find and choose the least intrusive alternative would require them to exercise superhuman judgment\" and could \"induce tentativeness\" in officers that might deter them from protecting the public and themselves. However, some courts have noted that the \"availability of alternative means\" is \"relevant\" to a Fourth Amendment analysis.\nAlthough significant deference is accorded officers, possession of a weapon does not always justify police use of deadly force. Take, for example, the 2013 Fourth Circuit case Cooper v. Sheehan . There, the court held that it is the threat posed by the possession of a firearm that justifies the use of force, not the mere possession of a firearm. The court concluded that Cooper did not pose such a threat—he was coming out of his home, held the gun towards the ground, made no sudden moves, made no threats, and did not ignore any commands.\nFourth, there is divergence in the lower courts in applying the Supreme Court's limited deadly force jurisprudence. For instance, questions remain whether courts should still be giving Garner's deadly force instructions after Scott instructed that reasonableness is the touchstone of assessing excessive force claims. Likewise, it is unclear after Scott how the three Graham factors play into the analysis. Based on Justice Scalia's rejection of Garner as controlling all excessive force cases, his failure to even cite to Graham , and admonishment that courts must still \"slosh [their] way through the factbound morass of reasonableness,\" it appears that courts must assess excessive force claims under a free-form totality of the circumstances evaluation, untethered from Garner and Graham .\nSince Scott , several circuits, including the Ninth and Eleventh circuits, have applied this free-form approach. In Mattos v. Agaronos , the Ninth Circuit noted that the Graham factors \"are not exclusive\" and that courts must \"examine the totality of the circumstances and consider whatever specific factors may be appropriate in a particular case, whether or not listed in Graham .\" Similarly, the Eleventh Circuit observed that \"none of [the Garner ] conditions are prerequisites to the lawful application of deadly force by an officer seizing a suspect.\"\nOther circuits, on the other hand, including the Second, Fourth, Fifth, and Sixth have failed to apply Scott 's more general inquiry. In Rasanen v. Doe , for instance, the district court provided a jury instruction that failed to include the justifications for use of deadly force provided in Garner , but instead provided a general reasonableness instruction. On appeal, the Second Circuit asserted that although Scott \"clarified that a special instruction based on Garner is not necessary (or even appropriate) in all deadly-force contexts,\" a Garner instruction should still be given in its original context: \"the fatal shooting of an unarmed suspect.\" Thus, in the Second Circuit, in a case \"involving use of force highly likely to have deadly effects, an instruction regarding justifications for the use of deadly force is required.\"", "Like the use of deadly force, use of so-called \"non-deadly,\" \"non-lethal,\" or \"less than lethal\" force has caused controversy in recent months. Although nominally non-lethal, recent deaths caused by chokeholds, tasers, and pepper spray have raised significant concerns about when these methods of force should be permitted. Moreover, some in the public have questioned the use of pepper spray, batons, and other non-lethal uses of force against individuals who are protesting the very use of force being used against them.", "Over the past several decades, law enforcement agencies in the United States have significantly increased their acquisition of tasers—a weapon capable of incapacitating a human being with an electroshock. As of 2013, over 12,000 law enforcement agencies were reportedly using tasers. While apparently reducing the numbers of police shootings and held out as a safer alternative to the use of a firearm, it has been reported that between 2001 and 2012, 500 people died after being shocked with a taser.\nTasers can be deployed in two modes. One of the most popular tasers used in the field—the X26, made by Taser International, Inc.—can fire two probes up to 35 feet and \"discharges pulsed energy to deliver a 50,000 volt shock designed to override the subject's central nervous system, causing uncontrollable contraction of the muscle tissue and instant collapse.\" Alternatively, the X26 and other similar devices can be used in \"stun mode,\" in which the device is physically pressed against a human body to deliver a more localized shock.\nLike all other use of force cases, those assessing the use of tasers tend to be heavily fact-specific from which it is difficult to derive universal principles. That said, a few general trends can be noted. First, the courts have held that the use of a taser is least justified against \"nonviolent misdemeanants who do not flee or actively resist arrest and pose little or no threat to the security of the officer.\" For instance, in Brown v. City of Golden Valley , a woman and her husband were allegedly pulled over for speeding. When the officers reportedly engaged in aggressive behavior, the woman called 911, and refused to hang up when commanded by the officers. One of the officers tased her arm and threw the phone on the ground. The Eighth Circuit rejected the officer's defense of qualified immunity, noting that the woman was only suspected of committing a minor offense and did not pose a threat to the safety of the officers. In another case, the Sixth Circuit held that an officer was not entitled to qualified immunity when she \"gratuitously\" shocked a man after he had been restrained by police.\nSecond, the courts have generally held that the use of a taser against persons who are belligerent or violent is permitted under the Fourth Amendment. In one case, a 9 th grade student was tased by a police officer after he attempted to punch a police officer after refusing to hand over his portable video game console. The court rejected the student's Section 1983 claim, observing that it was \"simply impossible\" to say that the amount of force used was unreasonable under the Fourth Amendment.\nSomewhere in the grey area between active resistance and no resistance are cases where law enforcement used a taser against someone who was passively resisting the officer's commands. The majority of cases seem to permit the use of a taser for individuals against such passive resisters. In Buckley v. Haddock , for example, the Eleventh Circuit upheld the use of a taser on a man who fell to the ground after being handcuffed and refused to get up after several requests from the officer. After giving the man several warnings, the officer tased him several times. In rejecting his claim, the court put significant weight on the government's interest, noting that \"[t]he government has an interest in arrests being completed efficiently and without waste of limited resources: police time and energy that may be needed elsewhere at any moment.\"\nIn another case, the U.S. District Court for the Southern District of Ohio held that a police officer was justified in using a taser on an elderly suspect suffering from Alzheimer's disease who had \"refused to comply\" with the officer's orders. Once the officer decided to engage the suspect, the court posited, \"he had to continue, and it seems the only way he was able to do this was with a taser.\" In doing so, the court denied the fact that the age or potential mental illness of a suspect should require a heightened use of force standard.\nSimilarly, the Western District of Washington upheld the use of a taser against a mentally ill woman who attempted to drive away from two police officers who were sent to check on the suspect after her mother reported that she might attempt suicide. The district court upheld this use of force for two reasons. First, it found credible the officer's belief that Lowe posed a risk to the safety of the officers and others when she got into her truck, which he believed could have been used as a weapon. Second, the court construed Lowe's actions as \"attempting to avoid legitimate contact by law enforcement.... \"\nBeyond the level of threat posed by the individual, the courts have taken other factors into consideration including the degree of harm caused by the Taser and how many times it was used in a specific situation. For instance, the Eleventh Circuit observed that \"[a]lthough being struck by a taser gun is an unpleasant experience, the amount of force [the officer] used—a single use of a taser gun causing a one-time shocking—was reasonably proportionate to the need for force and did not inflict any serious injury.\" To the contrary, the fact that an individual had suffered \"serious injury requiring emergency medical care\" and its multiple applications contributed to a court finding that the use of a taser multiple times was unreasonable. Because in the large majority of cases the target of the tasing is not going to suffer permanent injuries, the courts may be inclined to find that such use of force is reasonable in most cases. However, these opinions did not take into account the potential injury—including death—that might be caused by these devices. Other factors taken into consideration have included the vulnerability of the victim, and whether the officers provided a warning to the target before employing the taser.", "Like tasers, the use of pepper spray by local police as a law enforcement tool has engendered considerable public attention, including well-known incidents during the Occupy Wall Street protests, and more recently during the protests in Ferguson, Missouri.\nPepper spray, or oleoresin capsicum, is a chemical agent used by law enforcement to subdue violent or combative suspects without resorting to higher levels of force. The effects of pepper spray include \"(1) dilation of the capillaries and instant closing of the eyes through swelling of the eyelids, (2) immediate respiratory inflammation, including uncontrollable coughing, retching, shortness of breath and gasping for air with a gagging sensation in the throat, and (3) immediate burning sensations to the mucous membranes, skin and inside the nose and mouth.\"\nThe federal courts have generally been less deferential to law enforcement when using pepper spray on passive resisters than they have been with tasers. In cases in which the individual is only passively resisting—say, simply failing to listen to an officer's order—the courts have generally held that the use of pepper spray is a violation of the Fourth Amendment. Take, for instance, Young v. County of Los Angeles , in which the Ninth Circuit held that the use of pepper spray against a nonviolent traffic offender was unreasonable under the Fourth Amendment. Similarly, in Headwaters Forest Defense v. County of Humboldt , the Ninth Circuit held that the use of pepper spray against nonviolent protestors constituted an unreasonable seizure under the Fourth Amendment.\nWhile these cases disapproved of the use of pepper spray against persons who were passive resisters, there have been rulings upholding such use of force in the course of traffic stops. In Mecham v. Frazier , the Tenth Circuit rejected the plaintiff's Fourth Amendment claim that a police officer used excessive force when he sprayed her with pepper spray after she refused to leave her vehicle after a traffic stop. The court found that the officer's actions were justified based on Mecham's \"disregard for the officer's instructions, the length of the encounter, and the implausibility of Mecham's rationale for not cooperating.\" Like the use of tasers, the courts have generally held that an officer's use of pepper spray is not unreasonable when a suspect is actively resisting arrest or fails to heed an officer's direct command. In Singleton v. Darby , the Fifth Circuit upheld the use of pepper spray against a group of individuals, including the plaintiff Jeanette Singleton, who were protesting the Keystone XL Pipeline. In rejecting Singleton's Section 1983 claim premised on excessive force, the court held that the use of the pepper spray was not unreasonable because (1) the state had a significant interest in keeping public roads clear; (2) the officer faced an \"explosive situation\" in which he was greatly outnumbered by the protesters; (3) he provided a warning before using the spray; and (4) pepper spray was likely the least intrusive force available to the officer.\nFinally, like with tasers, federal courts have generally held that it is unreasonable to use pepper spray against individuals who are not resisting and pose no danger to the officer or others.", "To provide legal remedies for the unconstitutional use of force by law enforcement officers, Congress has primarily relied on three federal statutes: (1) a criminal offense for violations of constitutional rights, including excessive force; (2) a civil cause of action for deprivation of such rights; and (3) a statute authorizing the Attorney General to bring civil suits for injunctive relief against police departments engaged in a \"pattern or practice\" of such unconstitutional use of force. In each of these statutes, Congress relied on its power under the Fourteenth Amendment to \"enforce, by appropriate legislation\" certain constitutional safeguards including the right to be free from unreasonable seizures.", "Following the Civil War, Congress enacted the Civil Rights Act of 1866, which made it a criminal offense to deprive another of a civil right while acting under color of law. While primarily intending to protect the rights of newly freed African Americans, the statute protects victims of all races. Codified at 18 U.S.C. Section 242, the statute provides, in relevant part,\nWhoever, under color of any law, statute, ordinance, regulation, or custom, willfully subjects any person in any State, Territory, Commonwealth, Possession, or District to the deprivation of any rights, privileges, or immunities secured or protected by the Constitution or laws of the United States, or to different punishments, pains, or penalties, on account of such person being an alien, or by reason of his color, or race, than are prescribed for the punishment of citizens, shall be fined under this title or imprisoned not more than one year, or both[.]\nA prosecution under Section 242 requires the government to prove three elements: (1) the defendant deprived an individual of a right secured by the Constitution or the laws of the United States; (2) he or she acted under color of law when depriving this individual of constitutional right; and (3) acted willfully to deprive such individual of this right. Again, prosecutions under Section 242 do not require that the officer use force based upon an individual's race. It is enough that the individual is deprived of his or her constitutional rights.\nFor various reasons, including sympathetic juries, the close relationship between the police and prosecutors, the high evidentiary threshold needed to secure a conviction, and lack of resources, Section 242 is not frequently utilized. In fact, it has been reported that between 1981 and 1990, DOJ only prosecuted 1% of civil rights complaints it received.\nPerhaps the greatest hurdle to successful prosecutions under Section 242 is its specific intent element. As originally drafted, the statute did not require that a constitutional deprivation be done \"willfully\"; however, Congress added that term to the precursor to Section 242 as part of the criminal code codification in 1909, evidently in an attempt to make the section \"less severe.\" DOJ has declined to prosecute Section 242 cases at an extremely high rate, with \"lack of criminal intent\" being one of the primary reasons. To understand why prosecutions might be so limited and what Congress might do, if anything, to alter the current statute, the seminal 1945 Supreme Court case United States v. Screws and subsequent federal circuit court cases interpreting Section 242's mens rea requirement must be reviewed.", "In Screws , the Court faced a \"shocking and revolting episode in law enforcement.\" In that case, M. Claude Screws, Sheriff of Baker County, Georgia; Frank Jones, a police officer; and Jim Kelley, a special deputy, went late at night to Robert Hall's home to arrest him for theft of a tire. Hall, a 30-year-old African American, was handcuffed and taken by car to the courthouse. Upon arriving at the courthouse, the three officers began beating him with their fists and with a \"solid-bar blackjack about eight inches long and weighing two pounds.\" They claimed that Hall had attempted to pull out a gun and had used insulting language towards the officers. After Young, still handcuffed, had been knocked to the ground, the officers beat him mercilessly from 15 to 30 minutes until he was unconscious. Hall's body was then dragged feet first through the courthouse yard into the jail and \"thrown upon the floor dying.\" He was taken to the hospital, but died less than an hour later without ever regaining consciousness. The three officers were charged under 18 U.S.C. Section 52—the precursor to Section 242.\nThe prosecution was premised on the claim that the officers deprived Hall of \"life without due process of law.\" The defendants challenged the statute on vagueness grounds, arguing that they were being prosecuted under a constitutional provision that \"provides no ascertainable standard of guilt.\" Justice Douglas, writing for a four-member plurality joined by Chief Justice Stone and Justices Black and Reed, attempted to assuage such concerns by noting that \"the decisions of the courts are ... a source of reference for ascertaining the specific concept of due process.\" At the same time, Justice Douglas acknowledged that the act \"incorporate[d] by reference a large body of changing and uncertain law\" that could \"cast law enforcement agencies loose at their own risk on a vast uncharted sea.\" To remedy this potential vagueness problem, Justice Douglas turned to the interpretation of the mens rea element.\nJustice Douglas noted that traditionally the mens rea term \"intent\" only required that \"if a man intentionally adopts certain conduct in certain circumstances, he intentionally breaks the law in the only sense in which the law ever considers intent.\" However, the plurality noted that merely requiring this form of general intent would make government actors into criminals \"though his motive was pure and his purpose was unrelated to the disregard of any constitutional guarantee.\" Latching onto the term \"willfully\" in the statute, the plurality noted that generally \"willfully\" means \"an act done with bad purpose,\" and, as such, \"an evil motive to accomplish that which the statute condemns becomes a constituent element of the crime.\" Requiring proof of a \"specific intent to do a prohibited act may avoid those consequences to the accused which may otherwise render a vague or indefinite statute invalid.\" The thinking goes, if a person specifically intends to violate the constitutional rights of another, he cannot then complain he did not know what he was doing violated the law.\nIn an effort to further explain this standard, the plurality infused confusion into its new rule. First, the Court noted that the defendant need not \"have been thinking in constitutional terms ... where their aim was not to enforce local law but to deprive a citizen of a right and that right was protected by the Constitution.\" As noted by one circuit court, there seems to be some contradiction in saying that the officers need not be thinking in constitutional terms, but that it is enough that their \"aim\" is to deprive a citizen of a constitutional right. How can an officer aim to deprive a citizen of a right if he or she is not thinking in terms of that right? The Court does not provide a clear answer.\nSecond, although he asserted that specific intent is required under Section 242, Justice Douglas then posited that an individual can be prosecuted under the lesser \"reckless disregard\" mens rea standard: \"[A defendant] is under no necessity of guessing whether the statute applies to him for he either knows or acts in reckless disregard of its prohibition of the deprivation of a defined constitutional or other federal right.\" The plurality similarly noted in another part of the opinion: \"When they act willfully in the sense in which we use the word, they act in open defiance or in reckless disregard of a constitutional requirement which has been made specific and definite.\"\nNeedless to say, Screws \"is not a model of clarity.\" On the one hand, it seemed to be saying that requiring specific intent was necessary to ensure that the statute was not unnecessarily vague. On the other hand, the plurality opinion appeared to endorse a \"reckless disregard\" standard—a mens rea standard significantly lower than specific intent and one that would likely permit many more prosecutions to go forward.", "In the wake of Screws , the lower courts have been left to determine the meaning of \"willfully\" and how to apply Section 242's specific intent requirement. In one camp, several courts read Screws and Section 242 stringently to require that a defendant have the specific intent to do what the law forbids. In another camp, courts seem to require an intent to do the physical act, but not necessarily the purpose to violate another's constitutionally protected right, akin to general intent at common law. In the third group, courts have latched onto the \"reckless disregard\" language from the plurality opinion in Screws to permit a conviction under Section 242 on this lesser mens rea standard.\nCourts in the first camp have read Screws strictly to require not only an intent to commit the physical act in question, but also an intent to deprive that person of a constitutional right. In United States v. Garza , a county sheriff in Texas and his special investigator were convicted under Section 242 for, among other things, arresting individuals without probable cause, detaining them for long periods, subjecting them to repeated questioning, and failing to bring them before a magistrate judge as required under Texas law. At their trial, the district court defined \"willfully\" in Section 242 as follows:\nThe word \"willfully,\" as that term has been used from time to time in these instructions means that the act was committed voluntarily and purposely with the specific intent to do something the law forbids. That is to say, with a bad purpose either to disobey or to disregard the law.\nThe Fifth Circuit upheld these instructions, finding that they complied with the Supreme Court's instructions that \"willfully in 18 U.S.C. §242 implies conscious purpose to do wrong and intent to deprive another of a right guaranteed by the Constitution, federal statutes, or decisional law.\" Indeed, this instruction seems to comport with the more stringent rule announced in Screws that the defendant must actually intend to violate the constitutional rights of the victim.\nIn an earlier case, United States v. Kelsey , the Fifth Circuit reversed the defendant's conviction based upon the district court's failure to properly instruct the jury on the \"willfully\" element under Section 242. There, the district court had instructed the jury as follows:\n[T]he evidence must establish beyond reasonable doubt that the Defendant knew that the degree of force which he utilized on Mr. de la Osa at the time of the arrest was not reasonably necessary to effect the arrest, but, despite this knowledge, he knowingly and intentionally exerted force which he knew to be unlawful under all the circumstances to accomplish the arrest.\nAn act is done \"intentionally\" if it is done voluntarily and with the specific intent to do the act in question, as distinguished from an act done through inadvertence, mistake, accident or for some other innocent reason.\nThe Fifth Circuit rejected the district court's instructions for two reasons. First, although the district court instructed the jury that the defendant had to knowingly and intentionally exert force that he knew to be unlawful, it did not \"instruct the jury that willfulness means an act which is done with a bad purpose or an evil motive.\" Second, although the instruction required that the act be done with the specific intent to do the act in question, it failed to require that he have the specific intent to deprive the victim of his constitutional rights. Thus, under the Fifth Circuit's test, it is not enough that the defendant intentionally and knowingly commits an act which he knows would violate an individual's rights; he must intend to violate those rights.\nSimilarly, the Northern District of Ohio applied this more stringent test in a case stemming from the National Guard shooting at Kent State. There, the court held that\neven the specific intent to injure, or the reckless use of excessive force, without more, does not satisfy the requirements of § 242 as construed in Screws . There must exist an intention to 'punish or to prevent the exercise of constitutionally guaranteed rights, such as the right to vote, or to obtain equal protection of the law.'\nThe second group of courts permits a somewhat lesser showing by requiring that the defendant intend to commit the physical act, but not necessarily intend to violate the constitutional rights of another. In United States v. Cobb , the Fourth Circuit addressed an appeal by three officers who were convicted under Section 242 for beating a prisoner while detained and in handcuffs. At the trial, the district court provided the following instruction on the mens rea element of Section 242:\nFourth, that the defendant willfully and knowingly intended to subject Kenneth Pack to the deprivation of his constitutionally protected right....\n[The government] must show that a defendant had the specific intent to deprive Kenneth Pack of his right not to be subjected to unreasonable and excessive force. If you find that a defendant knew what he was doing and that he intended to do what he was doing, and if you find that he did violate a constitutional right, then you may conclude that the defendant acted with the specific intent to deprive the victim of that constitutional right.\nIn its brief analysis, the Fourth Circuit upheld this instruction, observing that \"the instruction on element (4) expressly conditions guilt on a finding that the defendants 'willfully and knowingly' acted with a 'specific intent to deprive' Pack of his liberty interest.\" The court continued: \"The instruction could not have been more emphatic that conviction was contingent upon a finding that appellants wilfully, knowingly, and intentionally assaulted Pack in contravention of his constitutional rights.\" It appears from this language that the court did not require that the defendant intentionally violate the rights of another, but instead that he intended to engage in the physical act. Again, in Screws , Justice Douglas noted that traditionally \"intent\" only required that \"if a man intentionally adopts certain conduct in certain circumstances, he intentionally breaks the law in the only sense in which the law ever considers intent.\" This is one iteration of what was known as general intent at common law. However, Justice Douglas went on to say in Screws that under Section 242 this form of general intent was insufficient. It appears that the Fourth Circuit was adopting this form of general intent rejected by the plurality in Screws . That said, in Screws , the court also endorsed a reckless disregard standard that is lower than both specific intent and general intent.\nCourts in the third camp require the least stringent showing under Section 242 by permitting a conviction under a reckless disregard standard. The Third Circuit adopted this approach after conceding that it had great difficulty in reconciling the seemingly inconsistent statements in Screws . In an attempt to reconcile these \"facially inconsistent standards—that an individual can intend to violate a right even if the individual is not thinking in terms of any right,\" the court accepted that willfulness in Section 242 can include reckless disregard. The only remaining question for the court was whether this standard should be applied subjectively or objectively. An objective standard, generally used in the civil context, would require that the officer was indifferent to the rights of another that the officer knew or was so obvious that the officer should have known. The subjective standard, on the other hand, would require that the prosecution prove that the defendant was indifferent to a right that he was personally aware, either through training or otherwise. The Third Circuit did not resolve this question, as it found that the officer was liable under either standard.\nThe Ninth Circuit in United States v. Gwaltney similarly upheld the following reckless disregard instruction: \"It is not necessary for the government to prove the defendant was thinking in constitutional terms at the time of the incident, for a reckless disregard for a person's constitutional rights is evidence of specific intent to deprive that person of those rights.\"\nIn sum, there is much debate in the lower courts about how exactly to interpret the phrase \"willfully\" in Section 242 or how to apply the Screws ruling. Confusion in the lower courts in such a sensitive area of the law could be considered troublesome for two reasons. First, the subject matter—the use of deadly force—is the most serious action a government can take against its citizenry. Second, with a potential penalty of life imprisonment or death, it would be beneficial to officers in the field to know exactly what level of culpability is required to subject them to these punishments.\nThe recent shootings in Ferguson and elsewhere have prompted some commentators to call for an overhaul of Section 242 to better clarify the mens rea element in the hopes of spurring more consistent enforcement. In its 2000 report \"Revisiting Who is Guarding the Guardians ,\" the U.S. Commission on Civil Rights recommended removing the specific intent standard. However, as discussed, the Third and Ninth Circuits already employ a reckless disregard standard, but it is not clear whether this less stringent burden of proof has prompted DOJ to bring more prosecutions in those circuits.\nAdditionally, there could be unintended consequences to lowering the mens rea threshold in Section 242. If Section 242 is amended, it will affect not only cases of excessive force, but all claims of constitutional violations by those acting under color of law. This might work to ensnare the unknowing government worker that unwittingly violates the constitutional rights of another. For example, the town clerk who denies a parade permit might be deemed to recklessly disregard the First Amendment rights of an applicant. A more targeted approach would be to create a standalone statute that lowers the mens rea specifically for police use of force cases. This is well within Congress's authority, as it had the constitutional authority to pass Section 242 to begin with, and this standalone statute would merely represent a part of that subject matter.\nNo matter which mens rea standard is used, Section 242 is a criminal statute, and as such the prosecution must still prove beyond a reasonable doubt that the government official committed the offense. Civil suits under the federal civil rights statute, on the other hand, require a lower threshold—preponderance of the evidence—and have had much greater success in the courtroom.", "In addition to criminal liability, victims of police abuse can bring civil suits under 42 U.S.C. Section 1983. Like Section 242, Section 1983 was enacted during the Reconstruction Era to secure the constitutional rights of African Americans. Section 1983 provides, in relevant part:\nEvery person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress[.]\nSection 1983 \"is not itself a source of substantive rights,\" but instead looks to the Fourth Amendment and other constitutional and civil rights laws for its content. To prove a violation under Section 1983 for claims of excessive force, the plaintiff must prove that (1) the officer deprived the individual of his or her right to be free from unreasonable seizures under the Fourth Amendment and (2) the officer acted under color of law. Note that Section 1983, \"unlike its criminal counterpart, 18 U.S.C. §242, contains no state-of-mind requirement independent of that necessary to state a violation of the underlying constitutional right.\" Plaintiffs in Section 1983 actions can seek damages, injunctive relief, or other equitable relief.", "Even if an officer has engaged in unconstitutional conduct, the doctrine of qualified immunity insulates an officer from personal civil liability if his or her actions did not \"violate clearly established statutory or constitutional rights of which a reasonable person would have known.\" The Court has noted that qualified immunity represents a balance between two important interests: \"the need to hold public officials accountable when they exercise power irresponsibly and the need to shield officials from harassment, distraction, and liability when they perform their duties reasonably.\" That qualified immunity provides a broad shield to liability is evidenced by the Court's observation that it \"provides ample protection to all but the plainly incompetent or those who knowingly violate the law.\" This doctrine has frequently come under attack for shielding officers from liability even when they have engaged in unconstitutional conduct. In response to this concern, it should be noted that qualified immunity appears to be derived from common law, and is not constitutionally compelled. Thus, Congress can alter its contours or eliminate it altogether via statute.\nThe process for applying this doctrine has evolved in recent years. Under older precedent, the Court mandated a two-step sequence for qualified immunity claims. First, a reviewing court had to decide whether the facts alleged by the plaintiff amounted to a constitutional violation. Second, if the plaintiff made this showing, the court had to decide whether the right was \"clearly established\" at the time of the misconduct. The Court noted that skipping ahead to the \"clearly established\" prong of the test would deprive future courts of case law defining the parameters of the right in question. However, lower courts frequently criticized this \"rigid order of battle\" on \"practical, procedural, and substantive grounds.\" Under the older regime, lower courts were required to fully litigate the constitutional merits when in many instances it was obvious that the law relied upon was not clearly established at the time. In an effort to give courts more flexibility, in the 2009 case Pearson v. Callahan , the Court overruled its prior rule and held that lower courts \"should be permitted to exercise their sound discretion in deciding which of the two prongs of the qualified immunity analysis should be addressed first in light of the circumstances in the particular case at hand.\" That being said, the Court noted that following the Saucier order is \"often beneficial.\"\nFor a law to be clearly established, \"the contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right.\" This provides officers \"fair warning\" which conduct will violate the Constitution. This standard \"depends substantially upon the level of generality at which the relevant 'legal rule' is to be identified.\" The Court has instructed lower courts not to define a clearly established rule at a high level of generality. That being said, the Court does \"not require a case directly on point, but existing precedent must have placed the statutory or constitutional question beyond debate.\"\nIn the use of force context, the major Supreme Court precedents, Tennessee v. Garner , Graham v. Connor , and Scott v. Harris , are each written at a very high level of abstraction. As aptly noted by Justice Scalia, the very nature of the objective reasonableness/totality of the circumstances approach necessarily requires courts to \"slosh [their] way through the factbound morass of 'reasonableness.'\" The by-product of the generality of these tests is that they commonly cannot be applied as precedents in use of force qualified immunity cases. For instance, in Wilson v. City of Lafayette , the Tenth Circuit addressed the use of a taser that resulted in the death of the suspect. After concluding that there were no controlling circuit cases on point at the time (2006), the court looked to Supreme Court case law but found that there was no \"clear lesson to be drawn from Graham ,\" and thus granted the officer qualified immunity.\nNote that even if an officer is held liable under Section 1983 in his personal capacity, he may be indemnified by state or local government. The right to indemnification is not governed by federal law, but is a matter of state or local law.", "In addition to suing the police officers directly involved in an incident of excessive force, many Section 1983 plaintiffs can go after the \"deep pocket of municipalities\" that employ these officers. In a series of cases, the Court addressed under what circumstances municipalities may be held liable under Section 1983.\nThe Court in Monell v. Department of Social Services of New York held that municipalities can be held liable as \"persons\" under Section 1983, but only when the municipality itself caused the constitutional violation. Thus, a municipality cannot be held liable solely because it employs someone who violates the constitutional rights of another. Rather, to hold a municipality liable, it must be the execution of the government's \"policy or custom\" that inflicts the constitutional injury.\nIn City of Canton, Ohio v. Harris , the Court addressed whether a failure to train can rise to the level of a \"policy.\" The Court answered in the affirmative, but limited this rule to instances where the failure to train amounted to a \"deliberate indifference to the rights of persons with whom the police come into contact.\" A failure to adequately train a class of officers will not always be deemed a city \"policy.\" It is only where the \"need for more training is so obvious, and the inadequacy so likely to result in the violation of constitutional rights, that the policymakers of the city can be said to have been deliberately indifferent to the need.\"\nIn Board of County Commissioners of Bryan Country v. Brown , the Court addressed whether a single hiring decision by a municipality can be a \"policy\" permitting Monell liability. In that case, the plaintiff was severely injured after she was thrown to the ground during a traffic stop by a sheriff's deputy with a criminal history, including arrests for assault and battery, resisting arrest, and public drunkenness. The plaintiff proceeded against the county on the theory that its hiring decision resulted in her injury. Although the Court did not foreclose the theory that one hiring decision might result in liability, it observed that \"rigorous standards of culpability and causation must be applied to ensure that the municipality is not held liable solely for the actions of its employee.\" Ultimately, the Court rejected the plaintiff's claim, noting that she had not demonstrated that the sheriff's hiring decision reflected a \"conscious disregard for a high risk\" that the officer would use excessive force in violation of the plaintiff's constitutional rights.", "The third federal remedy for unconstitutional conduct by law enforcement officers is 42 U.S.C. Section 14141, the \"pattern or practice\" statute. Enacted as part of the Violent Crime Control and Law Enforcement Act of 1994, the need for this statute was partially prompted by several judicial rulings that held that both private litigants and the Department of Justice (DOJ) lacked legal standing to seek equitable relief to stop unlawful police practices absent specific statutory authorization.\nSection 14141 prohibits government authorities or agents acting on their behalf from engaging in a \"pattern or practice of conduct by law enforcement officers ... that deprives persons of rights ... secured or protected by the Constitution or laws of the United States.\" It authorizes the Attorney General to sue for equitable or declaratory relief when he or she has \"reasonable cause to believe\" that such a pattern of constitutional violation has occurred.\nThe scope of investigations under Section 14141, primarily conducted by the Special Litigation Section of DOJ's Civil Rights Division, has ranged from police use of force and unlawful stops and searches to racial and ethnic biases. Many of these investigations are resolved by consent decree—a judicially enforceable settlement between DOJ and the local police department—which outlines the various measures the local agency must take to remedy its unconstitutional police practices. For instance, after two years of extensive investigation into the New Orleans Police Department's policies and practices in which DOJ found numerous instances of unconstitutional conduct, DOJ entered into a consent decree with the City of New Orleans requiring the city to implement new policies and training to remedy these constitutional violations. The content of each consent decree can differ, but many include provisions concerning use-of-force reporting systems, citizen complaint systems, and early warning systems to identify problem officers.", "In response to the recent law enforcement-related deaths in Ferguson and elsewhere, Members have introduced various bills in the 114 th Congress to rein in police use of excessive force and provide accountability.", "The Excessive Use of Force Prevention Act of 2015 ( H.R. 2052 ) would amend 18 U.S.C. Section 242 so that \"the application of any pressure to the throat or windpipe which may prevent or hinder breathing or reduce intake of air\" would be considered \"a punishment, pain, or penalty.\" It is not clear how this statute would operate in practice. Most excessive force prosecutions brought under Section 242 rely on the statute's first prong, the deprivation of a constitutional right, and not the second prong, the unequal punishment on account of a person's race, color, or alien status. It would appear that prosecutions under H.R. 2052 would occur only when an officer administers a chokehold as a punishment or penalty based on the suspect's race, color, or alien status.", "The Police Accountability Act of 2015 ( H.R. 1101 ) would create a new federal crime for certain homicides committed by law enforcement officers. H.R. 1102 would provide that any state or local officer in a public agency that receives funding under the Edward Byrne Memorial Justice Assistance Grant (JAG) Program who engages in conduct in the line of duty that would constitute murder or manslaughter if it were to occur in the special maritime and territorial jurisdiction of the United States would be punished as provided for that offense under federal law. The constitutionality of this bill has been addressed previously by CRS.", "The National Statistics on Deadly Force Transparency Act of 2015 would reduce a state or local government's JAG funding by 10% if it fails to submit data concerning police use of excessive force, including data concerning the following:\nidentifying characteristics of the person who was the target of the use of deadly force and the officer who used deadly forced; time, date, and location of the use of deadly force; alleged criminal activity of the person who was the target of deadly force; nature of the deadly force used, including the use of a firearm; explanation, if any, from the relevant law enforcement agency on why deadly force was used; copy of deadly force guidelines in effect at the time deadly force was used; and description of any non-lethal efforts employed to apprehend or subdue the person who was the target of the use of deadly force before deadly force was used.", "The Police Reporting Information, Data, and Evidence Act of 2015 (PRIDE Act) ( S. 1476 , H.R. 3481 ) would require the collection of data concerning any incident where the use of force by either a law enforcement officer or a civilian results in serious bodily injury or death. Such data shall include the following:\ngender, race, ethnicity, and age of each individual who was shot, injured, or killed; date, time, and location of the incident; whether the civilian was armed, and, if so, the type of weapon the civilian had; the type of force used against the officer, the civilian, or both, including the types of weapons used; number of officers involved in the incident; and a brief description regarding the circumstances surrounding the incident.", "On December 21, 2014, President Barack Obama signed an executive order establishing the Task Force on 21 st Century Policing. The task force was charged with identifying best police practices, including use of force policies. In May 2015, the task force issued its final report with the following recommendations for law enforcement agencies concerning the use of force:\nDevelop comprehensive policies on the use of force that include training, investigations, prosecutions, data collection, and information sharing. These policies must be clear, concise, and openly available for public inspection. Training on use of force should emphasize de-escalation and alternatives to arrest or summons in situations where appropriate. Mandate external and independent criminal investigations in cases of police use of force resulting in death, officer-involved shootings resulting in injury or death, or in-custody deaths. Mandate the use of external and independent prosecutors in cases of police use of force resulting in death, officer-involved shootings resulting in injury or death, or in-custody deaths. Require agencies to collect, maintain, and report data to the federal government on all officer-involved shootings, whether fatal or nonfatal, as well as any in-custody death. Policies should clearly state what types of information will be released, when, and in what situation, to maintain transparency. Establish a Serious Incident Review Board comprising sworn staff and community members to review cases involving officer-involved shootings and other serious incidents that have the potential to damage community trust or confidence in the agency. The purpose of this board should be to identify any administrative, supervisory, training, tactical, or policy issues that need to be addressed. Implement nonpunitive peer review of critical incidents separate from criminal and administrative investigations.", "In addition to introduced legislation, academics, civil rights advocates, and others have suggested other reform proposals:\nlower the mens rea standard in 18 U.S.C. Section 242; create a standalone excessive force statute; alter the \"deliberate indifference\" standard for failure to train claims under Section 1983; and a mend 42 U.S.C. Section 14141 to permit lawsuits by private citizens ." ], "depth": [ 0, 1, 1, 2, 3, 3, 3, 2, 2, 3, 3, 1, 2, 3, 3, 2, 3, 3, 2, 1, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h2_full", "h2_title h1_title", "h1_full", "h1_full", "h1_full", "", "h1_full", "h2_title", "", "h2_full", "h2_full h1_title", "h2_full", "", "h2_full", "h2_title h1_title", "h2_full h1_full", "", "h2_full", "h0_title h3_title", "", "h3_full", "h3_full", "", "", "h0_full h3_full" ] }	{ "question": [ "How has police force been brought into Congress?", "What direct movement has this caused in Congress?", "What is the argument for police reform?", "How are recent trends in violent police deaths being dismissed?", "How are uses of excessive force by the police ruled over?", "How are uses of force determined as reasonable?", "How are decisions based off this subjective determinant made?", "How do courts often rule on police use of potentially excessive force?", "What is a potential reason why cops are less likely to be ruled as using excessive force?", "What possible assistance has Congress provided for rulings on police use of force?", "What is the first remedy for police use of excessive force?", "Why does this fail to provide adequate deterrents?", "How is the real life application of this statue subpar?", "What is the second remedy for police use of excessive force?", "How has this statue done the opposite of its intended use?", "What is the third remedy for police use of excessive force?", "What reforms have been created to potentially reduce use of police force?", "How have additional bills affected reporting of police force?" ], "summary": [ "Several high-profile police shootings and other law enforcement-related deaths in the United States have sparked intense protests throughout the country and a fierce debate in Congress concerning the appropriate level of force police officers should wield in a society that equally values public safety and the lives of each of its citizens under law.", "These incidents have been the subject of several congressional hearings, have prompted the introduction of various legislative measures, and have catalyzed a new civil rights movement in the United States aimed at reforming the criminal justice system.", "Reformers claim that police work too closely with local prosecutors resulting in insufficient oversight and have called for greater involvement by the federal government.", "The law enforcement community and its supporters have countered that these recent deaths are anomalous in otherwise exemplary police conduct, and that placing the federal government in direct regulation of state and local police would present an unwarranted intrusion into state and local affairs.", "Rules. In a line of cases beginning in the mid-1980s, the Supreme Court ruled that all claims of excessive force occurring during an arrest or investigatory stop—deadly or otherwise—are governed by the Fourth Amendment's prohibition against unreasonable seizures.", "Under prevailing judicial precedent, all uses of force must be \"objectively reasonable\" based on the totality of the circumstances viewed through the lens of the officer in the field.", "This requires a fact-intensive inquiry that is not easily reduced to categorical rules, but some general trends can be discerned from the case law.", "For instance, the courts have been deferential to officers in the field who are required to make split-second decisions in dangerous situations.", "Also, officers need not use the least intrusive means to effectuate a seizure so long as their actions are reasonable.", "Remedies. In an effort to provide teeth to federal constitutional restraints, Congress has enacted three federal statutes that accord various remedies for police use of excessive force.", "First is the federal criminal statute, 18 U.S.C. Section 242, which prohibits officers from willfully depriving another of a constitutional right while acting under color of law.", "Enacted shortly after the Civil War, many have argued that Section 242's specific intent mens rea requirement is too high a threshold to provide an adequate deterrence to excessive force.", "Moreover, the federal circuit courts are split on how to apply this test, with some requiring a strict form of intent and others permitting a reckless disregard jury instruction.", "Second is the federal civil rights statute, 42 U.S.C. Section 1983, which provides a civil cause of action for deprivations of one's constitutional rights.", "While generally viewed as successful in providing monetary damages to those injured by officers in the field, the doctrine of qualified immunity has frequently shielded officers from liability when the law was not \"clearly established\" at the time.", "Third is the more recently enacted \"pattern or practice\" statute, 42 U.S.C. Section 14141, which authorizes the Attorney General to sue local municipalities whose police forces have engaged in a pattern of excessive force under the Fourth Amendment.", "Reforms. Various reform bills have been introduced in the 114th Congress to provide additional restraints on police use of force, including the Excessive Use of Force Prevention Act of 2015 (H.R. 2052), which would criminalize the use of chokeholds, and the Police Accountability Act of 2015 (H.R. 1102), which would create a new federal crime for certain homicides committed by law enforcement officers.", "Additionally, several bills would place requirements on states to report use of force statistics to the federal government." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 1, 2, -1, -1, -1, 1, 1, -1, 4, -1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 4, 4 ] }
CRS_R44006	{ "title": [ "", "Introduction", "A General Exception", "Drug Offenses", "Safety Valve", "Cocaine Sentencing", "Fair Sentencing Retroactivity", "Sentencing Guideline Reconciliation", "Marijuana Sentencing", "Attorney General Reports", "Firearms", "Sex Offenses", "Commercial Sex Trafficking", "Liability of Patrons", "Age: Prosecutors' Burden", "Advertisers", "Mann Act" ], "paragraphs": [ "", "Federal crimes are usually punishable by a statutory maximum term of imprisonment—for example, \"imprisoned for not more than 5 years.\" A surprising number also have statutory minimum terms of imprisonment—for example, \"imprisonment which may not be less than 10 years or for life.\" Under some circumstances, mandatory minimums have proven controversial. Opponents contend that in some instances they can be arbitrary and unduly severe. Proponents contend that they ensure the offenders of the most serious offenses will receive at least some minimum punishment. Legislative proposals in the 114 th Congress reflect both perspectives.", "Federal courts are required to weigh the standards listed in 18 U.S.C. 3553(a) before sentencing a defendant. The standards include things like \"the need for the sentence imposed ... to provide just punishment for the offense\" and \"the need to avoid unwarranted sentence disparities ...\" In doing so, however, the courts may not disregard any applicable statutory mandatory minimums.\nS. 353 (Senator Paul) and H.R. 706 (Representative Scott (VA)) would permit federal courts to impose a sentence below an otherwise applicable mandatory minimum when necessary to avoid violating the sentencing standards found in Section 3553(a). When exercising the authority, the court would have to provide the government and the defendant a chance to be heard, and to provide a written statement of the Section 3553(a) factors that justify the decision to sentence below the mandatory minimum.", "The Controlled Substances Act and the Controlled Substances Import and Export Act establish a series of mandatory minimum sentences for violation of their prohibitions. Trafficking—that is, importing, exporting, manufacturing, growing, or possessing with the intent to distribute—a very substantial amount of various highly addictive substances such as more than a kilogram of heroin is punishable by imprisonment for not less than 10 years or more than life. A subsequent conviction carries a sentence of imprisonment for not less than 20 years or more than life. When substantial but lesser amounts are involved, such as100 grams of heroin, sentences of imprisonment for not less than five years or more than life are called for, and imprisonment for not less than 10 years or more than life in the case of a subsequent conviction.\nAs noted in Table 1 below, S. 502 (Senator Lee) and H.R. 920 (Representative Labrador) would reduce the mandatory minimum sentences for drug traffickers engaged in manufacture, cultivation, or distribution. They would not reduce the mandatory minimum sentences for traffickers engaged in importing or exporting, other than those who were simply acting as couriers (mules). This is a departure from the proposals in the 113 th Congress, which would have reduced the mandatory minimum sentences for traffickers generally, without regard to whether they manufacture or import/export.", "The so-called safety valve provision of 18 U.S.C. 3553(f) allows a court to sentence qualified defendants below the statutory mandatory minimum in controlled substance trafficking and possession cases. To qualify, a defendant may not have used violence in the course of the offense. He must not have played a managerial role in the offense if it involved group participation. The offense must not have resulted in a death or serious bodily injury. The defendant must make full disclosure of his involvement in the offense, providing the government with all the information and evidence at his disposal. Finally, the defendant must have a virtually spotless criminal record, that is, not more than 1 criminal history point.\nCriminal history points and categories are a feature of the U.S. Sentencing Commission's Sentencing Guidelines. The Guidelines assign points based on the sentences imposed for prior state and federal convictions. For example, the Guidelines assign 1 point for any past conviction that resulted in a sentence of less than incarceration for 60 days; 2 points for any conviction resulting in a sentence of incarceration for at least 60 days; and 3 points for any conviction resulting in a sentence of incarceration of more than a year and a month. Criminal History Category I consists of zero or 1 point, Criminal History Category II of 2 or 3 points.\nThe Sentencing Commission's report on mandatory minimum sentences suggested that Congress consider expanding safety valve eligibility to defendants with 2 or possibly 3 criminal history points. The report indicated that under the Guidelines a defendant's criminal record \"can have a disproportionate and excessively severe cumulative sentencing impact on certain drug offenders.\" It explained that the Guidelines are construed to ensure that the sentence they recommend in a given case calls for a term of imprisonment that is not less than an applicable mandatory minimum. In addition, the drug offenses have escalated mandatory minimums for repeat offenders. Moreover, similarly situated drug offenders may be treated differently, because states punish simple drug possession differently and prosecutors decide when to press recidivism qualifications differently.\nThe Lee and Labrador bills ( S. 502 / H.R. 920 ) would expand safety valve eligibility from defendants with no more than 1 criminal history point to those with no more than 3 points. S. 1410 , as voted out of the Senate Judiciary Committee during the last Congress, would have expanded safety valve eligibility from defendants with no more than 1 criminal history point to those with no more than 2 points, if they avoided certain disqualifications. A defendant would have been ineligible for the expanded 2-point criminal history safety valve threshold if he had a prior conviction for a federal firearms offense, sex offense, crime of terrorism, RICO predicate offense, or conspiracy to use or invest drug profits. The current proposals have no such limitation.", "Originally, the Controlled Substances Act made no distinction between powder cocaine and crack cocaine (cocaine base). The 1986 Anti-Drug Abuse Act introduced a 100-1 sentencing ratio between the two, so that trafficking in 50 grams of crack cocaine carried the same penalties as trafficking in 5,000 grams of powder cocaine. The 2010 Fair Sentencing Act replaced it with the present 500-28 ratio, so that trafficking in 280 grams of crack cocaine carries the same penalties as 5,000 grams of powder cocaine. It also abolished the mandatory minimum for simple crack cocaine possession that the 1988 Anti-Drug Abuse Act had established. The Sentencing Commission subsequently revised the Sentencing Guidelines to reflect the change, and made the modification retroactively applicable at the discretion of the sentencing court.\nH.R. 1255 (Representative Scott (VA)) would eliminate the sentencing distinction between powder and crack cocaine by eliminating the cocaine base specific references. Trafficking in cocaine would carry the same penalties regardless of whether the substance was powder or crack cocaine.", "The Fair Sentencing Act reductions apply to cocaine offenses committed thereafter. They also apply to offenses committed beforehand when sentencing occurs after the time of enactment. Federal courts have discretion to reduce a sentence imposed under a Sentencing Guideline that was subsequently substantially reduced. The Fair Sentencing Act (FSA), however, does not apply to sentences imposed prior to its enactment, and it does not apply in sentence reduction hearings triggered by new Sentencing Guidelines. In such proceedings, the courts remain bound by the mandatory minimums in effect prior to enactment of the FSA.\nS. 502 (Senator Lee) and H.R. 920 (Representative Labrador) would allow a court to reduce a previously imposed sentence for crack cocaine possession or trafficking, consistent with the FSA, on its own or at the behest of the defendant, prosecutor, or Bureau of Prisons. They would also permit a court to reduce such sentences, but would have limited the authority to instances in which the defendant had not been previously granted or denied a similar reduction. The Judiciary Committee's version of S. 1410 (113 th Cong.) contained identical provisions.", "S. 502 and H.R. 920 would direct the U.S. Sentencing Commission to review and propose amendments to the federal Sentencing Guidelines in order to reflect the changes the bills call for and the changes the FSA introduced.\nThe Sentencing Reform Act created the Sentencing Commission and authorizes it to propose Sentencing Guidelines. It also authorizes the commission to periodically review and propose amendments to the Guidelines. Once considered binding, the Guidelines still substantially limit the sentences a federal court may impose. A court must correctly calculate the Guidelines' recommended sentencing range, and it must justify any deviation.\nThe bills would instruct the commission to conduct this reexamination with six factors in mind:\nthe need to minimize the risk that the federal prison population would exceed the system's capacity; the findings and recommendations of the Commission's report on mandatory minimum sentences; the fiscal implications of any changes to the Guidelines; relevant public safety concerns; congressional intent to maintain appropriately severe penalties for violent, repeat, and serious drug traffickers; and the need to reduce and prevent racial sentencing disparities.", "The Controlled Substances Act prohibits cultivation, distribution, possession with intent to distribute, and simple possession of marijuana. Those prohibitions carry with them mandatory minimum sentences when substantial amounts of marijuana are involved. Thus, cultivation, distribution, or possession with intent to distribute \" 1,000 kilograms [2,204.6 lbs.] or more of a mixture or substance containing a detectable amount of marihuana, or 1,000 or more marihuana plants regardless of weight\" is punishable by\n[A] term of imprisonment which may not be less than 10 years or more than life and if death or serious bodily injury results from the use of such substance shall be not less than 20 years or more than life ... If any person commits such a violation after a prior conviction for a felony drug offense has become final, such person shall be sentenced to a term of imprisonment which may not be less than 20 years and not more than life imprisonment and if death or serious bodily injury results from the use of such substance shall be sentenced to life imprisonment ... If any person commits a violation of this subparagraph ... after two or more prior convictions for a felony drug offense have become final, such person shall be sentenced to a mandatory term of life imprisonment without release and fined in accordance with the preceding sentence.\nIf the offense instead involves a lesser amount, that is, less than 1,000 kilograms, but \"100 kilograms (220.46 lbs.) or more of a mixture or substance containing a detectable amount of marihuana, or 100 or more marihuana plants regardless of weight,\" the offense is punishable by\n[A] term of imprisonment which may not be less than 5 years and not more than 40 years and if death or serious bodily injury results from the use of such substance shall be not less than 20 years or more than life ... If any person commits such a violation after a prior conviction for a felony drug offense has become final, such person shall be sentenced to a term of imprisonment which may not be less than 10 years and not more than life imprisonment and if death or serious bodily injury results from the use of such substance shall be sentenced to life imprisonment....\nH.R. 1013 (Representative Polis) would eliminate mandatory minimum sentences for trafficking in marijuana by removing marijuana from the coverage of the Controlled Substances Act.", "S. 502 (Senator Lee) and H.R. 920 (Representative Labrador) would also direct the Attorney General to prepare two reports covering federal criminal statutes, generally both those that feature mandatory sentencing provisions and those that do not. The first would address the impact of the bill's provisions, including an indication of how the savings realized from the reduction in mandatory minimum sentences would be used to reduce prison overcrowding and to contribute to crime prevention.\nThe second would provide an inventory of federal criminal statutory and regulatory offenses. The report would be required to indicate the range of penalties that accompany each offense, the mens rea element for each offense, and the regularity with which each offense has been prosecuted. For the regulatory offenses, inventory and related information would have to be broken down on an agency-by-agency basis.\nThe same provisions appeared in S. 1410 as it was taken to the floor during the 113 th Congress.", "Section 924(c), in its current form, imposes one of several different minimum sentences when a firearm is used or possessed in furtherance of another federal crime of violence or drug trafficking. The mandatory minimums, imposed in addition to the sentence imposed for the underlying crime of violence or drug trafficking, vary, depending upon the circumstances:\nimprisonment for not less than five years, unless one of the higher mandatory minimums below applies; imprisonment for not less than seven years, if a firearm is brandished; imprisonment for not less than 10 years, if a firearm is discharged; imprisonment for not less than 10 years, if a firearm is a short-barreled rifle or shotgun or is a semi-automatic weapon; imprisonment for not less than 15 years, if the offense involves armor-piercing ammunition; imprisonment for not less than 25 years, if the offender has a prior conviction for violation of Section 924(c); imprisonment for not less than 30 years, if the firearm is a machine gun or destructive device or is equipped with a silencer; and imprisonment for life, if the offender has a prior conviction for violation of Section 924(c) and if the firearm is a machine gun or destructive device or is equipped with a silencer.\nH.R. 1254 (Representative Scott (VA)) would convert all of Section 924(c)'s mandatory minimum penalties to maximum penalties. Each of its not-less-than penalties would become not-more-than penalties. So, for example, possession of a shotgun in furtherance of a crime of violence or of drug trafficking would be punishable by imprisonment for not more than 10 years. Possession of a machine gun in furtherance of such an offense would be punishable by imprisonment for not more than 30 years.\nThe Scott bill would append in large measure the procedure used in Controlled Substance Act cases to establish the existence of a qualifying prior conviction, 21 U.S.C. 851. It would, however, drop the provision in Section 851 that affords the defendant the right to have the question presented to the grand jury in the case of serious enhancements. It would also abandon the provision that bars questioning the validity of remote convictions. H.R. 1254 is a twin of a proposal offered by Representative Scott in the 113 th Congress.\nS. 847 (Senator McCain) and H.R. 1588 (Representative McSally), in contrast, would enlarge the coverage of Section 924(c) by adding alien smuggling, 8 U.S.C. 1324(a), 1327, or 1328, to violent crimes and drug trafficking as predicate offenses which trigger Section 924(c)'s mandatory minimum sentences. Thus, for example, a defendant, in possession of a firearm in furtherance of alien smuggling, would be subject to imprisonment for not less than five years. The proposal has a number of antecedents in the 113 th Congress.", "The Mann Act (travel or transportation for unlawful sexual purposes) and 18 U.S.C. 1591 (commercial sex trafficking) contain several provisions which outlaw sexual misconduct punishable by mandatory minimum sentences. A number of proposals would either clarify or expand the reach of those provisions.", "", "Section 1591 outlaws commercial sex trafficking. More precisely, it outlaws\nknowingly recruiting, enticing, harboring, transporting, providing, obtaining, or maintaining another individual knowing or with reckless disregard of the fact that the individual will be used to engage commercial sexual activity either as a child or by virtue of the use of fraud or coercion when the activity occurs in or affects interstate or foreign commerce, or occurs within the special maritime or territorial jurisdiction of the United States.\nIt outlaws separately profiting from such a venture.\nOffenders face the prospect of life imprisonment with a mandatory minimum term of not less than 15 years (not less than 10 years if the victim is between the ages of 14 and 18). The same penalties apply to anyone who attempts to violate the provisions of Section 1591.\nThere have been suggestions to expand Section 1591 to cover advertisers and to more explicitly cover the customers of a commercial sex trafficking scheme. At first glance, Section 1591 does not appear to cover the customers of a sex trafficking enterprise. Moreover, in the absence of a specific provision, mere customers ordinarily are not considered either co-conspirators or accessories before the fact in a prostitution ring. Nevertheless, the U.S. Court of Appeals found that the language of Section 1591(a) applied to the case of two customers caught in a law enforcement \"sting\" who attempted to purchase the services of what they believed were child prostitutes. \"The ordinary and natural meaning of 'obtains' and the other terms Congress selected in drafting §1591 are broad enough to encompass the actions of both suppliers and purchasers of commercial sex acts,\" the court declared.\nS. 178 , H.R. 181 , and a number of other bills would explicitly confirm this construction by amending Section 1591(a) to read in part \"Whoever knowingly ... recruits, entices, harbors, transports, provides, obtains, maintains, or patronizes, or solicits by any means any person ...\" (language of the proposed amendment in italics).", "The same bills often amend the \"knowledge of age\" element in Section 1591(c) to reflect its clarifying amendment with respect to the customers of a commercial sex trafficking venture. The law now absolves the government of the obligation to prove that the defendant knew the victim was a child, if it can show that the defendant had an opportunity to \"observe\" the victim. The proposal would make it clear that the government would be equally absolved regardless of whether the defendant were a consumer or purveyor of a child's sexual commercial services, as long as it establishes that the defendant had an opportunity to observe the child: \"In a prosecution under subsection (a)(1) in which the defendant had a reasonable opportunity to observe the person so recruited, enticed, harbored, transported, provided, obtained, maintained, patronized, or solicited the Government need not prove that the defendant knew, or recklessly disregarded the fact , that the person had not attained the age of 18 years,\" 18 U.S.C. 1591(c) (language of the proposed amendment in italics).", "Proposals to explicitly cover advertisers might also be seen as a matter of simply sharpening existing law. Anyone who aids and abets the commission of a federal crime by another merits the same punishment as the individual who actually commits the crime. Liability for aiding and abetting requires that a defendant embrace the crime of another and consciously do something to contribute to its success.\nOne of Section 1591's distinctive features is that its action elements—recruiting, harboring, transporting, providing, obtaining—are activities that might be associated with aiding and abetting the operation of a prostitution enterprise. Section 1591, read literally, does not outlaw operating a prostitution business; it outlaws the steps leading up to or associated with operating a prostitution business—recruiting, harboring, transporting, etc. Strictly construed, advertising in aid of recruitment, harboring, transporting, or one of the other action elements might qualify as aiding and abetting a violation of Section 1591; advertising the availability of a prostitute might not.\nYet one court suggests that Section 1591 does outlaw operating a prostitution business, at least for purposes of aiding and abetting liability, and that by implication advertising might constitute aiding and abetting a violation of the section:\nPringler first argues that the evidence is insufficient to support his conviction for aiding and abetting the sex trafficking of a minor [in violation of Section 1591].... We disagree. The record is not devoid of evidence to support the jury's verdict and show Pringler's integral role in the criminal venture. Pringler took the money that Norman and B.L. earned from their prostitution and used some of it to pay for hotel rooms where the women met their patrons. Pringler bought the laptop Norman and B.L. used to advertise their services. He drove Norman and B.L. to \"outcall\" appointments, and he took photographs of Norman, which he had planned for use in advertisements.\nSome bills, H.R. 285 and S. 572 , for example, would amend Section 1591(a)(1) to outlaw knowingly advertising a person, knowing the victim would be used for prostitution. Proponents might suggest that \"advertising\" would seem to fit snugly within the litany of Section 1591's action elements.\nSection 1591 now requires the government to prove either that the defendant knew of the victim's underage or coerced status or recklessly disregarded it. The proposal would expose the trafficker and the profiteer to liability based on different levels of knowledge. The liability for advertising traffickers would require that they knew of or recklessly disregarded the victim's status. The liability for advertising profiteers would require that they knew of the victim's status.\nKnowledge is obviously a more demanding standard than reckless disregard, but the dividing line between the two is not always easily discerned, in part because of the doctrine of willful blindness. The doctrine describes the circumstances under which a jury may be instructed by the court that it may infer knowledge on the part of a defendant. Worded variously, the doctrine applies where evidence indicates that the defendant sought to avoid the guilty knowledge.\nSince the element is worded in the alternative—knowing or in reckless disregard of the fact—the courts have rarely distinguished the two. One interpretation comes from comparable wording in an immigration offense which outlaws transporting an alien knowing or acting in reckless disregard of the fact that the alien is in this country illegally: \"To act with reckless disregard of the fact means to be aware of but consciously and carelessly ignore facts and circumstances clearly indicating that the person transported was an alien who had entered or remained in the United States illegally.\" The courts refer to a similar unreasonable indifference standard when speaking of the veracity required for the issuance of a warrant.", "The Mann Act criminalizes, among other things, (1) interstate or foreign transportation of a child for purposes of prostitution or other unlawful sexual purposes; (2) interstate or foreign travel for purposes of engaging in \"illicit sexual activity\" with a child; and (3) overseas travel of U.S. nationals followed by illicit sexual activities with a child.\nDefendants enjoy an affirmative defense in \"illicit sexual activity\" cases, if they can establish by a preponderance of the evidence that they reasonably believed that the victim was over 18 years of age.\nS. 178 , H.R. 181 , and other bills would limit the defense to cases where the defendant establishes the reasonableness of his belief by clear and convincing evidence. The difference between preponderance of the evidence and clear and convincing is the difference between more likely than not and highly probable. Many of these same proposals would amend the \"illicit sexual activity\" definition to include child pornography cases, with the result that interstate or foreign travel associated with the production of child pornography would be clear violations of the Mann Act's Section 2423(b)(interstate or foreign travel for purposes of such production), Section 2423(c)(foreign travel followed by such production), and Section 2423(d)(commercially facilitating such travel), each of which is punishable by imprisonment for not more than 30 years." ], "depth": [ 0, 1, 1, 1, 2, 2, 3, 3, 2, 1, 1, 1, 2, 3, 3, 3, 2 ], "alignment": [ "h0_title h1_title", "", "", "h0_full", "h0_full", "h0_full", "", "", "", "", "h1_full", "", "", "", "", "", "" ] }	{ "question": [ "How would new legislative on sex trafficking and drug trafficking be different?", "How would S. 502 and H.R. 920 impact drug trafficking sentences?", "How would these same bills also potentially extend sentences?", "How would changes in differentiation of types of cocaine affect sentencing?", "How is firearm legislation different?", "What is the baseline of firearm legislation?", "What is Representative Scott's firearm legislation?", "What is Senator McCain's and Representative McSally's firearm legislation?" ], "summary": [ "While proposals relating to sex trafficking would largely increase the number of mandatory minimum sentences imposed, most of the proposals relating to drug trafficking would have the opposite impact.", "Senator Lee's S. 502 and Representative Labrador's H.R. 920, for instance, would reduce the mandatory minimum sentences that accompany a number of drug trafficking offenses.", "The same bills would expand the so-called safety valve which allows a court to sentence certain low-level drug offenders below the otherwise applicable mandatory minimum sentence.", "Finally, Representative Scott's H.R. 1255 would eliminate the distinction between powder and crack cocaine, and as a consequence potentially reduce the number of defendants subject to the more severe drug trafficking mandatory minimums.", "Firearms legislation is more varied.", "Existing law imposes a series of mandatory minimum sentences when a firearm is associated with the commission of a crime of violence or drug trafficking (18 U.S.C. 924(c)).", "Representative Scott's H.R. 1254 would convert all of Section 924(c)'s mandatory minimums (not-less-than) to statutory maximums (not-more-than).", "Senator McCain's S. 847 and Representative McSally's H.R. 1588, on the other hand, would make Section 924(c)'s mandatory minimums available not only in cases involving crimes of violence or drug trafficking, but also those involving the smuggling of aliens." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 4, 4, 4, 4, 5, 5, 5, 5 ] }
CRS_RL32929	{ "title": [ "", "Background", "Most Recent Developments", "Issue Definition", "The Need to Maintain Nuclear Warheads for the Long Term", "The Solution So Far: The Life Extension Program", "Is LEP Satisfactory for the Long Term?", "RRW and the Transformation of Nuclear Warheads", "Yield-to-Weight Ratio", "Nuclear Testing", "Performance, Schedule, and Cost Tradeoffs", "Environment, Safety, and Health (ES&H)", "Skill Development and Transfer", "RRW and Nuclear Weapons Complex Transformation", "RRW Program Developments", "Congressional Action on the FY2006 RRW Request", "Congressional Action on the FY2007 RRW Request", "Congressional Action on the FY2008 RRW Request", "Congressional Action on the FY2009 RRW Request", "Congressional Action on RRW for FY2010", "Chronology, 2007-", "For Additional Reading", "Appendix. Nuclear Weapons, Nuclear Weapons Complex, and Stockpile Stewardship Program" ], "paragraphs": [ "", "", "For FY2010, the Administration proposed to terminate the RRW program and requested no funds for it. The House and Senate Armed Services Committee versions of the FY2010 defense authorization bill each had a provision that would strike Section 4204a of the Atomic Energy Act, which directed the Department of Energy to establish the RRW program. Neither committee recommended providing RRW funds. On June 25, 2009, the House passed the defense authorization bill with this provision intact. The House and Senate Appropriations Committees recommended providing no RRW funds for the National Nuclear Security Administration (NNSA).", "While some argue for abolition of nuclear weapons, there is widespread agreement within the United States that this nation must maintain its nuclear warheads as long as it retains them. Yet warheads deteriorate with age. The current Life Extension Program (LEP) maintains them by replacing deteriorated components. The National Nuclear Security Administration (NNSA), the DOE agency in charge of the nuclear weapons program, however, expresses concerns that LEP might be unable to maintain warheads for the long term on grounds that the accumulation of minor but inevitable variations between certain original and replacement components may reduce confidence that life-extended warheads remain safe and effective. It recommends a new approach, the Reliable Replacement Warhead (RRW), described below. On the other hand, a study released in November 2006 estimates that pits, a key warhead component (see Appendix ), should have a service life of 85 to 100 years or more, which some argue makes it unnecessary to replace current warheads for decades by extending the time for which confidence in them should remain high.\nReflecting NNSA's concern, Congress first funded the RRW program in the FY2005 Consolidated Appropriations Act, P.L. 108-447 . The entire description of RRW in the conference report was a \"program to improve the reliability, longevity, and certifiability of existing weapons and their components.\" No committee report earlier in the FY2005 cycle had mentioned RRW. Congress authorized the program in the FY2006 National Defense Authorization Act, P.L. 109-163 , Section 3111.\nCongress has spelled out dozens of goals for the RRW program. A key goal is to increase confidence, without nuclear testing, that warheads will perform as intended over the long term. Other goals are to increase ease of manufacture and certification, reduce life cycle cost, increase weapon safety and use control, and reduce environmental burden. CRS Report RL33748, Nuclear Warheads: The Reliable Replacement Warhead Program and the Life Extension Program , by Jonathan Medalia, details 20 such goals. To achieve them, RRW would trade characteristics important during the Cold War for those of current importance, as described below. The Department of Defense (DOD) has approved this tradeoff. It would be impossible to meet all the goals simultaneously by modifying existing warheads, in part because their designs are so \"tight\" that NNSA is concerned that even minor changes might reduce confidence in the reliability of these warheads over the long term. As such, the RRW program would design new warheads to replace existing ones. In contrast, LEP makes changes chiefly to maintain weapons, and in particular minimizes changes to the nuclear explosive package (see Appendix ).\nRRW is sharply debated. Supporters anticipate that RRW will permit replacing a large stockpile of nondeployed nuclear warheads with fewer warheads in which DOD can have greater confidence over the long term, and restructuring the nuclear weapons complex (the \"Complex\"; see Appendix ) to be smaller, safer, more efficient, and less costly. A Defense Science Board task force finds that LEP \"is clearly not a sustainable approach\" and recommended proceeding with RRW. NNSA argued that RRWs \"will be re-designed for long-term confidence in reliability and greater security, and ease of production and maintenance. Critics question whether some of the tradeoffs and goals are feasible, necessary, or worth potential costs and risks. For example, one commenter argued, \"The plutonium research results [see footnote 2 ] obliterate the chief rationale for NNSA's emerging strategy\" of RRW, while the New York Times opined that RRW \"is a public-relations disaster in the making overseas\" and \"a make-work program championed by the weapons laboratories and belatedly by the Pentagon.\"\nSeveral external reviews of the program have been released. (1) The House Appropriations Committee directed NNSA to have the JASONs, a group of scientists who advise the government on defense matters, conduct an independent peer review\nto evaluate the competing RRW designs. The JASONs should evaluate the RRW design recommended by the POG [the RRW Project Officers Group] against the requirements defined by congressional legislative actions to date and the elements defined in the Department of Defense's military characteristics for a reliable replacement warhead requirements document. The JASON review should also include an analysis on the feasibility of the fundamental premise of the RRW initiative that a new nuclear warhead can be designed and produced and certified for use and deployed as an operationally-deployed nuclear weapon without undergoing an underground nuclear explosion test.\nThe report was due March 31, 2007. In accordance with a schedule decided by the JASONs, NNSA, and the House Appropriations Committee, NNSA transmitted the report to Congress on September 28, and JASON transmitted the final report, in classified form, to NNSA by October 1. (See \"Congressional Action on the FY2008 RRW Request,\" below, for details.) (2) The Nuclear Weapons Complex Assessment Committee of the American Association for the Advancement of Science studied whether RRW is the best path for addressing certain potential risks of SSP and LEP and for developing a responsive infrastructure in a report released April 24, 2007. (3) The FY2006 National Defense Authorization Act, P.L. 109-163 , Section 3111, mandated a report due March 1, 2007. It was to \"discuss the relationship of the Reliable Replacement Warhead program within the Stockpile Stewardship Program (SSP) and its impact on the current Stockpile Life Extension Programs\" and RRW's \"feasibility and implementation.\" The report was delivered to Congress on May 5, 2008. It concluded, \"DOE and the DoD firmly believe that it is time for the United States to seek an alternative to the current strategy of extending the lives of legacy warheads indefinitely,\" and \"To ensure the viability of its nuclear deterrent, the United States must initiate and invest in the RRW program now—so there will be no disconnect between today's credible deterrent and the one required for the future.\" (4) P.L. 110-181 , FY2008 National Defense Authorization Act, Section 3121, required NNSA to report on using existing pits for RRW. The report was due on July 28, 2008, and was submitted on August 8. It concluded, \"The multiple objectives of the RRW program would be best met by newly manufactured pits. Until we can achieve adequate pit production capacity, we must plan on using existing pits for any warhead replacement or life extension programs.\" Further, \"Gravity bomb designs, due to the large available weight and volume, allow the most opportunities for desired improvements and are therefore the most technically feasible candidates for pit reuse.\"\nAs discussed under \"Congressional Action on the FY2008 RRW Request,\" below, several FY2008 reports on defense authorizations and energy-water appropriations have called for other reports related to RRW, such as linking RRW to broader issues of strategy, nuclear nonproliferation, and stockpile size.\nThis report (1) describes the LEP, difficulties ascribed to it by its critics, and their responses; (2) shows how changed post-Cold War constraints might open opportunities to improve long-term warhead maintenance and reach other goals; (3) describes RRW and its pros and cons; (4) tracks RRW program developments and congressional action on budget requests; and (5) presents options and issues for Congress. An Appendix describes nuclear weapons, the SSP, and the Complex.", "Nuclear warheads must be maintained because they contain thousands of parts that deteriorate at different rates. Some parts and materials have well-known limits on service life, while the service life of other parts may be unknown or revealed only by multiple inspections of a warhead type over time. A 1983 report argued that maintenance requires nuclear testing:\nCertain chemically reactive materials are inherently required in nuclear weapons, such as uranium or plutonium, high explosives, and plastics. The fissile materials, both plutonium and uranium, are subject to corrosion. Plastic-bonded high explosives and other plastics tend to decompose over extended periods of time ... portions of materials can dissociate into simpler substances. Vapors given off by one material can migrate to another region of the weapon and react chemically there.... Materials in the warhead electrical systems ... can produce effluents that can migrate to regions in the nuclear explosive portion of the weapon.... The characteristics of high explosives can change with time.... Vital electrical components can change in character....\nA 1987 report, written to rebut the contention of the foregoing report that nuclear testing is needed to maintain warheads, agreed that aging affects components:\nIt should also be noted that nuclear weapons engineering has benefitted from a quarter century of experience in dealing with corrosion, deterioration, and creep since the time that the W45, W47, and W52 [warheads] entered the stockpile in the early sixties (just after the test moratorium of 1958-1961).... Most of the reliability problems in the past have resulted from either an incomplete testing program during the development phase of a weapon or the aging and deterioration of weapon components during deployment.\nSome feel that deterioration, while a potential problem, has been overstated. A scientific panel writing in 1999 stated,\nthere is no such thing as a \"design life.\" The designers were not asked or permitted to design a nuclear weapon that would go bad after 20 years. They did their best on a combination of performance and endurance, and after experience with the weapon in storage there is certainly no reason to expect all of the nuclear weapons of a given type to become unusable after 20 or 25 years. In fact, one of the main goals of SBSS [Science-Based Stockpile Stewardship, an earlier term for the Stockpile Stewardship Program, discussed below] is to predict the life of the components so that remanufacture may be scheduled, and results to date indicate a margin of surety extending for decades.... Until now, clear evidence of warhead deterioration has not been seen in the enduring stockpile, but the plans for remanufacture still assume that deterioration is inevitable on the timescale of the old, arbitrarily defined \"design lives.\"\nThe deterioration noted above pertained to warheads designed in the 1950s and early 1960s that are no longer deployed. Newer warheads correct some of these problems. As knowledge of warhead performance, materials, and deterioration increases, the labs can correct some problems and forestall others. Still other aging problems have turned out to occur more slowly than was feared. In particular, it was long recognized that plutonium would deteriorate as it aged, but it was not known how long it would take for deterioration to impair performance of the pit, the fissile core of a nuclear weapon's primary stage (see Appendix ). NNSA had estimated that that would take at least 45 to 60 years, but a November 2006 study found\nthere is no degradation in performance of primaries of stockpile systems [i.e., warheads] due to plutonium aging that would be cause for near-term concern regarding their safety and reliability. Most primary types have credible minimum lifetimes in excess of 100 years as regards aging of plutonium; those with assessed minimum lifetimes of 100 years or less have clear mitigation paths that are proposed and/or being implemented.\nDuring the Cold War, any deterioration problems were limited in their duration because this nation introduced generations of long-range nuclear-armed bombers and ballistic missiles, each of which would typically carry a new warhead tailored to its mission. New warheads were usually introduced long before the warheads they replaced reached the end of their service lives. Three trends concerning deterioration have emerged since the end of the Cold War. (1) SSP and other tools, described below, have greatly increased NNSA's understanding of warhead deterioration and how to deal with or prevent it. (2) By maintaining the current set of warhead designs for many years, design and production errors have been subjected to systematic identification and elimination. (3) Nuclear warheads have much more time to age, as warheads that were expected to remain in the stockpile for at most 20 years are now being retained indefinitely. The net of these trends is that understanding of deterioration, while improving, is not perfect, so deterioration remains a concern.\nCurrent warheads were designed to meet an exacting set of constraints, such as safety parameters, yield, and conditions (such as temperature) that they would encounter in their lifetimes. Design compromises were made to meet these constraints. Ambassador Linton Brooks, NNSA Administrator, said that to meet requirements, \"we designed these systems very close to performance cliffs.\" That is, designs approached points at which warheads would fail. Many parts were hard to produce or used hazardous materials. Warheads were often hard to assemble. This approach increased the difficulty of replicating some components and of maintaining warheads. Ambassador Brooks said, \"it is becoming more difficult and costly to certify warhead remanufacture. The evolution away from tested designs resulting from the inevitable accumulations of small changes over the extended lifetimes of these systems means that we can count on increasing uncertainty in the long-term certification of warheads in the stockpile.\"\nAt issue is whether warheads can be maintained despite the absence of nuclear testing by replacing deteriorated components with newly made ones built as close as possible to the original specifications. This debate has been going on for decades. In a 1978 letter to President Carter, three weapons scientists argued that the United States could go to great lengths in remanufacturing weapon components:\nit is sometimes claimed that remanufacture may become impossible because of increasingly severe restrictions by EPA or OSHA to protect the environment of the worker ... if the worker's environment acceptable until now for the use of asbestos, spray adhesives, or beryllium should be forbidden by OSHA regulations, those few workers needed to continue operations with such material could wear plastic-film suits.... It would be wise also to stockpile in appropriate storage facilities certain commercial materials used in weapons manufacture which might in the future disappear from the commercial scene.\nHowever, a 1987 report by Lawrence Livermore National Laboratory stated:\nExact replication, especially of older systems, is impossible. Material batches are never quite the same, some materials become unavailable, and equivalent materials are never exactly equivalent. \"Improved\" parts often have new, unexpected failure modes. Vendors go out of business.... Documentation has never been sufficiently exact to ensure replication .... We have never known enough about every detail to specify everything that may be important.... The most important aspect of any product certification is testing; it provides the data for valid certification.", "With the end of the Cold War, the Complex, like the rest of the defense establishment, faced turmoil. Budgets and personnel were reduced, design of new weapons ended, and a test moratorium began. For a time, the chief concern of DOE's nuclear weapons management was survival of the Complex.\nTo address this concern and set a course for the nuclear weapons enterprise, Congress, in the FY1994 National Defense Authorization Act ( P.L. 103-160 ), Section 3138, directed the Secretary of Energy to \"establish a stewardship program to ensure the preservation of the core intellectual and technical competencies of the United States in nuclear weapons, including weapons design, system integration, manufacturing, security, use control, reliability assessment, and certification.\" Since then, the Clinton and Bush Administrations have requested, and Congress has approved, tens of billions of dollars for this Stockpile Stewardship Program (SSP), which is presented in NNSA's budget as \"Weapons Activities.\"\nSSP uses data from past nuclear tests, small-scale laboratory experiments, large-scale experimental facilities, examination of warheads, and the like to better understand nuclear weapon science. It uses this knowledge to improve computer codes that simulate aspects of weapons performance to aid the nuclear weapons laboratories' understanding of it. Such advances help scientists analyze data from past nuclear tests more thoroughly, mining it to extract still more information. Theory, simulation, and data reinforce each other: theory refines simulation, simulation helps check theory, theory and simulation guide researchers to look for certain types of data, and data help check simulation and theory.\nA key task of the Complex is to monitor warheads for signs of actual or future deterioration. This work is done through a program that conducts routine surveillance of warheads in the stockpile by closely examining 11 warheads of each type per year to search for corrosion, gases, and other evidence of deterioration. Of the 11, one is taken apart for destructive evaluation, while the other 10 are evaluated nondestructively and returned to the stockpile. In addition, an Enhanced Surveillance Program supports surveillance; its goal \"is to develop diagnostic tools and predictive models that will make it possible to analyze and predict the effects that aging may have on weapon materials, components, and systems.\"\nWhen routine surveillance detects warhead problems, the Complex applies knowledge gained through SSP to fix problems through the Life Extension Program (LEP), which attempts \"to extend the expected stockpile lifetime of a warhead or warhead components at least 20 years with a goal of 30 years\" beyond the originally-anticipated service life.\nA warhead's components may be divided into two categories: those that are part of the nuclear explosive package (NEP), and those that are not. As described in the Appendix , the NEP is the part of the warhead that explodes, as distinct from the more numerous components like the outer case or arming system. Because non-NEP components can be subjected to extensive experiments and nonnuclear laboratory tests, they can be modified as needed under LEP to incorporate more advanced electronics or safer materials. In contrast, NEP components cannot be subjected to nuclear tests because the United States has observed a moratorium on nuclear testing since 1992. As a result, LEP seeks to replicate these components using original designs and, insofar as possible, original materials. In this way, it is hoped, components will be close to the originals so that they can be qualified for use in warheads. Because NEP components cannot be tested while other components can be, long-term concern focuses on the former.\nWarheads contain several thousand components. While not all need to be refurbished in an LEP, some are difficult to fabricate, and assembly may be difficult, as discussed earlier. As a result, the LEP for an individual warhead type is a major campaign requiring extensive preparatory analysis and detailed work on many components that can take many years. For example, NNSA describes the LEP for the W76 warhead for Trident submarine-launched ballistic missiles as follows:\nThe W76 LEP will extend the life of the W76 for an additional 30 years with the first production unit (FPU) targeted in FY 2008. Activities include design, qualification, certification, production plant Process Prove-In (PPI), and Pilot Production. The pre-production activities will ensure the design of refurbished warheads meets all required military characteristics. Additional activities include work associated with the manufacturability of the components including the nuclear explosive package; the Arming, Firing, and Fuzing (AF&F) system; gas transfer system; and associated cables, elastomers, valves, pads, cushions, foam supports, telemetries, and miscellaneous parts.\nStockpile stewardship has made great strides in understanding weapons science, in predicting how weapons will age, and in predicting how they will fail. Many agree with the following assessment by NNSA Administrator Thomas D'Agostino:\nthe Stockpile Stewardship Program is working —today's stockpile remains safe and reliable and does not require nuclear testing. This assessment is based on a foundation of past nuclear tests augmented by cutting edge scientific and engineering experiments and analysis, and improved warhead surveillance. Most importantly, it derives from the professional (and independent) judgment of our laboratory directors advised by their weapon program staffs.\nOthers reply that the United States cannot have confidence in stockpile stewardship without conducting nuclear tests to validate the tools and computer models. In this view, it is easier to fit computer models to data from past nuclear tests than to predict results of future tests.", "In the turmoil following the end of the Cold War, it is scarcely surprising that the method chosen to maintain the stockpile—a task that had to be performed in the face of the many changes affecting the Complex and the many unknowns about its future—was to minimize changes. Now, with SSP well established, NNSA feels that it is appropriate to use a different approach to warhead maintenance, one that builds on the success of SSP and challenges the notion underlying LEP that changes must be held to a minimum.\nAdvocates of RRW recognize that LEP has worked well and concede that it can probably maintain warheads over the short term. Their concern is with maintaining reliability of warheads over the long term. They assert that LEP is not suited to the task because it will become harder to make it work as the technology under which current warheads were created becomes increasingly archaic and as materials, equipment, processes, and skills become unavailable. They maintain that if the labs were to lose confidence that they could replicate NEP components to near-original designs using near-original materials and processes, the United States could ultimately face a choice between resuming nuclear tests or accepting reduced confidence in reliability. Instead, for example, the three nuclear weapons laboratories (Los Alamos, Livermore, and Sandia) argue that a \"vision of sustainable warheads with a sustainable [nuclear] enterprise can best be achieved by shifting from a program of warhead refurbishment to one of warhead replacement.\"\nAdvocates of RRW note further that while the current stockpile—most units of which were manufactured between 1979 and 1989—was designed to deter and, if necessary, defeat the Soviet Union, the threat, strategy and missions have changed, leaving the United States with the wrong stockpile for current circumstances. Ambassador Brooks said that current warheads are wrong technically because \"we would [now] manage technical risk differently, for example, by 'trading' [warhead] size and weight for increased performance margins, system longevity, and ease of manufacture.\" These warheads were not \"designed for longevity\" or to minimize cost, and may be wrong militarily because yields are too high and \"do not lend themselves to reduced collateral damage.\" They also lack capabilities against buried targets or biological and chemical munitions, and they do not take full advantage of precision guidance. Furthermore, LEP's critics believe the stockpile is wrong politically because it is too large:\nWe retain \"hedge\" warheads in large part due to the inability of either today's nuclear infrastructure, or the infrastructure we expect to have when the stockpile reductions are fully implemented in 2012, to manufacture, in a timely way, warheads for replacement or for force augmentation, or to act to correct unexpected technical problems.\nFinally, they believe the stockpile is wrong in terms of physical security because it was not designed for a scenario in which terrorists seize control of a nuclear weapon and try to detonate it in place. According to Brooks, \"If we were designing the stockpile today, we would apply new technologies and approaches to warhead-level use control as a means to reduce physical security costs.\"\nAdvocates of LEP challenge each assertion. They believe that LEP can continue to maintain warheads. They note that criticisms of LEP are vague: not that LEPs will fail, but that life-extended warheads might at some future point lead to a reduction in confidence. LEP supporters do not accept even that criticism. As Richard Garwin, IBM Fellow emeritus said,\nI don't agree with the generally stated assumption that confidence and the reliability of our existing nuclear weapons will inevitably decline with time as the weapons age ... the Science-Based Stockpile Stewardship Program and, in particular, the advanced scientific computing capabilities that have been procured at great cost over the last 15 years for the Stockpile Stewardship Program, have paid off handsomely, as indicated in confidence in increased pit longevity. Thus, in the case of the essential and sensitive thermonuclear weapon primaries, the passage of time has brought greater, not lesser, confidence in pit longevity.... And with the passage of time and the improvement in computing tools, I believe that confidence in the reliability of the existing legacy weapons will increase rather than diminish, just as has been the case with the nuclear weapon pits.\nThey challenge the assertion that RRW would improve the current stockpile. In this view, new weapons may not offer much new capability: earth penetrators could not destroy hardened facilities buried very deeply or at imprecisely-known locations, and nuclear weapons are of questionable effectiveness against chemical and biological agents. They note that Congress rejected funds for the Robust Nuclear Earth Penetrator, which many Members perceived as being a new nuclear weapon, and that the FY2006 National Defense Authorization Act, P.L. 109-163 , Section 3111, set \"fulfill[ing] current mission requirements of the existing stockpile\" as an objective for the RRW program. They anticipate that RRWs, like any other product, would have \"birth defects,\" whereas such defects have been wrung out of existing warheads, and believe that such defects could require a larger stockpile. They state that performance margins of current warheads are adequate and can be improved somewhat if needed, such as by new systems to deliver boost gas. They question the argument that RRW would reduce physical security costs on grounds that a terrorist attempt to seize and detonate a nuclear warhead in place is most unlikely given the high level of security currently in place, and doubt that Congress or NNSA would reduce the guard force because of RRW.", "The nuclear stockpile was designed to meet Cold War requirements. For example, high explosive yield per unit of warhead weight (the \"yield-to-weight ratio\") was critically important while cost, ease of manufacture, and reduction of hazardous material were less so. Now, yield-to-weight has become less important, the others just mentioned have become more important, new constraints have appeared in the wake of 9/11, and warheads must continue to be safe and reliable. As a result, RRW advocates claim, it is possible and necessary to transform the stockpile to reflect these changes.\nWith RRW, NNSA and DOD are revisiting tradeoffs underlying the current stockpile in order to adapt to post-Cold War changes and meet possible future requirements. NNSA and DOD assert RRW would trade negligible sacrifices to secure major gains. This section presents some Cold War warhead requirements, how they have changed, and implications of these changes for RRW and LEP.", "A major characteristic of warheads for ballistic missiles was a high yield-to-weight ratio. Lower weight let each missile carry more warheads to more distant targets; higher yield made each warhead better able to destroy its target; and high yield-to-weight enabled these goals to be met at the same time. For example, the W88 warhead for the Trident II (D5) submarine-launched ballistic missile uses a conventional high explosive (CHE) that is more sensitive to impact than insensitive high explosive (IHE) used on many other warhead types. IHE is safer to handle, but CHE packed more energy per unit weight. A missile could carry the lighter CHE warheads to a greater distance, so a submarine could stand off farther from its targets. Increased ocean patrol area forced the Soviet Union to spread out its antisubmarine assets, improving submarine survivability. Hard-to-manufacture designs, hazardous materials, and other undesirable features were deemed acceptable tradeoffs to maximize yield-to-weight.\nNow, ballistic missiles carry fewer warheads than they did during the Cold War, so each warhead can be heavier. In particular, the first RRW, \"WR1,\" which is to replace some W76 warheads now on the Trident II submarine-launched ballistic missile, will have the yield of the W76 but the higher weight of the W88, resulting in less yield per unit weight. The added weight is allocated to design features to improve use control, margin (excess performance designed into a warhead beyond the minimum required for it to perform as intended), ease of production, and the like.\nSome see LEPs of current warheads as satisfactory. Barry Hannah, chairman of the RRW POG,, explained his views on the project to convert original W76-0 warheads to life-extended W76-1's:\nThe W76-1 LEP that is currently underway is an excellent program in terms of technology, schedule, and cost. I believe it meets the Navy's needs. While the LEP makes many changes and some upgrades to components of the original W76-0, it made no changes that put the warhead's basic design at risk. For example, the W76-1 LEP POG wanted the W76-1 to remain as close to the original design as possible for the nuclear explosive package, as small differences in that package may have major effects on weapon performance. In cases where we did not fully understand the original manufacturing process for a material or component, we replicated the original process as exactly as possible. For that reason, we went to considerable effort to restore the process to manufacture \"Fogbank,\" a material used in the W76-0, for the W76-1. We also included changes that increase margins in order to compensate for problems or uncertainties that component changes or age-related degradation might introduce. One such change was an improved system to supply boost gas to the weapon.\nI am confident that the W76-1 will extend the life of the W76. The W76-0 was first deployed in 1978. Since the W76-1 is very close to the W76-0, data on W76-0 aging are directly relevant to gauging the service life of the W76-1. Observations on deterioration, or lack thereof, in W76-0 components increase confidence in an extended life for the W76-1. The W76-0 has aged well, and we have learned some lessons from its aging process that we have applied to the W76-1. Also, the modified boost gas transfer system supports an extended life.\nThe W76-1 POG opted for the W76-1 LEP in lieu of the WR-1 RRW for several reasons. The ability to produce a reasonable number of pits by the time they were needed was in question. If we had waited until 2020 to have the first WR-1, the W76-1 would have been out of production for many years and there would have been a risk if WR-1 had failed. Also, the Navy need for the safety and surety options was not as compelling as other services. When SLBM warheads are in Navy custody they are under heavy guard by Marines and other security personnel at bases, or out at sea.", "Between 1945 and 1992, the United States conducted over 1,000 nuclear tests, mostly for weapons design. These tests added confidence that a weapon incorporating hard-to-manufacture components was made correctly, that a weapon would work at extremes of temperatures it might experience, and that the design was satisfactory in other ways. Testing also enabled the labs to validate changes to existing warhead designs. With a congressionally-imposed U.S. nuclear test moratorium that began in October 1992 and that Presidents Clinton and George W. Bush have continued to the present, this nation cannot rely on tests to validate designs. Instead, WR1 seeks to provide high confidence in the design without nuclear testing by being a \"close neighbor\" of previously-tested designs, staying within design parameters that past nuclear tests have validated, and building in high margins. RRW advocates express concern that current warheads were designed with \"thin\" margins, and that minor changes as a result of LEPs can erode these margins further, possibly reducing confidence in these warheads that could testing to restore.\nAdvocates of LEP have high confidence in current warheads, and believe that this confidence is growing despite the absence of testing, as noted earlier. The JASON study on pit aging, in this view, delays by decades the time when pits would have to be manufactured for current warheads, thus delaying a potentially large risk factor that could lead to testing. In contrast, RRW missile warheads, such as WR1, would require the manufacture of new pits, and any new product runs the risk of design or manufacturing defects, which in this case could lead to testing.\nOthers hold that neither RRW nor LEP provides confidence in the stockpile. In this view, RRW uses untested designs, while the many changes introduced by LEPs move current warheads away from tested designs, so the only way to restore confidence is to resume a nuclear test program that would meet current needs with a much lower rate and yield of testing than during the Cold War.", "Performance has always been the dominant consideration for nuclear weapons. Weapons must meet standards for safety and reliability, and meet other military characteristics. During the Cold War, schedule was also critical. With new missiles and nuclear-capable aircraft entering the force at a sustained pace, warheads and bombs had to be ready on a schedule dictated by their delivery systems. As a result, \"our nuclear warheads were not designed ... to minimize DOE and DOD costs.\" Now, reducing cost has a higher priority. Cost reduction is also more feasible: performance is still dominant, but no imminent external threat drives the schedule.\nWR1 offers many features that, its backers claim, will reduce costs over its life cycle. It will be designed for ease of manufacture and reduce use of hazardous material, lowering manufacturing cost. Enhanced use-control and use-denial features may slow the growth of physical security costs. Reduced use of hazardous materials and a design that permits easier disassembly will lower dismantlement cost. RRW's proponents also raise concerns that it is becoming more costly to maintain existing warheads; for example, plants to make certain materials used in current warheads but that are no longer commercially available may cost millions of dollars to build.\nLEP supporters state that delaying pit manufacture for decades by continuing to use existing pits in current warheads will save many billions of dollars. They note that RRW is linked to a major upgrade of the nuclear weapons complex, which would be costly, and that the RRW program may involve manufacture of thousands of new warheads and dismantlement of thousands of old ones, adding costs. A study by the American Association for the Advancement of Science found, \"an RRW program would likely add to costs in the near term, and it is not yet possible to determine when (and whether) the RRW could lead to savings in the long term.\"", "During the Cold War, the urgency of production and limited knowledge of the ES&H effects of materials used or created in the nuclear weapons enterprise led to the use of hazardous materials, dumping contaminants onto the ground or into rivers, exposing citizens to radioactive fallout from nuclear tests, and the like. Now, ES&H concerns have grown within the Complex, reflecting their rise in civil society at large, leading to a strong interest in minimizing the use of hazardous materials in warheads and their production.\nRRW advocates note that reduction of hazardous materials is a design goal of RRW. A less stringent yield-to-weight requirement permits substitution of safer materials, even if they are somewhat heavier, for some hazardous materials. Manufacturing processes are simpler, reducing hazardous waste and increasing safety. Substitution of insensitive high explosive for conventional high explosive, it is argued, would increase worker safety. LEP supporters argue that the ability to defer pit manufacture for decades improves ES&H, and that existing manufacturing processes are well understood and have incorporated proper safety precautions.", "During the Cold War, the design of dozens of warhead types, the conduct of over 1,000 nuclear tests, and the production of thousands of warheads exercised the full range of nuclear weapon skills. Now, with no design or testing, no new-design warheads being produced, and with warheads being refurbished at a slower pace than that at which they were originally produced, some have raised concern that Complex personnel are not adequately challenged. In this view, skill development and transfer can no longer be simply a byproduct of the work, but must be an explicit goal of the nuclear weapons program.\nRRW advocates state that since RRW is a new design, designers must confront the full range of tradeoffs simultaneously, balancing yield, weight, cost, safety, ease of manufacture, use control, reduction of hazardous material, etc. In contrast, in this view, LEP constrains choices for the nuclear explosive package because replication is required to minimize divergence from parameters validated by nuclear testing. LEP supporters cite the American Association for the Advancement of Science study: \"Although life extension is not equivalent to executing a new design, it nonetheless employs many of the same tools, processes, and disciplines.\"", "Throughout its history, the nuclear weapons complex (the \"Complex\") has expanded and contracted in response to changing demands, whether the rush to produce the first bombs in World War II, the program to produce many thousands of warheads of many different types during the Cold War, or the need for more dismantlement and less production with the end of the Cold War, and many plans for Complex transformation have been drafted over the years.\nRRW's supporters saw RRW as the basis for addressing this transformation. Representative David Hobson, Chairman of the House Energy and Water Development Appropriations Subcommittee in the 108 th and 109 th Congresses, was RRW's prime sponsor. In introducing the FY2005 energy and water bill ( H.R. 4614 ) to the House, he emphasized the need to redirect the Complex:\nmuch of the DOE weapons complex is still sized to support a Cold War stockpile. The NNSA needs to take a 'time-out' on new initiatives until it completes a review of its weapons complex in relation to security needs, budget constraints, and [a] new stockpile plan.\nHe saw RRW as a key part of his effort to redirect U.S. nuclear strategy, reshape the nuclear weapons stockpile and Complex to support that strategy, undertake weapons programs consistent with that strategy, and reject those inconsistent with it.\nSome see RRW as the key to transforming the Complex into the responsive infrastructure envisioned in the 2001 Nuclear Posture Review. Thomas D'Agostino, then NNSA Deputy Administrator for Defense Programs, said in 2006,\nBy \"responsive\" we refer to the resilience of the nuclear enterprise to unanticipated events or emerging threats, and the ability to anticipate innovations by an adversary and to counter them before our deterrent is degraded.... much remains to be done to achieve stockpile and infrastructure transformation.... The \"enabler\" for transformation is our concept for the RRW. The RRW will benefit from relaxed Cold War design constraints that maximized yield to weight ratios. This will allow us to design replacement components that are easier to manufacture; are safer and more secure; eliminate environmentally dangerous, reactive, and unstable materials.... RRW, we believe, will provide enormous leverage for a more efficient and responsive infrastructure and opportunities for a smaller stockpile.\nHe also said, \"We have worked closely with the DoD to establish goals for 'responsiveness,' that is, timelines to address stockpile problems or deal with new or emerging threats. For example, our goal is to understand and fix most problems in the stockpile within 12 months of their discovery.\"\nTo meet these goals, NNSA proposed a \"Complex 2030\" plan for restructuring the Complex. It would consolidate fissile material, eliminate some redundancies in R&D facilities, and consolidate elements of the current Complex. It assumes Complex reconfiguration completed around 2030. As a result, even if the United States proceeds with RRW, the Complex would, for decades, need to support current warheads and RRWs simultaneously, so a Complex-in-transition would support a stockpile-in-transition. Because RRW would be designed in part for ease of manufacture, advocates claim it would permit a simpler a smaller and less costly Complex. In NNSA's view, Complex 2030, combined with easier-to-produce RRWs, would be more responsive to DOD's needs than the current Complex. Another plan, by a Secretary of Energy Advisory Board (SEAB) task force, proposed more consolidation of production, experimental equipment, and uranium and plutonium than the Complex 2030 plan. One of its elements was a Consolidated Nuclear Production Center (CNPC), which would produce all uranium and plutonium components for nuclear weapons, as well as assembling, surveilling, and disassembling weapons, and storing all weapons not in DOD custody.\nIn a letter to Secretary of Energy Samuel Bodman in November 2006, Representative Hobson expressed concern that DOE decided not to analyze the SEAB plan and instead considered Complex 2030 as its proposed action.\nIf the Department is not willing to conduct a thorough and objective analysis of all reform alternatives including the CNPC, and instead is determined to conduct an obviously prejudicial process aimed at ensuring the Department's preferred outcome, then I will not support funding for the Complex 2030 efforts, including the Reliable Replacement Warhead (RRW) program. RRW is a deal with Congress, but the deal requires a serious effort by the Department to modernize, consolidate, and downsize the weapons complex. Absent that, there is no deal.\nIn January 2007, NNSA stated it would evaluate the SEAB plan.\nRepresentative Peter Visclosky, Chairman of the Energy and Water Development Appropriations Subcommittee, also expressed concerns about the link between RRW and Complex transformation:\nI am also troubled by the apparent unbridled enthusiasm of the nuclear weapons complex over the Reliable Replacement Warhead and wish I saw that same enthusiasm replicated, as far as their dedication to downsizing the complex.... The department [DOE] will have to develop a modernization plan that is near-term and demonstrates a recognition that the long-term requirements of the nuclear weapons complex are tied to a much smaller nuclear stockpile.\nNNSA announced a revised plan for Complex reconfiguration, \"Complex Transformation,\" in December 2007. NNSA stated that this plan would consolidate nuclear materials within the Complex, close many buildings, reduce the footprint of the Complex by as much as one-third, employ fewer workers, and dismantle warheads faster. The link to RRW, though, seems less clear. As discussed below, Congress provided no NNSA funds for RRW for FY2008. NNSA stated that Complex Transformation \"is independent of whether [the nuclear] stockpile consists of legacy designs or Reliable Replacement Warhead (RRW) concept designs.\"", "Representatives of the Office of the Secretary of Defense, the armed services, and NNSA participate in the Nuclear Weapons Council, which under 10 U.S.C. 179 coordinates their efforts in this area. The council approved forming a DOD-DOE Project Officers Group (POG) for the RRW program in March 2005. According to NNSA, the POG is composed of representatives of NNSA, the nuclear weapon labs (Los Alamos, Lawrence Livermore, and Sandia), the Office of the Secretary of Defense, the U.S. Strategic Command, the Navy, the Air Force, and Lockheed Martin Space Systems Company. There are also observers from the Office of the Chief of Naval Operations, the Defense Threat Reduction Agency, and three nuclear weapon plants (Kansas City, Pantex, and Y-12). In practice, POGs do not take votes, so members and observers participate on an equal footing. The Nuclear Weapons Council tasked the POG to conduct an 18-month design competition, which started with the first POG meeting in May 2005. In the competition, two teams—Los Alamos and Sandia's New Mexico branch, and Lawrence Livermore and Sandia's California branch—were tasked to provide warhead designs consistent with RRW program objectives. The council set the terms of reference for the designs in a memorandum to the POG. DOD requested that the study be done as a competition between the two teams rather than as a collaboration, according to NNSA.\nBy February 2006, the two teams had become fully confident that their designs would meet military requirements, would not require nuclear testing to certify, and would meet other criteria including ease of manufacturing, reduction in the use of hazardous and exotic materials, and significantly enhanced safety and use control. The teams completed their preliminary designs in March 2006, and released their designs to the competing team. Over the next few months, the labs, POG, and NNSA reviewed and analyzed candidate design concepts. On November 30, 2006, the POG briefed the council on RRW, and the council determined that RRW \"is feasible as a strategy for sustaining the nation's nuclear weapons stockpile for the long-term without underground nuclear testing.\" According to a December 1 press release, the council was expected to select a preferred design \"in the next few weeks.\" On March 2, 2007, NNSA announced that the Nuclear Weapons Council had selected the California team's design. According to NNSA,\nThe two nuclear weapons laboratories both submitted designs that fully met all RRW requirements. However, [Acting NNSA Administrator Thomas] D'Agostino noted that higher confidence in the ability to certify the Livermore design without underground testing was the primary reason for its selection. That design was more closely tied to previous underground testing.\nThe competing designs were for a submarine-launched ballistic missile (SLBM) replacement warhead. This was consistent with a statement in a House Armed Services Committee report: \"the committee encourages the Department of Defense and the Department of Energy to focus initial Reliable Replacement Warhead efforts on replacement warheads for Submarine Launched Ballistic Missiles.\" Specifically, the designs sought to provide the military capability of the W76 warhead. In particular, as General James Cartwright, USMC, then Commander of the U.S. Strategic Command, stated in 2007, the yield of this RRW would be within 1% or 2% of that of the W76. Because of this SLBM focus, the Navy is the POG chair, and the Air Force is co-chair. At the same time, the designs were made so that they can also be used on land-based intercontinental ballistic missiles. In this way, the RRW could serve as a backup in case ICBM warheads encountered a problem. This approach could permit reducing the number of warhead types, meeting an objective in the House Appropriations Committee's energy and water report: \"A more reliable replacement warhead will allow long-term savings by phasing out the multiple redundant Cold War warhead designs that require maintaining multiple obsolete production technologies to maintain the older warheads.\"\nNNSA requested $88.8 million for FY2008, with most of the funds to be used for a design definition and cost study. The study was to be completed by the end of 2007. The FY2007 National Defense Authorization Act ( P.L. 109-364 , Section 3111) set as an objective having the first production unit (FPU, the first complete warhead from a production line certified for deployment) of RRW in 2012, and NNSA stated in April 2007 that 2012 remained its target date for FPU. However, a Nuclear Weapons Council memorandum of March 2007 stated, \"Given the level of maturity of the [RRW] design effort to date, our planning target for the First Production Unit, is 2014 plus or minus two years.\" Each year, it would be up to Congress to decide whether to fund the program as requested, modify it, or cancel it.\nRRW would involve plants as well as labs. The plants involved in RRW (Kansas City, Pantex, and Y-12) provided the labs with design information beginning at an early stage. They worked with the labs and NNSA to identify options for manufacturing processes and infrastructure transformation, such as steering the labs away from hard-to-manufacture designs. The contribution of the plants would change over time as the designs became more mature, at which time designers would be in a position to accept detailed recommendations on manufacturing from the plants. The results of this work, NNSA states, would be incorporated in the design and cost study. This role of the plants is in keeping with numerous congressional statements that ease and safety of manufacture, cost savings, and reduction of hazardous materials are goals of RRW.\nAs of November 2007, the Navy-led RRW POG was conducting a Phase 2A design definition and cost study. The Lawrence Livermore, Los Alamos, and Sandia National Laboratories were working within the POG study to refine the design, review tradeoff options, plan the potential development program, and estimate costs of the design.\nThe FY2008 Consolidated Appropriations Act, P.L. 110-161 , eliminated funds for RRW. When it was signed into law (December 26, 2007), NNSA instructed the laboratories to cease all technical work on RRW and to document the work done to that point so it would be available for use. In fact, the congressionally mandated Advanced Certification Campaign is currently drawing on this work. As specified in P.L. 110-161 , this campaign will address means of increasing confidence in certification of warheads through improved peer review, refinement of computer models, improved understanding of surety mechanisms and failure modes, and the like. The FY2009 and FY2010 requests and congressional action on them are discussed below.", "Consistent with congressional action in FY2005, NNSA requested $9.4 million for RRW for FY2006. The request stated that the program \"is to demonstrate the feasibility of developing reliable replacement components that are producible and certifiable for the existing stockpile. The initial focus will be to provide cost and schedule efficient replacement pits (see Appendix ) that can be certified without Underground Tests.\"\nThe House Appropriations Committee reported the FY2006 Energy and Water Development Appropriations Bill, H.R. 2419 , on May 18, 2005 ( H.Rept. 109-86 ). The bill passed the House, 416-13, on May 24 with no amendments to the Weapons Activities section. In its report, the committee offered a \"qualified endorsement\" of RRW \"contingent on the intent of the program being solely to meet the current military characteristics and requirements of the existing stockpile.\" (p. 128) (Page numbers in this section refer to H.Rept. 109-86 .) It did not endorse RRW if it produces new weapons for new military missions. (p. 128)\nThe committee saw RRW as part of a new Sustainable Stockpile Initiative, in which DOE would \"develop an integrated RRW implementation plan that challenges the [nuclear weapons] complex to produce a RRW certifiable design while implementing an accelerated warhead dismantlement program and an infrastructure reconfiguration proposal that maximizes special nuclear material [essentially, highly enriched uranium and weapons-grade plutonium] consolidation.\" (p. 128)\nThe committee focused on RRW throughout its discussion of Weapons Activities, linked RRW to many Weapons Activities programs, and used the potential of RRW as the rationale to reduce or delay several requested programs. Its many actions and statements on RRW include the following:\n\"The RRW weapon will be designed for ease of manufacturing, maintenance, dismantlement, and certification without nuclear testing, allowing the NNSA to transition the weapons complex away from a large, expensive Cold War relic into a smaller, more efficient modern complex. A more reliable replacement warhead will allow long-term savings by phasing out the multiple redundant Cold War warhead designs that require maintaining multiple obsolete production technologies to maintain the older warheads.\" (p. 128) \"The Committee directs the Secretary of Energy to establish a Federal Advisory Committee on the Reliable Replacement Warhead initiative.... \" (p. 128) A rebaselined LEP, an RRW program plan, and a dismantlement plan would provide \"reliable nuclear deterrence\" with a stockpile after 2025 that is significantly smaller than the stockpile level planned for 2012. As a result, \"the current Life Extension Plans will be scoped back to lower levels and the resources will be redeployed to support the Sustainable Stockpile Initiative.\" Accordingly, the committee recommended reducing the budget request for Directed Stockpile Work, a major category of Weapons Activities that directly supports weapons in the stockpile, by $137.3 million to $1,283.7 million. (p. 129) The committee recommended increasing RRW funding from $9.4 million to $25.0 million \"to accelerate the planning effort to initiative a competition between the NNSA weapons laboratories to develop the design for the RRW re-engineered and remanufactured warhead.\" (p. 130) The committee recommended eliminating the $4.0 million requested to study the Robust Nuclear Earth Penetrator, in part because it \"threatens Congressional and public support for sustainable stockpile initiatives that will actually provide long-term security and deterrent value for the Nation.\" (p. 131) Test Readiness is a program to enable the resumption of nuclear testing at Nevada Test Site should that be deemed necessary. Last year, the committee opposed a move to reduce the test readiness posture (the time between a presidential decision to test and the conduct of the test) from 24 to 18 months, this year, it added RRW to the rationale against an 18-month posture: \"The initiation of the Reliable Replacement Warhead (RRW) program designed to provide for the continuance of the existing moratorium on underground nuclear testing by insuring the long-term reliability of the nuclear weapons stockpile obviates any reason to move to a provocative 18-month test readiness posture.\" (p. 132) Accordingly, it recommended reducing Test Readiness funds from $25.0 million to $15.0 million. The committee noted that \"Congressional testimony by NNSA officials is beginning to erode the confidence of the Committee that the Science-based Stockpile Stewardship is performing as advertised.\" Accordingly, it \"redirects ASCI [Advanced Simulation and Computing] funding to maintain current life extension production capabilities pending the initiation of the Reliable Replacement Warhead program\" and recommended reducing funding from $660.8 million to $500.8 million. (pp. 133-134) The committee recommended eliminating the $7.7 million requested for the Modern Pit Facility (see Appendix ). It recommended that \"NNSA focus its efforts on how best to lengthen the life of the stockpile and minimize the need for an enormously expensive infrastructure facility until the long-term strategy for the physical infrastructure of the weapons complex has incorporated the Reliable Replacement Warhead strategy.... \" (p. 134) The committee recommended eliminating the $55.0 million requested for construction of the Chemistry and Metallurgy Research Facility Replacement (CMRR) at Los Alamos. \"Construction at the CMRR facility should be delayed until the Department [of Energy] determines the long-term plan for developing the responsive infrastructure required to maintain the nation's existing nuclear stockpile and support replacement production anticipated for the RRW initiative.\" (p. 136)\nThe House Armed Services Committee reported the FY2006 National Defense Authorization Bill, H.R. 1815 , on May 20 ( H.Rept. 109-89 ). The bill passed the House, 390-39, on May 25 with no amendments concerning RRW. The committee recommended providing the amount requested for RRW. The report stated: \"The committee firmly believes that the nation must ensure that the nuclear stockpile remains reliable, safe, and secure and that national security requires transforming the Cold War-era nuclear complex. Thus, the committee supports the Reliable Replacement Warhead program. To clearly articulate the congressional intent underlying this program authorization, the committee further states the key goals of the program.\" ( H.Rept. 109-89 , p. 463) In Section 3111 of H.R. 1815 , the committee required the Secretary of Energy, in consultation with the Secretary of Defense, to carry out the RRW program, and spelled out its objectives for RRW:\n(b) Objectives- The objectives of the Reliable Replacement Warhead program shall be—\n(1) to increase the reliability, safety, and security of the United States nuclear weapons stockpile;\n(2) to further reduce the likelihood of the resumption of nuclear testing;\n(3) to remain consistent with basic design parameters by using, to the extent practicable, components that are well understood or are certifiable without the need to resume underground nuclear testing;\n(4) to ensure that the United States develops a nuclear weapons infrastructure that can respond to unforeseen problems, to include the ability to produce replacement warheads that are safer to manufacture, more cost-effective to produce, and less costly to maintain than existing warheads;\n(5) to achieve reductions in the future size of the nuclear weapons stockpile based on increased reliability of the reliable replacement warheads;\n(6) to use the design, certification, and production expertise resident in the nuclear complex to develop reliable replacement components to fulfill current mission requirements of the existing stockpile; and\n(7) to serve as a complement to, and potentially a more cost-effective and reliable long-term replacement for, the current Stockpile Life Extension Programs.\nThe committee's report (pp. 464-465) described these objectives in more detail. Section 3111 of H.R. 1815 also required the Nuclear Weapons Council to submit an interim report on RRW by March 1, 2006, and a final report by March 1, 2007. The final report is to assess characteristics of warheads to replace existing ones; discuss the relationship of RRW within SSP and its impact on LEPs; assess the extent to which RRW, if successful, could lead to a reduction in warhead numbers; discuss RRW design criteria that will minimize the likelihood of nuclear testing; describe the infrastructure needed to support RRW; and summarize how funds will be used.\nOf the committee's 28 Democratic members, 23 signed a statement of additional views ( H.Rept. 109-89 , pp. 511-512). According to the statement, \"Democrats are willing to explore the concept of the RRW program, but do not yet embrace it.\" They felt that, to merit support, RRW must reduce or eliminate the need for nuclear testing, lead to dramatic reductions in the arsenal, avoid introducing new mission or weapon requirements, deemphasize nuclear weapons' military utility, increase nuclear security, and \"[lead] to ratification and entry into force of the Comprehensive Test Ban Treaty.\" On the latter point, they maintained that a successful RRW program should erase the main rationale against the treaty, uncertainty about the reliability of the nuclear arsenal. Therefore, \"[w]e believe strongly that ratification of the CTBT [Comprehensive Test Ban Treaty] is the logical end result of a successful RRW program.... \"\nThe Senate Armed Services Committee reported the FY2006 National Defense Authorization Bill, S. 1042 , on May 17. It recommended providing the amount requested for RRW. It noted that NNSA Administrator Brooks had presented several goals for RRW in his testimony to the committee on April 4:\nincreasing warhead security and reliability; developing replacement components that can be manufactured more easily, using materials that are more readily available and more environmentally benign; developing replacement components that provide high confidence in warhead safety and reliability; developing these components on a schedule that would reduce the need to conduct a nuclear test to address a reliability problem; reducing the cost and increasing the responsiveness of the infrastructure; and increasing confidence in the stockpile enough to permit reductions in non-deployed warheads.\n\"The committee supports these goals and this modest investment in feasibility studies.\" It required NNSA's Administrator to submit a report to the congressional defense committees by February 6, 2006, \"describing the activities undertaken or planned for any RRW funding in fiscal years 2005, 2006, and 2007.\" The bill passed the Senate, 98-0, on November 15. The reporting requirement was superseded by a similar requirement in the conference bill.\nThe defense authorization conference bill, as reported ( H.Rept. 109-360 ) December 8, included the House provision on RRW, somewhat revised, as Section 3111 of the conference bill. Conferees stated:\nThe conferees support the goal of continuing to ensure that the nuclear weapons stockpile remains safe, secure, and reliable. The conferees believe that the Reliable Replacement Warhead program is essential to the achievement of this goal and support its establishment with the objectives as defined in the provision [section 3111], and as further described in the committee reports of the Committees on Armed Services of the Senate and the House of Representatives for fiscal year 2006.\nThe measure was signed into law ( P.L. 109-163 ) January 6, 2006.\nThe Senate Appropriations Committee reported H.R. 2419 on June 16. It endorsed RRW and recommended increasing its funding above the FY2006 request.\nThe Committee recognizes that RRW is early in its development and will not significantly alter the near-term plans for stockpile support such as LEPs, but NNSA is encouraged to move aggressively to incorporate benefits from RRW into the stockpile as soon as possible.\nThe Committee recommends $25,351,000 for RRW to accelerate the planning, development and design for a comprehensive RRW strategy that improves the reliability, longevity and certifiability of existing weapons and their components.\nThe bill passed the Senate, 92-3, on July 1, with no change to the RRW provision.\nConferees on the energy and water bill reported H.R. 2419 ( H.Rept. 109-275 ) on November 7, 2005. The House agreed to the conference bill, 399-17, on November 9, and the Senate agreed to it, 84-4, on November 14. The President signed it into law ( P.L. 109-103 ) November 19. The bill provides $25.0 million for RRW. Conferees wanted the Complex to use various resources \"to support a Nuclear Weapons Council determination in November 2006.\" This determination would be a decision on which design to use for the first reliable replacement warhead. Conferees also emphasized goals and requirements of the RRW program:\nThe conferees reiterate the direction provided in fiscal year 2005 that any weapon design work done under the RRW program must stay within the military requirements of the existing deployed stockpile and any new weapon design must stay within the design parameters validated by past nuclear tests. The conferees expect the NNSA to build on the success of science-based stockpile stewardship to improve manufacturing practices, lower costs and increase performance margins, to support the Administration's decision to significantly reduce the size of the U.S. nuclear stockpile.\nIn sum, Congress supported RRW in various ways in the FY2006 budget cycle. Both Armed Services Committees recommended fully funding the request, both Appropriations Committees recommended a sharp increase in RRW funding, and Congress appropriated $25.0 million, reduced to $24.75 million by a rescission. The four committees saw RRW as a way to achieve a wide range of goals for the nuclear weapons program, spelled out many of these goals in legislation and in committee reports, and required several reports to track the status of RRW.", "NNSA's FY2007 budget document evidenced a program that gained momentum in the preceding year. The request for RRW was $27.7 million, up from $24.8 million for FY2006. (p. 71) (Page numbers in parentheses in the next few paragraphs refer to NNSA's FY2007 budget document.) Outyear budgets are: FY2008, $14.6 million; FY2009, $29.7 million; FY2010, $29.6 million; and FY2011, $28.7 million. (p. 72) The FY2006 budget request document contained few references to RRW because the program received its first funding just two months before that document was released. In contrast, the FY2007 document contains 30 or more references to RRW that show many sites and programs linked to RRW. Programs are discussed below; sites include Kansas City Plant (p. 620), Livermore (p. 627), Los Alamos (p. 635), Pantex (p. 646), Sandia (p. 651), and Y-12 (p. 665). What emerges is a program that is drawing on many resources of the Complex beyond the program's own budget. This is in accord with a directive in the FY2006 energy and water conference report:\nThe conferees expect that the laboratories and plants will also utilize the existing resources in the Directed Stockpile, Campaigns, and Readiness in Technical Base and Facilities accounts [the three largest accounts of the Stockpile Stewardship program] where applicable to further the RRW design options to support a Nuclear Weapons Council determination in November 2006.\nVarious programs expect to support RRW in many ways:\n\"During the period FY2007-2011, the Science Campaign will endeavor to make significant progress toward providing the experimental data and certification methodologies necessary to support the current stockpile workload and future requirements that will include the Reliable Replacement Warhead and reflect an evolving stockpile.\" (p. 96) Within the Dynamic Materials Properties program of the Science Campaign, \"A second principal effort is to characterize the reaction kinetics and dynamics of high explosives, with special emphasis on improving the modeling of insensitive high explosives that will be used in replacement warheads to provide improved safety and surety.\" (p. 100) Within the Engineering Campaign, Enhanced Surveillance deliverables in the outyears are planned to support Reliable Replacement Warhead components assessment\" (p. 116) and the Enhanced Surety program \"will support studies such as the Reliable Replacement Warhead.\" (p. 118) \"Only through ASC [the Advanced Simulation and Computing Campaign] simulations can National Nuclear Security Administration (NNSA) determine the effects of changes to current systems as well as margins and uncertainties in future and untested systems, such as the RRW.\" (p. 176) Within the Pit Manufacturing and Certification Campaign, \"Additional personnel will be hired and additional equipment procured to support manufacture of existing pit types (or a RRW pit),\" and Los Alamos and Livermore \"will continue planning and development of integral experiments in FY2007 in support of certification of reliable replacement warhead pits.\" (p. 191)\nThe budget document offers many details of the proposed program.\nThe Nuclear Weapons Council (NWC) approved the Reliable Replacement Warhead (RRW) Feasibility Study which began in May 2005, and is expected to take 18 months to complete. The goal of the RRW Study is to identify designs that will sustain long term confidence in a safe, secure and reliable stockpile and enable transformation to a responsive nuclear weapon infrastructure. The Joint DOE/DOD RRW Project Officer's Group (POG) was tasked to oversee a laboratory design competition for a RRW warhead with the FPU [first production unit] goal of FY 2012. The POG will assess technical feasibility including certification without nuclear testing, design definition, manufacturing, and an initial cost assessment to determine whether the proposed candidates will meet the RRW study objectives and requirements. At the end of the study, the POG will establish the preferred RRW design options and recommendations to the NWC Standing and Safety Committee (NWCSSC) and NWC....\nIn FY 2007 specific activities include: with NWC approval, proceed with detailed design and preliminary cost estimates of RRW concepts to confirm that RRW designs provide surety enhancements, can be certified without nuclear testing, are cost-effective, and will support both stockpile and infrastructure transformation. (83)\nFurther, \"The RRW budget will increase when the RRW option is selected and starts development and production engineering activities.\" (76)\nThe John Warner National Defense Authorization Act for Fiscal Year 2007, P.L. 109-364 ( H.R. 5122 ), increased the amount requested by $20.0 million to support a second RRW design competition. It required NNSA to submit a plan for transform the Complex to achieve a responsive infrastructure by 2030 (Section 3111), with a report on the plan due February 1, 2007. An objective of the plan is \"To prepare to produce replacement warheads under the Reliable Replacement Warhead program at a rate necessary to meet future stockpile requirements, commencing with a first production unit in 2012 and achieving steady-state production using modern manufacturing processes by 2025.\" It required (Section 3116) NNSA to enter into an arrangement with the National Academy of Sciences (NAS) to have the latter prepare a study of Quantification of Margins and Uncertainties, a method to assess the nuclear stockpile. The study is to evaluate, among other things, \"Whether the application of the quantification of margins and uncertainty used for annual assessments and certification of the nuclear weapons stockpile can be applied to the planned Reliable Replacement Warhead program so as to carry out the objective of that program to reduce the likelihood of the resumption of underground testing of nuclear weapons.\" As of June 2008, NAS planned to deliver a classified version to DOE and Congress in July and planned to make an unclassified version available to the public as soon as possible thereafter. NAS held the ninth meeting for this project at Los Alamos National Laboratory on August 13-15. NAS also plans to do a phase 2 study on the use of archived underground nuclear test data for QMU.\nThe House Appropriations Committee \"supports the RRW, but only if it is part of a larger package of more comprehensive weapons complex reforms.\" It criticized NNSA's Complex 2030 plan as basically modernization in place, and favored a plan by a DOE task force. It recommended $52.7 million for RRW, an increase of $25.0 million, but fenced the latter amount until DOE provides the committee with a \"comprehensive complex transformation plan.\" It directed NNSA to engage the JASON Defense Advisory Group to \"evaluate the competing RRW designs\" and to analyze \"the feasibility of the fundamental premise of the RRW initiative that a new nuclear warhead can be designed and produced and certified for use and deployed as an operationally-deployed nuclear weapon without undergoing an underground nuclear test.\" The report is due March 31, 2007. Professor Roy Schwitters, Chair of the JASON Steering Committee, met with House Appropriations Committee staff and NNSA officials to set a schedule for the JASON study; the schedule calls for a preliminary report to be submitted to NNSA by March 1, 2007, an executive summary of the final report by August 1, 2007, and the final report by October 1, 2007. (As noted, the executive summary was transmitted on September 28 and the final report by October 1.) The House passed the bill, 404-20, on May 24, 2006, with no amendments to RRW provisions.\nThe Senate Appropriations Committee recommended $62.7 million for RRW.\nThe Committee ... recognizes the need to protect against unforeseen challenges and urges the NNSA to accelerate the transition to a responsive infrastructure and to proceed expeditiously with the RRW design. The Committee also realizes that a dual track strategy of supporting eight legacy systems and a RRW program is not sustainable and therefore has taken steps in this legislation to reduce the number of legacy systems and begin the replacement with RRW designs. The Committee has also initiated a second design competition for another RRW design....\nRegarding the second competition, the committee urged DOE and NNSA to \"expand the RRW program immediately to ensure that our strategic forces have at least two different certified RRW warheads\" to guard against failure in one system. It recommended using $10.0 million for this second competition, with a first production unit goal of 2014, and adding $4.0 million to \"accelerate the deployment\" of surveillance devices into the RRW design. This bill was placed on the Senate legislative calendar on June 29, but the Senate took no further action on it.\nCongress did not pass a separate FY2007 Energy and Water Development Appropriations Act, but instead included these funds in a continuing resolution ( P.L. 110-5 , February 15, 2007) to fund energy and water and many other programs through the balance of FY2007. DOE's FY2007 operating plan includes $35.8 million for RRW.", "The President submitted his FY2008 budget request to Congress on February 5, 2007. The NNSA request document presents details of the DOD-NNSA plan for RRW. In November 2006, according to the document,\nthe NWC [Nuclear Weapons Council] decided that the RRW for submarine launched ballistic missiles is feasible and should proceed to complete a Phase 2A design definition and cost study. In addition, the NWC determined that the RRW is to be adopted as the strategy for maintaining a long term safe, secure and reliable nuclear deterrent and as such also directed the initiation of a conceptual study for an additional RRW design.\nThe document also stated that the\nshift in strategy from a Life Extension Program to a RRW program will require substantial planning and resource realignments between the Departments of Defense and Energy that will not be completed in time for the FY 2008 budget submission. When planning is complete, expected at the end of FY 2007, an RRW budget adjustment will be requested.\nIt further stated that the budget approach for FY2008 for transforming the nuclear stockpile included the following goal: \"Maintain a relatively level DSW [Directed Stockpile Work] budget with RRW development funded through reductions in resources required to support legacy weapons.\"\nWhile NNSA's RRW budget figures are thus subject to revision, the projected figures as presented are as follows (in millions): FY2008, $88.769; FY2009, $99.787; FY2010, $109.240; FY2011, $167.358; and FY2012, $179.933. In addition, the Navy requests $30.0 million for FY2008, and estimates a request of $50.0 million for FY2009, for RRW. These figures are DOD funds to develop a cost estimate and to \"[c]ontinue the RRW Program into Phase 3 Engineering Development, when approved by Congress and the Nuclear Weapons Council.\" Examples of this work for RRW include development of an arming, fuzing, and firing system and of \"ancillary reentry body types,\" as well as integration of RRW with the Trident II (D5) missile that will carry the RRW. The Navy plans to award contracts for at least $29.5 million of the FY2008 request in October 2007, and for at least $49.0 million of the FY2009 request in October 2008. While keeping in mind NNSA's caveats, the projected total for RRW in the NNSA budget for FY2008-FY2012 and the Navy budget for FY2008-FY2009 is $725.1 million.\nThe House Armed Services Committee's Strategic Forces Subcommittee marked up its portion of H.R. 1585 , the FY2008 defense authorization bill, on May 2, 2007. The full committee retained the subcommittee's provisions relating to RRW and completed its markup May 9. The rule for considering the bill ( H.Res. 403 , H.Rept. 110-151 ) did not make in order any amendments regarding RRW. H.R. 1585 passed the House, 397-27, on May 17 (roll no. 373).\nThe bill as passed by the House included several provisions relevant to RRW:\nA congressional commission on U.S. strategic posture (Section 1046). Among other things, the commission would recommend a strategic posture and nuclear weapons strategy. It would include the force structure to support the strategy, \"the number of nuclear weapons required to support the strategy, including the number of replacement warheads required, if any,\" an analysis of the effectiveness of the strategy, and the size of the Complex needed to support the strategy. The committee stated in its report that it \"believes that there is an urgent need for a debate over the role of nuclear weapons in U.S. strategic posture ... the Administration ... has not articulated its views on the role of nuclear weapons in U.S. strategic posture since issuance of the [Nuclear Posture Review, i.e., at the end of 2001]. The committee believes clear policy objectives should be established before Congress commits to ambitious new programs.\" The commission's report would be due by December 1, 2008. A reduction in the Navy's request for RRW funds from $30.0 million to $5.0 million. The committee noted (p. 191) that the Navy said the funds would permit continuing RRW into Phase 3 engineering development (see below), but \"[t]he committee does not support moving into Phase 3 activities during fiscal year 2008, but understands that the Navy intends to pursue better design definition [of RRW] as part of the Phase 2a study during fiscal year 2008.\" A reduction in NNSA's RRW funds, from $88.8 million requested to $68.8 million (pp. 528-529). The committee noted that P.L. 109-163 , the FY2006 National Defense Authorization Act, set several objectives for RRW, such as increasing reliability, safety, and security of the nuclear stockpile, reducing the likelihood of resumed nuclear testing, and using components that can be certified without nuclear testing. \"The committee believes it is too soon to judge whether the RRW program can achieve these objectives ... the committee believes the focus of the RRW program during fiscal year 2008 should be the analysis necessary to describe in detail how the RRW program will achieve these objectives.\" Further, \"[t]he committee supports establishing clear nuclear weapons requirements before committing to the RRW program, and sees the planned Phase 2a design review and cost study as consistent with this approach.\" Accordingly, the committee limited FY2008 NNSA RRW funds \"for Phase 2a study activities only.\" Elimination of funds ($24.9 million requested) for a Consolidated Plutonium Center (CPC) (pp. 529-530). This facility would make pits. The committee \"finds that construction of a CPC is only required if the United States moves toward large-scale production of pits. The committee does not believe the need for such large scale processing has been established.\" A study on using existing pits for RRW (pp. 538-539). The committee felt that the need for CPC had not been established in part because of the prospect of reusing existing pits in RRWs. In testimony before the Strategic Forces Subcommittee in March 2007, Thomas D'Agostino, then Acting Administrator of NNSA, stated that existing pits might be suitable for use in RRW bombs but not RRW ballistic missile warheads. The House-passed bill required NNSA, in consultation with the Nuclear Weapons Council, to conduct the study, to be completed by February 1, 2008. The study (section 3111 of H.R. 1585 ) would assess the feasibility of pit reuse for RRW, whether it is more desirable to remanufacture warheads with existing or with newly-manufactured pits, the number of pits suitable for remanufacture, and \"the extent to which remanufacturing warheads with existing pits, as compared to remanufacturing warheads with newly manufactured pits, would reduce future requirements for new pit production.\" Eliminate funds for a B61 bomb life extension program (LEP). The prospect of pit reuse figured into another committee action. The request contained $63.1 million for the B61 LEP account. The B61 is currently undergoing an LEP, but NNSA planned to begin a Phase 6.2/Phase 6.2A study (see below) for another LEP for the B61. However, \"[t]he committee views the initiation of a new B61 LEP ... as unwarranted while the NNSA examines the feasibility of pit reuse for the remanufacture of warheads.\" Accordingly, it reduced the B61 LEP account by $4.2 million and directed NNSA \"to make no funds available for commencement of the new B61 LEP.\" (p. 530).\nIn its May 23 markup of the FY2008 Energy and Water Development Appropriations Bill, the Energy and Water Development Subcommittee eliminated NNSA funds for RRW. (The subcommittee has jurisdiction over RRW funds in the NNSA request but not in the Navy request.) Subcommittee Chairman Peter Visclosky's statement on the subcommittee's markup included the following:\nREDUCING UNNEEDED NUCLEAR WEAPONS\nWithout question, there is a need for a comprehensive nuclear defense strategy and stockpile plan to guide transformation and downsizing of the stockpile and nuclear weapons complex, and until progress is made on this critical issue, there will be no new facilities or Reliable Replacement Warhead. Only when a future nuclear weapons strategy is established can the Department of Energy determine the requirements for the future nuclear weapons stockpile and nuclear weapons complex plan.\nGiven the serious international and domestic consequences of the U.S. initiating a new nuclear weapons production activity, it is critical that the administration lay out a comprehensive course of action before funding is appropriated. Given the track record of mismanagement at the agency for projects that have a plan, I don't think it is asking too much for a comprehensive nuclear strategy before we build a new nuclear weapon.\nThe House Appropriations Committee marked up the bill on June 6. The committee bill recommended eliminating all NNSA funds for RRW. The report expressed extreme displeasure at changes in the program: \"The Committee finds the RRW program the DoD and NNSA have pursued at the direction of Congress goes far beyond the scope and purpose of the original congressional language and intent.... The Committee is unconvinced that pursuing the RRW design competition to a production phase is necessary at this time.\" It expressed concern that this program might impede nuclear nonproliferation:\nA particularly troubling issue for the Committee related to the RRW proposal is the contradictory U.S. policy position of demanding other nations give up their nuclear ambitions while the U.S. aggressively pursues a program to build new nuclear warheads. The Administration needs to develop a policy rationale that explains why the RRW program is not contradictory and does not undermine our international nuclear nonproliferation goals.\nThe committee raised further concerns with the Administration's rationale for the nuclear weapons program and NNSA's plan for the Complex. It stated that the RRW program and Complex 2030 \"are being proposed in a policy vacuum without any Administration statement on the national security environment that the future nuclear deterrent is designed to address.\" Accordingly, \"The Committee believes it is premature to proceed with further development of the RRW or a significant nuclear complex modernization plan, until a three-part planning sequence is completed.\" This sequence has three elements: \"a comprehensive nuclear defense and nonproliferation strategy\"; a detailed description translating that strategy into a \"specific nuclear stockpile\"; and \"a comprehensive, long-term expenditure plan, from fiscal year 2008 through fiscal year 2030.... \" The Committee did not specify a due date for this plan, but \"views completion of this three-part planning sequence as a necessary condition before considering additional funding for Complex 2030 and RRW activities.\" The House passed the bill, 312-112 (roll no. 641), on July 17, leaving the RRW provisions unchanged.\nThe Senate Armed Services Committee's National Defense Authorization Bill, S. 1547 , would reduce the Navy's RRW request of $30.0 million by $15.0 million, the amount for support of Phase 3. The committee's report \"recommends no funds for RRW activities beyond phase 2A in fiscal year 2008.\" The committee stated that in addition to $88.8 million that the NNSA request labeled as RRW, the request contained RRW funds in other budget elements: Engineering Campaigns, $86.4 million; Pit Manufacturing and Certification Campaign, $37.9 million; and Readiness Campaign, $25.0 million, for a total of $238.1 million. The committee recommended reducing this amount by $43.0 million and restricting FY2008 RRW work to Phase 2A and below. \"[T]he committee believes that many years of research are necessary before any such decision [proceeding beyond Phase 2A] can be made or even meaningfully discussed.\" Further, \"The RRW as envisioned by the NNSA and the NWC [Nuclear Weapons Council] would be a new warhead.... As a new warhead, there are many policy questions, concerns, and issues that must be raised, discussed, and resolved before any decision can be made to move to phase 3 or beyond.\" At the same time, \"The committee believes that the technical work [on RRW] must go forward apace with the policy discussion and before any decision on RRW development, manufacturing, or deployment.\"\nThe committee discussed its policy concerns in detail. It stated,\nThe idea of a new nuclear warhead and leadership in nonproliferation are distinctly at odds in the absence of additional steps and policies to reduce the reliance on nuclear weapons, accelerate reductions in the size of the stockpile, formalize the moratorium on nuclear weapons testing, strengthen the nonproliferation regime, and renew commitments to all aspects of the Treaty on the Nonproliferation of Nuclear Weapons.\nAs part of this policy focus, Section 1061 of S. 1547 required a revised nuclear posture review, to include, among other things, the role of nuclear forces, the relationship among deterrence policy, targeting, and arms control, the nuclear delivery systems required, the nuclear weapons complex required, and the stockpile required, \"including any plans for replacing or modifying warheads.\"\nSection 3122 of S. 1547 , \"Sense of Congress on the Nuclear Nonproliferation Policy of the United States and the Reliable Replacement Warhead,\" is another part of the committee's policy focus. Under this section, it would be the sense of Congress that the United States should: reaffirm its commitment to Article VI of the Nuclear Nonproliferation Treaty (discussed below), initiate talks with Russia to reduce numbers of nuclear weapons, work with other nuclear weapon states to \"decrease reliance on, and the importance of, nuclear weapons,\" and \"formulate any decision on whether to manufacture or deploy a reliable replacement warhead within the broader context of the progress made by the United States toward achieving each of the goals described in [this section].\" Further, under Section 3122, \"the Senate should ratify the Comprehensive Nuclear-Test-Ban Treaty.\"\nThe Senate Appropriations Committee reported S. 1751 , the Energy and Water Development Appropriations Bill, on July 9. The report stated, \"The Committee is divided on the Reliable Replacement Warhead (RRW) program, but unified in its desire to review and discuss our national strategic defense policy and the role of nuclear weapons in the post-cold war and post-September 11 th world.\" The committee recommended $66.0 million for NNSA for RRW in order to complete Phase 2A. It made clear that it was not committed to proceeding with Phase 3 but wanted \"a more vigorous analysis and debate\" first. It wanted more information to help with this decision, such as characteristics of the future stockpile, the possible effects of RRW on U.S. nuclear nonproliferation efforts, and comparative costs of RRW vs. LEP. To this end, it favored a bipartisan, congressionally-created commission \"to evaluate and make recommendations on the role of nuclear weapons in our future strategic posture.... That Commission report can form the basis of information and advice from which the President and the Congress can make decisions about the future of RRW and other weapons programs.\" At the same time, \"[i]t will be incumbent upon NNSA to provide specific details as to how many RRW weapons will be manufactured, how the Department of Defense intends to integrate the system into the stockpile and how many weapons from the existing deterrent can be retired.\" Although the committee recommended funds to continue Phase 2A work on the first RRW type, it barred the use of funds for initial research on a second RRW type.\nOn July 20, the Secretaries of Energy, Defense, and State issued a statement urging Congress to fully fund RRW for FY2008. They stressed the \"essential role that nuclear weapons play in maintaining deterrence,\" argued that \"it becomes increasingly difficult to certify the existing stockpile of weapons,\" and said that pursuit of RRW \"is critical to sustaining long-term confidence in our deterrent capability.\" Further, \"[d]elays on RRW also raise the prospect of having to return to underground testing to certify existing weapons.\" Responding to this statement, Representatives Skelton and Tauscher wrote a letter to the secretaries, stating in part:\nWe see promise in the proposed RRW program, but we take issue with your assertion that any delay in RRW would \"force the United States to maintain a large stockpile of nuclear weapons and sustain it through increasingly costly and risky Life Extension Programs,\" and \"raise the prospect of having to return to underground nuclear testing to certify existing weapons.\"\nAs we stated in the report accompanying the National Defense Authorization Act for FY 2008, it is too early to know whether RRW can deliver on the objectives that have been established for the program, and the prudent course at this point is rigorous study of the feasibility of achieving those objectives.\nRepresentatives Hobson and Visclosky also responded to the statement. They said, \"the Joint Statement reads as a description of the status quo,\" and continued,\nthe Joint Statement goes so far as to imply that RRW is the only available option for addressing the concerns about the existing stockpile of legacy nuclear weapons. Particularly troubling is the direct link between a resumption of nuclear testing and the provision of funding for RRW:\n\" Delays on RRW also raise the prospect of having to return to underground nuclear testing to certify existing weapons. \"\nIt is irresponsible for the Administration to make such an assertion.... There is no record of congressional testimony or reports sent to Congress by the Administration claiming that the safety, security, or reliability of the existing legacy stockpile is on a performance cliff such that a resumption of testing to verify performance of the warheads would be a necessity.\nFunds for the Navy's RRW work fall under the jurisdiction of the Defense Appropriations Subcommittee. The House Appropriations Committee reported the defense appropriations bill ( H.R. 3222 , H.Rept. 110-279 ) on July 30. It recommended eliminating the $30.0 million Navy request for RRW. The House passed this bill, 395-13, on August 5 (roll no. 846), leaving this provision unchanged.\nOn August 1, Senator Feinstein introduced S. 1914 , Nuclear Policy and Posture Review Act of 2007. Subsection (c) of this bill would require the President to report to Congress on the results of a nuclear policy review by September 1, 2009, and to report to Congress on the results of a nuclear posture review by March 1, 2010. The bill also provides, \"no funds may be appropriated or otherwise made available for the Reliable Replacement Warhead Program for fiscal years 2008, 2009, or 2010 until the reports required under subsection (c) have been submitted to Congress.\"\nA Phase 3 decision could be delayed to FY2010 or beyond for several reasons. The House Armed Services Committee called for a report on U.S. strategic posture, due December 2008, stating, \"The committee believes clear policy objectives should be established before Congress commits to ambitious new programs.\" The Senate Armed Services Committee called for a nuclear posture review, to be submitted to Congress in December 2009. Congress may wish to evaluate these reports before deciding how to proceed with RRW. There may also be interest in examining what approach to RRW a new presidential administration may adopt in 2009. Staff at the Lawrence Livermore, Los Alamos, and Sandia National Laboratories have indicated that were a delay to occur, continuing Phase 2A through FY2008 and FY2009 would allow more time for in-depth study of RRW issues such as safety, use control, cost, and manufacturing, thereby potentially reducing technical risk. They believe that this work could be accomplished by a small core team at modest cost.\nThe Senate Appropriations Committee reported H.R. 3222 , the Department of Defense Appropriations Bill, on September 14. It recommended reducing Navy RRW funding by $15.0 million.\nAs noted earlier, the JASON Defense Advisory Group delivered a classified report on RRW, along with an unclassified executive summary, to Congress on September 28. The report was required by the FY2007 House Appropriations Committee's report ( H.Rept. 109-474 ) on energy and water appropriations. The JASON report stated that the design for the first RRW type, WR1, \"is pursued with the above principles [on how to assess confidence and provide for successful certification] in mind, but certification is not yet assured. The certification plan presented needs further development.... Substantial work remains on the physical understanding of the surety mechanisms that are of high priority to the RRW program.\" It recommended steps to \"ensure that the new manufacturing processes [proposed for RW1] do not have a deleterious effect on WR1 performance\" and made several recommendations to establish a peer review to establish confidence in the warhead's design, such as having the effectiveness of the peer review mechanism \"examined periodically by an independent organization\" and having the review team \"broadly constituted\" with \"authority to pose formal tests of a computational or experimental nature to the design team.\"\nNNSA lauded the report, saying that it confirmed that NNSA's \"approach towards developing a Reliable Replacement Warhead (RRW) was proceeding with appropriate scientific principles\" and \"concluded that NNSA's current approach, with additional technical, experimental and peer review enhancements, could determine that RRW can be certified for the stockpile without the need to conduct an underground nuclear test.\" Further, NNSA Administrator Thomas D'Agostino said, \"I am pleased that the JASON panel feels that we are on the right track.\" In a subsequent letter, D'Agostino stated, \"Resolution of issues raised in the JASON's study can only be achieved if this [RRW] R&D effort is allowed to proceed and is funded along the lines of the request submitted last February.... \"\nRepresentatives Visclosky and Hobson, in a statement on the JASON report, said, \"Once again, independent sources have raised serious questions that must be addressed before proceeding with the RRW.... Only when the Department of Energy has completed the work recommended by the JASON report, can the nation appropriately consider what role an RRW might play as a 21 st century nuclear deterrent.\"\nIn October, DOD appealed items in the FY2008 defense appropriations bill. One such item was RRW. DOD asked that Congress provide the $15 million that the Senate provided for the Navy's RRW effort rather than the House-passed $0. It stated that $15.0 million is \"the minimum level of funding needed by the Navy to begin Phase 2A activities in FY2008, and with at least the same level of funding in FY2009, to complete the effort within 2 years, one year later than the date that could have been achieved with the President's original budget request for this item.\" DOD indicated how the money would be spent: it \"is required to begin the Navy portion of Phase 2A and for risk reduction analysis and preliminary development of a follow-on Arming, Fuzing and Firing (AF&F) subsystem for all weapons associated with the Mk5 aeroshell deployed on the TRIDENT II D5 Fleet Ballistic Missile System.\" (These funds would not be used to develop WR1 itself; that task is the responsibility of NNSA.) The nuclear warhead currently associated with the Mk5 is the W88. According to Steve Henry, Deputy Assistant to the Secretary of Defense for Nuclear Matters,\nThe W88 is housed in a MK5 aeroshell. Because of the MK5 size, it was also the aeroshell for the proposed RRW. In the not too distant future, a W88 LEP will have to be performed and the AF&F will require replacement. The future AF&F for the MK5 aeroshell is the same AF&F regardless of the NEP [nuclear explosive package] (W88 LEP'd or an RRW).\nThus, the new AF&F subsystem could be used with the life-extended W88 and WR1, but if WR1 does not go forward, the AF&F subsystem would still be used with the life-extended W88. In March 2008, the Navy provided further details on how it plans to use RRW funds:\nThe FY 08 RRW funding is currently on hold, so no work has been performed to date but, SSP has been directed by the Office of Secretary of Defense (OSD) to use the FY 08 and FY 09 RRW funding to support Mk5A life extension efforts. Once the FY 08 funds are released and the FY 09 funds are appropriated, SSP will use the RRW funds for risk reduction analysis and preliminary development of a follow-on Arming, Fusing and Firing (AF&F) subsystem for all weapons associated with the Mk5 aeroshell deployed on the TRIDENT II (D5) Fleet Ballistic Missile System. Specific Mk5A AF&F efforts directed by the Office of Secretary of Defense (OSD) supports a number of tasks needed to address early technology for the life extension program for the MK5/W88 nuclear weapon system. Below is a list of some of the major areas of technology to be pursued:\ndefine new safety architectures for the AF&F design of high density high power radar Non-volatile radiation hardened memory Radiation hardened application Specific Integrated Circuits (ASICs) High density thermal battery development Radiation hardened Wide band analog electronics Low noise radar receivers utilizing commercial parts Fuze modeling and test analysis\nIn support of this effort, the above technologies will be synthesized into bench top systems for test purposes.\nOn November 6, conferees on the defense appropriations bill filed their report ( H.Rept. 110-434 ), which included $15.0 million for the Navy for RRW. (Adjustments reduced this figure to $14.455 million. ) On November 8, the House agreed to the conference report, 400-15, and the Senate did so by voice vote.\nAn article in November 2007 offered some support for RRW. It reported that a letter to Senators Jon Kyl and Pete Domenici from former Secretary of State Henry Kissinger said, \"I believe that research and design of the RRW should continue.\" The article also cited a letter by former Secretary of State George Shultz and Sidney Drell, professor emeritus of physics at Stanford University, to Kissinger that stated, \"research work on new RRW designs should certainly go ahead. Such work would make possible the decision to implement the construction phase of the program were that to be desired at some future time. The design work itself is relatively small in cost and need not be viewed in any way as an eventual commitment to go ahead.\"\nThe conference version of H.R. 1585 , FY2008 National Defense Authorization Act, provided $66.0 million for RRW. It contained several provisions on RRW.\nIt barred moving RRW beyond Phase 2A in FY2008 (section 3111). The conference report stated, \"The conferees believe clarification of the United States' long-term nuclear weapons policy is a prerequisite to any major decisions on the size and composition of the nuclear weapons stockpile and the complex that supports it. To that end, the conference agreement includes section 1062 establishing a congressionally appointed bipartisan commission to examine U.S. nuclear policy and strategic posture, and section 1070, requiring that a new Nuclear Posture Review be submitted to Congress in December 2009.\" It required a study on the use of existing pits in the RRW program (section 3121) It included a sense of Congress provision that the United States should make any decisions on RRW in the context of progress made toward several goals related to nuclear nonproliferation and arms reduction (section 3126) As an aid to future decisions on nuclear weapons and related matters, it provided for establishing a commission on nuclear policy and strategic posture (section 1062), with a report due December 1, 2008, and required a new nuclear posture review be submitted to Congress by February 1, 2010 (section 1070).\nOn December 12, the House agreed to the conference report on H.R. 1585 , 370-49. On December 14, the Senate agreed to the conference report, 90-3. President Bush vetoed the measure on December 28 for reasons having to do with Iraqi economic issues; he signed a bill revised to accommodate these concerns, H.R. 4986 , into law ( P.L. 110-181 ) on January 28, 2008.\nOn December 16, the House Rules Committee posted the FY2008 consolidated appropriations bill (the House amendments to Senate amendment to H.R. 2764 , State, Foreign Operations, and Related Programs Appropriations Act, 2008). The House and Senate agreed to this bill through an exchange of amendments, December 17-19, and the President signed the Consolidated Appropriations Act, FY2008, into law ( P.L. 110-161 ) December 26. P.L. 110-161 eliminated NNSA RRW funds. According to the explanatory statement,\nThe amended bill provides no funds for the Reliable Replacement Warhead (RRW), as proposed by the House. As stated in both the House and Senate reports, Congress believes a new strategic nuclear deterrent mission assessment for the 21 st century is required to define the associated stockpile requirements and determine the scope of the weapons complex modernization plans. The NNSA is directed to develop a long-term scientific capability roadmap for the national laboratories to be submitted to the Committees on Appropriations.\nCommenting on the bill, according to a press report, Representative Peter Visclosky, Chairman of the House Energy and Water Development Appropriations Subcommittee, said, \"[m]oving forward on a new nuclear weapon is not something this nation should do without great consideration ... the U.S. needs a comprehensive nuclear defense strategy, and a revised stockpile plan to guide the transformation and downsizing of the [nuclear weapons] complex,\" while an NNSA spokesman said that eliminating NNSA RRW funding means \"we will likely have to go down a path of a full-life extension program for nuclear weapons in our stockpile, which in the long run will be more costly, without introducing modern safety and security measures into our weapons.\"", "For FY2009, DOE requests $10.0 million and projects a request the same sum for each year FY2010-FY2013. It justified the request as follows:\n$10 million is requested to enable maturation of the RRW design to address questions raised by the JASON review of RRW feasibility study activities. Design refinement is necessary to establish parameters for potential impact on certification. Without further design work, there is insufficient detail available to use this design to resolve certification questions raised by the JASONs review. This funding will also facilitate documenting the Phase 2A RRW work that has been completed through 2007 (prior to the FY 2008 Consolidated Appropriations Act ( P.L. 110-161 )) to support future administration decisions on options for our nuclear weapons stockpile. The Department of Defense and the Joint DoD-DOE Nuclear Weapons Council fully support continuing efforts to examine how the RRW concept can address issues of safety, security and long-term reliability of the nation's nuclear deterrent.\nIn February 2008, NNSA Administrator Thomas D'Agostino testified that proceeding with the RRW study will provide information crucial to completing the review of the nuclear posture in a timely manner. Further, it would address concerns about U.S. ability to maintain the stockpile for the long term with LEP, offer the prospect of improving warhead surety, and address the maintenance of nuclear skills. In the same hearing, General Kevin Chilton, USAF, Commander, U.S. Strategic Command, argued for \"a warhead that is designed for the 21 st century,\" with greater emphasis on reliability, safety, security, and maintainability, rather than on maximizing yield to weight. According to one report, he also said that without completing the RRW study \"he would be ill-prepared to advise the incoming president next year on how best to modernize the atomic arsenal.\"\nOthers expressed opposition to RRW. Regarding the need to improve surety, Daryl Kimball, Executive Director of the Arms Control Association, said, \"Should we spend billions of dollars to replace existing warhead types in our arsenal to reduce by an infinitesimal amount [the possibility] that al-Qaeda could detonate it?\" And former Senator Sam Nunn said, \"In this world atmosphere, in this climate, for us to build a new warhead now would be a real setback to all of our nonproliferation efforts, so I am opposed to it.... At this moment I think it would be a mistake for America to go forward with that program.\"\nFor FY2009, the Navy requests $23.3 million under \"Reliable Replacement Warhead,\" a reduction from a planned request of $50.0 million. The previous section details how the Navy plans to use FY2008 and FY2009 RRW funds.\nIn its markup of the FY2009 defense authorization bill, reported in a press release of May 1, 2008, the Senate Armed Services Committee recommended retaining NNSA's request for RRW but eliminating the Navy's request. The Senate passed the bill on September 17, 88-8, without amending the RRW provisions.\nIn its May 7 markup of its portion of the defense authorization bill, the Strategic Forces Subcommittee of House Armed Services Committee recommended eliminating NNSA and Navy funds for RRW. Chairwoman Tauscher said in a statement that these funds were \"re-directed to higher priority nuclear weapons research.\" In its May 16 report on the authorization bill, H.R. 5658 , the House Armed Services Committee adopted these positions and explained them in some detail. Regarding the Navy's request, the committee \"finds that the activities described in the budget request are premature and not executable in fiscal year 2009.\" Noting that this request was for an AF&F system (described under \"Congressional Action on the FY2008 RRW Request,\" above), the committee eliminated funds for RRW and authorized $13.3 million for research into integrated AF&F systems. Regarding the NNSA request, the committee stated that the $10.0 million request was to \"address questions raised by the JASON review of RRW feasibility study activities.\" However, it noted, other funds requested by NNSA, in Advanced Certification and Enhanced Surety, would also examine these certification issues. The committee stated its support for research on certification and stewardship issues \"critical to sustaining and modernizing the Stockpile Stewardship Program (SSP), whether or not the RRW program proceeds.\" Accordingly, it recommended eliminating the $10.0 million requested for RRW and adding $10.0 million within Advanced Certification to address issues raised by the JASON review and for \"other high priority SSP challenges.\" On May 22, Representative Stevan Pearce offered H.Amdt. 1052 to H.R. 5658 . The amendment would increase funding for RRW by $10.0 million in Title XXXI, Department of Energy National Security Programs, while offsetting that amount by a like amount \"to be derived from energy conservation on military installations.\" The amendment failed by a vote of 145 to 271 (roll no. 358). Also on May 22, the House passed the bill, 384-23 (roll no. 365).\nThe House and Senate had an informal conference on the defense authorization bill. According to the Joint Explanatory Statement, \"The result of these negotiations comprised the House amendment to S. 3001, which was considered and passed under suspension of the Rules of the House of Representatives on September 24, 2008, by a vote of 392-39. By unanimous consent, the Senate agreed with the House amendment to S. 3001 on September 27, 2008.\" The resulting bill had no RRW funds for the Navy or NNSA. It was signed into law, P.L. 110-417 , on October 14, 2008.\nThe House Appropriations Committee marked up the FY2009 energy-water appropriations bill on June 25 and released a committee print version of its report in June. The committee eliminated the $10.0 million NNSA request for RRW. The committee was highly critical of this request:\nThe Committee is aware of the advantages of a modern warhead design and strongly supports improved surety. The Committee also understands that high margin provides protection against failure due to compound unknowns. The Committee supports trading off Cold War high yield for improved reliability, in order to move to a smaller stockpile requiring a smaller and cheaper weapons complex with no need for nuclear testing.\nThat said, the Committee remains to be convinced that a new warhead design will lead to these benefits. The Committee will not spend the taxpayers' money for a new generation of warheads promoted as leading to nuclear reductions absent a specific glide path to a specified, much smaller force of nuclear weapons. Similarly, the Committee finds no logic in spending the taxpayers' money on a new generation of warheads promoted as avoiding the need for nuclear testing, while the Secretary of State insists that \"the Administration does not support the Comprehensive Test Ban Treaty.\" ...\nBefore the Committee will consider funding for most new programs, substantial changes to the existing nuclear weapons complex, or funding for the RRW, the Committee insists that the following sequence be completed:\n(1) replacement of Cold War strategies with a 21 st Century nuclear deterrent strategy sharply focused on today's and tomorrow's threats, and capable of serving the national security needs of future Administrations and future Congresses without need for nuclear testing;\n(2) determination of the size and nature of the nuclear stockpile sufficient to serve that strategy;\n(3) determination of the size and nature of the nuclear weapons complex needed to support that future stockpile.\nThe committee stated that while plans to execute these steps were laid out in the FY2008 Omnibus Appropriations Act, \"none of the required plans have been submitted.\" The committee approved the bill by voice vote on June 25; the report ( H.Rept. 110-921 ) was released December 10, 2008. The Senate Appropriations Committee reported S. 3258 , the FY2009 energy-water appropriation bill, on July 14. It recommended no NNSA funds for RRW. The House and Senate versions of this bill were not brought to the floor. Instead, funding for NNSA and many other agencies was made available through the continuing resolution component of H.R. 2638 , Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, for the period October 1, 2008-March 6, 2009 or until enactment of the applicable regular appropriations bill. Section 104 provided that \"No appropriation or funds made available or authority granted pursuant to section 101 shall be used to initiate or resume any project or activity for which appropriations, funds, or other authority were not available during fiscal year 2008.\" RRW was one such activity; accordingly, the bill provided no NNSA funds for RRW. H.R. 2638 was signed into law, P.L. 110-329 , on September 30, 2008. P.L. 111-6 , a one-sentence continuing resolution, extended the expiration of P.L. 110-329 through March 11, 2009. P.L. 111-8 , Omnibus Appropriations Act, 2009, provided funds for the balance of FY2009. It provided no NNSA funds for RRW.\nThe Administration requested $23.3 million in RRW funds for the Navy in the Department of Defense appropriations bill. These funds were part of an $80.1 million request for Program Element 11221N, strategic submarine and weapons system support. While the Defense Appropriations Subcommittees marked up the bill, the full committees did not report their respective bills. Instead, the Department of Defense appropriations bill was contained in H.R. 2638 , Division C, as a regular appropriations bill. That bill eliminated Navy RRW funds.", "For FY2010, the Administration requested no funds for RRW and included the program in a list of programs to be terminated. An Office of Management and Budget report called RRW \"not consistent with Presidential commitments to move towards a nuclear-free world.\" The House Armed Services Committee reported H.R. 2647 , the FY2010 defense authorization bill, on June 18, 2009. Section 3112 of the bill would strike Section 4204a of the Atomic Energy Act directing DOE to establish the RRW program. The bill passed the House, 389-22, with 1 present, June 25. The Senate Armed Services Committee reported S. 1390 , FY2010 defense authorization bill, on July 2. Section 3113 would strike Section 4204a of the Atomic Energy Act. The bill passed the Senate, 87-7, on July 23. No amendments on RRW were offered to either bill.\nThe House Appropriations Committee reported H.R. 3183 , FY2010 energy and water development appropriations bill, on July 13. It contained no funds for RRW. The House passed the bill, 320-97, on July 17, with no amendments on RRW. The Senate Appropriations Committee reported its energy-water bill on July 9. It contained no funds for RRW.\nWith the termination of the RRW program, the section on policy options and issues for RRW that appeared in previous updates of this report has become moot and is deleted.", "", "American Association for the Advancement of Science, Center for Science, Technology and Security Policy, Nuclear Weapons Complex Assessment Committee, The United States Nuclear Weapons Program: The Role of the Reliable Replacement Warhead, April 2007, 34 p.\nBrown, Harold, and John Deutch, \"The Nuclear Disarmament Fantasy,\" Wall Street Journal, November 19, 2007, p. 19.\nCenter for Security Policy, \"Towards a New Deterrent: Analysis and Recommendations for the Commission on the Strategic Posture of the United States,\" 5 p., c. May 2008, at http://www.centerforsecuritypolicy.org/modules/newsmanager/center%20publication%20pdfs/towards%20a%20new%20deterrent%20516.pdf .\nD'Agostino, Thomas, \"Statement of Thomas P. D'Agostino, Administrator, National Nuclear Security Administration, U.S. Department of Energy, Before the House Committee on Armed Services Subcommittee on Strategic Forces,\" February 27, 2008, 11 p.\nFox, Jon, \"Former Secretaries of State Support New Warhead,\" Global Security Newswire, November 15, 2007.\nGaffney, Frank, Jr., \"The Genie-Stuffers,\" Washington Times, June 19, 2007, p. 15.\nGrossman, Elaine, \"U.S. General Calls for Faster Action on Reliable Replacement Warhead,\" Global Security Newswire, March 6, 2008.\nGrossman, Elaine, \"Draft House Markup Adds $9 Million for Fast Strike,\" Global Security Newswire, September 9, 2008\nHarvey, John, \"Maintaining the 21 st [Century] Nuclear Deterrent: The Case for RRW,\" remarks to the Stanley Foundation conference, \"U.S. Nuclear Force Posture and Infrastructure,\" updated February 8, 2008.\nHemley, R.J., et al., Pit Lifetime, (JASON report), The MITRE Corporation, McLean, VA, JSR-06-335, January 11, 2007, 20 p.\nHoffman, Ian, \"Nuclear Deal May Come with Strings: Democrats Signal Openness to New Arsenal, as Long as It Is Linked with Test Ban Treaty Ratification,\" Contra Costa Times, February 3, 2007, p. F4.\nJASON [Defense Advisory Group], The MITRE Corporation, \"Reliable Replacement Warhead: Executive Summary,\" JSR-07-336E, McLean, VA, September 7, 2007, 8 p.\nKimball, Daryl, \"Replacement Warheads and the Nuclear Test Ban,\" Defense News, March 5, 2007.\n\"National Security and Nuclear Weapons: Maintaining Deterrence in the 21 st Century: A Statement by the Secretary of Energy, Secretary of Defense and Secretary of State,\" July 2007.\n\"The Next Generation of Nuclear Weapons,\" Bulletin of the Atomic Scientists (several short articles by multiple authors), July/August 2007, pp. 30-49.\nPincus, Walter, \"Congress Skeptical of Warhead Plan,\" Washington Post, April 22, 2007, p. 5.\nPincus, Walter, \"Making a Pitch for Nuclear Warhead Program,\" Washington Post, October 6, 2008, p. 13.\nPincus, Walter, \"Strategic Command Chief Urges Quick Nuclear Weapons Modernization,\" Washington Post, December 5, 2008, p. 9.\nScheber, Thomas, Reliable Replacement Warheads: Perspectives and Issues, publication 0005 of the United States Nuclear Strategy Forum, National Institute Press, August 2007, 31 p.\nSpring, Baker, \"Congress's Critical Role in the Reliable Replacement Warhead (RRW) Program,\" Heritage Foundation Executive Memorandum 1026, May 11, 2007, 2 p.\nU.S. Department of Defense and Department of Energy. Nuclear Weapons Council. \"Memorandum for the Nuclear Weapons Council (NWC), Subject: Reliable Replacement Warhead 1 (RRW-1) Path Forward,\" March 18, 2007, 1 p. + attachment.\nU.S. Department of Defense and Department of Energy. \"Report on the Feasibility and Implementation of the Reliable Replacement Warhead Program: Submitted to the Congressional Defense Committees Pursuant to Section 3111 of the National Defense Authorization Act for Fiscal Year 2006, P.L. 109-163 , by the Secretary of Defense and the Secretary of Energy in Consultation with the Nuclear Weapons Council,\" April 2008, 14 p.\nU.S. Department of Defense and Department of Energy. \"National Security and Nuclear Weapons in the 21 st Century,\" September 2008.\nU.S. Department of Energy. National Nuclear Security Administration. \"Design Selected for Reliable Replacement Warhead,\" news release, March 2, 2007.\nU.S. Department of Energy. National Nuclear Security Administration. \"Report on the Feasibility of Using Existing Pits for the Reliable Replacement Warhead Program,\" transmitted to Congress August 8, 2008, 15 p.\nU.S. Department of Energy. National Nuclear Security Administration. Office of Defense Programs. Report on the Plan for Transformation of the National Nuclear Security Administration Nuclear Weapons Complex, [report to] Congressional Defense Committees as requested by the United States Congress in P.L. 109-364 , John Warner National Defense Authorization Act for Fiscal Year 2007, January 31, 2007, 31 p.\nU.S. Executive Office of the President. Office of Management and Budget. \"Terminations, Reductions, and Savings: Budget of the U.S. Government, Fiscal Year 2010,\" 2009.\nWebb, Greg, \"Leading U.S. Scientist Criticizes Warhead Effort,\" Global Security Newswire, February 27, 2008.", "This report refers to nuclear weapons design, operation, and production throughout. This Appendix describes key terms, concepts, and facilities as an aid to readers not familiar with them.\nCurrent strategic (long-range) and most tactical nuclear weapons are of a two-stage design. The first stage, the \"primary,\" is an atomic bomb similar in principle to the bomb dropped on Nagasaki. The primary provides the energy needed to trigger the second stage, or \"secondary.\"\nThe primary has at its center a \"pit,\" a hollow core containing fissile material (typically plutonium) and containment shells of other metals. It is surrounded by chemical explosive shaped to generate a symmetrical inward-moving (implosion) shock front. When the explosive is detonated, the implosion compresses the plutonium, increasing its density so much that it becomes supercritical and can sustain a runaway nuclear chain reaction. A neutron generator injects neutrons into the plutonium. The neutrons drive this reaction by splitting (fissioning) plutonium atoms, repeatedly doubling the number of neutrons released. But the chain reaction can last only the briefest moment before the force of the nuclear explosion drives the plutonium outward so that it becomes subcritical and can no longer support a chain reaction. To increase the fraction of plutonium that is fissioned, boosting the yield of the primary, another system injects \"boost gas\"—a mixture of deuterium and tritium (isotopes of hydrogen) gases—into the pit before the explosive is detonated. The intense heat and pressure of the fission chain reaction cause this gas to undergo fusion. While the fusion reaction generates energy, its purpose is to generate a great many neutrons and thus \"boost\" the fission chain reaction to a higher level.\nA metal \"radiation case\" channels the energy of the primary to the secondary, which contains fission and fusion fuel. The energy ignites the secondary, which releases most of the energy of a nuclear explosion. The primary, radiation case, and secondary comprise the \"nuclear explosive package.\" Thousands of \"nonnuclear\" components are also needed to make the nuclear explosive package into a militarily usable weapon, such as an arming, firing, and fuzing system, an outer case, and electrical and physical connections linking a bomb to an airplane or a warhead to a missile.\nNuclear weapons were designed, tested, and manufactured by the nuclear weapons complex, which is composed of eight government-owned contractor-operated sites: the Los Alamos National Laboratory (NM) and Lawrence Livermore National Laboratory (CA), which design nuclear explosive packages; Sandia National Laboratories (NM and CA), which designs nonnuclear components; Y-12 Plant (TN), which produces uranium components and secondaries; Kansas City Plant (MO), which produces many of the nonnuclear components; Savannah River Site (SC), which processes tritium from stockpiled weapons to remove decay products; Pantex Plant (TX), which assembles and disassembles nuclear weapons; and the Nevada Test Site, which used to conduct nuclear tests but now conducts other weapons-related experiments that do not produce a nuclear yield. These sites are now involved in disassembly, inspection, and refurbishment of existing nuclear weapons. The National Nuclear Security Administration (NNSA), a semiautonomous part of the Department of Energy, manages the nuclear weapons complex and program.\nNNSA maintains nuclear weapons and associated expertise through the Stockpile Stewardship Program (SSP), which Congress created in the FY1994 National Defense Authorization Act ( P.L. 103-160 , section 3138). The legislation specified that the goal of SSP is \"to ensure the preservation of the core intellectual and technical competencies of the United States in nuclear weapons\" through \"advanced computational capabilities,\" \"above-ground experiments\" (experiments not requiring nuclear testing), and construction of large experimental facilities. SSP has three main elements. Directed Stockpile Work involves work directly on nuclear weapons in the stockpile, such as monitoring their condition, maintaining them through refurbishment and modifications, R&D in support of specific warheads, and dismantlement. It includes the Life Extension Program and the RRW program. Campaigns provide focused scientific and engineering expertise in support of Directed Stockpile Work, in such areas as pit manufacturing and certification, computation, and study of the properties of materials. Readiness in Technical Base and Facilities funds infrastructure and operations at the nuclear weapons complex sites. While the legislation did not specify that SSP was not to involve nuclear testing, that goal seems clear from the history, and has become a goal of the program. NNSA does not rule out the possible need for testing, such as if a problem were to emerge in a warhead type that could not be remedied in any other way, but the United States has been able to maintain its nuclear stockpile without testing since 1992." ], "depth": [ 0, 1, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2 ], "alignment": [ "h0_title h1_title", "h0_title h1_title", "h0_full", "", "", "", "h1_full", "h1_title", "", "", "", "", "h1_full", "", "h1_full", "h0_full", "h0_full", "h0_full", "h0_full", "h0_full", "", "", "" ] }	{ "question": [ "How is the RRW program administered?", "How was the program funded since FY2005?", "To what extent do the bicameral Armed Services Committees support the use of Navy and NNSA RRW funds?", "How did RRW funding change in 2010?", "How would the RRW program facilitate warhead certification?", "To what extent do critics of RRW believe that LEP and SSP can maintain the stockpile?", "What are main criticisms of the RRW program?", "What other popular views regarding the sustainability of nuclear warheads exist?" ], "summary": [ "The National Nuclear Security Administration (NNSA), the Department of Energy (DOE) component that operates the U.S. nuclear weapons program, would develop the Reliable Replacement Warhead (RRW).", "For FY2005, Congress provided an unrequested $9.0 million to start RRW. The FY2006 RRW appropriation was $24.8 million, and the FY2007 operating plan had $35.8 million. For FY2008, the request was $88.8 million for NNSA and $30.0 million for the Navy; Congress appropriated no RRW funds for NNSA and $15 million for the Navy. For FY2009, DOE requested $10.0 million for RRW. The Navy requested $23.3 million for RRW but said it prepared its request before Congress eliminated NNSA RRW funds and that the Navy funds would not be used for RRW.", "The House Armed Services Committee, in its report H.R. 5658, the FY2009 defense authorization bill, recommended eliminating Navy and NNSA RRW funds while adding funds for the Navy and NNSA for related purposes. The House defeated an amendment to add $10.0 million in NNSA RRW funds to H.R. 5658. The Senate Armed Services Committee recommended retaining NNSA's request for RRW but eliminating the Navy's request.", "For FY2010, the Administration canceled the RRW program and requested no RRW funds.", "NNSA argues it will become harder to certify current warheads with LEP because small changes may undermine confidence in warheads, perhaps leading to nuclear testing, whereas new-design replacement warheads created by the RRW program will be easier to certify without testing.", "Critics believe LEP and SSP can maintain the stockpile indefinitely.", "They worry that untested RRWs may make testing more likely and question cost savings, given high investment cost. They note that there are no military requirements for new weapons.", "Others feel that neither LEP nor RRW can provide high confidence over the long term, and would resume testing. Another point of view is that either LEP or RRW will work without nuclear testing." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 2 ] }
GAO_GAO-19-122	{ "title": [ "Background", "Moving FPS to Any of the Selected Agencies Evaluated Would Result in Both Benefits and Trade- offs", "DHS Has Not Taken Key Steps to Fully Assess Potential Placement Options", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comparison of Selected Agencies and the Federal Protective Service (FPS) in Elements Associated with Key Organizational-Placement Criteria", "Appendix III: Summary of Selected Agencies’ Similarities and Differences Related to Key Organizational-Placement Criteria", "Mission, Goals, and Objectives", "Responsibilities", "Physical Security and Law Enforcement Activities", "Contract Guard Responsibilities", "Organizational Culture", "Information Sharing and Coordination", "Coordination", "Mission Support", "Human Capital", "Information Technology (IT)", "Training", "Appendix IV: Comments from the U.S. Department of Homeland Security", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "While its core mission of protecting federal facilities has remained constant as FPS moved from one agency to another, its responsibilities have changed. While in GSA’s PBS, FPS was responsible for protecting GSA held-or–leased facilities, providing both physical security and law enforcement services. To protect buildings, FPS officers developed physical security risk assessments, installed security equipment, and oversaw contract guard services. As a part of its law enforcement services, among other duties, FPS officers enforced laws and regulations aimed at protecting federal facilities and the persons in such facilities and conducted criminal investigations. Following the September 11, 2001 attacks, the Homeland Security Act of 2002 was enacted; it created DHS and moved FPS from GSA to the new department, effective in March of 2003. Within DHS at ICE, FPS’s responsibilities grew beyond solely protecting GSA buildings to include homeland security activities such as implementing homeland security directives and providing law enforcement, security, and emergency-response services during natural disasters and special events.\nIn 2009, DHS proposed transferring FPS from ICE to NPPD. In explaining the proposed transfer in DHS’s fiscal year 2010 budget justification to Congress, DHS noted that this move would allow ICE to focus on its law enforcement mission of protecting the American people by targeting the people, money, and materials that support terrorist and criminal activities relating to our nation’s borders. DHS noted that FPS should reside within NPPD given that both agencies had responsibilities for implementing the National Infrastructure Protection Plan. DHS further noted that FPS would be able to gain synergy by working alongside NPPD’s Office of Infrastructure Protection and that having FPS and the Office of Infrastructure Protection in the same organization would further solidify NPPD as DHS’s lead for critical infrastructure protection. The fiscal year 2010 DHS appropriations act, which was signed into law on October 28, 2009, funded FPS under NPPD via revenue and collections of security fees. While in NPPD, FPS continued to lead physical security and law enforcement services at GSA-held or GSA-leased facilities and continued its efforts in homeland security activities.\nThroughout FPS’s different organizational placements in DHS, we have reported that FPS faces persistent challenges meeting its mission to protect facilities. In 2003, we designated federal real-property management as a high-risk area, in part, because of physical security challenges at federal facilities, such as the need for a risk-based approach to determining the level of security required. In 2011, we reported on FPS’s challenges in transferring mission support functions when transitioning from ICE into NPPD. While FPS has been in NPPD, we also reported on challenges FPS faced, such as in performing risk assessments, managing and overseeing contract guards, collaborating with GSA and the Marshals on facility security, and funding its operations. We made recommendations to help address these challenges, and FPS has made progress in addressing some of these recommendations. For example, FPS (1) developed a Modified Infrastructure Survey Tool to help it more effectively perform risk assessments, (2) coordinated with GSA and other agencies to reduce unnecessary duplication in risk assessments, (3) implemented new procedures to better manage and oversee contract guards, and (4) as of September 2018, established a formal agreement with GSA on roles and responsibilities related to facility protection. However, as we discuss later in this report, challenges related to other aspects of overseeing contract guards, collaborating with GSA and Marshals, and funding persist.\nIn November 2018, legislation was enacted that could result in FPS moving for a third time, although the location has not been determined. This legislation—which reorganizes NPPD to an organization that has a greater statutory focus on managing cyber risks—requires the Secretary of Homeland Security to, within 90 days after the completion of our review, determine the appropriate placement for FPS within DHS and begin transfer of FPS to that entity. If the Secretary determines that DHS is not an appropriate placement for FPS, the Secretary would be required to submit to the Director of OMB and Congress an explanation for the reasons of such a determination—including, among other things, how DHS considered the results of our current review—and a recommendation on the appropriate placement of FPS within the executive branch of the federal government.\nWhen DHS was established, we identified organizational and accountability criteria for the department. From this prior work, we identified key criteria that are relevant to assessing potential placement options for FPS, as shown in table 2.\nIn addition, other practices provide valuable insights for agency officials to consider when evaluating or implementing a reorganization or transformation. For example, we have previously reported (1) on key practices and questions for organizational transformations, mergers and consolidations, and agency reform efforts and (2) on best practices for the analyses of alternatives. We reported that organizational transformations, such as a change in organizational placement, can take many years to fully implement, can result in reduced productivity and morale in the short-term, and may require up-front investments. Therefore, we found that these practices and questions offer valuable insights for agency officials to consider when evaluating or implementing a reorganization or transformation. For example, in May 2012, we reported that a key practice in organizational change is for agency officials to identify and agree on the specific goals of the change—that is, what the agency expects to achieve by making the change—or the problems a change will solve. In July 2003, we reported that implementing a large-scale organizational transformation requires the concerted efforts of both leadership and employees to accomplish new organizational goals. In October 2015, we identified best practices for analyzing alternatives, such as defining criteria to assess alternatives, identifying a range of alternatives to assess, and analyzing the benefits and trade-offs of each alternative.", "We found that none of the selected agencies met all the organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade-offs. Officials from FPS and some of the selected agencies as well as representatives from other stakeholders we interviewed (e.g., an association of federal law enforcement officers, a union representing FPS employees, and others) provided us with examples of how those benefits and trade-offs might affect FPS.\nIn instances where selected agencies met organizational placement criteria (that is, in instances where selected agencies were similar to FPS), FPS could experience benefits. See table 3 for a summary of how selected agencies met and did not meet key organizational placement criteria, and appendix II and III for additional details. For example, for the mission, goals, and objectives criterion, DHS, NPPD, and Secret Service could provide benefits to FPS because, like FPS, their mission or goal statements as noted in their strategic plans include an explicit focus on the protection of infrastructure or specific facilities. Also, GSA has a statutory facility protection mission. Our prior work found that placing an agency into an organization that has a similar mission may help ensure that the agency’s mission receives adequate funding, attention, visibility, and support. For the responsibilities criterion, DHS, CBP, Secret Service, Justice, and the Marshals could provide benefits to FPS, because all of these agencies, like FPS, perform both physical security and law enforcement activities. In the past, FPS faced challenges ensuring that both these activities were prioritized, according to FPS officials. Officials explained that a parent agency that is able to focus on both activities could help ensure equal and adequate attention in both areas. While there are similarities in responsibilities between FPS and these agencies, there are differences in the extent to which and for what purpose these agencies perform the responsibilities, some of which we discuss following table 3.\nBecause none of the agencies met all criteria, placing FPS in any of the selected agencies would require trade-offs. For example:\nWhile placing FPS in DHS, NPPD, or the Secret Service may provide FPS benefits in areas related to mission, responsibilities, and information sharing, there could be some adverse effect on FPS’s law enforcement operations or other activities. Specifically, as discussed above, placement in DHS, NPPD, or the Secret Service could provide FPS benefits because these agencies have similar missions and facility protection responsibilities, and have access to and share information related to national homeland security that FPS needs to carry out its mission. However, NPPD, for example, does not perform law enforcement activities. Therefore, according to FPS officials, FPS’s law enforcement activities may not continue to receive full attention. Further, keeping FPS in NPPD may not address some of the challenges related to culture, such as morale issues that, according to an official from the association of law enforcement officers, stem in part from FPS not being placed in a law enforcement organization. If placed in the Secret Service, this agency may not have the administrative capacity to handle the additional FPS human capital workload. Secret Service officials told us that they have a staffing shortage, which is exacerbated by the time it takes to vet applicants and process new staff through background checks and security clearances.\nAs another example, FPS’s placement in GSA or Marshals could enhance coordination among these agencies, but there could be some adverse effect on FPS’s ability to carry out its mission or responsibilities. Specifically, GSA and Marshals could be appropriate choices as these agencies currently coordinate with FPS on facility protection. For GSA’s held or leased facilities, FPS is primarily responsible for protecting federal employees and visitors in those facilities while GSA, as the federal government’s landlord, performs some physical security activities, such as funding and repairing security fixtures. At federal courthouses, FPS is the primary federal agency responsible for patrolling and protecting the perimeter while Marshals is responsible for the security of the federal judiciary and as such provides for security inside the building. However, we have found challenges FPS has faced in coordinating with these agencies. In December 2015, for example, we found that FPS and GSA had not agreed on a common outcome related to facility protection or the roles and responsibilities to accomplish their missions. Further, in September 2011, we reported that FPS and Marshals faced challenges related to coordination, such as in the implementation of roles and responsibilities and the use or participation in existing collaboration mechanisms. In September 2018, NPPD and GSA signed a memorandum of agreement that, among other things, describes FPS’s and GSA’s roles and responsibilities, and FPS, Marshals, and other agencies involved in protecting courthouses (i.e., GSA and the Administrative Office of the U.S. Courts) are working to finalize a separate agreement for courthouse security. As these agreements are implemented, coordination between these agencies should improve as we have previously reported that establishing clear roles and responsibilities, in agreements or through other mechanisms, contribute to effective coordination. In addition, Marshals may be a good placement option for FPS since both agencies perform physical security and law enforcement activities, and because both agencies use a large number of contract guards. However, because FPS does not share mission and goals with Marshals, it may be less equipped to prioritize FPS’s activities in the law enforcement and physical security areas. Justice and Marshals officials said that, in their view, Marshals is different from FPS because Justice and Marshals perform limited physical security activities and have an extensive law enforcement mission, while the opposite is the case for FPS. Further, Marshals officials said that FPS’s and Marshal’s law enforcement activities support different purposes—with Marshals supporting a violent-crime reduction mission and FPS supporting a facility protection mission. As a result, Marshals officials said that FPS’s facility protection mission may not receive full attention. Regarding contract guards, Marshal’s guard force is smaller, performs different activities, and has different requirements compared to FPS’s guard force. Regarding GSA, while GSA performs some physical security activities, it does not perform law enforcement, which is a critical part of FPS’s responsibilities and, according to some stakeholders we interviewed, a key aspect of FPS’s culture. GSA also does not have the same access to information related to national homeland security as FPS currently has, and therefore, FPS’s access to this information could be affected, according to officials.\nFinally, various placement options could help FPS address some of its long-standing challenges such as in overseeing contract guards, collaborating with GSA and the Marshals, and funding. However, these placements could also affect whether FPS’s needs are prioritized. For example, placing FPS in GSA or the Marshals may further help address coordination challenges. Additionally, placing FPS in GSA could address challenges FPS faces with funding. If placed in GSA, GSA and FPS could consider whether to use the Federal Buildings Fund for security projects related to facility management, such as installing cameras. OMB staff said that there are limitations with the Federal Buildings Fund, such as the amount of funding available for security projects. Further, the adverse effect of placing FPS in either GSA or the Marshals is that Marshals does not share mission and goals with FPS and that GSA does not have law enforcement responsibilities; therefore, these agencies may not prioritize FPS’s needs.\nFor additional information on how the various agencies met each criterion, see appendixes II and III.", "When managing an agency or considering an organizational change, such as that of FPS’s placement within or outside of DHS, our prior work has stated that an agency can benefit from periodically evaluating its organizational structure, identifying what a change is expected to achieve, and analyzing alternatives. Specifically, Standards for Internal Control in the Federal Government states that agency management should establish an organizational structure to achieve the agency’s objectives. According to the Standards, an effective management practice for attaining this outcome includes periodically evaluating the organizational structure to ensure that it meets its objectives and has adapted to changes. We have also reported that a key practice in organizational change is to identify and agree on what a change is expected to achieve or the problems the change will solve. The process of defining such expected outcomes can help decision makers reach a shared understanding of what challenges need to be addressed. Furthermore, we have reported on best practices for analyzing alternatives to help ensure that agencies select the option that best meets their needs. These practices can be applied to a wide range of activities or programs in which an alternative must be selected from a set of possible options. The practices include assessing the current environment to provide a basis for comparison with other alternatives and identifying and assessing benefits and trade-offs of each alternative.\nHowever, DHS has not taken key steps to fully assess potential placement options. Specifically, DHS has not assessed the organizational structure of FPS, such as its placement in NPPD, even though both have evolved since FPS was placed in NPPD in 2010. For example, NPPD has increased its focus on protecting the nation’s cyber infrastructure as threats in this area have grown, and its funding for this purpose has increased. In light of these changes, in 2015 and 2016, DHS proposed that NPPD restructure itself to increase its focus on cybersecurity. However, the proposals did not include an assessment of FPS’s organizational placement. The November 2018 legislation gave NPPD a greater statutory focus on cyber risk and may result in additional changes to the organization’s activities. Additionally, while in NPPD, FPS also has been increasingly engaged in providing law enforcement for homeland security, with the establishment of a rapid protection force of that can respond to heightened threat situations. Given these changes, without an assessment, DHS cannot be certain that FPS is currently placed in an agency that enables FPS to meet its mission.\nAdditionally, because DHS did not analyze FPS’s current placement in NPPD, it does not have a benchmark for comparison to other agencies. Without such an analysis, it is unclear whether FPS needed to be moved from NPPD. On one hand, FPS made progress while placed in NPPD in addressing many of our recommendations, and some stakeholders we spoke with (officials from DHS and NPPD) said that FPS was in the right place in NPPD. For example, a DHS official stated that from a resource perspective there was no good reason to move FPS out of NPPD as the official had not seen a business case to do so. Additionally, an NPPD official stated that mission alignment and an opportunity to influence the national facility-security policy were compelling reasons for FPS to stay in NPPD. Further, NPPD officials said that FPS was meeting its mission and objectives. On the other hand, FPS continued to experience challenges in carrying out its mission in NPPD—such as in overseeing contract guards, collaborating with GSA and the Marshals, and having adequate funding— such that questions have been raised as to whether placing FPS in NPPD was successful.\nDHS has recently initiated an effort to evaluate FPS’s placement, but it lacks several of the elements for a successful evaluation. Specifically, in August 2018, DHS, NPPD, and FPS established a working group with a draft charter with the objective of making a recommendation to the Secretary of Homeland Security on the organizational placement of FPS within DHS. The working group’s evaluation criteria for FPS placement consist of mission, command and control, resources, implementation schedule, and workforce and culture. While establishing this group and identifying criteria are positive steps in assessing FPS’s placement, the group’s planned activities are limited in several ways. For example, while the charter is a draft, it does not indicate that the working group will describe what changing FPS’s placement is expected to achieve. This factor is particularly important given that each placement option has its benefits and trade-offs and that stakeholders’ opinions of the options varied. Changing FPS’s placement could include: addressing one or more of the key criteria previously discussed in this addressing some or all of the challenges that persist, such as in collaboration or contract guard oversight; or a combination of both.\nFurther, the draft charter does not indicate that the working group will evaluate agencies outside of DHS or incorporate best practices for analyzing alternatives, such as evaluating FPS’s current placement in NPPD and the benefits and trade-offs of placement options. Without conforming to the best practices, DHS will not have assurance that the working group recommends the alternative that best meets mission needs.\nDHS’s current approach to evaluating FPS’s placement limits DHS’s ability to reliably assess the merits of placement options supported by GSA and FPS. GSA officials said GSA would take FPS and moving FPS back to GSA could benefit tenants in federal facilities, strengthen security support, and reduce redundancies because both agencies have federal facility protection responsibilities. Further, according to GSA, if consolidated under GSA, FPS could become more efficient, better manage costs, and leverage acquisition processes by making use of GSA’s existing services. FPS officials stated that they prefer FPS to be a standalone entity that reports directly to DHS leadership. According to FPS, being a standalone agency in DHS would establish the protection of federal facilities as a critical mission of DHS and provide FPS with the direct support of DHS leadership. Further, according to FPS officials, having this support would better enable them to carry out their mission. However, neither GSA nor FPS has conducted analyses to support their preferences, and DHS is not planning to look at options outside of DHS at this time. As a result, DHS cannot fully assess FPS’s or GSA’s positions.\nOnce DHS identifies what it expects to achieve by moving FPS, in line with key practices for organizational change, and establishes an evaluation approach that reflects best practices for an analysis of alternatives, it will be in a position to best assess benefits and trade-offs previously discussed. In absence of these steps, DHS may not be positioning itself to make an informed decision as to what organization best supports FPS.", "Over the past 15 years, FPS has been located in three different agencies (GSA, ICE, and NPPD), and there continues to be disagreement about whether it is currently in the best place to achieve its objectives. Further, agency and stakeholder opinions vary about where and whether FPS should move. DHS has established a working group to evaluate placement options for FPS. However, the working group’s planned activities do not include key steps to fully assess potential placement options. Specifically, while the group’s charter is a draft, it does not state whether it plans to assess FPS’s current placement in NPPD, what DHS expects to achieve by changing FPS’s placement, or effective placement options for relocating FPS.\nThese steps would help DHS address legislation enacted in November 2018 requiring the review of placement options for FPS—including how DHS considered the results of our review. Regardless of the legislation, DHS cannot have a complete discussion that leads to an informed decision on FPS’s placement without taking these steps. Identifying the expected outcomes of changing FPS’s placement and performing analyses are critical because organizational change can take many years to fully implement, can result in reduced productivity and morale in the short-term, and may require up-front investments. Without determining what it expects to achieve by moving FPS and conducting an evaluation using appropriate criteria, DHS may not be well-positioned to identify an organization that best supports FPS.", "We are making the following two recommendations to the Secretary of Homeland Security: The Secretary of Homeland Security—in consultation with NPPD and FPS—should identify the specific goals of a change in FPS’s placement— that is, what DHS expects to achieve by moving FPS to another agency. (Recommendation 1)\nThe Secretary of Homeland Security—in consultation with NPPD, FPS, and other agencies as relevant—should fully evaluate placement options for FPS based on what DHS expects to achieve by changing FPS’s placement, an assessment of FPS’s current placement, and other best practices such as an analysis of alternatives assessing the benefits and trade-offs discussed in this report. (Recommendation 2)", "We provided a draft of this product to DHS, GSA, Justice, and OMB for comment. In its comments, reproduced in appendix IV, DHS concurred with our recommendations and outlined steps it plans to take to address them. DHS also provided technical comments, which we incorporated as appropriate. GSA, Justice, and OMB only provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Administrator of General Services, the Attorney General, the Director of OMB, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff has any questions about this report, please contact me at (202) 512-2834 or RectanusL@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "To address our objectives, we reviewed our prior work related to organizational transformation, where we identified organizational and accountability criteria that Congress should consider when determining which agencies to include or exclude from the newly created DHS. The criteria are relevant to our review of FPS’s organizational placement as Congress considers whether to include or exclude FPS in various agencies within and outside DHS. We selected a subset of the criteria that are the most relevant to FPS’s organizational placement to include in our review. For each criterion, we also identified elements (i.e., characteristics) that are specific to FPS based upon our review of FPS documents and our prior work on topics related to the criteria, and our discussions with federal officials with experience in facility security, the Federal Law Enforcement Officers Association, and a former high-ranking official in NPPD with knowledge of FPS.\nTo identify challenges facing FPS, we reviewed our past work and the status of our prior recommendations, and interviewed stakeholders and agency officials. We reviewed pertinent proposed and enacted legislation related to DHS’s reauthorization and FPS. We reviewed Standards for Internal Control in the Federal Government for relevant management responsibilities. And, we reviewed our prior reports on key practices and questions for organizational change and best practices for an analysis of alternatives process. We used practices identified in these reports as well as internal controls to assess the steps DHS has taken to assess placement options for FPS.\nWe applied the key criteria to eight selected agencies in DHS, GSA, and the Department of Justice (Justice) that we determined could be potential organizational placement options for FPS, as shown in table 4.\nWe selected three of our eight placement options (CBP, ICE, and Secret Service) based upon our review of the most recently available data from the Department of Justice on the number of federal law enforcement officers. We selected these three agencies because they employed the largest number of law enforcement officers within DHS. Our selection of agencies with federal law enforcement officers is relevant because FPS employs such officers. We selected three options (GSA, NPPD, and a standalone entity in DHS) because FPS was previously organizationally placed within GSA, is currently placed in NPPD, and because of FPS’s preference to be a standalone entity reporting directly to the Deputy Secretary of DHS. We selected our remaining two options (a standalone entity within Justice and the Marshals) because the duties of the Marshals include law enforcement and protection of federal courthouses and because legislation proposed during our review would have, if enacted, instructed the Secretary of Homeland Security to recommend the appropriate placement of FPS within the executive branch of the federal government. We also identified DHS’s Office of the Chief Security Officer as an office within DHS that has the facility security responsibility for managing contract guards at DHS’s former headquarters at the Nebraska Avenue Complex in Washington, D. C. We determined that this security office is a policy office within DHS’s Management Directorate with its primary mission being the security of DHS employees and a focus on expanding internal security policy. For the purposes of our review, we did not include OCSO as a potential placement option for FPS because the security office does not have a large number of law enforcement officers, plans to divest operational security responsibilities, and was not a previous, current or FPS desired placement. Our exclusion of OCSO does not preclude DHS from assessing OCSO as a placement option for FPS.\nWe reviewed documentation and interviewed officials from FPS and the selected agencies to identify similarities, differences, and other considerations with regard to each of the key criteria. For the first four key criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—we determined that a selected agency met the criteria if the agency or its subcomponents have any similarities to FPS. For the last criterion— mission support—we determined that a selected agency met the criterion if the agency or its subcomponents have mission support similar to FPS or could provide mission support that FPS needs. Although we used the key criteria to assess eight agencies we selected, the criteria can be used to assess any potential placement option for FPS.\nWe also reviewed documentation and conducted interviews with stakeholders including: representatives from the Federal Law Enforcement Officers Association; representatives from the American Federation of Government Employees Local 918 (the union that represents NPPD employees— including FPS); representatives from two unions that represent a large number of Protective Security Officers (i.e., contract guards), the United Government Security Officers of America and Security and\nSecurity, Police and Fire Professionals Association of America; representatives from the National Association of Security Companies (an association of contract guard companies); officials from agencies that coordinate with or use FPS for facility the Department of Justice for law enforcement coordination and the Internal Revenue Service and the Social Security Administration as large users of FPS facility protection; staff from the Office of Management and Budget; and officials from DHS’s Interagency Security Committee, which develops the security standards for non-military federal facilities.\nWe also obtained views from a former high-ranking official in NPPD with knowledge of FPS. Additionally, we obtained views from officials, staff, and representatives from FPS, the selected agencies and stakeholders on the alignment between FPS and the agencies as well as on the potential placement options. The results of these interviews are non- generalizable to all of FPS’s stakeholders but provide useful examples of considerations related to various placement options.\nWe conducted this performance audit from June 2017 to January 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Based on our prior work related to organizational transformation, we identified five key criteria to consider when assessing placement options for FPS: (1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; (4) information sharing and coordination; and (5) mission support. For each criterion, we identified elements that are specific to FPS. We identified these elements from documentation and interviews from federal officials with experience in facility security, the Federal Law Enforcement Officers Association, a former high-ranking official in NPPD with knowledge of FPS, and our review of prior work on topics related to the criteria. We compared selected agencies that could be placement options to FPS in each of the elements—see tables below. The selected agencies are the Department of Homeland Security (DHS), U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), National Protection and Programs Directorate (NPPD), United States Secret Service (Secret Service), General Services Administration (GSA), Department of Justice (Justice), and the U.S. Marshals Service (Marshals). We assumed that FPS would be a standalone entity in DHS, GSA, and Justice.\nFor elements in the first four criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—a “yes” in the table means that any function of the selected agency or its subcomponents have similarities to FPS. For elements in the last criterion—mission support—a “yes” means that any function of the selected agencies or its subcomponents have mission support similar to FPS or could provide mission support that FPS needs. For all criteria, the “yes” designation does not account for the magnitude of the effort or activities performed by each of the selected agencies.", "We identified five key organizational placement criteria that are relevant to consider when assessing FPS’s placement: (1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; (4) information sharing and coordination; and (5) mission support. We evaluated whether selected agencies that could be placement options for FPS met the key organizational placement criteria. The selected agencies are the Department of Homeland Security (DHS); U.S. Customs and Border Protection (CBP); U.S. Immigration and Customs Enforcement (ICE); National Protection and Programs Directorate (NPPD); United States Secret Service (Secret Service); General Services Administration (GSA); Department of Justice (Justice); and the U.S. Marshals Service (Marshals). We assumed that FPS would be a standalone entity in DHS, GSA, and Justice.\nFor the first four criteria—(1) mission, goals, and objectives; (2) responsibilities; (3) organizational culture; and (4) information sharing and coordination—we determined that a selected agency met the criteria if the agency or its subcomponents have similarities to FPS in relevant elements identified in appendix II. We determined that a selected agency met the mission support criterion if the agency or its subcomponents have similarities to FPS or could provide FPS needed mission support in relevant elements.", "FPS’s mission focuses on the protection of federal facilities and the people working in and visiting those facilities.\nIn table 10 and subsequent paragraphs, we describe how selected agencies met the mission, goals, and objectives criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion.\nDHS, NPPD, and Secret Service are similar to FPS in that their mission statements or goals as stated in their strategic plans include an explicit focus on the protection of infrastructure or specific facilities. GSA has a statutory facility protection mission. Our prior work found that placing an agency into an organization that has a similar mission may help ensure that the agency’s mission receives adequate funding, attention, visibility, and support. One of DHS’s goals—as noted in its strategic plan covering fiscal years 2014 to 2018—is to reduce risk to the nation’s critical infrastructure. In addition, NPPD’s mission is to lead the national effort to protect and enhance the resilience of the nation’s physical and cyber infrastructure. To carry out this mission, NPPD coordinates efforts to protect infrastructure in 16 critical infrastructure sectors, including a government facilities sector. Further, the Secret Service’s mission is to ensure, among other things, the security of the United States President, Vice President, and other individuals. The Secret Service’s Uniformed Division protects locations necessary for accomplishing its mission of protecting these individuals. Per statute, GSA is responsible for the operation, maintenance, and protection of buildings and grounds occupied by the federal government and under the jurisdiction, custody, and control of GSA.\nWhile DHS, NPPD, Secret Service, and GSA may be good placement options for FPS given their similarities in mission or goals (i.e., focus on infrastructure or facility protection), stakeholders we interviewed identified some key areas of consideration that may have a bearing on how well FPS would fit in NPPD, Secret Service, and GSA.\nNPPD: FPS and NPPD officials expressed concerns about the fit between the two agencies given differences in how they perform their infrastructure protection missions. Specifically, FPS has employees who directly protect federal facilities, while NPPD’s physical infrastructure protection efforts provide guidance and resources to federal, state, and local governments, and private sector companies so that they can protect their facilities. Furthermore, officials from FPS, NPPD, the union representing FPS officials, an association representing federal law enforcement officers, and a former high- ranking official in NPPD said that a difference between the two agencies is that FPS performs law enforcement activities to carry out its protection mission while NPPD does not.\nSecret Service: Officials from FPS and Secret Service said that placing FPS in the Secret Service could present challenges because the two agencies’ missions have some fundamental differences—FPS focuses on protecting federal facilities and Secret Service focuses on protecting individuals such as the United States President and Vice President. Furthermore, another difference is that the scope of facilities that the Secret Service protects is smaller and narrower than FPS, according to FPS and Secret Service officials. FPS protects about 9,000 facilities throughout the United States, while Secret Service’s Uniformed Division—which is responsible for protecting facilities—protects a limited number of facilities in the National Capital Region (e.g., the White House, the Vice President’s residence). FPS officials said that another consideration between the two agencies is that FPS’s mission of protecting federal facilities would get lost in Secret Service’s mission of protecting the President of the United States and other key individuals.\nGSA: Stakeholders provided differing views on how well FPS would fit in GSA. An official from CBP and officials from Justice said that FPS should be placed in GSA because FPS focuses on GSA-held or- leased facilities. Furthermore, GSA officials stated FPS and GSA could merge as both have the authority to protect federal facilities, and there is an intuitive relationship between GSA’s focus on the management and operations of federal facilities and FPS’s mission of the security of federal facilities. Conversely, officials from FPS, staff from OMB, and officials of an association that represents security companies, said that FPS should not move to back to GSA. These officials and staff said that FPS should not move to GSA because, among other reasons, the two agencies have different missions: GSA focuses on federal real estate and some physical security activities not homeland security or law enforcement.\nCBP, ICE, Justice, and Marshals do not have mission statements or goals that focus explicitly on infrastructure or facility protection. Nonetheless, as we discuss in the next section of this report, CBP, Justice, and Marshals have some facility protection responsibilities.\nIn addition, FPS and the selected agencies share few or no operational objectives. DHS, ICE and NPPD share one or two operational objectives with FPS—DHS shares objectives that focuses on mitigating risks and responding to incidents, ICE shares one that focuses on intelligence gathering, and NPPD shares one that focuses on facility assessments. FPS, Justice, and Marshals have a few similar operational objectives. The three agencies have objectives that focus on the integration and use of intelligence information. FPS and Marshals also have similar objectives that focus on facility assessments, mitigating risks, and on rapidly responding to emergencies and incidents.", "To carry out its facility protection mission at about 9,000 federal facilities, FPS performs physical security as well as law enforcement activities. As a part of its physical security activities, FPS conducts facility security assessments, identifies countermeasures (e.g., equipment and contract guards) best suited to secure a facility, and oversees contract guards. As a part of its law enforcement activities, FPS proactively patrols facilities, responds to incidents, and conducts criminal investigations, among other things. FPS also provides additional operational law enforcement support, at the direction of the Secretary of Homeland Security, to address emerging threats and homeland security incidents. According to FPS officials, previous placements have focused on physical security or law enforcement, but not both. For example, FPS officials told us that because of ICE’s focus on law enforcement, FPS’s physical security activities took a backseat to ICE’s law enforcement mission. Similarly, according to FPS officials, NPPD has not prioritized FPS’s law enforcement activities because NPPD does not have a focus on law enforcement.\nOne of FPS’s most critical activities is overseeing about 13,500 contract guards who are posted at federal facilities and are responsible for controlling access to facilities, responding to emergency situations involving facility safety and security, and performing other duties. FPS is responsible for overseeing these guards to ensure, among other things, that they are performing their assigned duties and have the necessary training and certifications. We have reported on challenges FPS faces in overseeing contract guards. For example, in August 2012, we reported that FPS faced challenges ensuring that contract guards have the necessary training and certifications. We found that although FPS verifies contractor-reported guard certification and training information by conducting monthly audits, FPS does not independently verify the contractor’s information.\nIn table 11 and subsequent paragraphs, we describe how selected agencies met the “responsibilities” criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion.\nLike FPS, DHS, the selected agencies in DHS (except ICE), GSA, Justice, and Marshals have responsibilities for federal facility protection. As discussed above, DHS, NPPD, and the Secret Service have mission or goal statements that explicitly address infrastructure or facility protection. CBP’s, GSA’s, Justice’s, and Marshals’ mission or goal statements do not explicitly state a focus on infrastructure or facility protection, but these agencies have some facility protection responsibilities to help achieve their missions. For example, GSA has some protection responsibilities for about 8,700 GSA-held or GSA-leased facilities in support of its mission of managing the federal real estate portfolio. GSA conducts repairs that affect the operation of building security equipment and develops policy and requirements for the building security used in the design and construction of GSA buildings. Marshals have security responsibilities at federal courthouses in support of its mission to protect, defend, and enforce the nation’s justice system.\nStakeholders we interviewed identified some areas of consideration that may have a bearing on how well FPS would fit in agencies that have facility protection responsibilities:\nOfficials from FPS and Marshals questioned how FPS would meld with agencies that protect facilities on a smaller scale. CBP, Justice, and Marshals perform facility protection at a smaller number of facilities as compared to FPS and GSA: CBP has facility protection responsibilities at about 1,200 border patrol stations, ports of entry, and other facilities; Justice (excluding Marshals) at 36 facilities; and Marshals at about 430 facilities with a judicial presence, while FPS and GSA have protection responsibilities at about 9,000 and 8,700 facilities, respectively.\nJustice and Marshals officials said that there are some differences between their agencies and FPS’s facility protection responsibilities. Specifically, these officials said that unlike FPS, Justice and Marshals have limited responsibilities for facility protection, and in the case of Marshals, this responsibility is related to the protection of the federal judiciary.", "FPS most closely aligns with DHS, CBP, Secret Service, Justice, and Marshals because these agencies perform both physical security and law enforcement activities. However, as discussed in the paragraph below, there are differences in the extent to which and for what purpose these agencies perform these activities. The remaining agencies perform either physical security (NPPD, GSA) or law enforcement activities (ICE), but not both.\nWhile DHS, CBP, Secret Service, Justice, and Marshals align with FPS with regard to the two types of activities it performs, there are differences in how these agencies perform these activities because these agencies’ activities and missions differ from FPS. For example, Justice and Marshals officials explained that in their view, Justice and Marshals are different from FPS because Justice and Marshals perform limited physical security activities and have extensive law enforcement missions, whereas FPS has a limited law enforcement mission and an extensive facility protection mission. Further, Marshals officials said that FPS’s and Marshal’s law enforcement activities support different purposes—with Marshals supporting a violent-crime reduction mission and FPS supporting a facility protection mission. As a result, Marshals officials said that FPS’s facility protection mission may not receive full attention. Further while FPS performs law enforcement activities relevant to federal facility protection, the Secret Service performs law enforcement relevant to protecting key individuals, such as the President. Furthermore, although GSA does not perform law enforcement activities, GSA officials said that if FPS moved to GSA, its leadership would provide FPS organizational support that would enable both FPS’s law enforcement and physical security activities. FPS officials stated that if FPS moved outside of DHS, the Secretary of Homeland Security—who is responsible for protecting the nation—may lose protection responsibilities for federal facilities as well as the ability to use FPS for law enforcement support when needed for homeland security.", "Like FPS, Marshals also employs a large number of contract guards for facility protection. The remaining agencies (DHS, CBP, ICE, NPPD, Secret Service, GSA, and Justice) use FPS’s contract guards, procure a limited number of guards or use their own federal officers for facility protection, according to officials from these agencies. Similar to FPS, Marshals also performs compliance reviews of training and certification information maintained by its contractors, and Marshals officials explained that these reviews are performed periodically.\nStaff from OMB and an association of security companies said that Marshals may be a good fit for FPS because Marshals, like FPS, uses a contract guard force. We have previously reported that a consideration of moving one agency into another is whether the move can help improve the efficiency and effectiveness of agency missions by, among other things, addressing gaps. In this regard, one consideration is whether FPS could leverage the Marshals’ oversight of its own contract guards to address its ongoing challenges in this area.\nHowever, differences between FPS’s and Marshals’ contract guard programs exist. For example, Marshals’ guard force is smaller than FPS’s with about 4,400 guards and the day-to-day duties of FPS’s contract guards are different from Marshals’ contract guards. Both FPS’s and Marshals’ contract guards control access to facilities. However, Marshals contract guards also provide security for the judicial process, such as providing armed escort services to judges, jurors, and other court personnel and providing security in a courtroom during hearings. Furthermore, some requirements between the two guard forces vary. For example, Marshals has more stringent requirements for contract guards in the areas of education and law enforcement experience.", "While there are many areas relevant to organizational culture, law enforcement is a key aspect of FPS’s organizational culture, according to officials from an association of security companies and a former high- ranking official in NPPD. One area that has affected FPS’s culture, particularly morale, according to an official from the association of law enforcement officers, is that FPS’s criminal investigators receive federal law enforcement officer retirement benefits, while its inspectors—who also perform some law enforcement and who form the majority of FPS’s workforce—do not.\nIn table 12 and subsequent paragraphs, we describe how selected agencies met the organizational culture criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion.\nDHS, nearly all the selected agencies in DHS, and Justice have cultures similar to FPS because they are all law enforcement agencies, but NPPD and GSA do not. An official from an association of federal law enforcement officers said moving FPS to a law enforcement agency may improve FPS’s employee satisfaction. Specifically, this official explained that one advantage of moving FPS to a law enforcement agency is that it could mean that FPS inspectors could be reclassified into positions that would receive federal law enforcement officer retirement benefits, leading to improved employee satisfaction and retention. FPS officials said that Justice’s long-standing culture that is focused on law enforcement is something that FPS sees as one of Justice’s advantages.\nAlthough FPS and some of the selected agencies are similar in that their cultures focus on law enforcement, there are differences among their cultures. For example, FPS officials questioned how their agency would meld with the Secret Service since it has long history, and Marshals officials said that FPS and the Marshals do not have comparable legacies. The Secret Service and Marshals have been around for about 150 and 230 years, respectively, while FPS has a 47-year history. In addition, FPS and the law enforcement agencies may have different hiring practices, which can influence the culture of the workforce. Secret Service, for example, requires that all its employees hold a top-secret security clearance. This level of clearance is not required for all of FPS’s employees, according to an FPS official. If FPS moved to Secret Service, Secret Service officials stated that there may be a need to create different workforce categories due to differences in the hiring requirements, a situation that may affect FPS’s and the Secret Service’s employee morale.", "Regarding information sharing, in 2016, DHS designated a division within FPS as a Component Intelligence Program (CIP). CIPs are organizations in DHS that collect, gather, process, analyze, produce, or disseminate information related to national homeland security. According to FPS officials, FPS’s participation in meetings held by the CIPs is important because it provides FPS more visibility on the threats that other DHS agencies have identified and actions they plan to take. Further, FPS shares information obtained in CIP meetings with federal agencies across the United States to support emergency preparedness, security, and employee safety. Additionally, as a CIP, FPS has an opportunity to provide input on the national homeland-security information that the Secretary of Homeland Security receives. Finally, FPS has greater access to information than it might otherwise receive without the CIP designation. FPS officials said that FPS’s designation as a CIP was a “game changer” for FPS’s abilities to identify and share information on emerging threats. FPS officials explained that FPS’s placement could influence whether FPS continues to have direct access to information related to national homeland security that it needs to carry out its mission.\nRegarding coordination, FPS currently coordinates with both GSA and Marshals to fulfill its facility protection mission; however, we have reported on challenges FPS has faced in coordinating with these agencies.\nFPS’s coordination with GSA: FPS and GSA share responsibility for protecting federal facilities. FPS is primarily responsible for protecting federal employees and visitors in federal facilities held or leased by GSA. GSA serves as the federal government’s landlord and, in this role, performs some physical security activities such as funding and repairing security fixtures. In December 2015, we found that FPS and GSA had not agreed on a common outcome related to facility protection or the roles and responsibilities to accomplish their missions.\nFPS’s coordination with Marshals: FPS coordinates with Marshals to protect about 430 federal courthouses. At courthouses held or leased by GSA, FPS is the primary federal agency responsible for patrolling and protecting the perimeter of the facilities and for enforcing federal laws and regulations in those facilities. Marshals has primary responsibility for the security of the federal judiciary, including the safe conduct of court proceedings and the security of federal judges, court personnel, jurors, and the visiting public. In September 2011, we reported that FPS, Marshals, and other agencies involved in protecting courthouses (i.e., GSA and the Administrative Office of the U.S. Courts) faced challenges related to coordination, such as in the implementation of roles and responsibilities and the use or participation in existing collaboration mechanisms.\nIn table 13 and subsequent paragraphs, we describe how selected agencies that met the information sharing and coordination criterion—that is, the selected agencies that were similar to FPS for this criterion—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion.\nLike FPS, all of the selected agencies except GSA have access to and can share information related to national homeland security, and these agencies could share that same information with FPS. Specifically, like FPS, the selected agencies in DHS are CIPs or participate in other groups that have access to and can share information related to national homeland security. Justice and Marshals have access to homeland security information through the Federal Bureau of Investigation and participate in separate groups where national homeland security information is shared, including the Joint Terrorism Task Force and the National Counterterrorism Center.\nWhile selected agencies in DHS and Justice are similar to FPS in the area of information sharing, there are some differences and challenges that decision makers would need to consider before placing FPS in these agencies. For example, FPS and the selected agencies in DHS and Justice require different types of information to meet respective mission needs. In previous organizational placements, FPS has faced challenges with information sharing. For example, FPS officials told us that when FPS was part of ICE, they relied on ICE to provide them with information, which slowed down FPS’s ability to react to information specific to facility protection. This may not be an issue if FPS continues to have direct access to information as a CIP.\nWhile GSA does not have access to national homeland security information, GSA has access to and shares information pertinent to the security of government facilities through, among other sources, participation in the government facilities sector of the Government Coordinating Council and Interagency Security Committee. Officials from FPS, an association of security companies, and a former high-ranking official in NPPD—said if FPS moved to GSA, FPS could lose direct access to critical information that is necessary for it to accomplish its mission. Furthermore, staff from OMB said FPS’s participation in DHS’s homeland security groups has given the agency some level of credibility. Thus, if FPS moved to an agency that does not have access to national homeland security information, such as GSA, there may be resistance from DHS agencies and others in sharing information with FPS, according to the OMB staff. If FPS moved to Justice or Marshals, FPS officials said that they would be able to continue to access and share homeland security information through Justice’s information sharing community. Thus, a move to either of these two agencies would not have as great an impact to their access to homeland security information as a move to GSA would, according to FPS officials.", "Based on the coordination challenges we found in our prior work, FPS and GSA or Marshals may continue to disagree on roles and responsibilities if FPS is placed in these agencies. However, in September 2018, NPPD and GSA signed a memorandum of agreement that, among other things, describes FPS’s and GSA’s roles and responsibilities, and FPS, Marshals, GSA, and the Administrative Office of the U.S. Courts are working to finalize a separate agreement for courthouse security. Accordingly, coordination between these agencies should improve with the implementation of these agreements as we have previously reported that establishing clear roles and responsibilities, in agreements or through other mechanisms, contribute to effective coordination.\nMoving one agency into another does not necessarily mean that the two agencies will coordinate better. As discussed earlier in this report, FPS moved from ICE to NPPD so that FPS could gain synergy with NPPD’s Office of Infrastructure Protection, which is responsible for coordinating infrastructure protection across government and the private sector. According to OMB staff we interviewed, this synergy has not happened in part because NPPD and FPS missions are self-contained—with FPS focused on federal facility infrastructure and the Office of Infrastructure Protection focused on other types of infrastructure, including privately owned infrastructure.\nDHS, CBP, ICE, NPPD, and Secret Service do not have joint responsibilities for coordinating facility protection because these agencies rely on FPS to provide security services or provide their own security services.", "FPS officials told us that over the course of its previous organizational placements, FPS’s mission support capabilities have matured and that it is now able to provide its own mission support in most areas. For example, FPS owns and uses many of the key operational and business- related information technology (IT) systems and applications it needs to carry out its mission. Despite the maturation of FPS’s in-house mission support activities, FPS still receives some mission support services from other agencies in DHS, such as human capital and some aspects of information technology. FPS would need mission support in these areas if it changed its organizational placement. Separately, FPS has faced challenges in the area of financial management, and changing FPS’s placement could help address those challenges. Finally, FPS offers its own training courses and has access to DHS’s Federal Law Enforcement Training Centers (FLETC), and therefore it does not need mission support from a parent agency in this area.\nIn table 14 and subsequent paragraphs, we describe how selected agencies met the mission support criterion—that is, the selected agencies that had mission support that FPS needs—areas of consideration if FPS is placed in those agencies, and how the selected agencies did not meet the criterion.\nAmong the agencies we reviewed, GSA has the infrastructure to support FPS in its funding approach. FPS officials told us that one of the key challenges they experienced in ICE was that ICE did not have institutional knowledge on FPS’s funding approach, particularly FPS’s fee structure, and FPS experienced changes in fees that were not aligned to what was needed to cover its efforts. FPS funds its operations by collecting security fees from federal agencies that use FPS for facility protection. GSA is well positioned to support FPS’s funding approach because it is the only agency we reviewed that also collects monies from multiple federal agencies to support some of its operations. According to documentation we reviewed and interviews with officials from selected agencies, we found that among the remaining agencies, some do not collect fees (NPPD, Secret Service) and others collect fees to support operations, but not from other federal agencies (DHS, CBP, ICE, Justice, Marshals).\nFurther, based on our review of FPS’s fiscal year 2019 budget request to Congress and our past work, we found that FPS faces challenges in generating enough revenue to cover its operational costs. If placed in GSA, GSA and FPS could consider whether to use the Federal Buildings Fund for security projects related to facility management, such as installing cameras. OMB staff said that there are limitations with the Federal Buildings Fund, such as the amount of funding available for security projects. Further, OMB staff said that finding cost-effective ways for FPS to carry out its operations will help the agency address its funding challenges.", "Any of the selected agencies could provide FPS needed human capital support. FPS performs some human capital activities, such as estimating the number of staff it needs to perform its mission but does not have delegated examining authority that allows it to fill competitive civil service jobs. NPPD—FPS’s current parent agency—has this authority and is responsible for recruiting, hiring, and performing other human capital services on behalf of FPS. All the selected agencies we reviewed have delegated examining authority. Thus, any one of these agencies could provide human capital services on behalf of FPS. Officials from three of the selected agencies—ICE, the Secret Service, and Marshals—said that they already face challenges with hiring enough staff to fulfill their own missions or may not have the administrative capacity to handle an additional human capital workload for FPS. For example, officials from the Secret Service and Marshals said they have staffing shortages, which negatively affects their ability to fulfil their missions. The shortage is exacerbated by the time it takes to vet applicants and process new staff through background checks and security clearances, according to the officials. Marshals officials said absorbing FPS would not help the agency address the staffing shortage because FPS employees perform a different mission, including a different law enforcement mission, which require different skill sets, training, etc. Further, Marshals officials said that given the time it takes to vet its own applicants and process its own staff, it lacks the administrative capacity to take on a new agency. Finally, Justice officials said that if FPS moved into Marshals, FPS staff would require ongoing human resources support for such things as performance management, payroll, personnel action processing, and benefits counseling. They said that Marshals is not staffed to assume the full human capital services required of another agency. Separately, an official from ICE said that the agency’s human capital office is currently undergoing a major realignment of service functions and that given FPS’s large workforce, ICE would not have the administrative capacity to take on the additional human capital workload for FPS.\nNPPD may experience some gaps in providing some human capital functions if FPS moved out of NPPD. According to NPPD, FPS provides NPPD 23 staff positions to help NPPD carry out its human capital activities. If FPS moved out of NPPD, NPPD staff said that 15 of the positions could be realigned back to FPS. The remaining 8 positions, which perform major functions including processing pay and managing information technology systems for human capital needs, would need to remain in NPPD if they are not replaced by NPPD. According to NPPD officials, the human capital teams that perform these functions are already understaffed and the skillsets for these functions are not plentiful in the workforce. Thus, if NPPD were unable to retain these positions, NPPD officials said that there may be significant gaps, such as in processing pay.", "FPS’s operational and business-related IT systems and applications would not be greatly affected by a change in FPS’s organizational placement because FPS owns many of the systems and applications it needs to carry out its mission. For example, FPS owns a system to help agency officials conduct and track facility security assessments and another system to track law enforcement activities (e.g., tracking investigative cases and incidents). If FPS’s placement changed, the agency could take its systems with it, though there may be some transition or integration costs, according to FPS officials.\nFPS uses some IT systems or applications that it does not own and that would need some consideration if FPS changed its organizational placement, particularly if FPS moved outside DHS. For example, FPS uses ICE’s system for managing financial transactions and ICE’s IT network. If FPS moved outside of DHS, resources would be needed to remove FPS from this ICE system and network, according to FPS officials. GSA and Justice have financial management systems that FPS could use. Marshals do not have its own financial management but uses Justice’s system. According to Justice and Marshals officials, Justice’s financial management system is currently not configured to support the collection of fees that support operations. Any changes to the configuration of Justice’s financial management system, such as the inclusion of FPS’s fee-based collections, would require the approval of Justice and possibly other Justice components that use the system. If FPS stayed within DHS, including as a standalone entity within DHS, it could potentially continue to use ICE’s system or use CBP or the Secret Service’s systems.", "DHS, CBP, ICE, Secret Service, Justice, and Marshals provide law enforcement training, but FPS would not need access to such training if placed in these agencies because FPS provides its own training on topics related to facility protection. For example, FPS provides training to its inspectors on physical security activities, such as identifying countermeasures needed at facilities. FPS officials said that there would be no efficiency gained in merging FPS and these agencies’ training programs because FPS performs activities that most other law enforcement agencies do not perform. NPPD and GSA do not perform law enforcement activities and therefore do not have law enforcement training programs. If moved to either of these two agencies, FPS could continue to use its own training courses.\nFurthermore, CBP, ICE, Secret Service, and Marshals are Federal Law Enforcement Training Centers (FLETC) Partner Organizations, meaning that they have access to training provided at FLETC training facilities. FPS is also currently designated as a FLETC Partner Organization and therefore would not need to rely on these agencies to obtain this designation. All Partner Organizations, regardless of whether they are DHS agencies or not, share the same equal privileges at FLETC, including priority scheduling for basic and advanced law enforcement training. Nonetheless, Justice and Marshals officials explained that their FLETC training curriculum, planning, and structure are vastly different than other Partner Organizations due to the differing mission sets. NPPD and GSA are not FLETC Partner Organizations. According to FLETC officials, however, because FPS is currently a FLETC Partner Organization, it would continue to have access to FLETC while in NPPD or GSA.", "", "", "", "In addition to the contact named above, Amelia Bates Shachoy (Assistant Director); Roshni Davé (Analyst-in-Charge); Ben Atwater; Jazzmin Cooper; George Depaoli; Adam Gomez; Geoffrey Hamilton; Malika Rice; Amy Rosewarne; Kelly Rubin; Sarah Veale; and Amelia Michelle Weathers made key contributions to this report." ], "depth": [ 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 3, 3, 2, 2, 3, 2, 3, 3, 3, 1, 1, 2, 2 ], "alignment": [ "h2_full h1_full", "h0_full", "h1_full", "h1_full", "", "", "h3_full", "", "h3_full h2_title", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "To what extent did the selected agencies meet key organizational placement criteria?", "What could be potential benefits of keeping FPS in NPPD?", "What would be a potential trade-off in this arrangement?", "How could GSA and the Marshals collaborate?", "To what extent has DHS assessed potential placement options?", "How does this compare to internal control standards?", "How is DHS planning to assess FPS's placement?", "What flaws exist in the current structure of the group?", "How would these steps benefit DHS?", "What is FPS?", "How has FPS been administered?", "What challenges did FPS face during these administrative changes?", "Why is DHS reviewing FPS placement options?", "What was GAO asked to review?", "What does this report address?", "What were GAO's findings?", "On what basis were these agencies selected?", "How did GAO collect data for this report?" ], "summary": [ "In considering organizational placement options for the Department of Homeland Security's (DHS) Federal Protective Service (FPS), GAO found that none of the eight agencies GAO selected met all the key organizational placement criteria; thus, any of the organizational placement options could result in both benefits and trade-offs.", "For example, keeping FPS in DHS's National Protection and Programs Directorate (NPPD) could provide FPS some benefits because FPS and NPPD have missions that include the protection of infrastructure or specific facilities, facility protection responsibilities, and access to and sharing of information related to national homeland security.", "However, unlike FPS, NPPD does not perform both physical security and law enforcement activities, which is a potential trade-off.", "In another example, the General Services Administration (GSA) and the United States Marshals Service (Marshals) could provide benefits because they currently coordinate with FPS on facility protection. However, Marshals does not have a mission or goals that explicitly focus on the protection of infrastructure or facilities and GSA does not perform law enforcement, which are potential trade-offs.", "DHS has not taken key steps to fully assess potential placement options. Specifically, DHS has not assessed the organizational structure of FPS, such as its placement in NPPD, even though FPS and NPPD have evolved since FPS was placed in NPPD in 2010.", "Standards for Internal Control state that agency management should establish an organizational structure to achieve the agency's objectives and that an effective management practice for attaining this outcome includes periodically evaluating the structure to ensure that it has adapted to changes.", "DHS recently established a working group to assess the placement of FPS.", "However, the group's planned activities are limited in several ways. For example, the group's draft charter does not indicate that the working group will describe what DHS expects to achieve by changing FPS's placement. Further, the draft charter does not indicate that the working group will evaluate the benefits and trade-offs of placement options. GAO has previously identified these and other steps as key to successful organizational change or analysis of alternatives.", "These steps would help DHS address the 2018 legislation to review placement options for FPS—including, how DHS considered the results of GAO's review.", "FPS, within DHS's NPPD, conducts physical security and law enforcement activities for about 9,000 federal facilities and the millions of employees or visitors who work in or visit these facilities.", "FPS moved from GSA to DHS's ICE in 2003 and to NPPD in 2009.", "GAO has reported that FPS faced challenges in each location.", "Legislation enacted in November 2018 requires DHS to review placement options for FPS and could result in FPS moving again within DHS or to another executive branch agency.", "GAO was asked to review issues related to organizational placement options for FPS.", "This report examines (1) the potential effects of FPS's placement in selected agencies and (2) steps DHS has taken to assess placement options for FPS.", "GAO identified five key organizational placement criteria based on prior work and identified eight agencies as potential placement options.", "The agencies were selected because they have the largest number of law enforcement officers or perform physical security, among other reasons.", "GAO reviewed documentation and interviewed officials from FPS, selected agencies, and key stakeholders. GAO compared agencies to FPS to determine if they meet the organizational placement criteria." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, 2, 3, -1, 0, 0, -1, -1, 0, -1, 2, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1, 1, 1 ] }
GAO_GAO-14-215	{ "title": [ "Background", "The Federal Civilian Workforce Grew by 14 percent from 2004 through 2012, and 14 percent of On Board Employees were Eligible to Retire in 2012", "From 2004 through 2012, Federal Civilian Compensation Remained Relatively Constant as a Proportion of Total Discretionary Spending", "Concluding Observations", "Agency Comments", "Appendix I: Briefing Slides", "Appendix II: Scope and Methodology", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "In our earlier work on studies comparing federal and non-federal pay, we noted how the composition of the federal workforce has changed over the past 30 years, with the need for clerical and blue collar roles diminishing, and the need for professional, administrative, and technical roles increasing. Today’s federal jobs require more advanced skills at higher grade levels than federal jobs in years past. As a result, a key management challenge facing the federal government in an era of fiscal austerity is balancing the size and composition of the federal workforce so it is able to deliver the high quality services that taxpayers demand, within the budgetary realities of what the nation can afford.\nAs we have previously stated, inadequate planning prior to personnel reductions jeopardizes the ability of agencies to carry out their missions. For example, in the wake of extensive federal downsizing in the 1990s— done largely without adequate planning or sufficient consideration of the strategic consequences—agencies faced challenges deploying the right skills when and where they were needed.\nMore recently, this management challenge has been exacerbated by the fact that today’s federal workforce consists of a large number of employees who are eligible for retirement. Various factors affect when individuals actually retire. Some amount of retirement and other forms of attrition can be beneficial because it creates opportunities to bring fresh skills on board and allows organizations to restructure themselves in order to better meet program goals and fiscal realities. But if turnover is not strategically managed and monitored, gaps can develop in an organization’s institutional knowledge and leadership as experienced employees leave. We have previously reported that the needs and missions of individual agencies should determine their approach to workforce planning.\nGAO-09-632T.\nOur prior work has shown that strategic human capital management has been a pervasive challenge facing the federal government, and has led to government-wide and agency-specific skills gaps. Our February 2011 update to our high risk list noted that federal strategic human capital management was a high risk area because current and emerging mission critical skills gaps were undermining agencies’ abilities to meet their vital missions. To help close these skills gaps, we reported that actions were needed in three broad areas: planning, to identify the causes of, and solutions for, skills gaps and to identify the steps to implement those solutions; implementation, to put in place corrective actions to narrow skills gaps through talent management and other strategies; and measurement and evaluation, to assess the performance of initiatives to close skills gaps.\nSince our February 2011 update, OPM, individual agencies, and Congress have taken a number of steps to close mission critical skills gaps, but as we noted in our 2013 High Risk update, additional actions were needed, as our work found that skills gaps were continuing in such areas as cybersecurity, acquisition management, and aviation safety, among others. These actions included reviewing the extent to which new capabilities were needed, in order to give OPM and other agencies greater visibility over government-wide skills gaps so that agencies could take a more coordinated approach to remediating them. OPM agreed that these were important areas for consideration.\nSince our 2011 High Risk update, OPM’s efforts to address mission critical skill gaps have included establishing the Chief Human Capital Officers Council Working Group in order to identify and mitigate critical skills gaps for both government-wide and agency-specific occupations and competencies. Moreover, the Working Group’s efforts were designated a cross-agency priority goal within the administration’s fiscal year 2013 federal budget; OPM is partnering with the Chief Human Capital Officer’s Council to create a government-wide Human Resources Information Technology strategy that can provide greater visibility to OPM and agencies regarding current and emerging skills gaps.", "From 2004 to 2012, the non-postal civilian workforce grew from 1.88 million to 2.13 million, an increase of 14 percent, or 258,882 individuals. Most of the total increase (94 percent) was from 2007 through 2012. The number of permanent career executive branch employees grew by 256,718, from about 1.7 million in 2004 to 1.96 million in 2012 (an increase of 15 percent). Of the 24 CFO Act agencies, 13 had more permanent career employees in 2012 than they did in 2004, 10 had fewer, and one agency was unchanged. Three agencies (DOD, DHS, and VA) accounted for 94 percent of the growth between 2004 and 2012. These three agencies employed 62 percent of all executive branch permanent career employees in 2012. A number of factors contributed to the overall growth of the civilian workforce: For example, at DOD, according to agency officials, converting certain positions from military to civilian, as well as the growth of the agency’s acquisition and cybersecurity workforce contributed to this overall increase. At VA, according to agency officials, approximately 80 percent of employees hired from 2004 through 2012 were hired by the Veterans Health Administration (VHA), primarily to meet increased demand for medical and health-related services for military veterans. At DHS, the increase in civilian permanent career employment was due to increased staffing to secure the nation’s borders.\nEmployees in professional or administrative positions account for most of the overall increase in federal civilian employment. For example, the number of employees working in professional positions increased by 97,328 (from 394,981 in 2004 to 492,309 in 2012). This growth accounts for nearly 38 percent of the 256,718 total government-wide increase in permanent career employees during this period. In comparison, employees in administrative positions increased by 153,914 (from 582,509 in 2004 to 736,423 in 2012). This growth accounts for 60 percent of the total government-wide increase during this period. Technical, clerical, blue collar, and other white collar positions accounted for the remaining 2 percent of those full-time permanent positions added from 2004 to 2012.\nThe retirement rate of federal civilian employees rose from 3.2 percent in 2004 to a high of 3.6 percent in 2007 when, according to data from the National Bureau of Economic Research, the recession began. During the recession, the total attrition rate dropped to a low of 2.5 percent in 2009 before rebounding to pre-recession levels in 2011 and 2012. Beginning at the end of 2007, the recession saw retirement rates decline to 3.3 percent in 2008, 2.5 percent in 2009, and 2.7 percent in 2010, before increasing again to 3.5 percent in 2012.\nWith respect to retirement eligibility, of the 1.96 million permanent career employees on board as of September 2012, nearly 270,000 (14 percent) were eligible to retire. By September 2017, nearly 600,000 (31 percent) of on board staff will be eligible to retire. Not all agencies will be equally affected. By 2017, 20 of the 24 CFO Act agencies will have a higher percentage of staff eligible to retire than the current overall average of 31 percent. About 21 percent of DHS staff on board as of September 2012 will be eligible to retire in 2017, while over 42 percent will be eligible to retire at both the Department of Housing and Urban Development (HUD) and the Small Business Administration (SBA). Certain occupations—such as air traffic controllers and those involved in program management—will also have particularly high retirement eligibility rates by 2017.", "With respect to pay and benefits as measured by each full-time equivalent (FTE) position, total government-wide compensation grew by an average of 1.2 percent per year from 2004 to 2012 ($106,097 to $116,828—about a 10 percent overall increase). Much of this growth was driven by increased cost of personnel benefits, which rose at a rate of 1.9 percent per year (a 16.3 percent increase overall). According to OMB, the government’s contribution to the Federal Employee Health Benefits (FEHB) program rose, on average, 5.2 percent from 2004 to 2011 and 4.7 percent from 2011 to 2012. One study showed that employer contributions for premiums for family insurance coverage nationwide grew by about 58 percent from 2004 through 2012, for an average annual increase of around 5 percent.spending rose at an average annual rate of 1 percent per year (a 7.9 percent increase overall). While government-wide spending on pay and benefits rose slightly, some agencies had significant increases in their spending on compensation per FTE. For example, the Department of State’s spending on pay and benefits per FTE increased by 4.5 percent per year, on average, from 2004 through 2012. In total, government-wide spending on pay and benefits increased by $51 billion, from $193.2 billion to $244.3 billion (an average annual increase of 3 percent and an overall increase of 26.4 percent) from 2004 to 2012.\nIn terms of employee pay per FTE, Spending on pay and benefits as a proportion of the federal discretionary budget remained relatively constant (at about 14 percent) from 2004 to 2010, with slight increases in 2011 and 2012. Specifically, the proportion spent on pay increased by 0.6 percent and the proportion spent on benefits increased by 0.5 percent from 2004 to 2012. According to OMB, a portion of this increase can be attributed to an increase in the growth in federal civilian employment at certain agencies, locality pay adjustments, across-the-board pay increases, and (as previously stated) increases in the government’s share of FEHB program premiums. Government-wide, while the proportion of the discretionary budget spent on compensation remained constant, certain agencies had increases from 2004 to 2012.\nThree agencies—DOD, DHS, and VA—accounted for 77 percent of the total government-wide increase in compensation from 2004 to 2012, largely due to increased hiring. DOD increased its spending on compensation by $19.9 billion (about 39 percent of the total increase), VA increased its spending by $10.5 billion (about 21 percent of the total increase), and DHS increased its spending by $8.8 billion (about 17 percent of the total increase).\nWith respect to occupational categories,increase in spending on pay from 2004 to 2012 was due to more employees working in professional or administrative positions, which often require specialized knowledge and advanced skills and degrees, and thus, higher pay. Specifically, the percentage of those employees grew from 56 percent of the federal civilian workforce in 2004 to 62 percent in 2012. Even if there had been no change in pay for the occupations, the changing composition of the federal workforce alone would have caused average federal pay to increase from $70,775 in 2004 to $73,229 in 2012, as opposed to the actual 2012 average of $75,947. 48 percent of the overall Appendix I provides more detail on each of our objectives and related findings.", "While the size of the civilian federal workforce grew moderately during the period of our study, most of this growth was concentrated in a few large agencies and reflects some of our nation’s pressing priorities. The cost of compensating the civilian workforce has remained relatively constant as a percentage of the discretionary budget during the past decade; however, nearly half of the increased pay and benefits costs can be attributed to a shift toward more employees serving in professional and administrative capacities, in jobs that require specialized knowledge and higher levels of education. Although employment levels have grown, large numbers of retirement-eligible employees may be cause for concern among agencies, decision-makers, and other stakeholders, because they could produce mission critical skills gaps if turnover is not strategically managed and monitored.\nReplacing retiring workers, both in terms of training and hiring costs, and in terms of the largely unquantifiable costs of losing experienced, high- level employees, could be problematic given the era of flat or declining budgets that the government is experiencing. At the same time, retirement-eligible employees present an opportunity for agencies to align their workforces with current and future mission needs. Indeed, as the federal government faces an array of current and future challenges, agencies will be confronted with going beyond simply replacing retiring individuals by engaging in broad, integrated planning and management efforts that will bolster their ability to meet both current and evolving mission requirements.\nCombined, these challenges underscore the importance of strategic workforce planning and early preparation to help ensure agencies maintain their capacity to carry out their vital functions. Thus, as we have reported in our prior work, agencies should (1) take such key steps as determining the critical skills and competencies that will be needed to achieve current and future programmatic results; (2) develop appropriate talent management strategies to address any gaps in the number, deployment, and alignment of skills; and (3) monitor and evaluate their progress toward their human capital goals. In short, understanding the dynamics of the federal workforce and the drivers of agencies’ compensation costs will help guide decision-making on workforce composition and budgeting.", "We provided a draft of this report to the Director of OMB and the Director of OPM for their review and comment. In addition, we provided sections of this report to DOD, DHS, and VA. GAO received technical comments on a draft of this report from OMB, OPM, DOD, DHS, and VA, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to OMB, OPM, DOD, DHS, VA, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "", "To analyze workforce and turnover trends, we used OPM’s Enterprise Human Resources Integration Statistical Data Mart (EHRI-SDM), which contains personnel action and on board data for most federal civilian employees. We analyzed agency-level EHRI data for the 24 Chief Financial Officers (CFO) Act agencies, which represent the major departments (such as the Department of Defense) and most of the executive branch workforce. We analyzed EHRI data starting with fiscal year 2004 because personnel data for DHS (which was formed in 2003 with a mix of new hires and transfers from other agencies) had stabilized by 2004. We selected 2012 as the endpoint because it was the most recent, complete fiscal year of data available during most of our review. We analyzed on board trends for most of the executive branch workforce, including temporary and term limited employees. However, we focused on career permanent employees in our analysis of separation trends, retirement eligibility, and changes in occupational categories and education levels because these employees comprise most of the federal workforce and become eligible to retire with a pension, for which temporary and term limited employees are ineligible. To calculate the number of federal civilian employees, we included all on board staff, regardless of their pay status. In addition, we excluded foreign service workers at the State Department since those employees were not included in OPM data for the years after 2004.\nWe examined on board, attrition, and retirement eligibility trends by agency, occupation, and education level. Occupational categories include Professional, Administrative, Technical, Clerical, Blue Collar, and Other white-collar (PATCO) groupings and are defined by the educational requirements of the occupation and the subject matter and level of difficulty or responsibility of the work assigned. Occupations within each category are defined by OPM and education levels are defined by OPM as the extent of an employee’s educational attainment from an accredited institution. We grouped education levels to reflect categories of degree attainment, such as a bachelor’s or advanced degree.\nTo calculate attrition rates, we added the number of career permanent employees with personnel actions indicating they had separated from federal service (for example, resignations, retirements, terminations, and deaths) and divided that by the 2-year on board average. To calculate retirement eligibility for the next 5 years, we computed the date at which the employee would be eligible for voluntary retirement at an unreduced annuity, using age at hire, years of service, birth date, and retirement plan coverage.\nWe assessed the reliability of the EHRI data through electronic testing to identify missing data, out of range values, and logical inconsistencies. We also reviewed our prior work assessing the reliability of these data and interviewed OPM officials knowledgeable about the data to discuss the data’s accuracy and the steps OPM takes to ensure reliability. On the basis of this assessment, we believe the EHRI data we used are sufficiently reliable for the purpose of this report.\nTo assess the extent to which federal civilian employee compensation has changed as a percentage of total discretionary spending from fiscal year 2004 through 2012, we analyzed discretionary outlays from OMB’s MAX Information System , which captures compensation costs as gross obligations, hereafter referred to as “spending.” We analyzed spending on employee compensation as a ratio of federal discretionary spending (as opposed to other baseline measures, such as total federal spending or gross domestic product) because discretionary spending—that is, spending that is decided upon by Congress each fiscal year through annual appropriations acts—includes personnel costs as well as other operational and program expenses (such as equipment and contracts) that agencies incur to carry out their mission. As a result, the ratio of compensation to discretionary spending enabled us to compare personnel costs to other agency spending. Moreover, using discretionary spending as a baseline allowed us to present this information for both the entire federal government as well as for an individual agency. Obligations data are reported in object classes, which are categories that present obligations by the type of expenditure. We analyzed the object class, “personnel compensation and benefits,” for executive branch agencies in our analysis.and discretionary spending categories when reporting on budget obligations, we used outlays as a proxy for pay and benefits obligations. According to a senior OMB official, this approach is appropriate for pay and benefits spending categories because most (or all) of the budget authority for these categories is obligated in the same year that it is authorized, resulting in similar numbers between outlays and obligations.\nBecause OMB does not distinguish between mandatory We analyzed pay and benefits per full time equivalent (FTE) based on the MAX database designation for FTEs. To assess the reliability of the MAX data, we performed electronic testing and cross-checked it against the numbers reported in the President’s Budget. In addition, we interviewed OMB officials to understand any discrepancies in the data. For example, we met with OMB officials and provided them our initial results to determine whether we were accurately representing spending on pay and benefits. Based on these discussions, we made adjustments to our scope and methodology, as appropriate. Based on our assessment, we believe these data are sufficiently reliable for the purpose of this report.\nTo determine the factors contributing to workforce, turnover, and compensation trends in the civilian workforce from 2004 to 2012, we interviewed officials at the Office of Personnel Management (OPM), Office of Management and Budget (OMB), Department of Defense (DOD), Veterans Administration (VA), and the Department of Homeland Security (DHS).\nWe conducted this performance audit from June 2012 to January 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov.", "Robert Goldenkoff (Director), Trina Lewis (Assistant Director), and Chelsa Gurkin (Assistant Director) managed this assignment. Jeffrey Schmerling (Analyst-in-Charge) and Wesley Sholtes (Analyst) made key contributions to all aspects of the work. Ben Bolitzer, Sara Daleski, and John Mingus provided assistance with data analysis. Karin Fangman and Sabrina Streagle provided legal support; Robert Gebhart provided key assistance with message development and writing. Robert Robinson provided key assistance with graphics and Rebecca Shea provided methodological assistance." ], "depth": [ 1, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full h2_full h1_title", "h0_full h2_full", "h0_full h1_full", "h3_full h2_full", "", "", "h3_full", "", "", "" ] }	{ "question": [ "How has the federal non-postal civilian workforce changed between 2004 and 2012?", "What categories accounted for this growth?", "What agencies saw the greatest increase?", "What factors led to the increase at DOD?", "What factors led to the increase at VA?", "What factors led to the increase at DHS?", "How did some agencies see an opposing trend when compared to the growth of the DOD, DHS, and VA?", "What sorts of occupations were generally represented in the increased employment opportunities?", "How did retirement rates change between 2004 and 2012?", "How will retirement eligibility rates change by 2017?", "How did FTE compensation change from 2004 to 2012?", "What factors drove this growth?", "How did compensation change as a measure of employee pay per FTE?", "How did compensation change as a proportion of governmentwide federal discretionary spending?", "What driving factors led to the growth of the workforce?", "What employment factors may be a cause for concern?", "How can this issue be addressed?", "What portion of federal discretionary spending were personnel costs in 2012?", "Why must these compensation trends be better studied and understood?" ], "summary": [ "From 2004 to 2012, the federal non-postal civilian workforce grew by 258,882 employees, from 1.88 million to 2.13 million (14 percent).", "Permanent career employees accounted for most of the growth, increasing by 256,718 employees, from 1.7 million in 2004 to 1.96 million in 2012 (15 percent).", "Three agencies--the Departments of Defense (DOD), Homeland Security (DHS), and Veterans Affairs (VA)--accounted for about 94 percent of this increase.", "At DOD, officials said that converting certain positions from military to civilian, as well as the growth of the agency's acquisition and cybersecurity workforce, contributed to this overall increase.", "At VA, officials said the increased demand for medical and health-related services for military veterans drove most of the growth in personnel levels.", "DHS officials said the increase in employment was due in large part to the nation's border security requirements.", "(In contrast, ten agencies had fewer career permanent employees in 2012 than they did in 2004).", "Government-wide, most of the increase in employment from 2004 to 2012 occurred within occupational categories that require higher skill and educational levels. These categories include professional occupations (e.g., doctors and scientists), and administrative occupations (e.g., financial and program managers), as opposed to clerical, technical, and blue collar occupations (which remained stable).", "In terms of turnover, retirement rates remained relatively flat (at around 3.5 percent) from 2004 until the start of the recession in December 2007. Retirement rates fell to a low of around 2.5 percent during the recession in 2009, and then increased to pre-recession rates in 2011 and 2012.", "With respect to retirement eligibility, of the 1.96 million permanent career employees on board as of September 2012, nearly 270,000 (14 percent) were eligible to retire. By September 2017, nearly 600,000 (around 31 percent) will be eligible to retire, government-wide.", "Spending on total government-wide compensation for each full-time equivalent (FTE) position grew by an average of 1.2 percent per year, from $106,097 in 2004 to $116,828 in 2012.", "Much of this growth was driven by increased personnel benefits costs, which rose at a rate of 1.9 percent per year. Other factors included locality pay adjustments, as well as a change in the composition of the federal workforce (with a larger share of employees working in professional or administrative positions, requiring advanced skills and degrees).", "In terms of employee pay per FTE, spending rose at an average annual rate of 1 percent per year (a 7.9 percent increase overall).", "However, as a proportion of governmentwide federal discretionary spending, spending on compensation remained constant from 2004 to 2010 (at 14 percent), with slight increases in 2011 and 2012.", "While the federal civilian workforce grew in size from 2004 to 2012, most of the growth was concentrated in three federal agencies and was driven by the need to address some of the nation's pressing priorities.", "At the same time--as GAO reported in February 2013--large numbers of retirement-eligible employees in the years ahead may be cause for concern: Their retirement could produce mission critical skills gaps if left unaddressed.", "As GAO reported in its February 2013 High Risk update, strategic human capital planning that is integrated with broader organizational strategic planning will be essential for ensuring that-- going forward--agenices have the talent, skill, and experience mix they need to cost-effectively execute their mission and program goals.", "At the same time, personnel costs for current and former federal civilian employees represented about 26 percent of total discretionary spending in 2012; these personnel costs are outlays from budget authority authorized by appropriations acts.", "Given the need to control agencies' personnel costs while also maintaining agencies' high performance, a thorough understanding of employment and compensation trends is a critical component of strategic workforce planning." ], "parent_pair_index": [ -1, 0, 0, 2, 2, 2, 0, -1, -1, 8, -1, 0, 0, 0, -1, 0, 1, -1, 0 ], "summary_paragraph_index": [ 4, 4, 4, 4, 4, 4, 4, 4, 4, 4, 5, 5, 5, 5, 6, 6, 6, 0, 0 ] }
CRS_RL34157	{ "title": [ "", "Introduction to the Caribbean Region", "Political Development", "Economic and Social Development", "Regional Integration", "Most Recent Developments", "Regional and U.S. Policy Developments", "Congressional Action", "Issues in Caribbean-U.S. Relations", "U.S. Foreign Assistance", "HIV/AIDS in the Caribbean7", "Millennium Challenge Account8", "Article 98 Agreements and Sanctions on U.S. Aid9", "Hurricane Recovery and Reconstruction Assistance in 2004", "Drug Trafficking and Money Laundering Issues", "Tax Haven Issue", "Internet Gambling Issue15", "U.S. Trade Policy20", "Movement Toward Free Trade", "Third Border Initiative and Security Issues", "Muslim Extremists", "Port Security", "U.S. Passport Requirements", "Crime", "Deportation Issues", "Caribbean Energy Security53", "Legislative Initiatives in the 110th Congress", "Caribbean-American Heritage Month", "Carribean Community", "Education", "Energy", "Health and HIV/AIDS", "Jamaica", "Passport Requirements", "Tax Havens", "Trade", "For Additional Reading" ], "paragraphs": [ "", "The Caribbean, encompassing 16 independent nations and 13 overseas territories, is a region of almost 42 million people that includes some of the hemisphere's richest and poorest nations. Although many of these nations have similar characteristics, the region as a whole is more commonly distinguished for its diversity. The region consists of 13 island nations from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and the two nations of Guyana and Suriname, located on the north central coast of South America. The largest nations in terms of land area are Guyana and Suriname, while those with the largest populations are Cuba, the Dominican Republic, and Haiti. The island nations of the Eastern Caribbean are among the smallest countries in the world. (See Tables 1 and 2 and Figure 1 .)\nEthnically, a majority of the regional's population is of African heritage, descendants of slaves brought to the West Indies in the 17 th to 19 th centuries to work on sugar plantations. Three nations—Guyana, Trinidad and Tobago, and Suriname—have large populations of East Indian heritage, descendants of indentured servants who were brought to the West Indies in the 19 th and early 20 th centuries. Small minorities of ethnic Chinese are also found in several Caribbean nations and a Javanese population is found in Suriname. Both Cuba and the Dominican Republic have large populations of Spanish descent, but in both countries, people of mixed African-Spanish heritage make up the majority of the population. Descendants of indigenous Caribbean peoples, the Arawak and Carib Indians, constitute small minorities in several Caribbean island nations, while Guyana and Suriname have minorities of several Amerindian tribes. Belize, in addition to having a small Garifuna (mixed African and Amerindian heritage) population, also has a significant indigenous Mayan population.\nMany countries in the region share a common British colonial heritage, while Cuba and the Dominican Republic were Spanish colonies, Haiti was French, and Suriname was Dutch. Stemming from its diverse colonial history, the region includes 12 predominantly English-speaking nations. In several nations, however, more than one language is spoken, and in several countries, a common patois or dialect is spoken. Haiti has two official languages: Creole, the common language spoken by most of the population; and French, which is spoken only by about 10% of the population. In several of the English-speaking Caribbean nations, a French patois is also spoken, evidence of a historical era when British and France vied for colonial control in the region.", "Politically, all Caribbean nations, with the exception of communist Cuba, have elected democratic governments. Although Haiti and the Dominican Republic achieved independence in the 19 th century and Cuba became independent in 1902, the remaining Caribbean nations did not gain full political independence until the second half of the 20 th century. Four of these gained independence in the 1960s, six in the 1970s, and three in the 1980s, with St. Kitts and Nevis the most recent in 1983. Most of the former British colonies have parliamentary forms of government. Guyana, the Dominican Republic, Haiti, and Suriname are republics headed by presidents. As noted above, the region also includes 13 overseas territories, consisting of six British, three French, two Dutch, and two U.S. territories (see Table 1 ).\nRegular free and fair elections have been the norm in most Caribbean nations for many years, with the exception of Cuba and Haiti. In 2006, Haiti ultimately held successful elections in February that had been postponed several times in 2005; Guyana held successful elections in August without the political violence that some observers had expected; and St. Lucia held successful elections in December that led to a change in government. To date in 2007, the Bahamas held parliamentary elections in early May that led to a change of government; Jamaica has elections scheduled for September 3 (postponed from August 27 because of Hurricane Dean); and elections in Trinidad and Tobago are due by October. (See Table 3 for a listing of leaders and elections for head of government.)\nAlthough many Caribbean nations have maintained long democratic traditions, they are not immune from terrorist and other threats to their political stability. In 1981, the government of Eugenia Charles in Dominica was threatened by a bizarre coup plot involving foreign mercenaries. Grenada, under the socialist-oriented government of Maurice Bishop, experienced a break from the democratic norm after it assumed power in a nearly bloodless coup in 1979 and installed a people's revolutionary government. After the violent overthrow and murder of Bishop in 1983, the United States intervened to restore order and end the Cuban presence on the island. In 1990, the government of Trinidad and Tobago was endangered by a coup attempt by a radical Muslim sect, the Afro-Trinidadian based Jamaat al Muslimeen, led by Yasin Abu Bakr. In 1993, stability on St. Kitts was threatened following violent protests after disputed elections; order was restored with the assistance of security forces from neighboring states. More recently, in early June 2007, one Trinidadian and three Guyanese nationals were arrested in Trinidad and Tobago in a foiled plot to blow up a fuel pipeline and tanks at New York's John F. Kennedy International Airport. A fourth suspect, a U.S. citizen of Guyanese origin, was arrested in the United States. The plot focused U.S. and international attention on the potential security threat of Muslim extremists from the Caribbean region.", "As noted above, the Caribbean region is home to some of the richest and poorest nations in the hemisphere, with varying levels of social development. Based on per capita income levels, the World Bank categorizes two Caribbean countries—Antigua Barbuda and the Bahamas—as high income, eight as upper middle income, five as lower middle income, and one—Haiti—as low income. Most of the English-speaking countries have high literacy rates and relatively low infant mortality rates. Haiti has the lowest adult literacy rate in the Caribbean, estimated at 52%, and the highest infant morality rate, measured at 74 per 100,000 live births, while Cuba by far has the lowest infant mortality rate in the region. The United Nations Development Program issues an annual report on human development, with a composite human development index (HDI) that ranks countries based on life expectancy, adult literacy, educational enrollment, and per capita income. In 2006, based on their HDI rank, six Caribbean nations—Barbados, Cuba, St. Kitts and Nevis, the Bahamas, Trinidad and Tobago, and Antigua and Barbuda—were categorized as having \"high development,\" while nine others, ranging from Dominica to Jamaica, were categorized as having \"medium development.\" The only Caribbean nation ranked as having \"low development\" was Haiti.\nMany Caribbean nations experienced an economic slump in 2001-2002 due to downturns in the tourism and agriculture sectors, although most economies in the region have rebounded since 2003. In 2006, all Caribbean nations experienced economic growth, with English-speaking nations and Suriname averaging 6.8% growth for the year. Among the strongest Caribbean economic performers in 2006 were Trinidad and Tobago, with 12% growth, Antigua and Barbuda, with 11% growth, and the Dominican Republic, with 10% growth. Grenada's economy, which experienced an economic decline of over 7% in 2004 because of the damage from Hurricane Ivan, rebounded in 2005 and 2006, with growth rates of 13.2% and 7% respectively. The weakest economic performers in recent years have been Guyana, which experienced a 3% decline in 2005 because of high oil prices and floods, and just a 1.3% increase in 2006; and Haiti, hard hit by floods in 2004 caused by Tropical Storm Jeanne, which experienced a 3.5% economic decline in 2005, and only experienced modest growth of 1.8% in 2005 and 2.5% in 2006.", "In terms of regional integration, 14 of the region's independent nations belong to the Caribbean Community (CARICOM), with the exception of the Dominican Republic (which has observer status) and Cuba. CARICOM was formed in 1973 to spur regional integration.\nCARICOM, which often has been criticized for acting too slowly, is trying to prepare itself for hemispheric integration by moving ahead with its own regional integration. In April 2005, CARICOM members established the Caribbean Court of Justice (CCJ), headquartered in Port-of-Spain in Trinidad and Tobago, that will serve as the region's final court of appeal and replace the Privy Council based in London. To date, however, only Barbados and Guyana have accepted the CCJ as their final court of appeal.\nIn 2006, 12 out of 14 CARICOM nations signed an accord for a CARICOM Single Market (CSM) to further the process of regional economic integration. Eastern Caribbean nations were enticed to join in part by a decision to establish a regional Development Fund and Development Agency for poorer or disadvantaged countries. Under the accord, governments have agreed to provide for the free movement of goods, services, capital, and labor. The goal is to have a CARICOM Single Market and Economy (CSME) by the end of 2008, which is to include a single currency and the harmonization of economic policy. Some observers maintain that while there has been some progress under the CSM, a number of governments are lagging behind in facilitating the free movement of labor and capital. Trinidad and Tobago's Central Bank governor has pointed the difficulty of moving ahead with a common monetary or macroeconomic policy given the differences in the region's economies.\nThe Cricket World Cup games held in nine Caribbean nations in March and April 2007—including Grenada, St. Vincent, and Trinidad and Tobago—spurred some movement toward regional integration. In preparation for the event, CARICOM established a travel and security initiative dubbed the Single Domestic Space, allowing visitors to obtain one visa to travel to 10 English-speaking Caribbean countries, with the need to pass through security checks only at their first point of entry.\nIn addition to CARICOM, six Eastern Caribbean nations are members of the Organization of Eastern Caribbean States (OECS), the subregional organization designed to stimulate economic integration and foreign policy harmonization. The six OECS nations also share a common currency, the Eastern Caribbean dollar, with monetary policy managed by the Eastern Caribbean Central Bank. The Caribbean Development Bank (CDB), headquartered in Barbados, promotes economic development and regional integration.", "", "On September 3, 2007 , Jamaica is scheduled to hold parliamentary elections that were postponed from August 27 because of recovery efforts after Hurricane Dean. The ruling People's National Party (PNP), headed by Prime Minister Portia Simpson Miller, is competing against the opposition Jamaican Labour Party (JLP), led by Bruce Golding, in a race that is expected to be close. From August 17-19, 2007 , Hurricane Dean caused damage in several Caribbean nations, with about a dozen deaths attributed to the storm. In the eastern Caribbean, Dominica St. Lucia, and the French islands of Guadeloupe and Martinique reported extensive damage to the agricultural sectors. Jamaica was hard hit by the storm, which caused flooding in several parishes, made many roads impassable, caused power outages, and significantly damaged the agricultural sector. U.S. Ambassador to Jamaica Brenda LaGrange declared a disaster due to the hurricane, and the U.S. Agency for International Development's Office of Foreign Disaster Assistance (USAID/OFDA) provided $125,000 for emergency relief supplies. A USAID assessment team is determining whether Jamaica needs additional assistance. On June 19-21, 2007 , the Caribbean Community (CARICOM) held a conference in Washington D.C. in which Caribbean leaders held meetings with President Bush and several Members of Congress, and a series of meetings at the Inter-American Development Bank, the Organization of American States, and the World Bank, with forums for the diaspora, the private sector, and development experts. A joint statement issued by President Bush and Caribbean leaders pledged cooperation in several areas, including a strengthening of existing trade arrangements. President Bush announced that he would work with Congress to extend and update the Caribbean Basin Trade Promotion Act (CBTPA). See the joint statement at http://www.state.gov/p/wha/rls/prsrl/07/q2/86952.htm . On June 2, 2007 , the Department of Justice announced that four individuals—one U.S. citizen of Guyanese origin, two Guyanese nationals, and one Trinidadian national—were being charged in a plot to attack John F. Kennedy International airport by planting explosives in the airport's major jet-fuel supply tanks and pipeline. The plot allegedly tapped into \"an international network of Muslim extremists from the United States, Guyana, and Trinidad and Tobago.\" The three foreign nationals were arrested in Trinidad and Tobago. On June 9, 2007 , the Departments of Homeland Security and State announced that there would be some flexibility in the passport requirement for U.S. citizens traveling by air to the Caribbean, as well as Canada and Mexico, that went into effect on January 23, 2007. A backlog of passport applications resulted in a policy change through the end of September 2007 whereby individuals who have applied but have not yet received their passports are able to travel with a government-issued photo and official proof of their passport application. On May 2, 2007 , the Bahamas held parliamentary elections in which the opposition conservative Free National Movement (FNM), led by former Prime Minister Hubert Ingraham, defeated the ruling center-left Progressive Liberal Party (PLP), led by Prime Minister Perry Christie. The FNM captured 23 seats while the PLP won the remaining 18 seats in the House of Assembly.", "On July 31, 2007 , the House passed, by a vote of 371to 55, H.R. 176 (Lee), the Shirley A. Chisholm United States-Caribbean Educational Exchange Act of 2007, which would authorize assistance to the countries of the Caribbean to fund educational development and exchange programs. On July 24, 2007 , the House Western Hemisphere Subcommittee of the Committee on Foreign Affairs held a hearing on U.S. deportees in Latin America and the Caribbean. On June 18, 2007 , the House passed H.Con.Res. 148 (Lee) by voice vote, which recognizes the significance of National Caribbean-American Heritage Month. ●On June 15, 2007 , the House passed, by a vote of 379 to 25, H.Amdt 291 to the FY2008 Department of Homeland Security Appropriations Act, H.R. 2638 , that would prohibit any funds in the bill from implementing a passport requirement plan under section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 before June 1, 2009. The House subsequently approved H.R. 2638 with the provision, and the Senate approved its version July 26, 2007, with a provision that would delay the implementation of a passport requirement plan to no earlier than June 1, 2009. On June 11, 2007 , the House passed H.Res. 418 (Engel), by a vote of 386-0, which recognizes and welcomes the delegation of Presidents, Prime Ministers, and Foreign Ministers from the Caribbean to Washington DC, and commends CARICOM for holding the conference on the Caribbean.", "U.S. interests in the Caribbean are diverse, and include economic, political, and security concerns. During the Cold War, security concerns tended to eclipse other policy interests, and focused on the potential threat in the region from the Soviet Union and Cuba. In the aftermath of the Cold War, other U.S. policy interests emerged from the shadow of the East-West conflict in the Caribbean and U.S. policy priorities shifted from one emphasizing security concerns to a new focus on strengthened economic relations through trade and investment. With the September 2001 terrorist attacks in the United States, security concerns have re-emerged as a major U.S. interest in the Caribbean. The Administration describes the Caribbean as America's \"third border,\" with events in the region having a direct impact on the homeland security of the United States. It describes Caribbean nations as \"vital partners on security, trade, health, the environment, education, regional democracy, and other hemispheric issues.\"\nThe United States has close relations with most Caribbean nations, with the exception of Cuba under Fidel Castro. The U.S.-Caribbean relationship is characterized by extensive economic linkages, cooperation on counternarcotics efforts and security, and a sizeable U.S. foreign assistance program supporting a variety of projects to strengthen democracy, promote economic growth and development, alleviate poverty, and combat the AIDS epidemic in the region. The region has had preferential treatment of its exports to the U.S. market since the early 1980s, and U.S. efforts are now focused on helping the region prepare for hemispheric free trade.\nDespite close U.S. relations with most Caribbean nations, at times there has been tension in the relationship. For example, relations between CARICOM nations and the United States became strained in the aftermath of the departure of Haitian President Jean Bertrand Aristide from power in February 2004. CARICOM nations called for an investigation into the circumstances surrounding Aristide's departure, and Haiti's participation in CARICOM was suspended. After Haiti held elections in February 2006 leading to the inauguration of Rene Préval as president, CARICOM subsequently reinstated Haiti's participation in CARICOM at their July 2006 summit. In another example, Caribbean nations generally maintain good relations with Cuba and Venezuela, and resent U.S. expressions of concern about these relations. Many Caribbean nations are participating in a Venezuelan program known as PetroCaribe that offers oil on discounted terms depending on the price of oil.", "The United States has provided considerable amounts of foreign assistance to the Caribbean over the past 25 years. U.S. assistance to the region in the 1980s amounted to about $3.2 billion, with most concentrated in Jamaica, the Dominican Republic, and Haiti. An aid program for the Eastern Caribbean also provided considerable assistance, especially in the aftermath of the 1983 U.S.-led military intervention in Grenada. In the 1990s, U.S. assistance to Caribbean nations declined to about $2 billion, or an annual average of $205 million. Haiti was the largest regional recipient of assistance during this period, receiving about $1.1 billion in assistance or 54% of the total. Jamaica was the second largest U.S. aid recipient in the 1990s, receiving about $507 million, almost 25% of the total, while the Dominican Republic received about $352 million, about 17% of the total. Eastern Caribbean nations received about $178 million in assistance, almost 9% of the total. The bulk of U.S. assistance was economic assistance, including Development Assistance (DA), Economic Support Funds (ESF), and P.L. 480 food aid. Military assistance to the region amounted to less than $60 million during the 1990s.\nFrom FY2000 through FY2007, U.S. aid to the Caribbean region amounted to about $1.9 billion, with increases reflecting increased HIV/AIDS assistance to the region (especially to Guyana and Haiti), disaster and reconstruction assistance in the aftermath of several hurricanes and tropical storms in 2004, and increased support for Haiti following the departure of President Jean-Bertrand Aristide from power. As in the 1990s, the bulk of assistance to the region consisted of economic assistance. With regard to hurricane disaster assistance, Congress appropriated $100 million in October 2004 in emergency assistance for Caribbean nations ( P.L. 108-324 ), with $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2 million for other countries affected by the storms. Overall assistance to the Caribbean amounted to $393 million in FY2005, $336 million in FY2006, and an estimated $346 million in FY2007 (see Table 4 ).\nFor FY2008, the Bush Administration requested almost $367 million in assistance for the Caribbean, with about 61% for Haiti, almost 13% for Cuba democracy programs, almost 10% for the Dominican Republic, and just over 7% for Guyana. The Caribbean regional program would be funded at $9.3 million, while Eastern Caribbean nations would also receive about $3.2 million for a Peace Corps program, $0.6 million for International Military and Training (IMET) assistance, $0.5 in counternarcotics assistance, and $0.5 million in anti-terrorism assistance (ATA). While in past years, Caribbean nations have received some Foreign Military Financing (FMF)—for example, almost $4 million in FY2006—the Administration did not request any FMF for Caribbean nations in FY2008. Funding for the Third Border Initiative would decline, and has been subsumed into a Western Hemisphere Program, with at least $1.750 million identified for the TBI in the State Department's FY2008 Congressional Budget Justification for Foreign Operations. (Also see discussion below on \"Third Border Initiative and Security Issues.\")\nIn the 110 th Congress, the House passed H.R. 176 (Lee), the Shirley A. Chisholm United States-Caribbean Educational Exchange Act of 2007, on July 31, 2007, by a vote of 371-55. The measure would authorize assistance to the countries of the Caribbean to fund educational development and exchange programs.", "The AIDS epidemic in the Caribbean has begun to have negative consequences for economic and social development in several countries, and continued increases in HIV infection rates threaten future development prospects. In contrast to other parts of Latin America, the mode of HIV transmission in several Caribbean countries has been primarily through heterosexual contact, making the disease difficult to contain because it affects the general population. The countries with the highest prevalence or infection rates in the Caribbean are Belize, the Bahamas, Guyana, Haiti, and Trinidad and Tobago, with rates between 2% and 4%; and Barbados, the Dominican Republic, Jamaica, and Suriname, with rates between 1% and 2%.\nThe response to the AIDS epidemic in the Caribbean America has involved a mix of support by governments in the region, bilateral donors (such as the United States, Canada, and European nations), regional and multilateral organizations, and nongovernmental organizations (NGOs). Many countries in the region have national HIV/AIDS programs that are supported through these efforts.\nU.S. government funding for HIV/AIDS in the Caribbean has increased significantly in recent years. Aid to the Caribbean region rose from almost $6 million in FY2000 to $23.2 million in FY2003, largely through the Child Survival and Health (CSH) foreign assistance funding account. Because of the inclusion of Guyana and Haiti as focus countries in the President's Emergency Plan for AIDS Relief (PEPFAR), largely funded through the Global HIV/AIDS Initiative (GHAI) funding account, U.S. assistance to the region for HIV/AIDS increased to $36 million in FY2004, $70 million in FY2005, $79 million in FY2006, and $104 million in FY2007. For FY2008, the Administration requested almost $116 million in HIV assistance for the Caribbean, with $83 million for Haiti and $21 million for Guyana. (See Table 5 , which shows U.S. aid levels for HIV/AIDS assistance to the Caribbean from FY2003-2008. The figures represent a subset of total assistance levels shown in Table 4 .)\nIn the 110 th Congress, H.R. 848 (Fortuño), introduced February 6, 2007, would add 14 Caribbean countries to the list of focus countries targeted for increased HIV/AIDS assistance. The additional countries are Antigua and Barbuda, Barbados, the Bahamas, Belize, Dominica, Grenada, Jamaica, Montserrat, St. Kitts and Nevis, St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad and Tobago, and the Dominican Republic. Another initiative, H.Con.Res. 166 (Lee), introduced June 7, 2007, would support the goals and ideals of National Caribbean American HIV/AIDS Awareness Day.", "Over the past several years, several Caribbean nations have been potential recipients for Millennium Challenge Account (MCA) assistance, but none have been selected for the program, which provides assistance to countries with strong records of performance in the areas of governance, economic policy, and investment in people. Although Haiti and Guyana have been candidate countries potentially eligible for MCA funds since FY2004 (because of low per capita income levels), neither country has been approved to participate in the program because they have not met MCA performance criteria. Guyana has been designated as an MCA \"threshold\" country since FY2005, and in June 2007 was slated to receive $7.2 million in assistance (from FY2005 MCA funds) to help the country improve its fiscal policy so that it may become eligible for regular MCA funding. For FY2006 and FY2007, the per capita income level for MCA-eligibility increased, and as a result, in addition to Guyana and Haiti, three other Caribbean countries—the Dominican Republic, Jamaica, and Suriname—became potentially eligible for MCA funding but ultimately were not approved for participation.", "An obstacle in the provision of some U.S. assistance to the Caribbean has been that several Caribbean nations that are parties to the International Criminal Court (ICC)—Barbados, St. Vincent, and Trinidad and Tobago—have not signed agreements to exempt Americans from ICC prosecution, so-called \"Article 98 agreements.\" The American Servicemembers' Protection Act (ASPA, P.L. 107-206 , title II), prohibited U.S. military assistance to countries that are parties to the ICC and do not have Article 98 agreements. In 2006, Congress modified ASPA through a provision in the FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 ), which ended the ban on IMET; restrictions on FMF, however, remain in effect. Since FY2005, foreign operations appropriations legislation has also prohibited ESF assistance to countries that are parties to the ICC and have not signed Article 98 agreements, although the legislation has provided for presidential waiver.\nIn July 2003, the Administration announced the termination of military assistance to six Caribbean nations because they had not signed bilateral immunity agreements: Antigua and Barbuda, Barbados, Belize, Dominica, St. Vincent and the Grenadines, and Trinidad and Tobago. Subsequently, Antigua and Barbuda signed an Article 98 agreement in September 2003; Belize signed one in December 2003; and Dominica signed one in May 2004. This left Barbados, St. Vincent, and Trinidad and Tobago as the three Caribbean countries forgoing U.S. military assistance because of the ASPA sanction. Trinidad and Tobago, which played a leading role in the establishment of the ICC, has strongly resisted signing an agreement, as has Barbados. In term of ESF assistance, both Barbados and Trinidad and Tobago reportedly have been excluded from Third Border Initiative projects, because these countries have not signed Article 98 agreements.", "Several Caribbean nations—especially Haiti, Grenada, Jamaica, and the Bahamas—were hard hit during the 2004 Atlantic hurricane season. Hurricane Charley struck western Cuba in August 2004, damaging over 70,000 homes and thousands of hectares of crops. Hurricane Frances struck the Bahamas in September 2004, causing widespread damage throughout the country's islands. In the same month, Hurricane Ivan caused severe damage across the Caribbean: it devastated Grenada, damaging some 80% of the nation's housing, and destroying or damaging much of country's public infrastructure; it passed over Jamaica, causing damage in the western part of the island and in southern coastal towns; and it affected western Cuba, damaging houses and crops. Tropical Storm Jeanne caused devastating mudslides and floods in northern Haiti in September 2004 that killed some 3,000 people, with over 2,800 of those in the city of Gonaives. Another 300,000 Haitians were affected by the loss of homes, livelihoods, and infrastructure.\nIn response, the United States provided immediate humanitarian assistance to several Caribbean nations, especially Grenada, Haiti, and Jamaica, but also the Bahamas, the Dominican Republic, and Cuba. USAID's Office of Foreign Disaster Assistance (OFDA) set up Disaster Assistance Response Teams (DARTs) to respond to the storms, with team members located in the various islands. By the end of October 2004, USAID had provided almost $23 million in emergency humanitarian assistance, largely for assistance to respond to Hurricane Ivan and Tropical Storm Jeanne. In addition, the 108 th Congress appropriated $100 million in emergency assistance ( P.L. 108-324 ) in late October 2004 to provide longer-term reconstruction assistance for Caribbean nations afflicted by the storms.\nThe reconstruction assistance was targeted as follows: $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2 million for other countries affected by the storms. In Grenada, USAID's assistance program had two phases. The first was a short-term program to restore and revitalize rural communities, repair schools and health centers, and reestablish the productive capacity of small and medium-size businesses. The second, longer-term phase focused on rebuilding infrastructure, revitalizing the business sector, and restoring the government's economic management capacity.\nIn Haiti, the reconstruction program had two major components. A community revitalization component involved road repair, disaster mitigation, water system rehabilitation, drainage and clean up, public building rehabilitation, and household repairs. A rural revitalization component involved hillside stabilization, irrigation, and an early warning system for flooding on the La Quinte River, which flows past Gonaives, the city that was devastated by Tropical Storm Jeanne.\nThe Jamaica assistance program also had two phases. The first was an immediate recovery program to help repair community infrastructure and help revitalize the agricultural sector. The second phase involved the repair and rebuilding of homes, assistance for business recovery, and the rehabilitation and re-supply of schools. Other smaller hurricane assistance programs targeted affected communities in the Bahamas and Tobago, and also provided assistance to Eastern Caribbean nations to design and implement risk reduction efforts for low-income housing.", "Because of their geographic location, many Caribbean nations are transit countries for cocaine and heroin from South America destined for the U.S. and European markets. In addition, two Caribbean nations—Jamaica and St. Vincent and the Grenadines—are large producers and exporters of marijuana. Of the 16 countries in the Caribbean region, President Bush designated four of them—the Bahamas, the Dominican Republic, Haiti, and Jamaica—as major drug-producing or drug-transit countries in September 2006 pursuant to annual legislative drug certification requirements. The President urged the new government in Haiti to strengthen law enforcement and the judiciary to bring drug trafficking and crime under control.\nAll four designated Caribbean countries are major transit countries for illicit drugs to the U.S. market, and Jamaica is the largest marijuana producer and exporter in the Caribbean. The Bahamas cooperates extensively with the United States on counternarcotics measures, including interdiction efforts through Operation Bahamas and Turks and Caicos (OPBAT), a multinational interdiction effort, and efforts that target Bahamian drug trafficking organizations. The Dominican Republic, a major transit country for both cocaine and heroin, cooperates closely with the United States, although the State Department's March 2007 International Narcotics Control Strategy Report notes that \"corruption and weak governmental institutions remained an impediment to controlling the flow of illegal narcotics\" through the country. Jamaican cooperation with U.S. law enforcement agencies on counternarcotics efforts is described by the State Department report as robust, but the report also noted that the government seemed unable to act against official corruption, ranging from petty shakedowns by street cops to higher-level corruption and other criminal activities. In Haiti, anti-drug efforts have been hampered over the years by weak institutions, poor economic conditions, and political instability. According to the State Department report, a challenge for the Preval government is curbing continued violence perpetrated by criminal elements, some of whom are involved in drug trafficking.\nMany other Caribbean nations, while not designated major transit countries, are still vulnerable to drug trafficking and associated crimes because of their geographic location. In particular, the State Department's March 2007 report maintains that such crimes have the potential to threaten the stability of the small states of the Eastern Caribbean, and to varying degrees, have damaged civil society in some of these countries. Given the poor outlook for the banana industry in the Caribbean, some observers believe that it will be difficult to contain marijuana production unless there is adequate support to diversify these economies away from banana production. St. Vincent and the Grenadines is the largest marijuana producer in the Eastern Caribbean.\nEfforts to crack down on money laundering also constitute a major component of U.S. anti-drug strategy, and became increasingly important as a counter-terrorist strategy in the aftermath of the September 2001 terrorist attacks in the United States. The State Department's list of major money laundering countries (also categorized as \"jurisdictions of primary concern\") includes six Caribbean countries—Antigua and Barbuda, the Bahamas, Belize, the Dominican Republic, Haiti, and St. Kitts and Nevis—and one British Caribbean dependency, the Cayman Islands. The Department of State, in its March 2007 drug strategy report, maintains that although Antigua and Barbuda has comprehensive legislation to regulate its financial sector, the country remains vulnerable to money laundering because the sector is loosely regulated and because of its Internet gaming industry; the report notes that Antigua and Barbuda has yet to prosecute a money laundering case. The Bahamas has enacted strong anti-money laundering laws that has made it difficult for drug traffickers to deposit large amounts of cash; as a result, traffickers have begun storing large quantities of cash in safe houses, purchasing real estate, vehicles, and jewelry, and processing money through legitimate businesses and shell companies. In Belize, money laundering is believed to occur primarily in the country's growing offshore financial center. Money laundering in both the Dominican Republic and Haiti stems from their roles as major drug transhipment points. In the Dominican Republic, financial institutions engage in transactions with money derived from illegal drug sales in the United States, with courier and wire transfers the primary methods for moving the funds. St. Kitts and Nevis, according to the State Department, is at major risk for corruption and money laundering because of the high volume of narcotics being trafficked through the country and because of the presence of known traffickers on the islands.\nThe Financial Action Task Force on Money Laundering (FATF), an inter-governmental body with the objective of combating money laundering and terrorist financing, has published a list of non-cooperative countries and territories in the fight against money laundering since 2000. The FATF evaluative process has been a major factor in Caribbean countries improving their anti-money laundering regimes. Four Caribbean nations and one dependent territory were on the first FATF non-cooperative list issued in 2000: the Bahamas, the Cayman Islands, Dominica, St. Kitts and Nevis, and St. Vincent and the Grenadines. Grenada was added to the list in September 2001. Subsequent actions by all these nations to improve their anti-money laundering regimes resulted in all of them being removed from the list by June 2003. The Bahamas and the Cayman Islands were removed from the list in June 2001; St. Kitts and Nevis in June 2002; Dominica in October 2002; Grenada in February 2003; and St. Vincent in June 2003. Once a nation is removed from the list, the FATF continues to monitor developments in the country to ensure compliance.\nSome Caribbean officials and others have complained that pressure to strengthen and enforce anti-money laundering regimes in the region have had a detrimental effect on its offshore financial sectors. They maintain that the anti-money laundering measures required have been indiscriminate and constitute an attack on legitimate business conducted in the small financial sectors of the region. In particular, after the U.S. congressional passage of new anti-money laundering provisions in the USA PATRIOT Act ( P.L. 107-56 , Title III), approved in the aftermath of the September 11 terrorist attacks, some feared that the stricter scrutiny of transactions between U.S. and Caribbean financial institutions would threaten the offshore financial industry in the Caribbean. The act's anti-money laundering provisions include a prohibition on U.S. correspondent accounts with shell banks (banks that have no physical presence in the chartering country) and tighter bank record keeping requirements.\nSome observers maintain that the strengthening of anti-money laundering regimes in the Caribbean will have the end result of increasing the attractiveness of the region's offshore financial sectors for legitimate business transactions. According to this view, such efforts as the FATF evaluative process and the anti-money laundering measures under the PATRIOT Act will help change the reputation of the Caribbean as being a haven for money launderers and tax evaders.", "Legislation has been introduced in the 110 th Congress that would restrict the use of offshore tax havens and tax shelters to avoid U.S. Federal taxation. S. 396 (Dorgan), would amend the Internal Revenue Code to treat controlled foreign corporations established in tax havens as domestic corporations, including those in several Caribbean states. S. 681 (Levin) and H.R. 2136 (Doggett), the Stop Tax Haven Abuse Act, would restrict the use of offshore tax havens and tax shelters to inappropriately avoid Federal taxation. Of the 34 countries and territories listed in S. 681 / H.R. 2136 as \"offshore secrecy jurisdictions,\" 16 are in the Caribbean: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Dominica, Grenada, Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Turks and Caicos Islands.\nCaribbean nations have strongly objected to the legislation because they believe it unfairly targets the region. They have called for the removal of CARICOM member states from the legislation, asserting that the countries are in compliance with international information and transparency requirements. According to the Organization for Economic Co-operation and Development (OECD), 17 Caribbean nations and territories that have been categorized as tax havens have committed to improving transparency, and are not listed on the OECD's list of uncooperative tax havens. Barbados, which had been listed as an OECD tax haven in 2000, was subsequently removed from the list because of its longstanding information exchange arrangements with other countries, and its actions to further enhance the transparency of its tax and regulatory rules.", "A controversial issue in U.S. relations with the Caribbean has been a World Trade Organization (WTO) complaint filed by Antigua and Barbuda challenging U.S. restrictions on cross-border Internet gambling. Antigua, which has invested in Internet gambling as a means of diversifying its economy, maintains that it has lost millions of dollars because of the U.S. restrictions. In April 2005, the WTO Appellate Body ruled that the restrictions were inconsistent with U.S. market access commitments under the General Agreement on Trade in Services (GATS), but that the United States could justify them under the GATS public morals exception. The Appellate Body also found, however, that the United States did not appear to be in full compliance with the exception because of possible discriminatory treatment of foreign service suppliers in the area of horseracing. The United States was given until April 2006 to comply. In July 2006, the WTO established a compliance panel at the request of Antigua, which maintained that the United States had taken no action in response to the 2005 decision. The compliance panel ruled in Antigua's favor in March 2007.\nIn May 2007, the United States Trade Representative (USTR) announced that the United States would modify its commitments under the GATS to rule out any market access commitments on gambling services. As a result, Antigua and Barbuda, along with the European Union, Japan, India, Costa Rica, Macao, Canada, and Australia are seeking compensation from the United States for the decision to change its commitments under the GATS. A first round of talks on the issue was held in July 2007. In addition, Antigua and Barbuda announced separately in June that it would seek authorization from the WTO to impose more than $3.4 billion in annual trade sanctions on the United States for not complying with the 2005 WTO ruling against U.S. restrictions on cross-border Internet gambling. U.S. officials challenged Antigua's retaliation figure, and an arbitration panel was set up in late July 2007 to rule on Antigua's request. Antigua maintains that it simply wants a negotiated solution in the gambling case.\nCARICOM officials have expressed concerns about U.S. inaction in the WTO case and have told U.S. officials that they consider it a regional Caribbean issue with the United States as opposed to just a U.S. bilateral issue with Antigua and Barbuda. The issue was raised by Caribbean officials during CARICOM's June 2007 Washington conference, with CARICOM states urging the United States to collaborate with Antigua and Barbuda.", "The United States has offered a one-way duty-free preferential trade arrangement for a wide range of products from Caribbean Basin nations since the early 1980s as an incentive for increased investment and export production in the region. These preferences have changed over the years, but are broadly referred to as the Caribbean Basin Initiative (CBI). In 1983, Congress enacted the Caribbean Basin Economic Recovery Act (CBERA), which allowed duty-free importation of many categories of products with certain significant exceptions. Most apparel and textile goods were ineligible under the CBERA, but in the late 1980s imports of apparel from CBERA countries that were assembled from U.S. components became eligible for reduced duties. These production-sharing arrangements boosted the apparel sectors of several Caribbean Basin countries. In 1990, Congress enacted so-called CBI II legislation that enhanced the benefits of CBERA and made its provisions permanent.\nCongress approved the Caribbean Basin Trade Partnership Act (CBTPA) ( P.L. 106-200 , Title II) in 2000, which expanded preferential tariff treatment for Caribbean Basin nations, providing them with preferential tariff treatment on their exports to the United States, similar to that provided under the North American Free Trade Agreement. Most significantly, this included preferential treatment for petroleum products and qualifying textile and apparel products. To be eligible for the program, countries must fulfill criteria covering a wide spectrum of issues, including WTO obligations, intellectual property rights, worker rights, child labor, and counternarcotics, anti-corruption, and transparency efforts.\nThe CBTPA benefits are scheduled to expire at the end of September 2008, or earlier if the country enters into a free trade agreement with the United States. Currently, seven Caribbean countries are participating in the CBTPA program because they fully meet the eligibility criteria: Barbados, Belize, Guyana, Haiti, Jamaica, St. Lucia, and Trinidad and Tobago. The Dominican Republic traded its benefits under both the CBERA and the CBTPA when it approved implementing legislation in March 2007 for a reciprocal free trade agreement with the United States as part of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). Remaining Caribbean countries continue to benefit from the CBERA program with the exception of Cuba, which is not eligible, and Suriname, a former Dutch colony which has never elected to participate in the CBI trade program. As noted above, the CBERA program has no expiration date. Haiti received additional tariff preferences beyond CBERA and CBTPA in 2006 when Congress approved the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2006 (Title V of P.L. 109-432 ), which includes more flexible rules of origin for apparel.\nSince the United States first implemented a preferential trade program for Caribbean Basin imports in 1984, the overall performance of the region's exports has been mixed (see Table 6 ). The Dominican Republic has been the Caribbean country that has benefitted most from the program, and its apparel sector expanded significantly because of production-sharing arrangements. Overall U.S. imports from the Caribbean amounted to about $4.8 billion in 1984 and to about $14.9 billion in 2005, an increase of over $10 billion. The Dominican Republic accounted for $3.5 billion of the increase. Trinidad and Tobago, an oil and gas exporter, increased its exports destined for the United States from $1.4 billion in 1984 to about $8.4 billion in 2005. For other Caribbean nations, however, such as Haiti and the Bahamas, overall exports to the United States have declined or been stagnant since the early 1980s. Bahamian exports to the United States fell when the country's oil refinery closed in 1985; the country's economy remains based on tourism and financial services. Many small Caribbean nations have service-based economies, with tourism and financial services the leading sectors. As a result, the U.S. trade preferences have not had a significant economic impact on these small economies.\nU.S. exports to the Caribbean region (including agricultural exports to Cuba, which have been allowed since late 2001) rose from $8.9 billion in 2001 to $14.2 billion in 2006 (see Table 7 ). Four Caribbean countries—Dominican Republic, Trinidad and Tobago, Jamaica, and the Bahamas—are the destination for the lion's share of U.S. exports to the region. In 2006, U.S. exports to these four countries accounted for 79% of total U.S. exports to the Caribbean. The United States ran a trade deficit of almost $700 million with the Caribbean in 2006, largely because of natural gas imports from Trinidad and Tobago. For most other Caribbean nations, the United States ran a significant trade surplus.", "All Caribbean nations with the exception of Cuba are participating in the negotiations for a Free Trade Area of the Americas (FTAA), although negotiations for that agreement have been stalled since 2004. Within CARICOM, while some governments, like Trinidad and Tobago, are enthusiastic about the FTAA, other Caribbean governments, especially the smaller countries of the region, have reservations about the FTAA and its impact on the region. While participating in the FTAA negotiations, Caribbean nations argue for special and differential treatment for small economies, including longer phase-in periods. CARICOM has also called for a Regional Integration Fund to be established that would help the smaller economies meet their needs for human resources, technology, and infrastructure.\nIn April 2006, U.S. and CARICOM trade officials meeting in Washington began exploring the possibility of a free trade agreement, although Caribbean ministers reportedly maintained that they would only negotiate such an agreement if it included extensive transition periods for Caribbean nations. The officials also agreed to revitalize a dormant Trade and Investment Council, originally established in the early 1990s, that would be the mechanism used to continue exploratory talks on an FTA as well as other trade and investment issues.\nA key issue for the Caribbean and Congress is how to deal with the impending expiration of the CBTPA program in September 2008, which provides the greatest trade benefits to the region. At CARICOM's June 2007 meeting in Washington D.C., a joint U.S.-CARICOM statement expressed determination to strengthen existing trade arrangements. President Bush pledged to Caribbean leaders that he would work with Congress to extend and update the CBPTA.", "As first announced by President Bush at the April 2001 Summit of the Americas, the \"Third Border Initiative\" (TBI) had the goals of deepening cooperation in fighting the spread of HIV/AIDS, responding to natural disasters, and making sure the benefits of globalization are felt in even the smallest economies. The Caribbean was described as an often overlooked \"third border,\" where illegal drug trafficking, migrant smuggling, and financial crime threaten U.S. and regional security interests. The initiative consisted of a package of programs to enhance diplomatic, economic, health, education, and law enforcement cooperation and collaboration. Most significantly, the initiative included increased funding to combat HIV/AIDS in the region.\nIn the aftermath of the September 2001 terrorist attacks in the United States, the Third Border Initiative expanded to focus on issues affecting U.S. homeland security in the fields of administration of justice and security. Economic Support Funds (ESF) under the TBI have been used to help Caribbean airports modernize their safety and security regulations and oversight, which is viewed an important measure to improve the security of visiting Americans. TBI funds have also been used to support border security such as the strengthening of immigration controls; to help Caribbean economies move toward greater competitiveness; and to support an improvement of environmental management. Assistance in FY2007 was used to help Caribbean nations enhance security in preparation for the Cricket World Cup games.\nRecent funding for the TBI amounted to $8.9 million in FY2005, almost $3 million in FY2006, and a request of $3 million for FY2007. For the FY2008 request, the TBI has been subsumed into a larger Western Hemisphere Regional Program, with $1.75 million in ESF that will support TBI activities designed to enhance diplomatic, economic, health, education, disaster preparedness, and law enforcement cooperation and collaboration. An unspecified portion of $1.1 million humanitarian assistance under the Western Hemisphere Regional Program would fund TBI activities that help Caribbean governments plan and prepare for natural disasters. (See Table 4 on U.S. assistance to the Caribbean.)\nCaribbean nations have been supportive of the TBI program, and in 2004 signed a joint declaration with the United States stating that the TBI was a valuable framework for structuring Caribbean-U.S. engagement and enhancing cooperation in a variety of areas: diplomatic, security, economic, environmental, health, and education.", "As noted above, in early June 2007, the Department of Justice announced that four individuals—two Guyanese nationals, one Trinidadian national, and one U.S. citizen of Guyanese origin—were being charged with conspiring to blow up fuel tanks and a fuel pipeline at JFK International Airport in New York. The U.S. citizen—Russell Defreitas, a former airport cargo worker at JFK—was arrested in New York. The two Guyanese nationals, Abdul Kadir (a former member of Guyana's parliament) and Abdel Nur, and the Trinidadian national, Kareen Ibrahim, were arrested in Trinidad and Tobago and face extradition to the United States to stand trial. According to the Justice Department, the failed \"plot tapped into an international network of Muslim extremists from the United States, Guyana, and Trinidad,\" and the defendants \"used their connections to present their terrorist plot to radical groups in South America and the Caribbean, including senior leadership of Jamaat al Muslimeen (JAM).\" The JAM had been responsible for a bloody coup attempt in 1990 in Trinidad and Tobago. Some news reports maintain that the plotters had also planned to seek help from Iran. U.S. officials have lauded cooperation from both Guyana and Trinidad and Tobago as instrumental in deterring the plot, and the arrests have highlighted the strong counterterrorism cooperation between the Caribbean and the United States.\nFor some observers, the failed plot focuses attention to the potential security threat posed by Muslim extremists in the Caribbean. According to this view, while there are doubts that the accused had the resources and expertise to carry out the plot, the very presence of such individuals in the region espousing such radical views warrants closer scrutiny and attention. Some terrorism specialists, however, maintain that there is little evidence to indicate that Muslims in the Caribbean in such countries as Guyana and Trinidad and Tobago are attracted to radical Islamist ideologies. They contend that the JAM in Trinidad and Tobago has not a track record of operating outside of Trinidad.", "In addition to the TBI, the United States has also provided support to improve port security in the Caribbean region, with the objective of helping ports comply with the more stringent set of maritime regulations embodied in new International Ship and Port Facility Security (ISPS) Code, which went into effect on July 1, 2004. The ISPS is a set of maritime regulations for ships and port facilities with the objective of preventing terrorist incidents. There has been concern among Caribbean nations about the high cost of implementing these security regulations. Some of the larger, richer countries in the Caribbean will be better equipped to afford these extra security costs, while some of the smaller and poorer nations will have difficulty coming into compliance.\nThe U.S. Coast Guard has responsibility for conducting foreign port security assessments to see whether the ports are in compliance with the ISPS standards. Trade sanctions are an option if the port is not in compliance. By November 2004, all Caribbean nations had self-reported that they were in compliance with the more stringent standards of the ISPS Code. The Coast Guard is currently involved in visiting foreign ports worldwide to ensure that security practices are up to standards. According to the Government Accountability Office, most Caribbean ports visited by the Coast Guard have implemented the ISPS Code to a large degree, but the Coast Guard also found facilities in some counties that needed to make improvements or take additional measures.\nIn addition to the Coast Guard, several U.S. agencies have provided some support to help Caribbean nations come into compliance with the ISPS Code and improve port security. The U.S. Maritime Administration (MARAD) in the Department of Transportation organizes, manages, and implements the Inter-American Port Security Training Program (IAPSTP) for the Organization of American States. The State Department's Bureau for International Narcotics and Law Enforcement Affairs has funded port security improvements for several Western Hemisphere countries. In the past, USAID has funded a project specifically for Eastern Caribbean nations to help assess the status of each port's security requirements and its security plans, and has more recently funded a program to help Haiti comply with ISPS Code requirements.\nSeveral Caribbean ports are included in the Container Security Initiative (CSI), a program implemented by U.S. Customs and Border Protection (CBP) of the Department of Homeland Security. The CSI program helps ensure that high-risk containers are identified and inspected at foreign ports before they are placed on vessels for delivery to the United States. In September 2006, three Caribbean ports became operational CSI ports: Caucedo, Dominican Republic; Kingston, Jamaica; and Freeport, Bahamas. All three of these ports are also involved in the Megaports Initiative run by the National Nuclear Security Administration of the Department of Energy. That initiative has the goal of deploying radiation detection equipment to ports in order to detect nuclear or radioactive materials. The Megaports Initiative is currently operational in the Bahamas, while Jamaica and the Dominican Republic are working to implement the program.", "Caribbean nations that depend on tourism such as Jamaica and the Bahamas have expressed concern about the potential negative effects on tourism in the region because of new U.S. passport requirements mandated by Section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), known as the Western Hemisphere Travel Initiative. Beginning January 23, 2007, U.S. citizens traveling by air to the Caribbean (including Bermuda), as well as to Canada and Mexico, require passports. The requirement for the Caribbean originally had been set for December 31, 2005, but subsequently was delayed several times. Because of an extensive backlog of passport applications, the Departments of State and Homeland Security announced on June 8, 2007, that there would be some flexibility with the policy through the end of September 2007, whereby individuals who have applied but have not yet received their passports are able to travel with a government-issued photo and official proof of their passport application. The Caribbean tourism industry has feared that the impact of the air travel passport requirement would be catastrophic for Caribbean economies. To date, according to some anecdotal reports, the passport requirement has discouraged some travelers to the region, with reports of 10% declines in U.S. tourists going to Jamaica and other islands. In the Bahamas, stopover tourists declined 5% in the first quarter of 2007 compared to the same period in 2006.\nThe passport requirement for U.S. citizens traveling by sea to the Caribbean (as well as by land and sea to Canada and Mexico) could be implemented as early as January 2008, according to the Department of State, but an exemption for cruise ship travel could mitigate a negative affect on tourism in the region. Proposed rules were published in the Federal Register on June 26, 2007, which laid out the documents that would be required for those traveling by land and sea. Under the proposed rules, U.S. citizens traveling on cruise ships on round trip voyages that begin and end in the same U.S. port would not require passports, but could travel with government-issued photo ID and a certified copy of their birth certificate. For several Caribbean nations, however, a majority of tourism revenues are derived from tourists arriving by air, compared to day trippers from cruise ships.\nIn the 110 th Congress, both the House and Senate-passed versions of H.R. 2638 , the FY2008 Department of Homeland Security Appropriations Act have provisions that would delay the implementation of any plan for passport requirements to no earlier than June 1, 2009. The House approved its provision in the bill on June 15, 2007, when it passed H.Amdt 291 (LaTourette), by a vote of 379 to 25, prohibiting any funds in the bill from implementing a passport requirement plan under section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 before June 1, 2009. The Bush Administration opposes any provisions in the bill that would delay implementation of the Western Hemisphere Travel Initiative to June 2009.", "High rates of violent crime, including murder and kidnaping, is a major public security concern throughout the Caribbean. Jamaica, with 1,335 murders in 2006, had a murder rate of 50.5 (per 100,000 people), the highest in the Caribbean. Other countries with high murder rates in 2006 were St. Kitts and Nevis (35.5), Belize (32.2), Trinidad and Tobago (28.6), St. Lucia (24), and Guyana (20.4). According to a March 2007 joint UN/World Bank study, homicide rates in the Caribbean are high by world standards. Comparative international rates from 2002 show that the region has more murders per capita—30 per 100,000—than any other region in the world, compared to a rate of 29 for Southern and West Africa, 26 for South America, and 7 for North America.\nThe UN/World Bank study concluded that the transit of illicit drugs through the Caribbean is the major factor contributing to high rates of crime and violence in the region. The report maintained that a criminal justice-focused approach is necessary for certain types of crime and violence, but contended that there has been over-reliance on this approach for crime reduction in the region. Additional approaches could focus on prevention, environment-improvement, community policing, and targeted youth services. The report also called for more reintegration services for deportees (see discussion below) and for the availability of firearms to be limited and regulated.", "U.S. deportations to Latin American and Caribbean countries constitute the overwhelming majority of U.S. deportations worldwide. In FY2006, for example, the Department of Homeland Security (DHS) deported almost 197,000 aliens worldwide, with almost 188,000 of those, or 95%, going to Latin American and Caribbean countries. Overall in FY2006, some 45% of those deported to Latin America and the Caribbean were removed based on a criminal conviction. For a number of countries, particularly in the Caribbean, a majority of those deported were removed on criminal grounds. Legislation enacted in 1996—the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA, P.L. 104-132 ) and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, Division C of P.L. 104-208 )—made changes to immigration law that increased the number of aliens subject to deportation and decreased access to relief from deportation. As a result, U.S. deportations to the Latin American and Caribbean region have increased (as with deportations worldwide) more than fourfold over the past decade, from over 46,000 in FY1995 to, as noted above, some 199,000 in FY2005 and almost 188,000 in FY2006.\nCaribbean countries accounted for just over 3% of total U.S. deportations in FY2006, with 6,100 aliens deported to the sub-region. Among Caribbean countries, the major recipient of U.S. deportations in FY2006 were the Dominican Republic, with over 2,800 of its citizens deported, accounting for 46% of U.S. deportations to the Caribbean; Jamaica, with over 1,400 deportations, or 23%; and Haiti, with over 800, accounting for just over 13%. A number of small English-speaking Caribbean nations—such as St. Kitts and Nevis, Antigua and Barbuda, and Guyana—while having much smaller numbers of their citizens deported from the United States, were among the top recipient countries on a per capita basis. For most Caribbean nations, with the exception of Haiti, a large majority of their citizens deported from the United States were removed on criminal grounds. For example, almost 88% of Jamaicans and 80% of Dominicans were deported on criminal grounds in FY2006. (See Table 8 .)\nThe deportation of Caribbean citizens from the United States has been one of the thorniest issues between Caribbean nations and the United States for a number of years, with challenges centered on criminal deportees and social stigma. The number of U.S. criminal deportations to the Caribbean has increased from just over 3,100 in FY1996 to over 5,300 in FY2005, although the number fell to about 4,500 in FY2006. While the majority of those returned are not hardened criminals, even a small number of such criminals can cause significant problems. A recent U.N.-World Bank study concluded that it is unlikely that the average deportee in Jamaica is committing violent crime, and that statistics on criminal deportees in Barbados and Trinidad and Tobago show low re-offender rates among criminal deportees. Nevertheless, the study maintains that it is possible that some deportees are involved in violent crime, and that such activity can have a significant impact in such small Caribbean countries.\nStigma has been a major problem facing deportees to Caribbean countries, with employers often unwilling to hire deportees because of the perception that they are hardened criminals that cannot be trusted. Caribbean officials often fuel the stigma by contending that the deportees are largely responsible for the rise in crime in the region. For example, Haitian officials have repeatedly criticized the deportations, and have blamed the country's increase in violent crime and kidnaping on the deportees. In contrast, foreign diplomats as well as officials of the U.N. police force in Haiti dispute this, and assert that Haiti's powerful street gangs are responsible for the crime. In Jamaica, government officials often link the criminal deportees to criminal organizations and rising homicide rates in the country. Some Jamaican politicians contend that the deportees learned their criminal ways in the United States and that many have lived in the United States since they were young children. In contrast, noted Jamaican criminologist Bernard Headley contends that the majority of criminal deportees in Jamaica are not hardened criminals, and that a only minority of deportees were raised in the United States at a young age.\nCaribbean officials have called on the United States to provide better information on deportees with criminal records. Some have recommended that U.S. law enforcement authorities share information on all Caribbean deportees, with the goal of establishing a Deportee Databank for the region. Some Caribbean officials have also called on the United States to reconsider the policy of deporting long-term permanent residents, balancing such issues as the interests of children, the interests of the individual, and the impact on both the United States and recipient countries.\nCaribbean leaders have also called for reintegration assistance to help returning nationals, many who have spent many years away from their country. Speaking at the June 2007 CARICOM meeting in Washington D.C., Jamaican Prime Minister Portia Simpson Miller called for international assistance for rehabilitation, reintegration into society, and mechanisms for effective monitoring. The U.N.-World Bank study noted above maintained that assisting reintegration efforts in the Caribbean for deported offenders could be a cost-effective way for deportee-sending countries to promote development and weaken international criminal networks. The study recommended improved coordination and information sharing on criminal deportees by sending countries; robust research on the contribution of deportees to crime; and the financing of deportee reintegration programs, including financial support from sending countries.\nCARICOM issued a report on crime and security in 2002 recommending that its member states establish offices for the resettlement of deportees, modeled after such an office in St. Kitts and Nevis, that would provide temporary employment, housing, and other services. Several countries in the region have established such offices. Trinidad and Tobago, for example, established a Social Displacement Unit within the Ministry of Social Development that assesses the needs and provides some assistance to deportees.\nIn 2006, the United States indirectly funded a $1 million pilot project in Haiti through the United Nations Development Program and implemented by the International Organization for Migration (IOM), which established a Haitian government program providing services to deportees. The program, which began operating in 2007 under the Haitian government's Ministry of Social Affairs, involves counseling, HIV/AIDS testing, a drug rehabilitation program, skills training, and micro-enterprise support. State Department officials indicate that they are hoping to use the program as a model for reintegration programs in other CARICOM countries in the future.", "A major concern for Caribbean nations—the majority of which are net energy importers—has been the rising price of oil and the potential effect of such rising prices on economic growth and social stability. In the Caribbean region, only three nations—Trinidad and Tobago, Cuba, and Suriname—have significant oil and gas reserves. Of these, only Trinidad and Tobago is a major oil and gas producer. With gas reserves of 19 trillion cubic feet—the fifth largest in the Western Hemisphere—Trinidad is the largest supplier of liquefied natural gas (LNG) to the United States, accounting for 75% of all U.S. LNG imports. It also produced an estimated 150,000 barrels of oil per day in 2006. Both oil and gas reserves in Trinidad have declined in recent years, putting pressure on exploration efforts in order to sustain future production. Cuba produces oil, about 69,000 barrels of oil per day, but still imports a majority of its consumption needs. Estimates of Cuba's offshore oil reserves, however, approach 5 billion barrels of undiscovered oil. Suriname produces about 12,000 barrels of oil per day. Barbados also produces a small amount of oil, which is refined in Trinidad and Tobago, but it imports 90% of its oil consumption needs.\nVenezuela is now offering oil to Caribbean nations on preferential terms in a new program known as PetroCaribe, and there has been some U.S. concern that the program could increase Venezuela's influence in the Caribbean region. Since 1980, Caribbean nations have benefitted from preferential oil imports from Venezuela (and Mexico) under the San Jose Pact, and since 2001, Venezuela has provided additional support for Caribbean oil imports under the Caracas Energy Accord. PetroCaribe, however, goes further with the goal of putting in place a regional supply, refining, and transportation and storage network, and establishing a development fund for those countries participating in the program.\nUnder the program, Venezuela is offering to supply 190,000 barrels per day of oil to the region on preferential terms. When oil prices are over $50 a barrel, 40% of the volume is financed over 25 years at an annual interest rate of 1%. Cuba, a major beneficiary of PetroCaribe, receives some 90,000 barrels per day (bpd) of oil from Venezuela, while the Dominican Republic receives some 40-45,000 bpd and Jamaica receives some 23,500. Fourteen Caribbean nations are signatories of PetroCaribe. PetroCaribe also has the goal of putting in place a regional supply, refining, and transportation and storage network, and establishing a development fund for those countries participating in the program. Barbados, which already receives discounted petroleum rates from Trinidad, has declined to sign the agreement, and Trinidad, which has its own abundant energy resources, has declined to sign.\nIn the past, Trinidad's Prime Minister Patrick Manning warned other CARICOM nations that PetroCaribe could leave them dependent on Venezuelan oil. Petrotrin, Trinidad and Tobago's state-owned oil company reportedly is looking for new oil markets outside the Caribbean to replace some markets lost to Venezuela because of PetroCaribe. The company traditionally has sold about 60,000 barrels per day of oil to the region. More recently, Trinidad has increased its energy cooperation with Venezuela. In March 2007, Trinidad and Venezuela signed an agreement for the joint development of offshore gas blocks that lie in common waters. Trinidadian Prime Minister Patrick Manning has suggested that the gas produced from the joint endeavor should be processed in Trinidad because it already has the infrastructure in place and well-developed LNG capabilities. Manning also has proposed to both Brazil and Venezuela that the three countries cooperate in building a second oil refinery in Trinidad and Tobago.\nThe development of biofuels such as ethanol, produced from sugar, could help some Caribbean countries reduce their dependence on imported oil. In March 2007, the United States and Brazil signed an agreement to promote greater cooperation on ethanol with part of the accord focusing on assistance for biofuels development in several countries, including the Dominican Republic, Haiti, and St. Kitts and Nevis. In early August 2007, Brazil and Jamaica signed an agreements to help modernize Jamaica's sugar and ethanol sectors.", "", "H.Con.Res. 148 (Lee) , introduced May 14, 2007 and passed by the House on June 18, 2007 by voice vote, recognizes the significance of National Caribbean-American Heritage Month.", "H.Res. 418 (Engel) , passed (386-0) by the House June 11, 2007; recognizes and welcomes the delegation of Presidents, Prime Ministers, and Foreign Ministers from the Caribbean to Washington DC, and commends the Caribbean Community for holding the conference on the Caribbean.", "H.R. 176 (Lee) , Shirley A. Chisholm United States-Caribbean Educational Exchange Act of 2007—introduced January 4, 2007; reported by the House Committee on Foreign Affairs July 23, 2007 ( H.Rept. 110-254 ); and passed (371-55) by the House on July 31, 2007—would authorize assistance to the countries of the Caribbean to fund educational development and exchange programs.", "S. 1007 (Lugar) , introduced March 28, 2007, would, among other provisions: direct the Secretary of State to work with the government of Brazil and other foreign governments in the Western Hemisphere to ensure energy security by fostering the development of biofuels production, research and infrastructure; and require a study and investigation from the Secretary of the Treasury regarding ethanol imports from certain Caribbean Basin countries. S. 1106 (Thune) , would extend the additional duty on ethanol from January 1, 2009 to January 1, 2011, and require an investigation into ethanol imports from certain Caribbean Basin countries.", "H.R. 848 (Fortuño) , introduced February 6, 2007, would amend the State Department Basic Authorities Act of 1956 to authorize assistance to combat HIV/AIDS in Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Saint Lucia, Suriname, Trinidad and Tobago and Dominican Republic. H.Con.Res. 166 (Lee) , introduced June 7, 2007, would support the goals and ideals of National Caribbean American HIV/AIDS Awareness Day. H.Con.Res. 173 (Jones, Stephanie Tubbs) , introduced June 21, 2007, would support the goals and ideals of the First Summit of Caribbean Ministers of Health.", "H.Con.Res. 16 (Lee) , introduced January 5, 2007, would congratulate Prime Minister Portia Simpson Miller for becoming the first democratically-elected female Prime Minister of Jamaica and the first female Jamaican head of state.", "H.R. 2638 (Thompson, Bennie) , the FY2008 Department of Homeland Security Appropriations Act, both the House and Senate-passed versions have provisions that would delay the implementation of any plan for passport requirements to no earlier than June 1, 2009. The House approved its provision on June 15, 2007, when it passed H.Amdt. 291 (LaTourette), by a vote of 379 to 25, prohibiting any funds in the bill from implementing a passport requirement plan under section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004. The Bush Administration opposes any provisions in the bill that would delay implementation of the Western Hemisphere Travel Initiative to June 2009.\nH.R. 1684 (Thompson, Bennie) , Department of Homeland Security Authorization Act for FY2008, passed (296-126) by the House May 9, 2007; Section 1124(a) of the House-passed bill would, among other provisions, provide that citizens of the United States or Canada less than 16 years of age not be required to present a passport when returning to the United States from Canada, Mexico, Bermuda, or the Caribbean at any port of entry along the international land or maritime border of the United States.\nH.R. 1061 (Slaughter) , Protecting American Commerce and Travel Act of 2007, introduced February 14, 2007, would: direct the Secretary of Homeland Security to conduct a pilot program to determine if a state driver's license may be enhanced to satisfy the passport requirements of the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) for land and sea travel only; provide that a U.S. citizen under 17 shall not be required to present a passport when returning to the United States from Canada, Mexico, Bermuda or the Caribbean at specified ports of entry; direct the Secretary of State to issue U.S. citizen applicants a passport card that may be used for international travel although the Secretary may limit the use of a passport card to only international land and sea travel.", "S. 396 (Dorgan) , introduced January 25, 2007, would amend the Internal Revenue Code to treat controlled foreign corporations established in tax havens as domestic corporations, including those in several Caribbean states. S. 681 (Levin) , introduced February 17, 2007, and H.R. 2136 (Doggett) , introduced May 3, 2007, the Stop Tax Haven Abuse Act, would restrict the use of offshore tax havens and tax shelters to inappropriately avoid Federal taxation. Of the 34 countries and territories listed as \"offshore secrecy jurisdictions,\" 16 are in the Caribbean.", "H.R. 762 (Fortuño) , introduced January 31, 2007, would authorize appropriations for FY2008 for voluntary contributions on a grant basis to the Organization of American States to establish a Center for Caribbean Basin Trade and to establish a skill-based training program for Caribbean Basin countries.", "CRS Report RL33337, Article 98 Agreements and Sanctions on U.S. Foreign Aid to Latin America , by [author name scrubbed].\nCRS Report RL33819, Cuba: Issues for the 110 th Congress , by [author name scrubbed].\nCRS Report RS21718, Dominican Republic: Political and Economic Conditions and Relations with the United States , by [author name scrubbed] and [author name scrubbed].\nCRS Report RL31870, The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) , by [author name scrubbed].\nCRS Report RS21930, Ethanol Imports and the Caribbean Basin Initiative (CBI) , by [author name scrubbed].\nCRS Report RS20864, A Free Trade Area of the Americas: Major Policy Issues and Status of Negotiations , by [author name scrubbed].\nCRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by [author name scrubbed] and [author name scrubbed].\nCRS Report RL32001, HIV/AI DS in the Caribbean and Central America , by [author name scrubbed].\nCRS Report RL33693, Latin America: Energy Supply, Political Developments, and U.S. Policy Approaches , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].\nCRS Report RL33828, Latin America and the Caribbean: Issues for the 110 th Congress , coordinated by [author name scrubbed].\nCRS Report RS22657, Latin America and the Caribbean: Fact Sheet on Economic and Social Indicators , by [author name scrubbed].\nCRS Report RL33162, Trade Integration in the Americas , by [author name scrubbed].\nCRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean , by [author name scrubbed].\nCRS Report RL32739, Tsunamis: Monitoring, Detection, and Early Warning Systems , by [author name scrubbed].\nCRS Report RL32487, U.S. Foreign Assistance to Latin America and the Caribbean , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].\nCRS Report RL33951, U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements , by [author name scrubbed].\nCRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed]." ], "depth": [ 0, 1, 2, 2, 2, 1, 2, 2, 1, 2, 3, 3, 3, 3, 2, 2, 2, 2, 3, 2, 3, 3, 3, 3, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full", "h0_full", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "", "h1_full", "h1_full", "", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What kind of region is the Caribbean?", "What countries does the Caribbean consist of?", "To what extent are these nations democratic?", "How did most Caribbean economies change between 2001 and 2003?", "What is the nature of the U.S.-Caribbean relationship?", "What projects does the U.S. aid support?", "How did the Caribbean Basin Initiative shape how the U.S. treated Caribbean imports?", "How did the U.S. work to strengthen trade arrangements?", "What tensions exist in the U.S.-Caribbean relationship?" ], "summary": [ "With some 42 million people encompassing 16 independent countries and 13 overseas territories, the Caribbean is a diverse region that includes some of the hemisphere's richest and poorest nations.", "The region consists of 13 island countries, from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and the two countries of Guyana and Suriname, located on the north central coast of South America.", "With the exception of Cuba and Haiti, regular elections in the region are the norm, and for the most part have been free and fair. Nevertheless, while many Caribbean nations have long democratic traditions, they are not immune to threats to their political stability, including terrorism.", "Many nations in the region experienced economic decline in 2001-2002 due to downturns in the tourism and agriculture sectors, but most Caribbean economies have rebounded since 2003.", "The U.S.-Caribbean relationship is characterized by extensive economic linkages, cooperation on counternarcotics and security, and a sizeable U.S. foreign assistance program.", "U.S. aid supports a variety of projects to strengthen democracy, promote economic growth and development, alleviate poverty, and combat the HIV/AIDS epidemic in the region.", "The United States has offered preferential treatment for Caribbean imports since 1984 under the Caribbean Basin Initiative yet the performance of the region's exports to the United States has been mixed.", "During a June 2007 meeting in Washington, DC, Caribbean leaders and President Bush pledged to strengthen existing trade arrangements. President Bush vowed to work with Congress to extend and update the Caribbean Basin Trade Partnership Act, which provides NAFTA-like tariff treatment for Caribbean imports, before it expires at the end of September 2008.", "Many Caribbean nations resent U.S. expressions of concern about their relations with Cuba and Venezuela. Another delicate issue has been the large number of deportations from the United States to the region over the past several years." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, -1, 2, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2, 2, 2 ] }
GAO_GAO-12-648	{ "title": [ "Background", "Current Eligibility Requirements and Enrollment Policies for Medicaid and CHIP", "Eligibility Requirements for Medicaid, CHIP, and the Premium Tax Credit under PPACA", "Enrollment Policies for Medicaid, CHIP, and the Premium Tax Credit under PPACA", "PPACA’s Private Health Insurance Market Provisions", "An Estimated Three- Quarters of Uninsured Children Would Be Eligible for Medicaid, CHIP, or the Premium Tax Credit under PPACA, but the Proposed Affordability Standard May Result in Some Children Remaining Uninsured", "An Estimated 14 Percent of Children Eligible for Medicaid, CHIP, or the Premium Tax Credit under PPACA Would Experience a Change in Eligibility within 1 Year", "CMS Has Provided States with Tools to Increase Enrollment, and States Express a Need for Further Guidance and Note Budget Constraints", "CMS Has Provided States with Financial and Technical Assistance to Facilitate the Enrollment and Retention of Eligible Children in Medicaid and CHIP", "Conclusions", "Recommendation for Executive Action", "Agency Comments", "Appendix I: Scope and Methodology of the Survey of Income and Program Participation Analysis", "Analysis Variables", "Methodology", "Appendix II: Federal Initiatives and Funding Available to States to Facilitate Enrollment of Eligible Children and Implement PPACA", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The federal government has historically established minimum eligibility requirements for Medicaid and CHIP and provided states with considerable flexibility in expanding eligibility to individuals in households with higher incomes. PPACA made numerous changes to existing federal Medicaid and CHIP eligibility requirements and specified eligibility criteria for new types of assistance, such as the premium tax credit. PPACA also provided for a continued focus on certain CHIPRA initiatives; specified additional policies to facilitate eligible children’s enrollment in Medicaid, CHIP, and the premium tax credit; and included provisions to facilitate children’s access to private health insurance. Federal and state implementation of PPACA enrollment and eligibility provisions is under way.", "Eligibility for Medicaid and CHIP is limited to U.S. citizens and certain legally residing immigrants and is generally based on household income in relation to the FPL. For Medicaid, the federal government requires that states cover children with household incomes at or below specific eligibility levels, which range from 100 through 133 percent of FPL depending on the age of the child. States have flexibility to increase eligibility levels beyond the federally required levels for children of specific ages. For example, several states have Medicaid eligibility levels of 185 percent of FPL for infants, and a more limited number of states also have eligibility levels higher than the federal requirement for children older than age 1. Because Medicaid eligibility levels vary by children’s age, some members of a given family may qualify for Medicaid, while others do not. With CHIP programs, states cover children whose household incomes are too high for Medicaid eligibility; most states’ CHIP eligibility levels are between 200 and 300 percent of FPL. States use different methods for counting household income; for example, some states disregard portions of certain types of income, such as earned income, and states have varying standards regarding which household members to include when determining family size.", "With regard to changes to children’s eligibility for Medicaid and CHIP and eligibility specifications for the new premium tax credit, which are to be fully effective in 2014, PPACA included the following provisions.\nPPACA expanded Medicaid eligibility to children and adults under age 65 with household incomes at or below 133 percent of FPL. As a result, minimum eligibility levels for Medicaid will generally be the same for all family members. Some children with household incomes higher than 133 percent of FPL will continue to be eligible for Medicaid in states that have established higher eligibility levels for children. These states are not allowed to lower their Medicaid eligibility levels for children until fiscal year 2020.\nPPACA required a uniform method of counting household income, based on a household’s modified adjusted gross income (MAGI) to determine eligibility for Medicaid, CHIP, and the premium tax credit. As a result, household income for Medicaid and CHIP, as well as for the premium tax credit, will be determined consistently in all states.\nPPACA defined eligibility criteria for the new premium tax credit, which will apply in all states. Similar to Medicaid and CHIP, eligibility for the premium tax credit will be limited to U.S. citizens and legally residing immigrants. Eligibility will also be limited to individuals with household incomes between 100 and 400 percent of FPL. In addition, to be eligible for the premium tax credit, an individual cannot have access to public insurance such as Medicaid or CHIP or to affordable employer-sponsored health insurance that provides a minimum value.\nA child’s eligibility for Medicaid, CHIP, and the premium tax credit can change over time under PPACA as his or her household income fluctuates. For example, a child who begins the year eligible for the premium tax credit may become eligible for Medicaid or CHIP if household income declines during the year. Conversely, depending on the state, a child who begins the year eligible for Medicaid or CHIP may lose eligibility for these programs if household income increases.", "PPACA also contained provisions to facilitate eligible children’s enrollment in Medicaid, CHIP, and private health insurance subsidized by premium tax credits. For example, PPACA extended funding for CHIPRA outreach and enrollment grants through fiscal year 2015, prohibited states from requiring in-person interviews for enrollment beginning in 2014, provided for income to be verified through a federally managed hub of data electronically accessible to states, and specified a coordinated enrollment process, whereby with one federally defined uniform application, states will assess families for eligibility for Medicaid, CHIP, or the premium tax credit. PPACA also made funding available to states to plan and implement exchanges, which will provide eligible individuals and families—including those eligible for premium tax credits—the ability to compare, select, and enroll in participating private health insurance plans with standardized benefit and cost-sharing packages. Under PPACA, exchanges must be established in every state by January 1, 2014, either by the state itself or by the Secretary of HHS.", "Although not the focus of this report, PPACA also contained provisions to facilitate children’s access to private health insurance, apart from the provision of the premium tax credit. For example, as of September 2010, PPACA prohibited health plans and issuers from limiting or denying coverage for children under age 19 because of preexisting health conditions. (See table 1.)\nImplementing PPACA’s changes to Medicaid and CHIP eligibility determination and enrollment policies and preparing for implementation of the premium tax credit and other provisions of PPACA will require significant state and federal efforts. In August 2011, CMS and IRS separately issued three proposed rules to implement key PPACA provisions related to eligibility and enrollment for Medicaid, CHIP, and the premium tax credit; the CMS rules were finalized in March 2012. According to CMS, more detailed guidance, such as the specific information to be collected in the uniform application or the nature of the data available from the federal hub, will be distributed at a later date. The IRS proposed rule specified how to calculate household MAGI for determining premium tax credit eligibility, and the CMS rules adopted these methods for determining Medicaid and CHIP eligibility, with certain exceptions. IRS finalized its proposed rule in May 2012 with minimal change to these methods. The IRS proposed rule also described the standard for determining whether an individual has access to affordable employer-sponsored insurance for purposes of determining eligibility for the premium tax credit. Under the proposed affordability standard, employer-sponsored insurance is considered affordable if the cost of a self-only plan—meaning a plan that only covers the employee—does not exceed 9.5 percent of household income. Under the proposed standard, if one family member has access to affordable self-only employer- sponsored insurance, all other family members who are eligible to enroll in the employee’s plan are also considered to have access to affordable insurance and are therefore ineligible for the premium tax credit. In this manner, the proposed rule applied the same standard to all family members eligible for the employee’s plan, even if the cost of enrolling the family as a whole exceeds the 9.5 percent threshold. In the preamble to its proposed rule, IRS stated that the PPACA statute specifies using the self-only insurance affordability standard for employees as well as for spouses and dependents of an employee, citing a report issued by the Joint Committee on Taxation that similarly interpreted the law. Some who commented on the proposed rule suggested that it would be more consistent with congressional intent to interpret the statute to require the use of the cost to an employee of insuring all eligible family members in determining access to affordable employer-sponsored insurance. In its final premium tax credit rule, IRS confirmed that the proposed self-only insurance affordability standard would apply to employees, but it deferred a decision on the affordability standard for other eligible family members, such as children, to future rule making. Therefore, because this report focuses on children, the relevant affordability standard remains a proposed standard, and is referred to as such for the remainder of the report.", "Over three-quarters of uninsured children in January 2009 would be eligible for Medicaid, CHIP, or the premium tax credit under 2014 PPACA eligibility rules, according to our estimates. Applying final CMS and proposed IRS rules for 2014 program eligibility to 2009 SIPP data, we estimate that on the basis of household income and other eligibility criteria, such as citizenship, nearly 68 percent of the approximately 7 million children who were uninsured in January 2009 would be eligible for Medicaid or CHIP—about 48 percent for Medicaid and about 20 percent for CHIP. In addition, 7.5 percent of the uninsured children would be eligible for the premium tax credit. Nearly 13 percent of the uninsured children were noncitizens for whom we did not estimate eligibility because of limitations in the data.approximately 12 percent of uninsured children would be ineligible for We estimate that the final Medicaid, CHIP, or the premium tax credit. Specifically, 5.5 percent would be ineligible because they were in families with a household income that was too high—at greater than 400 percent of FPL. The remaining 6.6 percent would be ineligible because, though their families were considered low-income in that they met the household income requirements for the premium tax credit, they were considered to have access to affordable employer-sponsored insurance based on IRS’s proposed affordability standard. In particular, these children had at least one parent with employer-sponsored insurance that had an estimated cost below 9.5 percent of household income for a self-only plan. (See fig. 1.)These children would not be automatically eligible for the premium tax credit if the affordability standard were instead based on a family plan; their eligibility would depend on the cost of the family plan to which they had access. See appendix I for more information about our estimates.\nThe proposed affordability standard could potentially affect significantly more children than the approximately 460,000 uninsured children we estimated above under certain scenarios. Many children eligible for CHIP have a parent with employer-sponsored insurance. Under PPACA, CHIP is not funded beyond 2015, and, even if federal funding is extended, states may opt to reduce eligibility levels for CHIP or eliminate Without CHIP- CHIP programs altogether beginning in fiscal year 2020.funded Medicaid expansion or separate CHIP programs, we estimate that an additional 1.9 million children who would otherwise be eligible for CHIP would be considered to have access to affordable insurance under this proposed standard and would be ineligible for the premium tax credit.(See fig. 2.)\nIn commenting on IRS’s proposed rule on eligibility for the premium tax credit, some states and other organizations noted that IRS’s proposed interpretation of access to affordable employer-sponsored insurance— defining affordability on the basis of the cost of a self-only plan, and not on the cost of a family plan—could result in some children remaining uninsured. They explained that although a self-only plan for the employee may cost less than the 9.5 percent threshold, a family plan that would also insure the employee’s eligible family members could exceed it. As a result, some employees would not be able to afford the higher premiums to insure their family members, who therefore could remain uninsured. We did not estimate the cost associated with defining the affordability standard based on the cost of a family plan. The cost of such a change would depend on multiple factors, many of which remain uncertain, such as the availability of CHIP funding beyond 2015, the extent to which eligible families avail themselves of the premium tax credit, employer decisions, and the extent to which additional enrollees could affect the aggregate cost of premiums. The Congressional Budget Office has commented on the high degree of uncertainty inherent in projecting the future actions of employees and employers under PPACA as well as other factors that may affect federal costs, such as the number of individuals and families who will have household income in specific eligibility ranges in future years.\nWe did not examine how many of the children estimated to be ineligible for the premium tax credit because of access to affordable employer- sponsored insurance would become eligible if the affordability standard were instead based on the cost of a family plan; the cost of family plans available to employees who chose not to purchase them was not available in the data we analyzed. However, separate data on the cost of family plans among employees who purchased a family plan suggest that some of these uninsured children, particularly those in families facing higher-than-average premium contributions, could become eligible for the premium tax credit if the affordability standard were based on the cost of a family plan. For example, in a 2011 survey, the Kaiser Family Foundation and Health Research & Education Trust found that on average, employees contributed $4,129 annually for a family plan, or 28 percent of the total cost to the employer of an annual family premium, which averaged $15,073. For a family of four with household income equivalent to 250 percent of the FPL, $4,129 represents about 7 percent of household income. However, the percentage of the annual premium paid by employees ranged widely around this average, and 15 percent of employees with family plans paid more than 50 percent of the annual premium. For a family of four with household income equivalent to 250 percent of the FPL, paying 51 percent of the average annual premium (or $7,687) would represent just over 13 percent of household income, exceeding the 9.5 percent threshold. Whether families ultimately choose to purchase insurance for children will depend on many factors, including individual decisions regarding what they can afford for health insurance.", "Applying final CMS and proposed IRS 2014 PPACA eligibility rules to children in 2009, we estimate that nationally, 9 percent of children eligible for Medicaid, CHIP, or the premium tax credit experienced a change in household income within 6 months that would affect their eligibility for a specific form of assistance, and 14 percent of these children experienced (See table 2.) In addition, some at least one such change within 1 year.children experienced multiple income changes within these time periods that would affect their eligibility for assistance more frequently. We estimate that, nationally, 2 percent of eligible children experienced changes in household income that would affect eligibility two or more times within 6 months, and 6 percent experienced two or more such changes within 1 year.\nThe effect of continuous eligibility policies for Medicaid and CHIP on the frequency of eligibility changes becomes apparent when we consider children in states with versus states without such policies separately. Eligibility changes are higher than the national average in states without continuous eligibility policies in either their Medicaid or CHIP programs, and lower than the national average in states with them. In states with continuous eligibility policies for Medicaid and CHIP, eligibility changes under PPACA would be limited to children who begin the year eligible for the premium tax credit but experience a decrease in household income that would result in eligibility for Medicaid or CHIP instead. Therefore, the percentage of children experiencing changes in eligibility, and at risk of experiencing disruptions in coverage, is lower than the national average among children in the 23 states that have adopted continuous eligibility in both their Medicaid and CHIP programs and greater than the national average among children in the 18 states that do not have continuous eligibility in either program. Specifically, we estimate that about 3 percent of eligible children in states with continuous eligibility for Medicaid and CHIP experienced a change in household income that would affect eligibility under PPACA within 1 year. In contrast, we estimate that about 19 percent of eligible children in states without continuous eligibility experienced a change in household income that would affect program eligibility under PPACA at least once within 6 months, and about 30 percent experienced such a change within 1 year. (See table 3.)\nChanges in eligibility caused by income fluctuations could deter children’s enrollment in relevant programs if the process for changing enrollment is burdensome for the families and could further complicate other eligibility complexities, such as variation in eligibility within households. Eligibility for specific types of assistance can vary within households because low- to moderate-income adults with household incomes greater than 133 percent of FPL will typically be ineligible for any assistance or will be eligible for the premium tax credit rather than Medicaid or CHIP, while children in some of these households—particularly in states with higher income eligibility levels for Medicaid and CHIP—will be eligible instead for Medicaid or CHIP. We estimate that based on 2009 data, 21 percent of children eligible for Medicaid, CHIP, or the premium tax credit under PPACA would have different eligibility from their parents as of the beginning of the year. However, because of income fluctuations that occurred over the course of the year, we estimate that an additional 9 percent of eligible children would encounter this situation.", "CMS has provided states with incentives and guidance to implement current initiatives to improve enrollment policies and has made progress assisting states in implementing PPACA requirements aimed at further simplifying Medicaid and CHIP enrollment. State officials reported ongoing challenges with regard to enrolling eligible children, including the need for timely guidance to implement PPACA provisions, concerns about enrolling family members who are not eligible for the same program, and state budget constraints.", "Through an array of financial incentives and technical assistance, CMS has worked with states to enroll and retain eligible children in Medicaid and CHIP and to set up state exchanges under PPACA. Many of these efforts were initiated with funds appropriated under CHIPRA and continue under PPACA. For example, CHIPRA appropriated $100 million for fiscal years 2009 through 2013 in outreach grants and related efforts to improve the enrollment and retention of underserved populations in Medicaid and CHIP, and by the end of fiscal year 2011, CMS had awarded $80 million in such grants. CMS awarded the first round of outreach grants in fiscal year 2009 to 69 applicants in 43 states, which included state agencies and community-based and other nonprofit groups, and the second round in fiscal year 2011 to 39 applicants in 23 states.officials from selected states, officials noted that the outreach grants had helped the agencies reach eligible children. For example, Oregon Medicaid officials said that the CHIPRA outreach grant their agency received was crucial to reaching the state’s Hispanic population. The grant sought to support outreach by safety net providers, public health departments, and school-based health centers.\nSince fiscal year 2009, CMS has also awarded performance bonuses annually to states that implemented at least five of the eight enrollment initiatives outlined in CHIPRA and met specific enrollment goals, which are based on the state’s current Medicaid enrollment and population growth. (See table 4.) The number of states receiving these bonuses has more than doubled over the 3 years that bonuses have been awarded, increasing from 10 states in fiscal year 2009 to over 23 states in fiscal year 2011. In 2011, the amount of the performance bonuses ranged from approximately $1.3 million for Idaho to over $28 million for Maryland. (See app. II for a summary of the states that received these performance bonuses and the amounts of the awards.) In addition, among the 23 states that received a performance bonus in 2011, 16 received an enhanced bonus for exceeding their enrollment target by more than 10 percent.bonuses annually through fiscal year 2013.", "A key goal of PPACA was to increase Americans’ access to affordable health insurance. PPACA expanded eligibility for existing federal health programs and private health insurance, offered a new premium tax credit to offset the cost of private health insurance for some low- to moderate- income families whose incomes are too high to qualify for Medicaid or CHIP, and provided means for streamlining enrollment. Although our estimates are based on 2009 data, they illustrate the potential impact of PPACA, when fully implemented in 2014, on children’s access to affordable health insurance, and highlight the importance of many of the policies introduced in CHIPRA and continued in PPACA. For example, our estimates suggest that about 68 percent of children who were uninsured in 2009 would be eligible for Medicaid or CHIP under PPACA, underscoring the continued importance of outreach and simplified enrollment policies to ensure that eligible children are enrolled in the appropriate program. Similarly, significantly higher estimates of changes in eligibility within a year among children in states without continuous eligibility policies compared to states with such policies underscore the importance of a continued emphasis on such policies to minimize changes in eligibility.\nIn addition, a small but significant number of uninsured children from low- to moderate-income families whose incomes are too high to qualify for Medicaid or CHIP would be ineligible for the premium tax credit under IRS’s proposed definition of access to affordable employer-sponsored insurance, which is based on the cost of a self-only plan available to the employee. Yet the cost of insuring other eligible family members could be higher and potentially unaffordable for some families. One implication of this proposal is that some families in which one member has an offer of self-only, employer-sponsored health insurance could be less likely to obtain family insurance than if no employer insurance were offered, because of their ineligibility for the premium tax credit. We recognize that in finalizing the affordability standard for an employee’s eligible family members, IRS must weigh many complex factors, such as costs to the federal government and effects on employers and families, some of which are difficult to predict, as well as the scope of its authority. However, under the proposed standard, an offer of affordable employer-sponsored health insurance to one family member could impede other family members’ access to affordable insurance—an outcome which would not further the broader goals of PPACA.", "In the Department of the Treasury’s future rule making, we recommend that the Secretary of the Treasury, in consultation with the Commissioner of Internal Revenue, consider the impact of the proposed standard for determining affordability of employer-sponsored insurance on children and other family members who are eligible to enroll, and whether it would be consistent with the goals of PPACA to adopt an alternative approach that would consider the cost of insuring eligible family members, or as necessary, seek clarification from Congress regarding its intent with respect to this standard.", "We provided a draft of this report for comment to HHS and the Department of the Treasury. Neither HHS nor the Department of the Treasury provided general comments on the report or its recommendation. Department of the Treasury officials provided technical comments, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to relevant congressional committees, the Secretary of Health and Human Services, the Secretary of the Treasury, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "Our first two objectives were to assess the extent to which uninsured children would be eligible for Medicaid, the State Children’s Health Insurance Program (CHIP), or the premium tax credit available under the Patient Protection and Affordable Care Act (PPACA) and the extent to which they would experience a change in eligibility among these forms of assistance because of changes in household income during a year. We identified the Survey of Income and Program Participation (SIPP), a nationally representative, longitudinal survey conducted by the U.S. Census Bureau, as a useful data set for our purposes because it provides detailed monthly information over a multiyear period about specific types of income, family relationships, and health insurance status of individuals and households representing the civilian, noninstitutionalized population of the United States. We analyzed data from the most recently available SIPP, which began in 2008, and surveyed the occupants of approximately 42,000 households.\nOur analysis of SIPP data is subject to limitations. The analysis uses 2009 data to illustrate the extent to which uninsured children would be eligible for Medicaid, CHIP, or the premium credit program had proposed and final 2014 PPACA eligibility rules been in effect at that time. To the extent that patterns in household income, insurance status, or other eligibility criteria differ in 2014, eligibility in 2014 will also differ. In addition, the estimates are based on a sample of the population and may differ from estimates that would be obtained if the full population had been surveyed using the same methods, and the estimates are based on self-reported information that may contain errors because of factors such as differing interpretation of survey questions, inability or unwillingness of survey participants to provide correct information, or data processing errors. The Census Bureau reported that quality control and edit procedures were used to reduce such errors.data have shown that the SIPP captures less income compared to other Studies of SIPP income surveys, particularly for higher-income survey participants.analysis focuses on lower-income survey participants, to the extent that the SIPP data underrepresent income in this population as well, our estimates would indicate that more children meet income requirements for Medicaid or CHIP versus the premium tax credit, and for the premium tax credit versus being ineligible for any type of assistance, than other surveys might suggest. Our analysis variables approximate but do not always fully capture key PPACA eligibility criteria, such as household income or citizenship status, as described further below. To determine the reliability of SIPP data, we reviewed related documentation and conducted electronic testing for missing data, outliers, and apparent errors. For example, we tested whether persons who reported being uninsured in January 2009 had reported having health insurance in the prior and following month. We also compared our results to estimates based on data from another Census Bureau survey, the American Community Survey, and to other studies that addressed related research questions. We determined that the SIPP data were sufficiently reliable for the purposes of our engagement.", "A child’s eligibility for Medicaid, CHIP, or the premium tax credit under PPACA is based in part on having household income below specified limits relative to the federal poverty level (FPL). The Centers for Medicare & Medicaid Services (CMS) and the Internal Revenue Service (IRS) have specified methods for determining a child’s household income under PPACA in final and proposed eligibility rules, and differences exist in how household income is determined for Medicaid and CHIP versus the premium tax credit. A child’s eligibility for these programs is also based on citizenship or legal residence, and, for the premium tax credit, on whether the child is considered to have access to other affordable insurance. From the available SIPP data, we developed variables for our analysis based on these eligibility rules.\nHousehold composition. We created two household composition variables for children on the basis of final CMS and proposed IRS rules for determining household composition for the premium tax credit and for Medicaid or CHIP. The premium tax credit household composition variable defined households as composed of a taxpayer and spouse, if applicable, and tax dependents. Tax dependents were defined as follows:\nChildren under age 19 (or ages 19 through 23 who were full-time students) whose taxable income (together with a spouse’s income, if applicable) was not more than half of household income.\nOther family members, who (together with a spouse, if applicable), earned less than the IRS threshold and whose total income was not more than half of household income.\nTaxpayers were those who did not meet the above definition of a tax dependent. This definition of a tax dependent excluded those with significant income, but did not capture tax rules about the amount of financial support a taxpayer must provide for children or other dependents in order to claim them as tax dependents.\nFor example, most children under age 19 were defined as tax dependents. Households of tax-dependent children included the child, the child’s taxpayer parents or guardians, and any other tax dependents of the taxpayers, such as the child’s siblings. When children lived with two unmarried parents, the parent with the higher income was designated as the taxpayer parent. This household composition variable did not account for children who may be claimed as tax dependents by a noncustodial parent or for spouses who choose to file taxes separately.\nThe Medicaid household composition variable was the same as the premium tax credit household composition variable, with certain exceptions. When a tax-dependent child did not live with a taxpayer parent or lived with two parents who were not married to one another, or had household income below tax filing thresholds, the child’s household for purposes of determining Medicaid and CHIP eligibility was composed of the child, the child’s parents, siblings under age 19 (or ages 19 and 20 who were full-time students), and any children of the child. In addition, pregnant women were counted as two household members when determining Medicaid and CHIP eligibility. Pregnancy status is not directly available from the SIPP data; we estimated that women were pregnant in a given month if they had a new infant during one of the following 8 months.\nHousehold income. We constructed four household income variables for children based on rules for counting income for Medicaid and CHIP and for the premium tax credit under PPACA. Tax dependent’s income was not included in any household income variable if it was less than the amount that would necessitate filing a tax return.\nTo approximate modified adjusted gross income (MAGI) household income under PPACA, a child’s premium tax credit household income was defined as the sum of all income, less means-tested assistance income; child support or foster care payments; veterans and workers compensation or sickness or accident insurance payments; or gifts from relatives or friends—self-reported by individuals included in the premium tax credit household composition variable defined above, during calendar year 2009.\nA child’s baseline Medicaid household income was the sum of the same income types in the Medicaid household composition variable defined above, during specific months of 2009.\nA child’s adjusted Medicaid household income was equal to the baseline Medicaid household income variable, less income deductions applied in specific states in their Medicaid eligibility determination processes, including deductions of certain amounts of earned income and child care expenses.\nA child’s adjusted CHIP household income was equal to the baseline Medicaid household income variable, less income deductions applied in specific states in their CHIP eligibility determination processes, including deductions of certain amounts of earned income and child care expenses.\nFPL. We constructed four percentages of FPL variables based on the four household income variables and two household composition variables defined above.\nA child’s baseline Medicaid percentage of FPL was the Medicaid household income variable divided by the 2009 poverty threshold applicable to the child’s state and family size contained in the Medicaid household composition variable.\nA child’s adjusted Medicaid percentage of FPL was the adjusted Medicaid household income variable divided by the 2009 poverty threshold applicable to the child’s state and family size contained in the Medicaid household composition variable.\nA child’s adjusted CHIP percentage of FPL was the adjusted CHIP household income variable divided by the 2009 poverty threshold applicable to the child’s state and family size contained in the Medicaid household composition variable.\nA child’s premium tax credit percentage of FPL was the premium tax credit household income variable divided by the 2009 poverty threshold applicable to the child’s state and household size contained in the premium tax credit household composition variable.\nInsurance status. Employer-sponsored insurance was defined as insurance obtained through an individual’s or a family member’s employer, former employer, union, or the military. Individuals were not categorized as having employer-sponsored insurance if they also had Medicaid or CHIP coverage. We used a procedure that the Census Bureau has adopted for the American Community Survey to address under-reporting of Medicaid coverage. Specifically, respondents were recategorized as having Medicaid if they were one of the following: a child under age 19 and the unmarried child of a parent with public a citizen parent with public assistance, a citizen parent married to a citizen with public assistance or a foster child, or a Supplemental Security Income recipient who met one of the following conditions: (1) did not have children or (2) had children but was not working.\nIndividuals were defined as uninsured if they were not categorized as having employer-sponsored or other private insurance, Medicaid, CHIP, or other public insurance.\nAccess to affordable employer-sponsored insurance. Children who had a taxpayer parent as part of their household composition who had employer-sponsored insurance, and children who were taxpayers and had employer-sponsored insurance, were defined as having met the proposed standard for access to affordable employer-sponsored insurance if the average annual employee contribution for a self-only plan, $921, was less than or equal to 9.5 percent of premium tax credit household income. This definition of access to affordable employer- sponsored insurance did not take into account the requirement that employer-sponsored insurance must provide a minimum value in order to be considered affordable, and it assumed that children were eligible to enroll in a parent’s employer-sponsored insurance.\nCitizenship or legal residence. Citizenship status is available in SIPP data, but the legal status of noncitizens is not directly available from SIPP data. We defined noncitizens as legally residing if they or a parent reported receiving public insurance, such as Medicaid, or other public assistance, which requires documentation of citizenship or legal residence. The remaining noncitizens were defined as potentially ineligible noncitizens.", "Based on the variables defined above, we categorized children as eligible or ineligible for Medicaid, CHIP, and the premium tax credit under proposed and final 2014 PPACA eligibility rules.\nWe defined children as eligible for Medicaid under PPACA if they were citizens or legally residing noncitizens whose baseline Medicaid percentage of FPL was less than or equal to 138 percent, or who had an adjusted Medicaid percentage of FPL that was less than or equal to the 2012 state-specific income eligibility level for their age group.\nFoster children and Supplemental Security Income recipients were also defined as Medicaid eligible.\nWe defined children as eligible for CHIP under PPACA if they were citizens or legally residing noncitizens not estimated to be eligible for Medicaid, with an adjusted CHIP percentage of FPL that was less than or equal to the applicable 2012 CHIP state-specific income eligibility level. CHIP included both CHIP-funded Medicaid expansion programs and separate CHIP programs. Children with employer- sponsored or other private insurance were defined as ineligible for separate CHIP programs.\nWe defined children as eligible for the premium tax credit under PPACA if they were citizens or legally residing non-citizens not estimated to be eligible for Medicaid or CHIP, with premium tax credit percentage of FPL between 100 and 400 percent and without access to affordable employer-sponsored insurance.\nOur analyses considered three groups of children: uninsured children ages 0 through 18, CHIP-eligible children ages 0 through 18 who were uninsured or publicly insured, and all children ages 0 through 18 eligible for Medicaid, CHIP, or the premium tax credit. We limited our analysis to children who participated in the SIPP for all of calendar year 2009.\nAmong uninsured children, we used January 2009 SIPP data to estimate the percentage who would be eligible for Medicaid, CHIP, and the premium tax credit based on the above definitions of 2014 PPACA eligibility rules, as well as the percentage who would be ineligible.\nAmong uninsured or publicly insured children estimated to be eligible for CHIP, we used January 2009 SIPP data to estimate the percentage who would be eligible for the premium tax credit based on the above definitions of 2014 PPACA eligibility rules, as well as the percentage who would be ineligible, if CHIP were not available.\nAmong all children estimated to be eligible for Medicaid, CHIP, or the premium tax credit in January 2009, we used calendar year 2009 SIPP data to estimate the percentage who would have experienced one or two changes in eligibility for specific types of assistance, including becoming ineligible for any type of assistance, under 2014 PPACA eligibility rules within 6 months and a year. We incorporated state-specific continuous eligibility policies; for children living in states that according to CMS had a continuous eligibility policy in place as of 2012, we did not count them as changing eligibility for the relevant program even if their income eligibility changed.\nAmong all children estimated to be eligible for Medicaid, CHIP, or the premium tax credit in January 2009, we used calendar year SIPP data to estimate the percentage who would be eligible for Medicaid and CHIP under 2014 PPACA eligibility rules with a Medicaid percentage of FPL higher than 138 percent in January 2009 and during 2009 as a whole, in order to examine the percentage of children who could be eligible for different program than their parents.\nFor all estimated percentages, we used the SIPP 2009 calendar year sampling weight and calculated a lower and upper bound at the 95 percent confidence level using replicate weights that took into account the complex survey design.", "The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) and PPACA included a number of initiatives and provisions under which states may obtain federal funding to assist in enrolling eligible children, and most states have taken advantage of at least one of these. For example, CHIPRA provided incentives to states to undertake eight enrollment initiatives. Beginning in fiscal year 2009, CMS awarded performance bonuses to states that implemented at least five of the eight enrollment initiatives and also achieved specific enrollment goals. (See fig. 3.) PPACA authorized the provision of planning grants and establishment grants to assist states with the implementation of the American Health Benefit Exchanges (referred to as exchanges)— marketplaces where eligible families and individuals can purchase private health insurance. Recognizing that states will need to upgrade their Medicaid information technology systems to comply with PPACA, CMS has provided states with the opportunity to claim an enhanced Federal Medical Assistance Percentage (FMAP)—the federal share of Medicaid expenditures—through fiscal year 2015 for the costs associated with certain systems improvements, such as updates to their claims processing and enrollment systems. Specifically, instead of the 50 percent FMAP that has historically been available for most Medicaid administrative expenses, qualified states can obtain a 90 percent FMAP for the costs of implementing new information systems and a 75 percent FMAP for the costs of administering these new systems.", "", "", "In addition to the contact named above, Susan T. Anthony, Assistant Director; Susan Barnidge; Emily Beller; Sandra George; Eagan Kemp; and Roseanne Price made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 1, 1, 2, 1, 1, 1, 1, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h0_title", "", "", "", "h0_full", "h0_full", "h2_full h1_full", "h2_full", "", "h0_full h2_full", "h3_full", "h3_full", "h2_title", "", "h2_full", "", "", "", "" ] }	{ "question": [ "How did PPACA affect uninsured children?", "Why were the remaining children not eligible?", "What concerns have been raised about the IRS's interpretation?", "How is CHIP funded?", "How common is PPACA eligibility fluctuation?", "How does this vary between states?", "How might frequent eligibility fluctuations affect program enrollment rates?", "What was the goal of PPACA?", "What did GAO review regarding PPACA?", "How did GAO assess CMS actions regarding PPACA?", "What data did GAO collect for this report?", "What did GAO recommend?", "How did HHS and Treasury respond to this report?", "How did GAO make use of Treasury's technical comments?" ], "summary": [ "GAO estimates that under the 2010 Patient Protection and Affordable Care Act (PPACA), about three-quarters of approximately 7 million children who were uninsured in January 2009 would be eligible for Medicaid, the State Children’s Health Insurance Program (CHIP), or the new premium tax credit.", "The remaining children had family incomes too high to be eligible, were noncitizens, or would be ineligible for the premium tax credit because they would be considered to have access to affordable employer-sponsored insurance per the Internal Revenue Service’s (IRS) proposed affordability standard, in which IRS interpreted PPACA as defining affordability for an employee’s eligible family members based on the cost of an employee-only plan.", "Some commenters raised concerns that IRS’s interpretation was inconsistent with PPACA’s goal of increasing access to affordable health insurance as it does not consider the higher cost of family insurance and could result in some children remaining uninsured.", "Under PPACA, CHIP is not funded beyond 2015, and states may opt to reduce CHIP eligibility or eliminate programs in fiscal year 2020. Without CHIP, more children could become uninsured.", "GAO estimates that about 14 percent of children in January 2009 who met 2014 PPACA eligibility criteria for these programs experienced a change in household income that would affect eligibility within 1 year.", "Changes in eligibility among children in states without policies allowing them to remain eligible for Medicaid and CHIP for a full year were estimated to be higher than in states with such policies.", "Frequent eligibility changes could deter enrollment if the process for changing enrollment is burdensome.", "PPACA sought to increase access to affordable health insurance, and major provisions, such as a tax credit to offset the cost of private insurance premiums, will become effective in 2014.", "GAO estimated the extent to which (1) uninsured children would be eligible for Medicaid, CHIP, or the premium tax credit under PPACA, and (2) children would experience a change in eligibility among Medicaid, CHIP, and the premium tax credit under PPACA because of income changes.", "GAO also assessed CMS steps thus far to help states enroll children and related state challenges.", "GAO applied proposed and final 2014 PPACA eligibility rules to nationally representative 2009 data from the U.S. Census Bureau and interviewed officials from CMS and IRS, two federal agencies responsible for implementing relevant PPACA provisions, and six states that received federal funds for enrollment efforts.", "GAO recommends that in future rule making, the Secretary of the Treasury, in consultation with the Commissioner of Internal Revenue, consider the impact of the proposed standard for determining affordability of employer-sponsored insurance on eligible family members, and whether it would be consistent with PPACA to adopt an approach that would consider the cost of insuring eligible family members, or as necessary, seek clarification from Congress regarding its intent with respect to this standard.", "HHS and Treasury were given a draft of this report for review, but neither provided formal comments.", "Treasury provided technical comments, which GAO incorporated as appropriate." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, 0, -1, 0, 0, 0, -1, 0, 1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 0, 0, 0, 0, 4, 4, 4 ] }
CRS_R42635	{ "title": [ "", "Introduction", "The Competing Interests in Protecting Contract Rights", "Waiver of Sovereign Immunity and Vesting of Jurisdiction", "Federal Actions Interfering with Public Contract Rights", "Breach of Contract", "Special Cases", "Implied Covenant of Good Faith and Fair Dealing", "Additional Requirements", "Congressional Inaction", "Breach Defenses Unique to the Sovereign", "Takings", "Reservation of Power to Amend", "Judicial Preference for Breach of Contract Claims", "Substantive Due Process and Borrowing Clause", "Federal Actions Interfering with Private Contract Rights", "Introduction", "Takings", "Omnia Rule for Incidental Interference", "Omnia Limits", "Substantive Due Process" ], "paragraphs": [ "", "Congress, when it enacts a new law, generally does not operate on an empty slate. The new law likely affects relationships, expectations, rights, investments, and other arrangements that already exist. In particular, the statute may interfere—either as its express purpose or incidental byproduct—with contracts entered into prior to its enactment. Such contracts may be between the United States and a private party (\"public contracts\") or solely between private parties (\"private contracts\").\nThe range of factual settings in which legislative interference with existing contracts may arise is unbounded, and the recompense sought by disappointed contract parties from the United States can be quite large. Perhaps the most high-profile such interference arose under the 1989 \"savings and loan bailout statute.\" In that law, Congress forbade thrift institutions from counting \"supervisory good will\" toward minimum capital requirements, after such thrifts had acquired failing thrifts on the federal contractual promise that supervisory good will could be so used. This federal reversal resulted in numerous thrifts falling below minimum capital requirements and being liquidated. Thus far, the United States has paid out $2.28 billion on the roughly 125 claims filed by acquiring thrifts, out of $34.34 billion sought (two cases remain to be resolved). Separately but also related to the savings and loan crisis, a 1993 congressional enactment undercut agreements premised on acquiring thrift institutions being able to take tax deductions for certain losses, by eliminating those deductions.\nOther illustrations abound. A bill now in Congress would demand renegotiation of existing collective bargaining agreements between the Postal Service and its employees if such agreements contain a specified provision. Under the Troubled Asset Relief Program, the United States required Chrysler and General Motors to terminate certain dealership contracts as a condition of obtaining financial assistance. Following 9/11, Congress enacted the Aviation and Transportation Security Act under which security screening at U.S. airports was transferred from private to federal hands, indirectly negating security services contracts between private security services and airlines. In 1988 and 1990, Congress statutorily blocked prepayment of certain mortgage contracts on low-income housing, which prepayment had been expressly allowed in those contracts. And in 2008 amendments to the Medicare statutes, Congress terminated a number of equipment and supply contracts previously entered into by the United States.\nThis report surveys the legal theories that may be invoked by aggrieved contract parties to obtain redress in these situations—that is, when new federal statutes interfere with contracts entered into pre-enactment. The effort is to give Congress some advance warning as to when such interferences, in bills before Congress, may result in legal challenge. For public contracts, the usual legal challenge is via a breach of contract claim, though claims that contract rights have been \"taken,\" requiring compensation under the Fifth Amendment Takings Clause, are often joined. For private contracts, the breach theory is not available since by definition the United States is not a party to the contract. Here, takings claims predominate.\nOne point warrants spotlighting. Breach, takings, and similar claims have no place if the federal statute applies only to contracts entered into after enactment . In the case of a statute whose application becomes clear only after regulations construing it are issued, claims based on contract interference have no place when the contract is entered into after the regulations take effect. In either case—post-enactment or post-regulation—the decisive principle is that parties are presumed to contract with knowledge of the law existing at the time. Congressional drafters can ensure a prospective-only interpretation of a statute by explicitly so stating in bill text. Absent an explicit statement, a prospective-only reading of a statute may be adopted, but is not guaranteed, under the general presumption that, lacking clear indication otherwise, statutes should be read to apply prospectively only.", "Protection of settled expectations is essential to ordered society, certainly to the conduct of business. Thus, contract law protects the settled expectations of parties to contracts. At the same time, government must have latitude to address new problems, even if that means interfering with settled expectations in existing contracts. Thus, contracts generally are said to confer no immunity against future legislation. Stated the Supreme Court: \"Contracts, however express, cannot fetter the constitutional authority of Congress.\" Or as the Court also noted: \"[P]arties by entering into contracts may not estop the legislature from enacting laws intended for the public good.\" However, the fact that Congress can legitimately thwart performance under existing contracts does not alter the fact that disappointed parties to those contracts may be able to obtain monetary relief under the breach and takings theories mentioned earlier.\nThe need for balance between protecting settled expectations and allowing the government future legislative latitude also applies to contracts to which the government is a party. The right of the government to enter into contracts is not only an essential attribute of sovereignty, but also a practical necessity. The ability of the government to contract with private parties would be hindered if it were able to ignore its contractual commitments or seek to avoid contractual remedies simply because it is the sovereign. Thus, the Supreme Court admonishes, \"[t]he United States are as much bound by their contracts as are individuals.\" At the same time, this report notes certain defenses to breach of contract that the United States has, but private parties do not. These defenses—chiefly, the sovereign act defense and unmistakability doctrine—are well known and arguably form part of the expectations of a private party who contracts with the government. Courts are generally reluctant to expand these defenses or otherwise allow the government to escape its contractual obligations simply because it is the sovereign. Conversely, when the government enters into a contract it is entitled to the same contractual protections as a private party.\nThe protection of settled expectations in the takings arena also invokes this distinction between the government acting in a sovereign versus proprietary capacity. When acting in a sovereign capacity, government may be held to have taken property, requiring compensation. When entering into contracts, however, government is often seen as acting in a proprietary capacity, in which capacity the application of a takings theory in the event of contract breach is disfavored.", "To sue the United States for congressional interference with a contract right (public or private), the United States must have waived its sovereign immunity: the United States is immune from suit except as it consents to be sued. This waiver/consent precondition applies to both breach of contract claims and takings claims. The consent to suit has been given, in both cases, in the form of the Tucker Act and Little Tucker Act. Actually, these acts do two interconnected things: they waive the sovereign immunity of the United States against suits based on breach and takings, and they vest jurisdiction over such claims in a particular court.\nThe Tucker Act gives the U.S. Court of Federal Claims jurisdiction over \"claims\" against the United States \"founded either upon the Constitution, … or upon any express or implied contract with the United States ….\" The phrase \"upon the Constitution\" plainly includes takings claims against the United States—important not only for jurisdictional reasons, but because the Takings Clause of the Fifth Amendment is not construed to contain its own waiver of sovereign immunity. The waiver comes only from the Tucker Act. As for breach of contract actions, the phrase \"upon any express or implied contract\" states the Tucker Act's coverage of such actions explicitly. However, the phrase \"implied contract\" has been limited by case law to contracts implied in fact, excluding contracts implied in law.\nThe Little Tucker Act gives federal district courts the same jurisdiction over breach and takings claims against the United States as the \"big\" Tucker Act gives to the Court of Federal Claims—with one difference. In Little Tucker Act suits, the amount in controversy may be no more than $10,000. Reading the two statutes together, those wishing to sue the United States over a legislative interference with contract must, if pursuing a breach or takings theory, sue in the Court of Federal Claims if seeking more than $10,000, but may sue in either district court or Court of Federal Claims if seeking $10,000 or less.\nUnder either statute, the remedy available to the plaintiff is exclusively money. The \"claims\" referred to in the Tucker Act and Little Tucker Act are universally construed to mean monetary claims. Thus, in the case of public contracts, the plaintiff cannot compel the United States to perform its end of the contract (\"specific performance\") through a declaratory, injunctive, or mandamus remedy; it can only seek money (\"damages\") for breach. In the case of either public or private contracts, suits under a takings theory can only ask for the constitutionally promised \"just compensation,\" not injunctive relief ordering the federal agency to rescind its allegedly contract-taking action. Also under either statute, any appeal taken, whether from the U.S. Court of Federal Claims or a federal district court, is to the U.S. Court of Appeals for the Federal Circuit.\nDue process claims cannot be heard in the Court of Federal Claims under the Tucker Act, or in federal district courts under the Little Tucker Act, but must instead go to a federal district court under federal question jurisdiction. Thus, appeal is to the appropriate regional circuit rather than the Federal Circuit.", "A \"public contract,\" as noted, is a contract to which the United States is a party. These are contracts \"where the sovereign steps off the throne and engages in purchase and sale of goods, lands, and services, transactions such as private parties, individuals, or corporations also engage in among themselves.\" However, the federal government's dual roles as sovereign and as contracting party often give rise to contracts that differ from traditional contracts between private parties. Types of public contracts include those that provide for (1) the purchase or sale of goods or services; (2) government conferring a benefit; (3) implementation of a statutory program; and (4) the lease or sale of resources on public lands.", "The concept of breach of contract defies simple definition, though reduced to its essence it constitutes the failure of one party to a contract to perform a promised action so as to give rise to a right to relief (often in damages) from the other party. Breach of contract is the main theory on which challenges to congressional interference with pre-existing public contracts are litigated. As earlier noted, the United States is as bound by its contracts as are individuals, save for the special \"sovereign defenses\" discussed below. That is, the same breach rules apply to the United States as a contract party as to a nonfederal party.\nOf course, the first step in determining if a federal enactment has effected a breach is to scrutinize the terms of the contract. If the United States can show that a later congressional enactment was contemplated by express or implied terms in the contract, there is obviously no breach. In Mobil Oil and Producing Southeast, Inc. v. United States , for example, the Supreme Court could not determine whether a federal statute was an anticipatory breach of pre-existing federal lease contracts with oil and gas producers until it determined whether a lease provision subjected the leases to only those laws existing when the lease was entered into, or later-enacted laws as well.", "There are several breach of public contract situations worth special mention:", "In a set of related cases, the United States was found liable for contract breach even though the congressional enactment did not run afoul of any express term in the affected contracts. During the savings and loan crisis of the 1980s, financial institutions had acquired failing thrifts in part based on a particular tax advantage: the deductibility of losses on the sale of certain assets of the acquired institution. Indeed, government agencies had actively promoted the availability of such deductions to encourage such acquisitions and thereby reduce the government's reimbursement obligation to depositors of the failed thrifts. In 1993, however, Congress enacted the \"Guarini amendment,\" which abolished the loss deduction retroactive to 1991. This eliminated a major part of the benefit to acquiring institutions under the agreements they had entered into with the United States (acting as receiver of the failing thrifts).\nThe leading decision is Centex Corp. v. United States . There, the Guarini amendment was held to have breached the implied covenant of good faith and fair dealing in the federal agreements with the acquiring institutions. This covenant imposes a duty \"not to interfere with the other party's performance and not to act so as to destroy the reasonable expectations of the other party regarding the fruits of the contract.\" The court found that Congress had been \"keenly aware\" of the deductibility benefit and had eliminated it retroactively to reduce what it regarded as the excessive costs of the acquisition transactions. Moreover, the court noted, the Guarini amendment had not been aimed at taxpayers generally, which would have mitigated its unfairness. Rather, the amendment \"had its sole impact on particular contracts that Congress regarded as being unduly favorable to the acquiring institutions ….\"", "The Supreme Court has held that Congress's imposition of additional requirements on an entity that has previously contracted with the United States may be regarded as tantamount to a breach. In Mobil Oil Exploration & Producing Southeast, Inc. v. United States , two oil companies paid the Department of the Interior $156 million in \"up front bonus payments\" for lease contracts allowing them to explore for and produce oil and gas off the North Carolina coast. The companies then submitted an exploration plan and certification of the plan's consistency with the state's coastal zone management plan. These submissions met the requirements of the Outer Continental Shelf Lands Act, which normally would have meant that under that statute, the Secretary had to approve the plan within 30 days. But a few days prior to the submissions, Congress enacted the Outer Banks Protection Act, which added significant new preconditions to the Secretary's approval of the exploration plan.\nThe oil companies claimed that the new act constituted a repudiation of their lease contracts, entitling them to restitution of the $156 million in up-front payments. The Supreme Court agreed. The delays imposed by the new act, it held, violated the lease contracts, which made the lessees subject only to the requirements in those leases and, by incorporation, other law existing when the leases were entered into.", "In at least one circumstance, the courts have found the United States to have breached contracts as the result not of Congress's action, but of its failure to act. Under the Nuclear Waste Policy Act of 1982, the Department of Energy has entered into contracts with nuclear power providers to gather and dispose of their spent nuclear fuel beginning in 1998 in return for regular payments by the power providers into a Nuclear Waste Fund. The providers have made the payments, but to this day the United States has not begun the removal and disposal of the spent fuel because Congress has yet to authorize a permanent repository for it.\nThis congressional inaction has spawned 81 breach of contract claims against the Department of Energy since 1998, resulting in $2.1 billion in damage awards and settlements thus far out of $8.6 billion sought. As of August 9, 2012, 33 cases are still pending, including some on appeal to the Federal Circuit.", "One defense to breach claims that may be asserted only by the sovereign was described earlier. This defense, that the sovereign has not waived its immunity from suit, cannot be asserted by the United States in breach cases in light of the broad waivers of sovereign immunity in the Tucker Acts. Three other defenses unique to the sovereign are described here.\nThe sovereign act d efense holds that the United States is not contractually liable for its \"public and general\" acts as sovereign. Stated the Supreme Court in its seminal decision on the defense: \"Whatever acts the government may do … so long as they be public and general, cannot be deemed specially to alter, modify, obstruct, or violate the particular contracts into which it enters with private persons ….\" The doctrine \"thus balances the Government's need for freedom to legislate with its obligation to honor its contracts.\" Otherwise put, the doctrine levels the contractual playing field by ensuring that government contractors and private contractors are affected the same way when the government, acting in its sovereign capacity through a \"public and general\" enactment, affects existing contract rights.\nFor example, in Yankee Atomic Electric Co. v. United States , a nuclear utility claimed that congressional legislation requiring it to pay money into a fund created to clean up contaminated uranium enrichment facilities violated the government's pre-existing contractual agreement to supply enriched uranium to the utility at a specified price. The court rejected the breach claim, reasoning that the legislation was not enacted to retroactively increase the earlier contract price—that is, was not enacted for the benefit of the government as contractor. Rather, it was enacted to address contamination at enrichment facilities, and the need to decommission them—that is, for the benefit of the public. Hence, the government could assert a sovereign act defense.\nBecause of the \"public and general\" requirement, federal legislation found to specifically target existing contracts does not qualify for the sovereign acts defense. One example is found in Winstar Corp. v. United States , where an accounting device placed in federal contracts to encourage thrift institutions to acquire failing thrifts was, after such acquisitions, specifically withdrawn by Congress. The United States, said the Supreme Court, could not invoke the sovereign acts defense. The fact that a substantial part of the impact of Congress's action fell on the government's own contractual obligations, not to mention the government's financial self-interest in the legislation, made the defense inappropriate.\nThe unmistakability defense asserts that \"sovereign power governs all contracts subject to the sovereign jurisdiction, and will remain intact unless surrendered in unmistakable terms.\" Thus, a federal agency \"cannot contract away Congress' sovereign power to regulate unless Congress has clearly and unmistakably empowered the agency to do so.\" But although the unmistakability doctrine is easy enough to state, it is harder to apply, raising a number of questions. There is no doubt that the sovereign acts doctrine and the unmistakability doctrine overlap in that the application of both requires an examination of the nature and purpose of the governmental action alleged to have breached an existing contract. But the doctrines \"proceed from independent lines of authority ….\" Also, there is dispute as to whether, if the enactment of legislation affecting existing public contracts does not fall within the scope of the sovereign acts doctrine, the unmistakability doctrine still may apply. Most courts answer no, but there is contrary authority.\nAn example of the majority rule—that legislation outside the sovereign acts doctrine is outside the unmistakability doctrine—is Cuyahog a Metropolitan Housing Authority v. United States . The case involved whether the United States breached certain Housing Assistance Payment contracts with the owners of low-income housing, entered into under the Housing Act of 1937, when it enacted legislation that changed the way rent subsidies were to be determined under that act and the existing contracts. The court found that the new law breached existing contracts because it was not protected by the unmistakability doctrine. In passing the law, the court noted, \"Congress did not act to protect public safety, morals, or the economy through the exercise, for example, of its police powers. Rather, in an appropriations measure, it deliberately targeted, at HUD's behest, that agency's contractual obligations … in an effort to reduce outlays ….\" Adjusting the price to be paid under existing contracts, concluded the court, \"fails to invoke any of the sovereign powers implicated by the unmistakability doctrine and thus remains actionable.\"\nTermination for convenience of the government . Breach claims based on contract termination by the United States are precluded, on the ground that the government's contracts are \"entered into subject to the power of Congress to enact legislation authorizing the government to … cancel them ….\" This is a specialized sovereign defense, applicable to contract termination by the United States rather than, as the defenses above, contract abrogation. It generally arises in connection with federal procurement contracts. The private contract party, following termination by the United States, is obviously entitled to compensation for work already done; the party simply cannot insist on continuing to perform under the contract and receiving payment therefor. Congressional termination of contracts often comes in the form of an appropriations bill instructing that federal funds not be spent on future purchases under a particular procurement contract.\nBeing inherent in federal sovereignty, this defense is not dependent on being expressly stated in government contracts. Nonetheless, \"termination for convenience of the government\" clauses often are used in contracts under which the United States receives goods or services. Such clauses serve to notify the unwary government contracting partner of the inherent federal termination power, and to define the damages owed upon termination. The clauses assert the federal government's \"broad right to terminate without cause and limit[] the contractor's recovery to costs incurred, profit on work done, and costs of preparing the termination settlement proposal.\"", "As mentioned, plaintiffs filing breach of contract complaints against the United States often add a takings claim under the Fifth Amendment Takings Clause. The Takings Clause is relevant because contract rights generally are deemed to constitute \"property\" as that term is used in the Takings Clause. A breach by the United States, therefore, can be argued to constitute a taking of one's property in a contract right.", "When Congress expressly reserves the power to amend a statute and agreements entered into thereunder, the contract rights arising under the statute will not be deemed property for takings purposes. That being so, the exercise of the reserved power to amend cannot be deemed a taking of those rights. Even when only a power to amend the statute is stated, authority to amend agreements under the statute will be implied and thus no property rights will accrue. Yet again, contract rights may be held to lack property status where reservation of a power to amend is contained solely in regulations and the agreements, not in the statute itself. But although a reservation of a right to amend may need to be found somewhere to prevent a contract right from gaining Takings Clause protection, the reservation need not always be express but may be implied from prior actions of the government.", "While breach of contract and takings claims against the United States are often brought in the same action, the Court of Federal Claims and Federal Circuit display a marked preference for litigating such actions under a breach theory—often ignoring the taking claim entirely. As seminally stated decades ago, takings theory \"has limited application to the relative rights of party litigants when those rights have been voluntarily created by contract. In such instances, interference with such contractual rights generally gives rise to a breach claim, not a taking claim.\" For example, all of the roughly 125 cases filed on account of Congress's withdrawal of an accounting technique in the S&L bailout statute (see page one) included both breach and takings claims, and all of them, except the two cases remaining, have been decided solely on breach grounds.\nThe explanations put forward by the Court of Federal Claims and Federal Circuit for this tilt toward breach adjudication have been several. One is that when the United States enters into a contract, it does so in its proprietary rather than sovereign capacity. Thus, remedies must arise from the contracts themselves. Nor is there a taking when the government's action in abrogating its contract is viewed as proprietary. Another explanation is that nothing has been taken where, as is typical, the plaintiff retains the full range of breach remedies. And if there is no breach of the contract right, nothing was taken. Finally, courts tend to avoid, or at least defer, constitutional questions when there are non-constitutional grounds for resolving a case.\nThe preference in Court of Federal Claims and Federal Circuit decisions for resolution on breach grounds takes two inconsistent forms. Under one view, if a breach claim is made, the taking claim must be dismissed at the outset. Under a second view, both theories may be pleaded, but the taking claim is held in abeyance until such time as the breach claim is resolved. The implication is that if breach is found, the taking claim is dismissed; if not, the taking claim may be litigated. While the second view—that a plaintiff losing a contract claim may proceed with his taking claim—has been expressly rejected in some decisions, a few recent decisions endorse it. Research reveals no decisions in which the second view has yielded a no-breach ruling followed by a finding of a taking. Under either view, of course, \"a party can obtain only one recovery for a single harm.\"\nOne circumstance where a breach claim clearly should not void the taking claim is when the taking claim is based on a property right existing independently of the contract, even if created by it.\nThe debate over which legal theory can be pursued—breach, taking, or both—is not merely a doctrinal nuance. It can substantially affect the amount of plaintiff's recovery. For example, damages for a breach of contract may include incidental or consequential losses caused by the breach, while such coverage is traditionally precluded in takings law. On the other hand, courts generally disallow prejudgment interest in breach cases, while prejudgment interest is constitutionally mandated in takings claims. It is not unheard of for prejudgment interest in takings cases to be greater than the core component of the award, the value of the property as of the date of the taking. Finally, the sovereign act defense, discussed above, is available only for breach claims.", "The Fifth Amendment Due Process Clause is worded solely as a procedural guarantee but is read to impose substantive constraints on federal legislation also. However, for so-called economic legislation, substantive due process constraints generally are minimal. The Supreme Court requires only that economic legislation not be arbitrary and capricious—that is, that there be some minimum rational basis connecting the means employed by the legislation and a legitimate government end (not necessarily the one the legislature had in mind). Plainly, this review standard is highly deferential. Note, though, that the justification for the prospective aspects of a piece of legislation may not suffice for the retroactive aspects—such as its application to existing contracts.\nDespite the famously lax nature of the substantive due process test for economic legislation, two Supreme Court decisions from the Depression indicate that when the United States abrogates its own contracts in order to enhance federal revenues, even in dire economic times, a much more searching scrutiny, and invalidation, will likely follow. In Lynch v. United States , a 1933 statute withdrawing the consent of the United States to be sued under contracts of war risk insurance from World War I was held to violate due process. And in Perry v. United States , a 1933 joint resolution purporting to abrogate a clause in government war bonds calling for payment in \"gold coin of the present standard of value\" was held invalid. Instead, the resolution allowed payment in dollars of the bond's face amount. Though bond holders alleged a due process violation, the Court based its decision on Congress's power \"[t]o borrow Money on the credit of the United States.\" To say that Congress can withdraw that pledge of credit, explained the Court, \"is to assume that the Constitution contemplates a vain promise ….\"", "", "As noted, no breach of contract action can be filed against the United States when it interferes with an existing private contract. A breach action by definition would assert that the United States failed to honor a contractual duty, clearly impossible if the United States is not even a contract party. Thus, the chief legal constraints on congressional interference with existing private contracts flow from the Constitution—in particular, from the Takings Clause and Due Process Clause. The one constitutional provision specifically aimed at protecting contract rights from government action, the Impairment of Contracts Clause, applies only to the states.\nCourt decisions regarding federal interference with contracts between private parties reveal two overarching precepts. First, Congress has greater constitutional freedom to impair private contract rights than contractual obligations of the federal government. This is unsurprising, since with private contracts there is no governmental self-interest to skew the government's decision making. That being so, courts can more readily assume that the government is acting as a neutral arbiter of competing societal interests whose decisions warrant deference. Second, within the realm of private contracts, Congress has greater freedom to impair contract rights than do the states. As the Supreme Court has said, the United States is subject to \"less searching standards\" than are the states under the Impairment of Contracts Clause. The combination of these two principles has meant that successful constitutional challenges to federal interference with existing private contracts are rare.", "Congressional interference with existing private contracts raises takings issues for the same reason that such interference with existing public contracts does: contract rights generally are deemed property under the Takings Clause. Still, the Supreme Court says that \"Congress has considerable leeway to fashion economic legislation, including the power to affect contractual commitments between private parties.\" As the following sections show, a recurring question in the case law is whether the interference with the contract right is merely an incidental byproduct of the congressional legislation, or is instead its targeted purpose.", "In Omnia Commercial Co. v. United States , the Supreme Court handed the federal government a powerful, broadly applicable defense against takings actions based on interference with existing private contracts. The Court held that government actions that only incidentally interfere with performance of private contracts—rather than targeting them directly—constitute but a \"frustration,\" not a taking, of those contract rights.\nOmnia involved a plaintiff company with a contract to buy steel plates from a manufacturer at an under-market price. Plaintiff's plans were thwarted when the United States requisitioned the manufacturer's entire production of steel plate for 1918, during World War I, and directed it not to comply with its contract with Omnia. Omnia alleged an appropriation of its contract right to the steel plates, but the Supreme Court saw it otherwise. The government's requisition, it explained, did not appropriate the company's contract right; rather, it rendered performance under the contract impossible. \"Frustration and appropriation are essentially different things,\" it said. The government, reasoned the Court, acquired the steel, not the contract right; one must not confuse the contract (the promise of steel delivery) with its subject matter (the steel). The company's losses due to contract nonperformance are thus only a consequential loss, for which takings law affords no remedy.\nUses of Omnia to defeat takings claims against the United States are legion. In one case, Congress, after the 9/11 attacks, determined that airport security could better be handled by federal personnel than by the system then in place using private security services under contract to the airlines. So Congress enacted the Aviation and Transportation Security Act, which transferred airport security responsibilities to a newly created federal agency. The effect of Congress's action was to eliminate the value of the security services' contracts. The Federal Circuit rebuffed the security services' takings challenge, however. As in Omnia , it said, the losses suffered by the disappointed contract parties were caused indirectly; the United States only \"frustrated,\" in Omnia 's words, the economic expectations of the security services. Such frustration, Omnia establishes, falls short of a taking.\nIn another case, a landlord asserted a taking of its lease contracts with Yugoslavia, after that country's offices in New York City were closed by the United States. No taking was found, in part because of the Omnia rule: no taking occurs when a contract is frustrated by government action not directed at the takings claimant. The United States' action was seen by the court to be directed at the lessee, Yugoslavia, not the landlord. In yet a third case, a nuclear waste transporter claimed a taking of its contract to deliver waste to a reprocessing facility, based on a federal moratorium on the reprocessor's operating license application. Again, no taking by the United States was found. The moratorium had as its target the reprocessor, not the plaintiff-transporter, so the latter's loss was viewed as only a consequential, hence noncompensable, loss.", "At least three limits to the Omnia rule exist.\nFirst, and as the statement of the rule implies, Omnia does not apply when congressional legislation expressly \"targets\" an existing contract right — rather than affecting contract rights only incidentally. In targeting cases, the impact on the contract is assessed for a taking instead under the ubiquitous \" Penn Central test,\" a multifactor balancing framework applied to regulatory interferences with property rights. Penn Central requires a court to evaluate (1) the economic impact of the government action on the property owner; (2) the degree of interference with the property owner's investment-backed expectations; and (3) the \"character\" of the government action. The precise meaning of these ill-defined factors is only now, 34 years after their debut, beginning to become clear, with the benefit of hundreds of lower court decisions construing them. Suffice it to say here that the Penn Central test is not an easy test to satisfy. Thus, even when the United States is divested of its Omnia liability shield, plaintiffs asserting takings claims based on targeted legislation almost invariably lose under Penn Central —though to be sure, the existing cases do not involve extreme facts.\nA few examples of this uphill climb for parties to private contracts make the point. In one Supreme Court case, a federal statute required employers quitting a multi-employer pension plan to make certain contributions to the plan, despite a pre-existing collective bargaining agreement setting out the employers' entire liability to the plan. Applying the Penn Central factors, the Court found no taking of the rights under the collective bargaining agreement: the economic impact on the employer was not deemed out of proportion to its experience with the pension plan; the employer could have little expectation of congressional non-interference because pensions are a heavily regulated field; and the character of the government action was not an invasion or appropriation, nor did the United States take anything for its own use. In another case, a federal statute explicitly relieved Conrail of its contract duty to state and local agencies to operate commuter lines. No taking of the agencies' contract rights, held the court. Under Penn Central , the economic benefit of the government action is softened by benefits conferred on the agencies by the same statute; as above, the agencies could have little expectation of congressional non-interference because railroad labor disputes are a heavily regulated field; and the character of the government action was non-physical, suggesting the absence of a taking.\nSecond, Omnia does not apply where the United States takes over the contract right , rather than merely affecting it. Taking over a contract right means putting oneself in the shoes of the contracting party—taking over its rights and responsibilities under the contract. That was not involved, Omnia noted, on the facts presented: \"there was no acquisition [by the United States] of the obligation …\" of the steel manufacturer to deliver. If the steel company had failed to deliver to the United States, the remedy, the Court pointed out, would have been on the statute, not on the contract. Omnia 's inapplicability to direct take-over of contract rights by the United States was underscored soon after it was decided. The following year, the Court rejected Omnia 's relevance and found a taking when the United States \"put itself in the shoes of the claimant and appropriated to the use of the United States all the rights and advantages that an assignee of the contract would have had.\" Viewed as an appropriation rather than a regulatory interference, this category of legislative impairment of existing private contract rights would not be tested under Penn Central .\nA third situation not reached by Omnia is where only one party to the contract has performed , then a government action directly blocks transfer of the bargained-for consideration. In one case, U.S. sanctions against Libya explicitly barred Americans from working for Libyan enterprises. The sanctions thus required plaintiffs to terminate their previously entered into employment contracts with a Libyan oil company. There was no taking of the employment contract, said the court. Among other reasons it cited: the economic impact on plaintiffs was slight, since the employment period had yet to begin. The court cautioned, however, that its conclusion would likely have been different had plaintiffs partly or completely performed and \"the sanctions resulted in a loss of income for services previously provided but not yet paid for.\"", "As noted earlier, substantive due process constraints on economic legislation are minimal, requiring only that such legislation not be arbitrary and capricious. This review standard is highly deferential. Moreover, when it comes to government interference with existing contracts, the interference has to be substantial. As summarized by the Supreme Court,\nIf an impairment [of contract] is found, the reviewing court next determines whether the impairment is of constitutional dimension. If the alteration of contractual obligations is minimal, the inquiry may end at this stage. If the impairment is substantial, a court must look more closely at the legislation. When the contract is a private one, and when the imp airing statute is a federal one, this next inquiry is especially limited, and the judicial scrutiny quite minimal . The party asserting a Fifth Amendment due process violation must overcome a presumption of constitutionality and establish that the legislature has acted in an arbitrary and irrational way.\nSubstantive due process review is minimal in the private contracts context in part because the concerns triggered by government abrogation of its own contracts are seen by the Supreme Court not to be present.\nProbably due to the highly deferential nature of the substantive due process review standard for economic legislation impairing existing private contracts, CRS is unable to find any successful substantive due process challenges to such legislation." ], "depth": [ 0, 1, 1, 1, 1, 2, 3, 4, 4, 4, 3, 2, 3, 3, 2, 1, 2, 2, 3, 3, 2 ], "alignment": [ "h5_title h0_title h2_title h4_title h3_title h1_title", "h0_full h2_full h1_full", "h4_full h1_full", "h2_full", "h5_title h0_title h4_title h3_title", "h3_full h4_title h0_title", "h0_title h3_title", "h0_full h3_full", "", "", "h4_full", "h5_full", "", "", "", "h5_title h2_title h1_title", "h2_full h1_full", "h5_full", "h5_full", "h5_full", "" ] }	{ "question": [ "How can Congressional legislation conflict with existing contracts?", "Historically, what have the outcomes of these suits been?", "What does this report cover?", "How might such litigation be avoided altogether?", "What competing interests form the basis of this issue?", "How does the case law strike a balance between these interests?", "Under what circumstances can the United States be sued?", "How are such cases categorized?", "How does this designation affect case outcomes?", "On what grounds are challenges to congressional interference with existing contracts litigated?", "To what extent do breach rules apply to the United States?", "What specific cases related to breach rules have occupied the courts in recent years?", "How can the United States defend itself if sued for breach?", "What is the sovereign acts doctrine?", "What is the aim of this defense?", "What is the unmistakability doctrine?", "How is breach of contract argued under the Fifth Amendment Takings Clause?", "How does the government commonly defend against such claims?", "How does this definition limit the scope of the Omnia rule?" ], "summary": [ "Laws enacted by Congress on occasion interfere with contracts entered into before enactment, prompting suits against the United States by disappointed contract parties.", "In a few of them, courts have awarded billions of dollars to the United States' contracting partners.", "This report surveys the legal theories invoked in such suits.", "Note that litigation on the grounds covered herein can be avoided entirely if the congressional enactment is construed to apply only to future contracts.", "On the one hand, protection of settled expectations, at least to some degree, is essential to ordered society. Contract law has this goal for expectations embodied in contracts. On the other hand, government needs latitude to address new problems, so contracts generally are said to confer no immunity against future legislation.", "The balance struck by the case law is that while Congress legitimately can thwart performance under existing contracts, the United States may in some instances have to pay compensation.", "The United States cannot be sued unless it waives sovereign immunity and vests jurisdiction to hear claims against it in a court.", "Once past these procedural thresholds, courts accord different treatment to legislative interference with existing contracts depending on whether the interference is with a \"public contract,\" defined as one where the United States is a party, or with a private contract, defined as one between two non-federal parties.", "Broadly speaking, challenges to the former are more likely to win.", "For public contracts, breach of contract is the main theory on which challenges to congressional interference with existing contracts are litigated.", "The United States is as bound by its contracts as are individuals, so the same breach rules apply.", "Some special situations that have occupied the courts in recent years have been (1) breaches of the implied covenant of good faith and fair dealing; (2) the addition by Congress of new hurdles for the private party to a contract with the United States; and (3) breach by congressional inaction.", "In addition to sovereign immunity, which as noted has been waived, there are other \"sovereign defenses\" that the United States can invoke when sued for breach.", "One is the sovereign acts doctrine, which holds that the United States is not liable for its \"public and general\" acts as sovereign.", "This defense seeks to ensure that the United States is no worse off than a private contracting party when acts of the United States as sovereign impede contract performance.", "Another sovereign defense flows from the unmistakability doctrine, which states that a federal agency may not contract away Congress's sovereign power to regulate unless Congress has unmistakably empowered the agency to do so.", "Plaintiffs argue that since contract rights generally are deemed \"property\" under the Takings Clause, a congressional enactment that thwarts performance under a contract in essence takes property, requiring compensation.", "The government's defense is often the Omnia rule, a Supreme Court holding under which government actions that only incidentally interfere with performance of private contracts are deemed to constitute but a frustration, not a taking, of contract rights.", "Per this definition, the Omnia rule does not apply when the congressional action expressly \"targets\" an existing contract right, though even here the taking claim usually is rejected." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, -1, 0, 1, -1, -1, 1, -1, -1, 1, -1, -1, 0, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5 ] }
CRS_R45420	{ "title": [ "", "Introduction", "Recent World and U.S. Economic Trends", "World Economic Trends", "World Trade Trends", "Volume of Goods and Services", "Value", "U.S. Economic Trends", "Current Account Trends", "U.S. Trade in Goods", "Trade in Goods by Category", "Exports", "Imports", "Energy Trade", "Trade in Goods with Leading Partners", "Trade in Goods with Free Trade Agreement Partners26", "U.S. Trade in Services", "Trade in Services by Category", "Exports", "Imports", "Trade in Services with Leading Partners", "U.S. Total Trade in Goods and Services", "Issues for Congress" ], "paragraphs": [ "", "Overview\nThe United States is the world's biggest economy (in nominal dollars), leading trading nation (goods and services), and largest source of and destination for foreign direct investment. The U.S. output of goods and services, or gross domestic product (GDP), totaled $19.5 trillion in 2017. That is almost the combined GDP of the next three largest economies. All told, the United States, with close to 5% of the world's population, accounted for almost 25% of the world's output and more than 16% of its growth in 2017. While the United States is the world's largest exporter (goods and services combined), U.S. exports are overshadowed by the large U.S. demand for imported products. However, the level of both U.S. exports and imports of goods and services depends on many interrelated domestic and international factors, including the value of the U.S. dollar relative to other currencies, global demand for other dollar-denominated assets—including U.S. Treasury securities, and the relative strength of the U.S. and world economies. While the United States is still by far the dominant economy in the world, its relative position has shifted in the past two decades.\nChanges in U.S. trade patterns pose both opportunities and challenges for U.S. international trade relations. These developments have intensified congressional interest in U.S. trade policy and demand for information and analysis of U.S. trade flows. In coming months, Congress may face issues such as shaping U.S. trade policy to reflect this changing composition of trade; enhancing the competitive position of U.S. firms, workers, and industries, promoting access to new foreign market opportunities for U.S. businesses, and addressing tensions, trade barriers and issues raised by the growing role of emerging economies in the global economy. In addition, questions affecting U.S. trade trends could also arise as the Trump Administration renegotiates FTAs and pursues new ones, and Congress debates and potentially ratifies them.\nRecent Developments in International Trade\nInternational trade is an important engine not only of the U.S. economy, but of the global economy. Total trade (exports plus imports) as a share of global GDP has risen from 25% in 1960 to 56% in 2017 ( Figure 1 ). Greater openness to trade and trade reforms worldwide have been linked to higher growth in productivity and real incomes, as well as to reduced poverty worldwide. For decades since World War II, annual real global trade growth outpaced GDP growth, growing on average 1.5 times faster. This trend has not held in recent years as the global economy recovered from the global financial and economic crisis. Real growth in the volume of world merchandise trade slowed to 2.0% in 2016—the slowest pace of growth since 2009. Trade growth has seen some rebound, increasing to 5.4% in 2017—the strongest growth rate since 2011, driven mainly by cyclical factors, particularly higher investment and consumption expenditure.\nOverall, analysts attribute the trend of weakened international trade growth in previous years to several factors, including weak import demand, exchange rate fluctuations, and falling commodity prices. The slowdown in world investment and China's rebalancing toward a consumption-driven economy are seen by some as major structural factors, while others consider growing trade protectionism to be equally important. With the improving global economic outlook, a rebound in trade growth had been projected for 2018 and 2019 by the International Monetary Fund (IMF) and the World Trade Organization (WTO). However, amid several downside risks, including rising trade tensions between major economies like the United States and China, and heightened trade policy uncertainty, the IMF and WTO now expect global trade growth to slow. Recently introduced restrictive trade policy measures by the United States and some of its major trading partners may already be affecting trade flows and prices in targeted sectors. Analysts claim that some recent policy announcements have also harmed business outlooks and investment plans, due to concern about possible disruption to supply chains as well as the risk that the restrictions may intensify. The Organization for Economic Cooperation and Development (OECD) projects that a further rise in trade tensions may have additional adverse effects on global investment and jobs.\nU.S. world trade has grown steadily over the past decade. In 2017, the United States exported $2.4 trillion in goods and services and imported $2.9 trillion. Since 2009, when trade flows declined sharply in the midst of the international financial and economic crisis, U.S. exports grew 48.5%, while U.S. imports grew 47.6% in nominal terms. More broadly, since 1960, trade relative to GDP has risen markedly. U.S. exports as a percentage of GDP expanded from 5% in 1960 to over 12% of GDP in 2017, while U.S. imports expanded from 4% to over 15% of GDP.\nChanging Patterns in U.S. Trade\nOver the past several decades, the process of globalization has introduced fundamental changes to the U.S. economy. The growing economic weight of emerging market and developing economies is contributing to a realignment of the distribution of power within the global economy and to changes in the direction and composition of U.S trade. Traditionally, the United States and other advanced economies, such as European Union members and Japan, have been the primary sources of world trade flows. While most of the United States' largest trading partners remain advanced economies, U.S. trade with emerging market and developing economies—although comparatively low—accounts for a growing share of total U.S. trade ( Figure 2 and Figure 3 ).\nThe share of U.S. exports to the Middle East and North Africa increased from 3.1% in 2000 to 5.3% in 2017, while the share to South Asia increased from 0.6% to 1.8% during the same time period. The share of U.S. imports from East Asia and the Pacific also grew significantly, from 32.9% in 2000 to 38.9% in 2017. Among the emerging economies, U.S. trade with China has grown the fastest. In 2000, China accounted for about 2.1% of U.S. merchandise exports and 8.1% of U.S. merchandise imports. By 2017, China represented 8.4% of U.S. merchandise exports and 21.4% of merchandise imports. The growing importance of emerging economies is also reflected in U.S. trade in services. Between 2000 and 2017, the share of U.S. services exports to the United Kingdom, Canada, Japan, and Mexico all decreased, while that of China and India increased. During the same time period, the share of U.S. services imports from India grew from 0.9% to 5.2%. In addition, the composition of U.S. trade has also changed since 2000. U.S. exports of petroleum and coal products, oil and gas, and aerospace products and parts have increased, while exports of semiconductors, computer equipment, and motor vehicle parts have decreased significantly ( Table 1 ).\nGlobal Value Chains\nInternational trade has become increasingly complex, and the changing dynamics of U.S. trade pose both opportunities and challenges for the United States. In the past, U.S. firms tended to source most or all of their production in the United States, using inputs that were largely made domestically. U.S. production, trade, and investments are increasingly organized within so-called global value chains (GVCs) where the different stages of the production process are located across different countries. GVCs mean that products are often traded across borders multiple times. This international fragmentation of U.S. and other countries' production has raised the level of trade associated with a particular final product, as well as trade with both developing and developed countries.\nLower global trade barriers and technological advances help to facilitate the growth of GVCs, making international transport faster and accelerating the flow of information across borders. These linkages have blurred the distinction between exports and imports as strictly domestic or foreign activities. This in turn has made it increasingly difficult to understand who benefits and loses from global trade. It also complicates the interpretation of bilateral trade balances. Trade in intermediates means that imports have become essential inputs into the production of exports. As a result, policies that affect a nation's imports ultimately affect its exports and vice versa.\nMore than half of global manufacturing imports are intermediate goods traveling within supply chains, while over 75% of global services imports are intermediate services. The latest data from the OECD suggests that, on average, over 25% of the value of national exports included foreign content in the form of imported inputs. For the United States, the foreign value-added share in U.S. exports has increased in most industries, particularly since the mid-1990s.\nThe Limitations of Trade Data\nThe growth in global production chains, intra-firm trade, and trade in intermediate goods means that traditional accounting methods may distort trade data and not fully reflect the source of resources that are used in producing goods and services. This makes it increasingly difficult to understand and interpret the implications of trade data for the U.S. economy. Thus, it is important to note that the conventional trade data that drives policy discussions, and that is used throughout this report, may underestimate U.S. trade, particularly in services, as the data are not measured on a value-added basis and do not attribute any portion of the traded value of manufactured and agricultural products to services inputs. Intermediate services embedded within a value chain as inputs include not only transportation and distribution to help move goods along, but also research and development (R&D), design and engineering, and business services.\nChina is an example of this phenomenon. Since initiating free market reforms in 1979 and opening up its economy to global trade and investment, China has emerged as a major center for global supply chains. Because of China's large pool of low-cost labor, many export-oriented multinational corporations have moved production from other countries (primarily in Asia) to China. In many cases, products that are \"made in China\" are actually products that are \"assembled in China,\" using imported inputs (such as components) that are designed and produced globally. The value added that occurs in China is often quite small relative to the total value of the finished product when it is imported into the United States and elsewhere, and a significant level of the profits from the sale of the product is estimated to accrue to the multinational company that owns the brand.\nTo illustrate, when the United States imports such products as iPhones and iPads, it attributes the full value of those imports as occurring in China, even though the value added that occurred there is quite small. Apple Inc., the U.S. firm that developed these products, is the largest beneficiary in terms of the profits generated by the sale of its products, and most of its product design, software development, product management, marketing, and other high-wage functions and employment occur in the United States. In other words, U.S. trade data may show where products are being imported from, but they often do not reflect who ultimately benefits from that trade. In many instances, U.S. imports from China are really imports from many countries. Yet, the full value of the final imported product is attributed to China, which results in what one might consider to be an inflated trade deficit figure. A joint study by the OECD and the WTO estimated that the U.S trade deficit with China in 2009 would have been reduced by 25% if bilateral trade flows were measured according to the value-added that occurred in each country before it was exported. Additionally, another study estimated that 24.7% of U.S. imports from Canada, and 39.8% of U.S. final merchandise imports from Mexico, consist of value added from the United States.\nSources\nThis report relies heavily on resources from the U.S. Department of Commerce's Bureau of Economic Analysis and Census Bureau, and from the U.S. International Trade Commission—the main sources of U.S. trade data—for information and statistics presented throughout the report. It is also based on primary and secondary source materials, including publications and news releases by the U.S. International Trade Commission, the Office of the U.S. Trade Representative, U.S. Energy Information Agency, U.S. Federal Reserve System, the International Monetary Fund, the World Bank, and the World Trade Organization. Much of the trade data used in the report, including U.S. goods and services trade data, are revised throughout the year.\nThe main purpose of this report is to provide an overview of U.S. exports, imports, and trade balances in 2017—the most recent year for which yearly U.S. trade data are available. It is intended primarily as a reference, and it focuses on what has happened with U.S. trade in recent years—not why it happened or what the changes imply. Developments in international trade have intensified congressional interest in U.S. trade policy and demand for comparative analysis of U.S. trade flows. Therefore, this report presents current data and statistics on U.S. trade in a way that is accessible and understandable—through charts, tables, and brief explanations—to help inform policy discussions. Given the linkages between U.S. and world economic activity, it begins by providing an overview of world economic and trade developments. The bulk of the report then focuses on the major trends in trade between the United States and the rest of the world. A comprehensive overview of trade concepts, data on key U.S. trade and investment trends, and the trade and investment policy tools used to advance U.S. objectives is provided in CRS Report R45148, U.S. Trade Policy Primer: Frequently Asked Questions , coordinated by [author name scrubbed].", "", "Real global GDP rose from 3.27% in 2016 to 3.74% in 2017 ( Figure 4 ). Advanced economies grew faster in 2017 (2.34%) than in 2016 (1.71%) ( Table 2 ). The change in the growth rate of emerging market and developing economies was small—0.33 percentage point (p.p.) — with growth rising from 4.39% in 2016 to 4.72% in 2017, partly due to the moderate slowdown in China's economic growth over the past few years (from 10.60% in 2010 to 6.86% in 2017). Among the United States' top trading partners, only India and Mexico experienced slower growth in 2017 than in 2016. In 2017, the United States accounted for 24.5% of world GDP (down from 30.6% in 2000), China for 14.7% (up from 3.6% in 2000), Japan for 6.5% (down from 14.6% in 2000, but up from 5.9% in 2016), and Germany for 4.6% (down from 5.8% in 2000) ( Figure 5 ).\nThe growth performance of major U.S. trading partners diverged widely in 2017, affecting both their bilateral trade with the United States and their exchange rates against the U.S. dollar. According to the most recent estimates by the IMF, worldwide growth can be attributed in large part to the strengthening of domestic demand in advanced economies and in China. The Eurozone grew 2.39% in 2017, up from 1.89% in 2016—its highest growth rate since the 2008 global financial and economic crisis, reflecting strong consumption, investment, and exports. Canada more than doubled its real GDP growth rate, from 1.41% in 2016 to 3.05% in 2017. In addition, France's growth rate rose from 1.10% in 2016 to 2.34% in 2017.\nOn the other hand, India's economy slowed, with growth decreasing from 7.11% in 2016 to 6.68% in 2017. India, however, is projected to grow 7.30% in 2018 and 7.44% in 2019, lifted by continued implementation of structural reforms, strong private consumption, and fading transitory effects of recent economic reform, such as a currency exchange initiative and implementation of the national goods and services tax, which was introduced in mid-2017. China's economy continued to grow modestly, with its growth rate increasing from 6.72% in 2016 to 6.86% in 2017. Despite this increase, China's growth rate is expected to slow in the coming years—to 6.60% in 2018 and 6.18% in 2019—as the economy continues to rebalance away from investment toward private consumption and from industry to services. The rise in China's nonfinancial debt as a share of GDP is expected to contribute to this downward trend.\nThe IMF forecasts improved performance in the short-term both from advanced economies— 2.36% for 2018 and 2.13% for 2019—as well as from emerging market and developing economies—4.68% in both 2018 and 2019. This growth is projected to slow in the medium term, however, as output gaps close and advanced economies return to their potential output paths. Beyond the short term, growth rates are expected to fall below pre-recession levels, as the aging populations and shrinking labor forces in advanced economies will act as a drag on expansion. Fiscal policy is expected to remain expansionary in 2018 and 2019, but begin to turn contractionary by 2020. Monetary policy will likely remain supportive in the Eurozone and Japan, but may tighten faster than projected in the United States. More broadly, global financial conditions are expected to remain generally accommodative.\nGrowth in emerging and developing Asia is expected to continue to exceed global growth, growing 6.52% in 2018 and 6.31% in 2019. The IMF also projects emerging and developing Europe to slow to 3.77 % in 2018 (down from 5.98% in 2017) and to 1.98% in 2019, as strong demand for exports from its Eurozone neighbors and favorable financial conditions continue to support economic activity in the short term. Recovery in commodity prices is projected to help Latin American and the Caribbean grow 1.20% in 2018 (down from 1.27% in 2017) and 2.19% in 2019. Economic growth in the Middle East and North Africa is expected to be 2.44% in 2018 (up from 2.19% in 2017) and 2.72% in 2019. Growth in sub-Saharan Africa is also projected to increase to 3.07% in 2018 (up from 2.75% in 2017) and to 3.76% in 2019, with higher commodity prices important to the region's growth prospects.", "Given the impact of commodity and energy prices and fluctuations in exchange rates on trade, among other factors, this section discusses trends in both the volume and value of exports and imports.", "In 2017, world trade volumes recorded their largest increases since 2011. This trade expansion followed a contraction in 2016, when trade growth lagged growth in real world output. According to the WTO, this large acceleration in trade growth was due to stronger than expected economic growth across the globe, with higher investment and private consumption, and supportive fiscal as well as financial conditions.\nOverall, world trade volume of goods and services increased 5.24% in 2017, compared to a 2.22% increase in 2016 ( Figure 6 ). Both advanced and emerging market and developing economies saw increased growth rates in exports and imports in 2017, but the latter group's trade flows grew at a higher rate, more than tripling the growth rate registered in 2016—from 2.17% to 6.41%. This was in large part driven by China, whose volume of exports of goods and services grew 9.31%, while its volume of imports rose 7.13% in 2017.\nThe recovery in export trade volumes was broad across the world's regions in 2017. Exports from all regions except the Middle East and North Africa achieved higher growth rates in 2016 than in 2017. In 2017, exports from emerging market and developing economies grew 6.94%, up from 2.95% in 2016. This compares to 4.37% for advanced economies (up from 1.80% in 2016). Emerging and developing Asia was the leader, with exports up 9.68%, followed by emerging and developing Europe, with 8.91%. The Eurozone's exports also increased considerably, from 2.63% in 2016 to 5.19% in 2017.\nThe dynamics of trade growth also differed among these groups. While emerging market and developing economies achieved higher overall import growth, it was the developed economies that had more momentum at the end of 2017, as these countries began to experience higher economic growth. The largest trade volume gains in 2017 were recorded on the import side in emerging market and developing economies, with real import volume growth of 7.03%, up from 1.83% in 2016. Meanwhile, advanced economies' real imports grew 4.19% in 2017, up from 2.45% the year before. Emerging and developing Asia led with 9.06% import volume growth, followed by emerging and developing Europe (up 8.76%) and Latin America and the Caribbean (up 4.82%).", "In nominal terms, world merchandise exports expanded 10.56% in 2017, after two years of declines, reaching $17,478.8 billion ( Figure 7 ). World merchandise imports also grew considerably in 2017, up 11.25%, after declining 3.23% in 2016. The EU remained the largest trading bloc in the world, with $11,346.5 billion in total trade. China accounted for 12.68% of world exports, up from 1.78% in 2000, while U.S. exports represented 8.87%, down from 12.55% in 2000. The stability of the U.S. dollar versus a broad basket of currencies, in spite of the commodity price increases, is believed to have contributed to this increase. The United States was the largest merchandise importer in 2017, accounting for 13.79% of world imports, followed by China (10.16%), Germany (6.62%), and Japan (3.76%). World exports and imports of services also increased in value considerably in 2017, up 7.74% and 6.93%, respectively. Despite increases in recent years, the U.S. share of world services imports is lower today than in 2000, whereas the U.S. share of world services exports has fluctuated in recent years but stands close to the 2000 level.\nThe WTO forecasts a gradual moderation in merchandise trade growth in 2018 and 2019. There are significant uncertainty to the medium-term forecast, as the heightened trade tensions and uncertainty about the major economies' commitment to existing rules-based architecture could begin to threaten business confidence, affect investment decisions, and undermine the robustness of current global economic growth. If the current GDP growth forecasts are realized, world exports of goods and services are projected to expand by 3.84% and imports by 4.52% in 2018. Advanced economies are expected to see export growth of 3.35% and import growth of 3.67%, while emerging market and developing economies are expected to expand their exports by 4.70% and their imports by 6.01%.", "The levels and growth of U.S. exports and imports of goods and services are determined by a wide range of domestic and international factors, including the relative strength of the U.S. and world economies. The United States had a $19.5 trillion economy in 2017. The U.S. economy grew faster in 2017 than in 2016: U.S. real GDP increased 2.2% in 2017, up from 1.5% in 2016, but down from 2.9% in 2015 ( Figure 8 ). The largest contributions to the 2017 growth rate figure came from five industries: professional and business services (0.42 percentage points, p.p.), finance, insurance, real estate, rental, and leasing (0.32 p.p.), manufacturing (0.22 p.p.), educational services, health care, and social services (0.22 p.p.), and retail trade (0.20 p.p.).\nThe contribution to U.S. GDP growth from net exports was negative again in 2017 (-0.31 p.p.), about the same as in 2016. Exports of goods and services contributed 0.26 and 0.11 p.p. to growth, respectively ( Figure 9 ). The contribution to growth from federal and state and local government spending was near zero as both federal and state and local expenditures contracted marginally in 2017.\nThe latest U.S. data show signs of continuing strong performance in 2018, with the IMF forecasting 2.9% growth and the U.S. Federal Reserve estimating growth between 2.9% and 3.2%. Most cyclical indicators suggest that growth will stop accelerating by 2019 due to higher projected commodity prices, upward pressure on inflation, faster monetary policy tightening by the U.S. Federal Reserve, and global risks. Labor market data indicate that the United States is at—or close to—full employment, as the jobless rate reached 4.1% at the end of 2017 and projected to fall below 4.0% in 2018.", "The U.S. current-account deficit—the combined balances of trade in goods and services, income, and net unilateral current transfers—increased 3.76% in 2017 to $449.1 billion, from $432.9 billion in 2016 ( Figure 10 ). The deficit amounted to 2.43% and 2.40% of current-dollar GDP in 2016 and 2017, respectively. The increase in the current-account deficit was due primarily to a rise in the merchandise trade deficit (up 7.52%). This trend offset increased surpluses in services trade (up 2.48%) and primary income (investment income, income payments to foreigners, and compensation of employees) (up 14.89%). The deficit in secondary income (government transfers abroad) declined 4.28%.\nThe U.S. trade deficit for goods and services increased 10.02%, from $502.0 billion in 2016 to $552.3 billion in 2017. The deficit on goods increased to $807.5 billion in 2017 from $751.1 billion in 2016, though it remained well below the annual record deficit of $837.3 billion registered in 2006. U.S. exports of goods rose from $1.46 trillion in 2016 to $1.55 trillion in 2017, reflecting growth in exports of capital goods, consumer goods, and, in particular, petroleum and petroleum products. Imports of goods increased to $2.36 trillion in 2017, from $2.21 trillion in 2016, reflecting increases in most sectors, particularly crude products (up 30.49% in 2017, compared to a decline of 19.21% in 2016).\nThe U.S. trade surplus for services grew to $255.2 billion in 2017, from $249.1 billion in 2016. This represented an increase of 2.48% from 2016, but it was still down 3.08% from the annual record surplus of $263.3 billion in 2015. U.S. services exports rose from $758.9 billion to $797.7 billion during this period. The largest increases in U.S. services exports occurred in the categories of financial services (10.32%) and telecommunications, computers, and information services (9.52%). At the same time, services imports also increased, rising from $509.8 billion in 2016 to $542.5 billion in 2017. The largest increase in U.S. services imports occurred in financial services (12.34%) and charges for the use of intellectual property (10.11%).", "U.S merchandise exports totaled $1.55 trillion in 2017, a 6.62% ($96.4 billion) increase from the 2016 level ( Figure 11 and Table 3 ). The value of U.S. merchandise imports was $2.36 trillion over the same period, up 6.92% ($152.9 billion) from 2016. U.S. imports increased more than U.S. exports, leading to a $56.4 billion (7.52%) increase in the U.S. merchandise trade deficit to $807.5 billion in 2017. The relative decline in the U.S. share of world merchandise exports and imports is shown in Figure 12 .\nThe United States experienced trade surpluses in two merchandise categories in 2017: agricultural foods, feed, and beverages (exported $15.8 billion in excess of imports) and agricultural industrial supplies and materials (exported $6.9 billion in excess of imports). Energy-related products had the largest absolute and relative (percentage) increase in both exports and imports: exports rose 42.86% in 2017, while imports increased by 22.52% over the same period.", "", "Capital goods (not including automotive) was the largest U.S. export category in 2017, accounting for 34.35% of all U.S. exports ( Figure 13 and Table 4 ). It was followed by industrial supplies and materials (29.37% of exports), consumer goods, not including food and automotive (12.69%), automotive vehicles, parts, and engines (10.15%), and foods, feeds, and beverages (8.55%). The top ten exports in 2017 were the same as in 2016: (1) petroleum and petroleum products; (2) chemicals; (3) metals; (4) automotive engines; (5) civilian aircraft; (6) electric-generating machinery; (7) passenger cars; (8) medicinal, dental, and pharmaceutical products; (9) semiconductors; and (10) scientific, hospital, and medical equipment.\nU.S. exports in all merchandise categories increased in 2017. The largest increase in both value and percentage terms occurred in the industrial supply and materials category (up 17.77% or $68.8 billion). It was followed by automotive vehicles, parts, and engines (up 4.88% or $7.3 billion) and capital goods (up 2.63% or $2.63 billion).\nAt the product level, there were both increases and decreases in exports. The largest increases at the product level were in crude oil (up 142.24% or $13.2 billion), coal and coal products (up 78.79% or $6.1 billion), natural gas (up 76.14% or $3.5 billion), raw cotton (up 47.33% or $1.9 billion), truck, buses, and special purpose vehicles (up 26.70% or $2.6 billion), and automotive engines and parts (up 24.8% or $2.3 billion). The largest declines were in civilian aircraft (down 7.65%), telecommunications equipment (down 7.09%), soybeans (down 5.91%), and medicinal, dental, and pharmaceutical products (down 3.74%). The smallest increases in exports between 2016 and 2017 were in textile supplies (up 1.06%) and computer accessories (up 1.20%).", "As with exports, capital goods (not including automotive) was also the largest U.S. import category in 2017, accounting for 27.26% of all U.S. imports ( Figure 14 and Table 5 ). It was followed by consumer goods (25.58% of exports), industrial supplies and materials (21.67%), automotive vehicles, parts, and engines (15.24%), and foods, feeds, and beverages (5.88%). The top ten imports in 2017, as in 2016, continued to be: (1) household and kitchen goods; (2) passenger cars; (3) apparel and footwear; (4) crude; (5) metals; (6) medicinal, dental, and pharmaceutical products; (7) electric-generating machinery; (8) chemicals; (9) telecommunications equipment; and (10) computers.\nU.S. imports in all merchandise categories increased in 2017. The largest increase in both value and percentage terms occurred in the industrial supply category (up 15.78% or $69.7 billion). It was followed by capital goods (up 8.38% or $49.8 billion) and foods, feeds, and beverages (up 5.94% or $7.8 billion).\nAt the product level, there were mostly increases in imports. The largest increases were in oil-drilling, mining, and construction machinery (up 34.55% or $5.1 billion), crude (up 30.49% or $31.7 billion), metals (up 19.92% or $18.5 billion), trucks, buses, and special purpose vehicles (up 19.7% or $2.9 billion), computers (up 13.36% or $8.1 billion), and fish and shellfish (up 10.77% or $2.1 billion). The largest declines in imports by product were in engines and engine parts (down 4.5%) and medicinal, dental, and pharmaceutical products (down 1.46%). The smallest increases in imports between 2016 and 2017 were in apparel and footwear (up 0.65% or $0.9 billion) and passenger cars (up 1.6% or $5.7 billion).", "In 2017, U.S. exports of all categories of energy products rose sharply, up 42.86% compared to a decline of 10.42% in 2016. The removal of the U.S. government ban on most exports of U.S. crude (to countries other than Canada) in December 2015 is thought to be a contributing factor. U.S. exports that rose in 2017 include petroleum and petroleum products (38.82%), coal and coal products (78.79%), and natural gas (76.14%) ( Table 4 , Figure 15 , and Figure 16 ). According to the U.S. Energy Information Administration (EIA), annual average U.S. crude oil production reached 9.3 million barrels per day in 2017, an increase of 464,000 barrels per day (5.25%) from 2016 levels, after declining by 551,000 barrels per days in 2016. In November 2017, monthly U.S. crude oil production reached 10.07 million barrels per day, the highest monthly level of crude oil production in U.S. history. U.S. crude oil production has increased significantly over the past 10 years, driven largely by production from tight rock formations using horizontal drilling and hydraulic fracturing. EIA projects that U.S. crude oil production will continue to grow in 2018 and 2019, averaging 10.7 and 11.3 million barrels per day, respectively.\nOver the same period, the United States exported 97.0 million short tons of coal, a 61% (36.7 million short tons) increase from the 2016 level. Exports to Asia more than doubled in 2017, although Europe continues to be the largest recipient of U.S. coal exports. Steam coal, which is used to generate electricity, accounted for most of the increase in coal exports in 2017. The Netherlands, South Korea, India, Mexico, and Japan were the top recipients of U.S. steam coal exports. India imported nearly three times as much steam coal in 2017 as it did in 2016—mainly to fuel growing electricity capacity in the country.", "In 2017, the EU was the United States' top trading partner in terms of two-way merchandise trade, followed by China, Canada, and Mexico ( Table 6 ). Ranked by exports, the EU was the leading market for U.S. exports, which totaled $284.8 billion (18.33% of all U.S. exports). Canada was the second largest export market ($282.9 billion worth of U.S. exports or 18.21% of all U.S. exports), followed by Mexico and China. In terms of imports, China was the leading source of U.S. imports ($506.3 billion or 21.44% of all U.S. imports), followed by the EU ($437.4 billion or 18.53% of all U.S. imports), Mexico, and Canada.\nU.S. merchandise exports to all six top trading partners increased from 2016 to 2017. The largest increase in value was a $15.63 billion increase in U.S. exports to Canada, which totaled $282.9 billion in 2017, compared to $267.2 billion in 2016. It was followed by a $14.4 billion increase in exports to China, from $115.9 billion in 2016 to $130.4 billion in 2017. In percentage terms, the largest increases in U.S. exports in 2017 were to South Korea (14.65%) and China (12.45%).\nU.S. merchandise imports from all six top trading partners also increased in 2017. The largest rise in value was a $43.0 billion (9.30%) increase in imports from China, a $21.9 billion (7.73%) increase in imports from Canada, and a $19.7 billion (6.55%) increase in imports from Mexico.", "U.S. two-way (exports plus imports) merchandise trade between the United States and its 20 FTA partners was $1,517.2 billion in 2017 countries. It accounted for 38.76% of total U.S. merchandise trade with the world. The value of U.S. exports to FTA partners totaled $720.3 billion, a 6.55% ($44.3 billion) increase from $676.0 billion in 2016. The value of U.S. exports to most FTA partners increased in 2017; the exceptions were exports to Bahrain and Israel, which declined 0.15% ($1.3 million) and 4.91% ($647 million), respectively ( Table 7 ). U.S. imports from FTA partners were valued at $796.8 billion, a 6.5% ($48.6 billion) increase from $748.2 billion in 2016. The U.S. merchandise trade deficit with all FTA partners increased 5.98% ($4.3 billion) to $76.5 billion in 2017.\nThe value of U.S. imports entering into the United States under the preferential terms of an FTA—or subject to the FTA tariff scheme—was $385.6 billion in 2017, a 2.83% ($10.6 billion) increase from the 2016 value of $375.0 billion. These imports accounted for nearly half (48.39%) of total imports from FTA partners in 2017 and for 16.47% of total U.S. imports from the world. FTA imports from Chile grew 26.59% ($1.3 billion), which represented the largest percent increase. Imports under FTAs from Peru and Bahrain increased 24.42% ($650 million) and 16.68% ($83.0 million), respectively, albeit from smaller baselines. Combined imports from the NAFTA partners (Canada and Mexico) rose 3.54% ($10.7 billion). U.S. imports under an FTA declined the most from Oman (down 13.81% or 113.0 million), followed by Colombia (down 7.00% or 377.0 million), and South Korea (down 5.62% or 2.0 billion).", "The United States remains highly competitive in the global services market. As the world's top exporter of services, the United States accounted for $780.9 billion, or 14.55%, of world services exports in 2017 ( Figure 17 ). Other top exporters included the UK ($360.6 billion or 6.72% share), Germany ($308.7 billion or 5.75%), France ($265.7 billion or 4.95%), and China ($206.5 billion or 3.85%). Most of the world's top 10 services exporters in 2017 were developed countries. However, China (currently the fifth largest services exporter) and India (currently the seventh largest services exporter) have been among the top 10 since the mid-2000s. Overall, the top 10 exporting countries together accounted for 52.14% of world services exports in 2017.\nThe United States also remains the world's largest importer of services ($538.1 billion or 10.57% of total world services imports), followed by China ($71.9 billion or 9.27%), Germany ($327.1 billion or 6.42%), France ($244.7 or 4.81%), and the UK ($222.6 billion or 4.37%). The top 10 importer countries together accounted for 52.04% of world services imports in 2017.\nU.S. two-way (exports and imports) trade in services grew 5.63% between 2016 and 2017 ( Figure 18 ). During that period, U.S. exports of services increased 5.11% ($38 billion), from $758.9 billion to $797.7 billion, while U.S. services imports grew 6.40% ($32.6 billion), from $509.8 billion to $542.5 billion ( Table 8 ). The U.S. surplus in services trade increased 2.45% ($6.1 billion) to $255.2 billion. U.S. exports in all nine services export categories grew in 2017. The services export categories with the highest growth rates in 2017 included: financial services (10.32%), telecommunications, computers, and information services (9.52%), and insurance services (5.74%). U.S. imports of services grew in all but one of the services import categories (maintenance and repair services).", "", "U.S. travel services exports, valued at $210.7 billion in 2017, accounted for the largest share (26.42%) of total U.S. services exports in 2017 ( Figure 19 and Table 9 ). Other large U.S. services export categories included: charges for the use of intellectual property ($128.4 billion or 16.09% of all U.S. exports), financial services ($109.6 billion or 13.74%), and transport ($88.6 billion or 11.11%). After growing 0.47% in 2016, total U.S. services exports were up 5.11% in 2017. In all services categories, exports increased in 2017, following decreases in several categories in 2016. These included transport (up 4.63% in 2017, compared to a decline of 3.47% in 2016), financial services (up 10.32% in 2017, compared to a decline of 2.98% in 2016), charges for the use of intellectual property (up 2.91% in 2017, compared to a decline of 0.03% in 2016), and travel (up 5.11% in 2017, compared to a decline of 0.02% in 2016).", "Categories that accounted for the largest shares of U.S. services imports in 2017 included travel services (with $135.0 billion or 24.89% of all U.S. imports), transport ($101.7 billion or 18.76%), charges for the use of intellectual property ($51.3 billion or 9.45%), insurance services ($50.7 or 9.34%), telecommunications, computers, and information services ($40.1 billion or 7.38%), and financial services ($28.9 billion or 5.33%) ( Figure 20 and Table 10 ). All but one of the nine services import categories experienced positive growth in 2017. These include financial services (up 12.34%, following a 0.07% decline in 2016), charges for the use of intellectual property rights (up 10.11%, following a 14.70% increase in 2016), travel (up 9.27%, following a 7.88% increase in 2016), and telecommunications, computers, and information services (up 7.12%, following a 1.87% increase in 2016). Imports of maintenance and repair services declined 4.51% in 2017, following a 3.13% decline in 2016.", "In 2017, the EU—as a single entity—was the United States' top trading partner in terms of two-way (exports plus imports) services trade, while the largest single-country trading partners were the UK, Canada, Japan, China, and Germany ( Table 11 ). The EU was the largest export market for U.S. services in 2017, as well as the largest foreign supplier of U.S. services imports. The EU accounted for $243.4 billion (30.51%) of total U.S. services exports and $192.0 billion (35.39%) of total U.S. services imports. After the EU, the top markets for U.S. services exports were the UK, Canada, China, and Japan, while the top sources of U.S. services imports were the UK, Germany, Japan, and Canada. In 2017, the United States maintained a services trade surplus with every major services trading partner except with Hong Kong ($4.4 billion deficit), India ($3.1 billion deficit), and France ($2.7 billion deficit).\nU.S. services exports to nearly all leading trading partners increased from 2016 to 2017. Exports declined to Taiwan (down $1.8 billion or 15.18%), France (down $552 million or 2.79%), and Saudi Arabia (down $155.0 billion or 1.66%). The largest increase in value was a $4.1 billion increase in U.S. services exports to Canada, followed by a $3.1 billion increase to India and a $2.8 billion increase to the UK. In percentage terms, the largest increases in U.S. services exports between 2016 and 2017 were to Hong Kong (19.15%), India (15.19%), South Korea (11.24%), and Brazil (10.57%).\nU.S. services imports from all but two of the major trading partners increased in 2017. Imports from both Brazil and South Korea fell last year, down 6.90% ($534 million) and 0.18% ($20 million), respectively. The largest increases in value were a $4.6 billion increase in U.S. services imports from the UK (up 8.77%), a $2.4 billion increase in imports from Canada (up 7.98%), and a $2.3 billion increase in imports from India (up 8.98%). In percentage terms, the largest increase in U.S. services imports between 2016 and 2017 was from Hong Kong (up 10.11%), followed by Singapore (up 9.31%) and Italy (up 9.22%).", "Since the United States runs a surplus in trade in services and a deficit in trade in goods, the combined trade deficit on goods and services is lower (less negative) than the deficit on goods alone. In 2017, exports of goods and services totaled $2,351.1 billion and imports totaled $2,903.3 billion, resulting in a deficit of $552.3 billion, up slightly from 2016 but down from the all-time high level registered in 2006 ($761.7 billion) ( Table 12 ).\nTrade in goods and services has risen in importance in the U.S. economy over the past two decades. Exports and imports of goods and services, both in U.S. dollars and as a percentage of gross domestic product (GDP), has been on the rise since the 1990s, although these shares still remains significantly lower than those of most major economies ( Table 13 ). In 1990, total U.S. trade (sum of exports and imports of goods and services measured as a share of GDP) was equal to about 19.82% of GDP; it stood at 27.09% in 2017 ( Figure 21 ).\nWhile total trade has increased, U.S. imports have grown faster than U.S. exports, causing an increase in the trade deficit. However, the deficit is down 22.07% since registering an all-time high of $761.7 billion in 2006. In 2017, the annual trade deficit on goods and services amounted to approximately 2.83% of U.S. GDP, up from 2.68% in 2016 but down from 5.51% in 2006 ( Figure 22 ). A level of 4-5% of GDP for countries is often considered to be cautionary by economists. At that level, other countries have experienced problems paying for imports and maintaining the value of their currency.", "Congress plays a major role in shaping U.S. trade policy through its legislative and oversight authority. Article I, Section 8 of the U.S. Constitution grants Congress the power to \"regulate Commerce with foreign Nations\" and to \"lay and collect Taxes, Duties, Imposts, and Excises….\" Congress exercises this authority in numerous ways, including the enactment of laws authorizing trade programs and measures to address unfair and other trade practices. Congress also conducts oversight of trade policies, programs, and agreements. These include such areas as U.S. trade agreement negotiations, tariffs and nontariff barriers, trade remedy laws, import and export policies, economic sanctions, and the trade policy functions of the federal government.\nShifts in U.S. trade policy can play a role in shaping U.S. trade patterns and the global trade landscape. The Trump Administration's trade policy, which it characterizes as \"Putting America First,\" has placed questions regarding the role of trade in the U.S. economy, the future of U.S. trade policy, and the U.S. role in the global economy at the forefront of the congressional policy debate. The President's 2018 Trade Policy Agenda represents a shift from the approaches of prior administrations to international trade, in that it questions the benefits of the U.S. leadership role in the rules-based global trading system, while emphasizing concerns over the potential limits that this system may place on U.S. sovereignty.\nPolitical factors and economic conditions affect the current trade policy environment, as well as the composition and direction of U.S. trade. The political factors involve the opinions of the American public and major stakeholders on trade, the preferences and perspectives of the President and Members of Congress, and the tensions between the legislative and executive branches—as they both exercise their respective trade policy functions. The economic forces include global economic developments, the rise of emerging market and developing economies, and the growth of global production networks. Other factors affecting U.S. trade include the proliferation of free trade agreements and other preferential trade arrangements, the inherent limitations of trade policy as a tool of economic policy, the growth of \"behind the border\" trade barriers, and—according to some analysts—the long-standing U.S. trade deficit.\nCurrently, U.S. policymakers appear to be at a crossroads on these issues. While the future shape, direction, and content of U.S. trade policy remain uncertain, U.S. trade trends and developments may feature high on Congress' agenda in the coming months. Some of the questions and options that Congress may contemplate with respect to international trade include:\nAre the benefits of international trade to the U.S. economy greater than the costs? If so, should the United States continue to promote greater international economic integration—as it has been doing since the 1940s? Greater trade liberalization—whether via unilateral or multilateral trade negotiations and agreements—would promote further U.S. integration with the world economy and with it, according to most economists, a more efficient allocation of resources and higher economic growth. It would also encourage the development and adherence to internationally negotiated rules on trade to promote stability and to prevent the use of protectionist measures. However, it would also expose already vulnerable firms and workers to increased competition, forcing them to make costly adjustments.\nDo the costs of international trade outweigh the benefits to the U.S. economy? If so, should the United States suspend or reverse past U.S. efforts to liberalize U.S. and international trade? Members of Congress could reevaluate trade policy as a whole to determine if it has benefitted or harmed U.S. interests, and they could reserve the opportunity to renegotiate trade agreements if trading partners fail to honor their commitments. This approach would aim to protect U.S. national sovereignty over matters pertaining to U.S. economic welfare and national security. Opponents of this approach have argued that it is very difficult, if not impossible, to determine the impact of trade negotiations and agreements on economic trends (e.g. the level of employment, the U.S. trade deficit, etc.), because so many other factors play a role. They also argue that revisiting and renegotiating trade agreements could undermine the credibility of the United States as a trading partner.\nHas U.S. trade policy failed to address effectively foreign protectionist practices and enhance reciproc al market access for U.S. firms, workers , and exports ? If so, should the United States only support greater international economic integration if it provides for a \"level playing field\"? Policymakers may want to address what some view as inequities in trade policy by proceeding with trade agreements that require U.S. trade partners to adhere to \"fair\" trading practices, core labor standards, environmental protection measures, and other provisions to \"level the playing field.\" In so doing, such trade agreements could be acceptable to larger segments of the American public and rebuild a consensus on trade. However, some trading partners have resisted what they consider efforts to impose U.S. values or preferences on them through trade policy.\nOther potential issues for Congress raised by changes in U.S. trade patterns and the global landscape include: (1) the future direction of the global trading system, as well as specific policies and issues raised by global economic developments; (2) the impact of the changing dynamics and composition of U.S. trade on the U.S. economy and U.S. relations with trading partners; (3) how to take full advantage of growing markets for U.S. manufacturers, service providers, agricultural producers, and their workers, including preparing for increased competition; and (4) how to assess the quality of data on trade and what, if any, additional resources should be devoted to collecting trade data and analyzing the role of trade in the U.S. economy.\nAppendix A. Trade Statistics and Resources\nTrade Data\nThe U.S. government compiles trade data in four different ways. The data on merchandise or goods trade are first compiled on a Census basis. Bilateral trade with countries and sectoral data are reported only on a Census basis. The Census numbers are then adjusted and reported monthly on a balance of payments (BoP) basis that includes adjustments for valuation, coverage, and timing, and excludes military transactions. The data are finally reported in terms of national income and product accounts (NIPA). The NIPA data also can be further adjusted to include correcting for inflation to gauge movement in trade volumes as distinct from trade values. Conceptually, this procedure is analogous to adjusting macroeconomic data from nominal to real values. Specific values can help in understanding the concepts involved.\nValuation methods are very important in trade data evaluation. The Census Bureau also reports imports on a c.i.f. (cost, insurance, and freight) basis, which includes the value of insurance, international shipping, and other charges incurred in bringing merchandise to U.S. ports of entry. The customs (or f.a.s.—free alongside ship) data do not include these supplementary costs. U.S. import data are reported on a customs basis with insurance and freight charges counted in U.S. services trade. Other countries, however, commonly report merchandise import figures that include insurance and freight charges. This tends to overstate their imports and understate their trade surpluses with the United States.\nFor analysis of specific industries or sectors, the classification system used is also important. The U.S. Harmonized Tariff Schedule (HTS) identifies products by a 10-digit number in order to assign duty rates. Each additional digit adds to the specificity of the classification. For example, the 2-digit level includes broad categories such as aircraft (88), electrical machinery (85), and meat (02). For the purpose of examining trade trends, the broader 2- or 4-digit classification is typically sufficient. There are a number of other classification systems that are also useful for different types of analysis. The North American Industry Classification System (NAICS), for example, is organized by production type (agriculture, manufacturing, retail trade, etc.).\nTrade Statistics and Web Resources\nListed below are resources available online for international trade and economic statistics.\nU.S. Trade and the Economy\nThe single most authoritative, comprehensive, and frequently published trade data statistical source for U.S. trade data is the monthly \"FT900,\" titled \"U.S. International Trade in Goods and Services.\" The FT-900 is issued monthly by the U.S. Department of Commerce's Census Bureau and Bureau of Economic Analysis. It provides information on U.S. trade in goods and services (balance, exports, and imports) in specific commodities and end-use categories and with selected countries. The report also provides information on trade in advanced technology, petroleum, and motor vehicle products. The report is available from the U.S. Bureau of Economic Analysis at http://www.bea.gov/newsreleases/rels.htm . Under \"International\" click on latest news release.\nThe U.S. Bureau of Economic Analysis' International Trade and Investment Country Facts provides information on U.S. trade in goods and services and foreign direct investment for individual countries and country groupings. Users select a country or region from an interactive world map or a searchable menu. The application generates a country or region factsheet with graphs and tables showing the latest data on U.S. trade and investment with that country or region.\" It is available at https://apps.bea.gov/international/factsheet/ .\nAnnual and quarterly year-to-date U.S. goods export and import data by individual state or U.S. region for individual countries, trade, and economic groups, or geographic regions, tabulated using NAICS classification (up to 3-digits) is available at https://www.export.gov/State-Trade-Data . State level trade data is also accessible via the U.S. Department of Commerce's Census Bureau at https://www.census.gov/foreign-trade/statistics/state/index.html and at the USA Trade Online database, https://usatrade.census.gov/ .\nInformation on trade in specific commodities, with particular regions, or for different time periods also can be obtained from the U.S. International Trade Commission at http://dataweb.usitc.gov/ . The Commission's publications are available at https://www.usitc.gov/research_and_analysis/332_commission_publication.htm .\nData and analysis on various industries (e.g. aerospace, automotive, e-commerce, metals, etc.) and their international competitiveness are available from the U.S. Department of Commerce's International Trade Administration, at https://www.trade.gov/data.asp.\nHistorical and current U.S. exchange rate data are available from the Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/.\nInformation on foreign country holdings of U.S. Treasury securities are available at http://www.treasury.gov/tic/ .\nThe Office of the U.S. Trade Representative also produces reports throughout the year, including the President's Trade Policy Agenda and Annual Report. They can be accessed at https://ustr.gov/about-us/policy-offices/press-office/reports-and-publications.\nInternational Trade and Economy\nThe International Monetary Fund's World Economic Outlook Database contains data on national accounts, inflation, unemployment rates, balance of payments, fiscal indicators, trade for countries and country groups, and commodity prices, available at https://www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx . The World Bank's DataBank has a collection of databases on international development indicators, national accounts, inflation, unemployment rates, balance of payments, fiscal indicators, and trade for countries and country groups, available at http://databank.worldbank.org/data/home.aspx. The World Trade Organization provides data on trade flows, tariffs, non-tariff measures (NTMs) and trade in value added, available at https://www.wto.org/english/res_e/statis_e/statis_e.htm .\nIMF Country Group Classification\nThe International Monetary Fund classifies 194 countries or territories into several groups:\nAdvanced Economies (39 countries)\nAustralia, Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Macao, Malta, Netherlands, New Zealand, Norway, Portugal, Puerto Rico, San Marino, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and United States.\nEuropean Union (28 countries)\nAustria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Romania, and United Kingdom.\nEuro Area (19 countries)\nAustria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovak Republic, Slovenia, and Spain.\nEmerging Market and Developing Economies (155 countries)\nAfghanistan, Albania, Algeria, Angola, Antigua and Barbuda, Argentina, Armenia, Aruba, Azerbaijan, The Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Burundi, Cabo Verde, Cambodia, Cameroon, Central African Republic, Chad, Chile, China, Colombia, Comoros, Democratic Republic of the Congo, Republic of Congo, Costa Rica, Côte d'Ivoire, Croatia, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Fiji, Gabon, The Gambia, Georgia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hungary, India, Indonesia, Iran, Iraq, Jamaica, Jordan, Kazakhstan, Kenya, Kiribati, Kosovo, Kuwait, Kyrgyz Republic, Lao P.D.R., Lebanon, Lesotho, Liberia, Libya, FYR Macedonia, Madagascar, Malawi, Malaysia, Maldives, Mali, Marshall Islands, Mauritania, Mauritius, Mexico, Micronesia, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nauru, Nepal, Nicaragua, Niger, Nigeria, Oman, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Russia, Rwanda, Samoa, São Tomé and Príncipe, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Africa, South Sudan, Sri Lanka, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sudan, Suriname, Syria, Tajikistan, Tanzania, Thailand, Timor-Leste, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Tuvalu, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Vanuatu, Venezuela, Vietnam, Yemen, Zambia, and Zimbabwe.\nCommonwealth of Independent States (12 countries)\nArmenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Georgia, which is not a member of the Commonwealth of Independent States, is included in this group for reasons of geography and similarities in economic structure.\nEmerging and Developing Asia (30 countries)\nBangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao P.D.R., Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nauru, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Timor-Leste, Tonga, Tuvalu, Vanuatu, and Vietnam.\nEmerging and Developing Europe (12 countries)\nAlbania, Bosnia and Herzegovina, Bulgaria, Croatia, Hungary, Kosovo, Macedonia, Montenegro, Poland, Romania, Serbia, and Turkey.\nLatin America and the Caribbean (33 countries)\nAntigua and Barbuda, Argentina, Aruba, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.\nMiddle East, North Africa, Afghanistan, and Pakistan (23 countries)\nAfghanistan, Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Pakistan, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen.\nSub-Saharan Africa (45 countries)\nAngola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Republic of Congo, Côte d'Ivoire, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, São Tomé and Príncipe, Senegal, Seychelles, Sierra Leone, South Africa, South Sudan, Tanzania, Togo, Uganda, Zambia, and Zimbabwe.\nCRS Resources\nBelow are some recent CRS reports and products related to international trade.\nCRS Report R44717, International Trade and Finance: Overview and Issues for the 115th Congress , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report R45148, U.S. Trade Policy Primer: Frequently Asked Questions , coordinated by [author name scrubbed]. CRS Report R44546, The Economic Effects of Trade: Overview and Policy Challenges , by [author name scrubbed]. CRS Insight IN10972, Global Trade Imbalances , by [author name scrubbed]. CRS In Focus IF10619, The U.S. Trade Deficit: An Overview , by [author name scrubbed]. CRS Report R45243, Trade Deficits and U.S. Trade Policy , by [author name scrubbed]. CRS Report R44044, U.S. Trade with Free Trade Agreement (FTA) Partners , by [author name scrubbed]. CRS In Focus IF10161, International Trade Agreements and Job Estimates , by [author name scrubbed]. CRS In Focus IF10156, U.S. Trade Policy: Background and Current Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report R45198, Bilateral and Regional Trade Agreements: Issues for Congress , by [author name scrubbed]. CRS Report R43291, U.S. Trade in Services: Trends and Policy Issues , by [author name scrubbed]. CRS Report R44565, Digital Trade and U.S. Trade Policy , coordinated by [author name scrubbed]. CRS In Focus IF10030, U.S.-China Trade Issues , by [author name scrubbed]. CRS Report RL33536, China-U.S. Trade Issues , by [author name scrubbed]." ], "depth": [ 0, 1, 1, 2, 3, 4, 4, 2, 3, 1, 2, 3, 3, 3, 2, 2, 1, 2, 3, 3, 2, 1, 1 ], "alignment": [ "h0_title", "h0_full", "", "", "", "", "", "", "", "h0_title", "", "", "", "", "", "h0_full", "", "", "", "", "", "", "h0_full" ] }	{ "question": [ "Why are the subjects of international trade and the changing patterns in U.S. trade highly relevant to the economy under the Trump administration?", "What are the potential effects of a re-negotiated FTA on the U.S. economy?", "How does Congress take into consideration the fact that there are both potential positive and negative effects of renegotiated FTAs?", "What other factors does Congress consider when contemplating the role of the U.S. in international trade going into the future?" ], "summary": [ "International trade is one of several important drivers of economic growth. A number of questions regarding recent and future trends in U.S exports and imports could arise as the Trump Administration renegotiates U.S. free trade agreements (FTAs) and pursues news ones, and takes a more forceful stance to reduce U.S. bilateral trade deficits, enforce U.S. trade laws and agreements, and promote what it considers to be \"free,\" \"fair,\" and \"reciprocal\" trade.", "As with any trade liberalizing measure, an FTA can have net positive overall effects on some sectors and adverse effects on others. An FTA may create export and import opportunities in one sector of the U.S. economy but divert trade away from others.", "Members of Congress weigh these effects on various industries and on their constituencies, while also considering the overall impact on the United States and other trading partners. Because trade relations can differ significantly from one trade partner to another, the evaluation will likely differ in each case. Furthermore, Members may take into account not only the immediate static effects of greater global economic integration efforts, but also the long-term, dynamic effects, which could play an important role in evaluating their contribution to the U.S. economy.", "Finally, other issues for Congress raised by the changing patterns in U.S. trade and the global landscape could include contemplating the future direction of the global trading system, as well as assessing the quality and availability of data on trade and what, if any, additional resources should be devoted to collecting trade data and analyzing the role of trade in the U.S. economy." ], "parent_pair_index": [ -1, -1, 1, -1 ], "summary_paragraph_index": [ 9, 9, 9, 9 ] }
GAO_GAO-12-540	{ "title": [ "Background", "VA Pension Program Design and Management Do Not Ensure Only Those with Financial Need Receive Benefits", "Program Allows Claimants to Transfer Assets Prior to Applying, Unlike Other Means-Tested Programs", "VA Lacks Complete Information on Claimants’ Finances", "VA Relies on Self-Reported Information, and Verification Processes Are Incomplete", "Opportunities for Internal Coordination Are Not Maximized", "Unclear Guidance on Assessing Financial Eligibility May Lead to Inconsistent Decisions", "Many Organizations Help VA Pension Claimants Transfer Assets to Qualify for Benefits", "Over 200 Organizations Market Services to Help Qualify Veterans and Surviving Spouses for VA Pension Benefits", "Some Products and Services May Adversely Affect Claimants", "Costs for Services to Transfer Assets Varied, but Some Organizations May Be Charging Prohibited Fees", "Conclusions", "Matter for Congressional Consideration", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Full Transcript of Selected Calls with Organizations Providing Products and Services to Help Claimants Qualify for VA Pension Benefits", "Appendix III: Comments from the Department of Veterans Affairs", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "In fiscal year 2011, VA provided about $ 4.3 billion in pension benefits for about 517,000 recipients. These benefits are available to low-income wartime veterans who are age 65 and older, or who are under age 65 but are permanently and totally disabled as a result of conditions unrelated to their military service.also be eligible for these benefits. At the end of fiscal year 2011, about Surviving spouses and dependent children may 314,000 pension recipients were veterans and about 203,000 were survivors. Also, about 329,000 recipients were over 65 and the average age was 71 for veterans and 79 for survivors. Average annual payments in fiscal year 2011 were $9,669 for veterans and $6,209 for survivors.\nVA provides pension benefits through its Veterans Benefits Administration (VBA), and accredits representatives of veterans’ service organizations, attorneys, and claims agents to assist claimants with the preparation and submission of VA claims at no charge. To become accredited, an individual must meet certain requirements set forth in federal law. Claims processors assess claims at VBA’s three Pension Management Centers (PMC) in Philadelphia, Penn.; Milwaukee, Wis.; and Saint Paul, Minn. As part of the pension program, VA provides enhanced pension benefit amounts to veterans and surviving family members who demonstrate the need for aid and attendance, or who are considered permanently housebound. For pension beneficiaries who are deemed unable to manage their affairs due to mental impairments, VA appoints a fiduciary to manage the beneficiary’s finances.\nTo qualify for pension benefits, claimants’ countable income must not exceed annual pension limits that are set by statute. These income limits are also the maximum annual pension payment that a beneficiary may receive. Such limits may vary based on whether claimants are veterans or survivors and their family composition, as well as whether claimants need aid and attendance or are considered housebound. For example, to qualify for pension benefits in 2012, a veteran with no dependents and who is in need of Aid and Attendance benefits cannot have income that exceeds $20,447, while a surviving spouse in similar circumstances cannot have an income that exceeds $13,138. In determining if a claimant’s income is below program thresholds, VA includes recurring sources of income such as the Social Security Administration’s (SSA) retirement and disability benefits, but not income from public assistance programs such as Supplemental Security Income (SSI). VA also allows some expenses, such as certain unreimbursed medical expenses that exceed 5 percent of the maximum pension amount the claimant is eligible for, to be deducted from a claimant’s countable income. The annual amount pension beneficiaries receive is the difference between their countable income and the maximum pension amount they would be eligible for (see table 1).\nVA’s policy manual specifically states that the pension program is not intended to protect substantial assets or preserve an estate for a beneficiary’s heirs. In assessing financial eligibility for pension benefits, VA also considers net worth or the total value of claimants’ assets, such as bank accounts, stocks, bonds, mutual funds, and any property other than the claimant’s dwelling, a reasonable lot area, a vehicle, and personal belongings. There are no thresholds on the value of a claimant’s assets that are defined in statute. However, according to VA’s procedures manual, claims processors are generally required to formally determine if claimants with assets worth over $80,000 have financial resources that will last a reasonable period of time to pay for their basic expenses. In making this determination, claims processors consider net worth, income, expenses, age, and life expectancy to determine if claimants’ financial resources are sufficient to pay for their expenses without assistance from VA. Ongoing eligibility for pension recipients who previously reported any income other than, or in addition to, Social Security income is also assessed. These recipients must complete an annual Eligibility Verification Report (EVR), which requests information on income and assets, that is used to determine if recipients continue to be financially eligible for the pension program.\nPotential VA pension recipients may also be eligible for other means- tested programs. For example, they may be eligible for Medicaid, a joint federal-state health care financing program that provides coverage for long-term care services for certain individuals whose income and resources do not exceed specific thresholds. Each state administers its Medicaid program and establishes specific income and resource eligibility requirements that must fall within federal standards, but we reported in 2007 that in most states, an individual must have $2,000 or less in countable financial resources to be eligible. Similarly, the SSI program provides cash benefits to individuals who are age 65 or older, blind, or disabled, and who have limited income and whose financial resources are $2,000 or less ($3,000 if the individual lives with their spouse).", "", "We found several potential vulnerabilities in the VA pension program’s design, as well as in VA’s policies and procedures, that hinder the department’s ability to ensure that only those in financial need receive benefits. More specifically, the program allows claimants to transfer assets prior to applying for benefits, and VA lacks complete information on claimants’ finances, relies on self-reported information, and does not utilize all opportunities for coordination within the agency. Additionally, guidance that claims processors use may be unclear. Despite being means-tested, the program currently permits VA pension claimants to transfer assets and reduce their net worth prior to applying for these benefits. Federal regulations state that, when evaluating financial eligibility for pension benefits, assets gifted to someone that does not reside in the claimant’s household will reduce the claimant’s net worth if all rights of ownership and control of the assets have been relinquished. As a result, prior to applying for benefits, claimants can transfer excess assets to someone outside their household to meet the financial eligibility criteria for VA pension benefits and be approved, as long as they no longer retain ownership or control of the assets. For example, we identified a case involving a pension recipient who transferred over a million dollars in assets into an irrevocable trust less than 3 months prior to applying for these benefits. VA was aware of the asset transfer when this pension claim was approved and did not count the trust as part of the claimant’s net worth. Although these types of transfers are generally permitted under law for the pension program, this practice is not consistent with other federal means-tested programs and weakens the pension program’s goal of supporting those with financial need.\nIn contrast, for Medicaid—another means tested program—federal law explicitly restricts eligibility for coverage for long term care for certain individuals who transfer assets for less than fair market value prior to applying., As a result, when an individual applies for Medicaid coverage for long-term care, states conduct a look-back—a review to determine if the applicant transferred assets for less than fair market value prior to applying. Individuals who transfer assets for less than fair market value during the 60 months prior to applying may be denied eligibility for long-term care coverage for a period of time, known as the penalty period. For example, gifting assets would generally be considered a transfer of assets at less than fair market value and would result in a penalty period. Also, under the SSI program, claimants who transfer assets for less than fair market value prior to applying may become ineligible for these benefits for up to 36 months.\nAn asset transfer at less than fair market value would occur when the claimant gifts or sells a resource and gets in return an amount that is less than the value of the resource on the open market at the time of the transfer.", "VA lacks complete information on claimants’ finances because the forms used to assess financial eligibility do not prompt applicants to report certain types of income and asset information. While the instructions on the pension application forms ask claimants to report all income sources and assets they own, the forms do not provide spaces for claimants to report some types of income and assets. For example, even though elderly pension claimants may receive private monthly retirement income, such as income from a company’s retirement plan, the application forms do not specifically provide space for claimants to report such income. According to SSA, in 2009, 9 percent of the aggregate income of those age 65 and older consisted of private pension income.\nThe application forms do provide a space to report other income sources not specifically itemized on the forms. However, some claims processors we spoke with said claimants who report an amount in that space do not usually specify the source of this income, or if this amount represents a single or a combination of income sources. As a result, they have to follow up with the claimant to obtain this information, which delays the processing of these claims.\nSimilarly, although the application forms specifically ask claimants to report assets such as bank accounts, stocks, and real property, the forms do not ask about other common assets such as annuities and trusts, which need to be considered when VA assesses claimants’ financial eligibility. (See figure 1 to view the section of the application form pertaining to income and assets.) We found cases where claimants did not report assets that they are not specifically asked to report. For example, in one case a claimant did not report a trust with assets valued at about $575,000. In another case, a claimant did not report a trust worth about $612,000. In contrast, we reviewed several state application forms for Medicaid long-term care benefits that specifically asked individuals to report information about annuities and trusts they may own, as well as retirement income.\nVA’s application forms also do not provide a specific space for claimants to report asset transfers, even though the instructions on the veterans’ application form ask claimants to disclose this information. Asset transfers to someone outside the claimant’s household are allowed under the pension program, as long as the claimant relinquishes ownership and control of the asset. However, VA still needs to know about any asset transfers when assessing a claimant’s financial eligibility because, consistent with VA’s regulations, the department must determine whether the claimant retains ownership and control of the transferred asset and if this asset should be counted as part of the claimant’s net worth. Without a designated space to report this type of information, claimants may not report asset transfers on the application forms. For example, we saw one case where a veteran transferred assets worth about $500,000 into an irrevocable trust 2 weeks prior to applying and did not report this on the application. VA learned of this asset transfer because the claims processor inquired about how the claimant’s medical expenses were being paid. If the claims processor had not identified these assets and determined that they should be included in the claimant’s net worth, because the claimant had not relinquished all ownership and control, the claim could have been approved. Application forms that do not specifically request information about certain income sources and assets, as well as asset transfers, may prevent VA from obtaining complete information about claimants’ financial situation to properly assess their eligibility for pension benefits.", "When assessing pension claimants’ eligibility, VA relies primarily on self- reported financial information that, unlike other means-tested programs, is not independently verified. VA does not require claimants to submit documents that corroborate self-reported financial information with their application, such as bank statements and tax returns. VA also does not require receipts to verify some types of claimed deductible expenses, even though these expenses may be a factor that enables some pension claimants to qualify for benefits. Without independent verification of self- reported financial information, VA will have difficulty detecting fraudulent claims. We identified cases where VA found individuals were advised by third parties to claim expenses they did not incur related to assistance with everyday living activities. For example, we saw one claim that was prepared by a financial planner in which $1,700 in monthly caregiver payments to a daughter were claimed. The claimant subsequently stated to VA that he did not pay his daughter any caregiver fees. In another case, a pension recipient claimed an attorney advised him to claim he was paying his son $1,000 per month for services that were not being provided in order to be eligible for a higher pension rate. The recipient subsequently withdrew this claimed medical expense. Most claims processors we spoke with said they accept self-reported financial information unless questions arise, and in those cases, supporting documentation may be requested. In contrast, some state Medicaid programs and the SSI program require applicants to submit documents that support some reported financial information, such as bank statements and tax returns.\nVA also does not make use of existing opportunities to verify self-reported financial information during the initial eligibility determination. For example, VA conducts computer matches to verify reported income from SSA benefits during the initial claims assessment process but is not using this type of technology to verify the accuracy of other self-reported financial information. Additional automated systems may be available that would enable VA to independently verify financial information during the initial eligibility assessment. For example, while VA performs a data match with Internal Revenue Service and SSA data to assess ongoing eligibility, it does not perform this match at the time of the initial claims assessment. In addition, for the SSI program, SSA recently implemented the Access to Financial Institutions system that allows the program to electronically request and receive records from financial institutions and verify an applicant’s or recipient’s financial information. Similarly, Medicaid requires states to implement an asset verification system for assessing applicants’ and recipients’ financial eligibility.\nVA’s efforts to verify ongoing eligibility for pension benefits also have some shortcomings. Pension recipients who have previously reported income in addition to, or other than, Social Security income must annually complete an EVR. However, like the application forms, the EVRs do not provide spaces for claimants to report private retirement income, annuities, trusts, or asset transfers, and self-reported financial information is not independently verified unless the claims processor has questions. In addition, because not all pension recipients complete an EVR, VA may not be able to identify potential changes in the financial situation of recipients that may affect their ongoing eligibility for these benefits.\nOther efforts to verify ongoing eligibility may not be effective in identifying ineligible pension recipients. VA’s Income Verification Match (IVM) program uses a computer match to compare income reported to VA by pension recipients for a given year with SSA earned income data and IRS unearned income data for that year, to determine if these recipients have any unreported income. However, there is about a 15-month lag between when a pension recipient reports income and when the IVM can be conducted, and the delay may be even longer. For example, in 2011, VA was completing IVMs for income information that was reported in 2007. As a result, improper payments may be made to ineligible pension recipients for at least over a year, but possibly several years, before the error is detected. In one case we reviewed, a beneficiary, who was approved for benefits in 2004 and reported $900 in net worth when he applied, had stocks worth over $162,000 at that time, which was only identified through the IVM process in 2007. This created an overpayment of over $18,000 that VA eventually waived. In addition to the IVM not being conducted in a timely manner, the match does not identify any assets that do not generate income, such as deferred annuities for which payments have not begun. Therefore, the IVM would not be effective in identifying these types of assets. Ultimately, delays in the IVM process prevent VA from promptly detecting improper pension payments and increase the magnitude of these payments.", "Opportunities for coordination between VA’s pension and fiduciary programs to identify ineligible pension recipients are not always maximized.fiduciary program are pension recipients. Field examiners in this program visit beneficiaries and fiduciaries, and prepare reports that may contain financial information of some pension recipients. Claims processors had access to these reports, but VA issued guidance in July 2011 that restricts pension claims processors from accessing them in VA’s electronic case file system. VA determined that claims processors did not need to review fiduciary program reports as part of their daily work. This guidance was issued due to concerns about the privacy of fiduciaries’ personal information, and concerns that pension recipients in the fiduciary According to VA officials, over half of VA beneficiaries in the program were being put under greater scrutiny. However, fiduciary field exam reports may contain information on beneficiaries’ finances that could be useful for claims processors in assessing eligibility for pension benefits. While safeguarding fiduciaries’ personal information is important, access to these reports allows claims processors to obtain a more accurate picture of a beneficiary’s financial situation. As a result, critical information to identify potentially ineligible individuals is not received, which may result in improper payments. Fiduciary program staff must notify the pertinent PMC when they identify information that may affect the ongoing eligibility of a pension recipient for these benefits, such as changes in a recipient’s income and assets. Claims processors generally rely on notification from fiduciary program staff about possible financial ineligibility of pension beneficiaries, since these claims processors no longer have direct access to those documents. A VA official from one of the PMCs told us that when claims processors had access to field exam reports prior to the issuance of the new guidance, cases of asset transfers or unreported assets were identified from reviews of these reports, even when there was no prior notification from fiduciary program staff. In addition, as part of our case file review, we identified cases of asset transfers or unreported assets that were identified in fiduciary field exam reports. Without access to field exam reports from the fiduciary program, claims processors may not have all available information to assess an individual’s financial eligibility.", "VA’s guidance to claims processors on assessing financial eligibility for VA pension benefits is unclear about when certain assets should be counted as part of an applicant’s net worth. As a result, claims processors may make inconsistent eligibility decisions. For example, VA’s procedures manual states that the value of any property owned by pension claimants must be considered when assessing financial eligibility for benefits, but the manual does not specifically discuss when or under what circumstance annuities or trusts should count as part of net worth. According to VA officials, and consistent with VA regulations, the decision as to whether an asset should be counted in a claimant’s net worth depends on whether the claimant has ownership and control of the asset. However, VA has not adequately defined the concept of ownership and control of assets in either its regulations or internal guidance and policy documents. As a result, VA cannot ensure that claims processors are making fully informed eligibility decisions that are consistent with VA policy.\nSeveral claims processors we spoke with confirmed that guidance on assessing net worth is unclear, and that it is difficult to determine when to count certain assets. For example, one claims processor expressed uncertainty whether to count trusts established for children residing outside of a claimant’s household when the funds are being used to pay for claimant’s expenses, since VA’s regulations do not directly address these types of cases. A VA official acknowledged that guidance on what constitutes ownership and control of an asset could be improved. We were provided local training material from one PMC on when to count assets in a trust and found that it seemed inconsistent with VA’s regulations regarding when to count assets. For example, the PMC training material stated that a claim involving assets transferred into a trust a claimant cannot access would likely be denied due to excess net worth. However, as we noted earlier, VA regulations indicate that assets gifted to someone outside a claimant’s household should not be counted as part of net worth if ownership and control of the asset has been relinquished. Also, according to VA officials we spoke with, claims processors do not have access to VA attorneys who could assist them in examining trust agreements and other documents to determine if a claimant has ownership and control of an asset.\nUnclear or disparate guidance about counting assets as part of net worth may also lead to different decisions in similar cases. For example, we saw two separate cases in which, just prior to applying, claimants transferred excess assets into trusts to which they did not have access. One of the claims was approved, but the other was denied. For the approved claim, VA determined the claimant did not have ownership and control of the trust and therefore did not count it in the veteran’s net worth. For the denied claim, VA also determined that the claimant did not have access to the trust, but the claim was denied because the claims processor felt the applicant was attempting to manipulate assets to qualify for benefits. The denial letter to the claimant explained that VA’s income programs are not intended to protect substantial assets or build up the beneficiary’s estate for heirs.\nFurther, we found that VA also lacks specific guidance on how to determine whether or not a claimant’s financial resources are sufficient to meet their basic needs without the pension benefit. VA’s procedures manual states that pension claims should be denied if a claimant’s financial resources are sufficient enough to pay for their living expenses for a “reasonable period of time,” but it does not define this term. As a result, claims processors must use their own discretion to determine what period of time is reasonable for claimants to use their assets before needing the assistance of the VA pension. Among case files we reviewed, we found inconsistent claims decisions for claimants whose financial resources would last about the same amount of time and who had similar life expectancies. For example, two veterans whose net worth was projected to provide for their needs for 2 years received different decisions on their claims based on this net worth. In this instance, a 90- year-old with a life expectancy of 4.4 years was denied benefits, while a 94-year-old with a life expectancy of 3.2 years was approved. Also, when we presented a hypothetical scenario of a claimant whose financial resources would last a specific amount of time, different processors at the same PMC gave differing opinions about whether the claimant should be approved for benefits.", "", "We identified over 200 organizations located throughout the country that market their services to help veterans and surviving spouses qualify for VA pension benefits by transferring or preserving excess assets.organizations consist primarily of financial planners and attorneys offering products and services such as annuities and the establishment of trusts, to enable potential VA pension claimants with excess assets to meet financial eligibility criteria for VA pension benefits. For example, one organization marketed on its website that it develops financial plans which include various insurance products, and that its specific area of expertise is to help VA pension claimants with hundreds of thousands of dollars in assets obtain approval for these benefits. Also, a law firm we identified marketed transferring excess assets into special trusts to enable VA pension These claimants to qualify for these benefits. These services being marketed and provided by these organizations are legally permissible under program rules because current federal law and regulations allow VA pension claimants to transfer assets and reduce their net worth prior to applying for benefits. (See figure 2 for excerpts from websites of organizations that offer to transfer assets to help claimants qualify for pension benefits.)\nDuring our investigative calls to 19 organizations, all of them correctly pointed out that pension claimants can legally transfer assets prior to applying. These organizations indicated that it is possible to qualify for VA pension benefits despite having excess assets, and almost all provided information on how to transfer these assets. (See figure 3 for transcript excerpts of calls with organizations on services they provide to qualify for VA pension benefits.)\nA number of different strategies may be used to transfer pension claimants’ excess assets so that they meet financial eligibility thresholds. Among the 19 organizations our investigative staff contacted, about half advised transferring excess assets into an irrevocable trust with a family member as the trustee to direct funds to pay for the veteran’s expenses. About half also advised placing excess assets into some type of annuity. Among these, several advised placing excess assets into an immediate annuity that generates income for the client. In employing this strategy, assets that VA would count when determining financial eligibility for pension benefits are converted into monthly income. This monthly income would fall below program thresholds and enable the claimant to still qualify for the benefits. About one-third of the organizations recommended strategies that included the use of both annuities and trusts. For example, one organization we contacted advised repositioning some excess assets into an irrevocable trust, with the son as the trustee, and placing remaining excess assets into a deferred annuity that would not be completely accessible, since most of the funds could not be withdrawn without a penalty. In addition, several organization representatives we interviewed also told us they may advise using caretaker agreements to enable a client to qualify for VA pension benefits. Organizations told us this strategy generally involves the pension claimant transferring assets to family members as part of a contract, in exchange for caretaker services to be provided by these family members for the remainder of the claimant’s lifetime.\nSome organization representatives we interviewed told us that transferring assets to qualify for VA pension benefits is advantageous for elderly pension claimants because it enables them to have more income to pay for care expenses and remain out of a nursing home for a longer period of time. For example, representatives from one organization said the use of immediate income annuities allows pension claimants to increase their monthly income that, combined with the VA pension, could help pay for assisted living or in-home care costs. Other financial planners and attorneys said if claimants do not conduct financial or estate planning to qualify for the VA pension and instead spend down their assets prior to applying, the monthly amount of the pension benefit they eventually receive may be insufficient to pay for their long-term care. They said that, as a result, these claimants may decide to seek Medicaid coverage for nursing home care because of their lack of financial resources, when they could have remained in an assisted living facility or at home with the aid of the VA pension. Some of these organizations told us that nursing home care financed by Medicaid is more costly for the government than if the veteran had received the VA pension benefit and obtained care in a lower-cost assisted living facility.\nMany organizations we identified also conduct presentations on VA pension benefits at assisted living or retirement communities to identify prospective clients. According to attorneys and officials from state attorneys general offices we spoke with, managers of assisted living facilities or retirement communities may have an interest in inviting organization representatives to conduct presentations on VA pension benefits because these benefits allow them to obtain new residents by making the costs more affordable. For example, we obtained documentation indicating that one retirement community paid an organization representative a fee for a new resident he helped the facility obtain. Another community in another state paid organization representatives fees to assist residents in completing the VA pension application.", "Some products may not be suitable for elderly veterans because they may lose access to funds they may need for future expenses, such as medical care. To help elderly clients become financially eligible for VA pension benefits, some organizations may sell deferred annuities, which would make the client unable to access the funds in the annuity during their expected lifetime without facing high withdrawal fees, according to some attorneys we spoke with. An elderly advocacy organization representative we spoke with also noted that elderly individuals are impoverishing themselves by purchasing these products when they may need the transferred assets to pay for their long-term care expenses. As part of our investigative work, one organization provided a financial plan to qualify for VA pension benefits that included both an immediate annuity as well as a deferred annuity for an 86-year-old veteran that would generate payments only after the veteran’s life expectancy.\nSome organizations that assist in transferring assets to qualify people for VA pension benefits may not consider the implications of these transfers on eligibility for Medicaid coverage for long-term care. Individuals who transfer assets to qualify for the VA pension may become ineligible for Medicaid coverage for long-term care services they may need in the future. For example, asset transfers that may enable someone to qualify for the VA pension program, such as gifts to someone not residing in a claimant’s household, the purchase of deferred annuities, or the establishment of trusts, may result in a delay in Medicaid eligibility if the assets were transferred for less than fair market value during the 60- month look-back period. According to several attorneys we spoke with, some organization representatives are unaware or indifferent to the adverse effects on Medicaid eligibility of the products and services they market to qualify for the VA pension. As a result, potential pension claimants may be unaware the purchase of these products and services may subsequently delay their eligibility for Medicaid.\nIn addition to the potential adverse impact of transferring assets, we heard concerns that marketing strategies used by some of these companies may be misleading. According to several attorneys we spoke with, some organization representatives market their services in a way that leads potential pension claimants and their family members to believe they are veterans advocates working for a nonprofit organization, or are endorsed by VA. As a result, they may fail to realize these representatives are actually interested in selling financial Products. For example, some organization representatives may tell attendees during presentations at assisted living facilities that their services consist of providing information on VA pension benefits and assisting with the application, and do not disclose they are insurance agents selling annuities to help people qualify for these benefits. One elder law attorney we spoke with said that many attendees at these presentations may have Alzheimer’s disease or dementia, and are not in a position to make decisions about their finances. Therefore, they are vulnerable to being convinced by these representatives that they must purchase a financial product to qualify for these benefits.\nConcerns have also been raised that VA’s accreditation of individuals to assist with applying for VA benefits may have unintended consequences. According to attorneys and officials in one state, organization representatives use their VA accreditation to assist in preparing claims as a marketing tool that generates trust and allows them to attract clients. Claimants may not understand that this accreditation only means that the individual is proficient in VA’s policies and procedures to assist in preparing and submitting VA benefits claims, and does not ensure the Products and services these individuals are selling are in claimant’s best interests.\nFinally, some organizations may provide erroneous information to clients, or fail to follow through on assisting them with submitting the pension application, which can adversely affect pension claimants. For example, one veteran said he was told by an organization representative to sell his home prior to applying for the VA pension and that he did not have to report the proceeds from the sale on the application. He followed this advice, but VA identified these assets, which caused him to incur a debt to VA of $40,000 resulting from a benefit overpayment. Organizations may also promise assistance with the application process to any interested pension claimant but, unbeknownst to the claimant, may not follow through in providing this service if the claimant does not want to transfer assets. For example, the daughter of a veteran we spoke with, who sought application assistance from an organization representative, told us the representative never submitted her father’s pension claim to VA as promised. She learned of this about a year after she thought the claim was submitted and had to reapply through a county veterans service officer. Her father was approved 2 months later but passed away less than a month after his approval. She believes her father could have received benefits for a year if the representative had submitted the claim, and believes he did not do so because she did not want to use his services to transfer assets.", "The costs of services provided by these organizations to assist in qualifying for VA pension benefits varied, but organizations may be charging prohibited fees. Among the 19 organizations our investigative staff contacted for this review, about one-third said they did not charge for their services to help claimants qualify for VA pension benefits. For example, financial planners told us that, generally, there are no direct costs associated with transferring assets into an annuity, but that costs would be included in the terms of the annuity, such as the commission earned by the insurance agent. Among organizations that did charge for services, fees ranged from a few hundred dollars for benefits counseling to up to $10,000 for the establishment of a trust. Also, although federal law prohibits charging fees to assist in completing and submitting applications for VA benefits, representatives from veterans advocacy groups and some attorneys we spoke with raised concerns that these organizations may be charging for fees related to the application, or find ways to circumvent this prohibition, such as by claiming they are charging for benefits counseling. For example, one organization our investigative staff contacted charged $850 to have an attorney work on the application process, a $225 analysis fee, and $1,600 for the establishment of a trust. Another organization representative indicated he charged a “long-term planning fee” of $1,200 to be paid prior to services being provided. The organization representative asked that someone other than the veteran pay this fee, claiming that only disinterested third parties can be charged fees but not the veteran. In addition, concerns have been raised that fees charged may be excessive for the services provided. In July 2011, California enacted a law generally prohibiting unreasonable fees from being charged for these services.", "The VA pension program provides a critical benefit to veterans, many of whom are elderly, who have only limited financial resources to support themselves. Current federal law allows veterans to transfer significant assets prior to applying for a VA pension and still be approved for benefits, but this arrangement seems to circumvent the intended purpose of the program and wastes taxpayer dollars. Without stronger controls over asset transfers, similar to other means-tested programs like Medicaid’s look-back and penalty period, VA cannot ensure that only those with financial need receive pension benefits. As a result, VA pension claimants who have sufficient assets to pay for their expenses can transfer these assets and qualify for this means-tested benefit. Moreover, because VA’s policies and procedures for assessing the initial financial eligibility of pension claimants do not adequately ensure that only veterans and surviving spouses who meet financial eligibility requirements are granted benefits, the program is vulnerable to abuse. In particular, claims processors’ reliance on unverified self-reported information when assessing eligibility means that VA cannot be assured that it is obtaining all relevant financial information from claimants, including information on asset transfers, trusts, annuities, and other forms of retirement income. Without all this information, claims processors may improperly grant pension benefits to claimants who do not meet financial eligibility requirements. In addition, while safeguarding fiduciaries’ personal information is important, the lack of adequate coordination between VA’s pension and fiduciary programs may result in missed opportunities to identify financially ineligible pension claimants, further undermining program integrity. Finally, because VA’s guidance concerning when assets should be counted as part of a claimant’s net worth and how to evaluate a claimant’s net worth in determining eligibility lack sufficient clarity, the program remains vulnerable to inconsistent interpretation and payments to ineligible individuals. Ultimately, in this era of constrained financial resources, VA has a responsibility to manage limited funds wisely, and help ensure continued public support for this important program.", "To ensure that only those in financial need are granted VA pension benefits, Congress should consider establishing a look-back and penalty period for claimants who transfer assets for less than fair market value prior to applying, similar to other means-tested programs.", "To improve VA’s ability to ensure that only veterans and surviving spouses with financial need receive VA pension benefits, the Secretary of Veterans Affairs should direct the Undersecretary for Benefits to take the following four actions: 1. Modify pension application forms, as well as EVR forms, to include space for claimants or recipients to report asset transfers, and to specify annuities, trusts, or private retirement income. For assets, such as annuities and trusts that are reported, forms should also request related documentation to enable claims processors to determine if claimants or recipients retain ownership and control of these assets. 2. For all claimants, verify financial information during the initial claims assessment process. This may include requesting supporting documentation such as bank statements and tax returns, or using automated databases that can verify financial information. 3. Strengthen coordination between pension and fiduciary programs to identify pension claimants or recipients who have transferred or unreported assets, such as allowing claims processors access to fiduciary field exam reports for these cases. 4. Revise the VA procedures manual to better define the concept of ownership and control to help claims processors determine when specific types of assets such as annuities and trusts should be counted as part of net worth, and establish a more specific criteria for what is considered a reasonable period of time for pension claimants to use up their financial resources before becoming eligible for pension benefits.", "We provided a draft of this report to the Secretary of Veterans Affairs for review and comment. In its comments (see app. III), VA generally agreed with our conclusions, concurred with three of our recommendations, and concurred in principle with one other recommendation.\nThe agency concurred with our recommendation to modify pension application and eligibility verification forms to include a space for claimants or recipients to report asset transfers, to specify annuities, trusts, and private retirement income, and to request related supporting documentation.\nVA concurred in principle with our second recommendation that the department verify financial information during the initial claims process. VA noted, however, that conducting this verification would add additional time to adjudicate pension claims. VA said it expects to complete an analysis by November 1, 2012 of whether financial information can be verified without placing undue burdens on claimants and recipients. We acknowledge that rigorous verification processes can sometimes entail additional time during the initial claims phase, but we continue to believe that such verification is an important part of ensuring that VA adequately balances its stewardship responsibilities with its service activities. We support the analysis VA is undertaking.\nRegarding our recommendation to strengthen coordination between the pension and fiduciary programs, VA concurred and noted that it has established a workgroup that is developing procedures to further enable fiduciary program staff to share income information with pension program staff.\nVA also concurred with our recommendation that the procedures manual be revised to better define the concept of ownership and control of assets and to establish a more specific criteria for what is considered a reasonable period of time for claimants to use their financial resources before becoming eligible for pension benefits. VA stated that it is drafting regulations that would address the effect on eligibility of transferring assets prior to applying for pension benefits. They noted these regulations would address and clarify the various factors VA uses to determine whether a claimant’s net worth precludes eligibility for pension benefits and would provide a more consistent set of rules for adjudicating claims. They added that upon completion of the rulemaking proceeding VA will amend its manual provisions consistent with the new regulations and provide the procedures to implement them. They expect to complete this revision by December 1, 2013.\nWhile VA did not directly comment on GAO’s Matter for Congressional Consideration related to establishing a statutory look-back and penalty period, VA did note that “unlike Medicaid and SSI, the statutes governing VA’s pension program lack provisions addressing the effects of transfers of assets on eligibility for program benefits, e.g., a look-back and penalty period.” VA asserted that after identifying gaps in VA’s regulations on this point, it has begun drafting regulations to address the issue. VA noted in its comments that any regulations it promulgates on this issue will be subject to challenge in the U.S. Court of Appeals for the Federal Circuit. While we commend VA’s efforts in this area, having a clearer statutory basis for this regulatory effort may help ensure that the regulations, should they be finalized, would be more likely to withstand potential legal challenges in the courts.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, and other interested parties. The report is also available at no charge on GAO’s website at http:/www.gao.gov.\nIf you or your staff members have any questions concerning this report, please contact me at (202) 512-7215 or bertonid@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff members who made key contributions to this report are listed in appendix IV.", "The objectives of our review were to examine (1) how the design and management of the Department of Veterans Affairs’ (VA) pension program ensure that only those with financial need receive pension benefits and (2) what is known about organizations that are marketing financial products and services to veterans and survivors to enable them to qualify for VA pension benefits.\nTo determine how the design and management of VA’s pension program ensure that only those with financial need receive pension benefits, we reviewed relevant federal laws and regulations, as well as VA’s policies, procedures, and guidance regarding how VA assesses financial eligibility for pension benefits. We examined VA’s pension application forms and other documents VA uses to collect financial information from pension claimants or recipients. Also, we visited VA’s three PMCs in Philadelphia, Milwaukee, and St. Paul, and interviewed staff and officials from these locations as well as from VA’s central office. To verify how VA assesses the net worth of pension claimants, we conducted a review of a nongeneralizable random sample of 85 of the total of 3,196 fiscal year 2010 pension claim files completed by each of the PMCs that were entered in VA’s electronic case file system, in which VA had to formally determine if the claimant’s assets were excessive to be approved for pension benefits. We also reviewed pension claims files VA provided us that involved asset transfers or unreported income and assets. In addition, we reviewed past GAO reports on VA’s pension program, Medicaid coverage for long-term care, and the Supplemental Security Income program, as well as relevant federal laws and regulations to learn how these other means-tested programs assess financial eligibility of claimants.\nTo determine what is known about organizations that are marketing financial products and services to veterans and survivors to enable them to qualify for VA pension benefits, we conducted an Internet search and interviews with stakeholders to identify organizations that market financial products and services to help veterans and surviving spouses meet the eligibility criteria for VA pension benefits. For our Internet search, we used the following search terms “Veterans Affairs and Pension Benefits,” “Veterans Affairs and Aid and Attendance Benefits,” and “Veterans Affairs and Pension and Aid and Attendance Benefits.” We applied three criteria when we examined the content of the websites obtained from our results to develop a list of organizations that market these services. To be included in our list, the organization’s website must indicate they provide services to help someone qualify for VA pension benefits or assess eligibility for VA benefits, and either indicate they provide products such as annuities or trusts to transfer assets or indicate they provide services to protect or preserve assets. In addition to our Internet search, we also included in our list several organizations that met these criteria that we identified through interviews with veterans advocacy groups, state officials, and attorneys. In applying these criteria, we developed a list of over 200 organizations that market these services. We used a methodology where two analysts had to agree that the organization met the criteria.\nOur investigative staff contacted a judgmental sample of 25 of the organizations on our list posing as the son of an 86-year-old veteran with over $300,000 in countable assets who is interested in applying for VA pension benefits. The 25 organizations were judgmentally selected to achieve geographic dispersion and include both financial planners and attorneys. For these calls, we sought to identify the types of products being marketed, their terms and costs, and the effect on the veterans’ access to their assets. The addresses for the main offices of the companies selected represent 13 different states that encompass about one-half of the veteran population age 65 and older. These states also include three states that represent one-fourth of the veteran population age 65 and older. Of the 25 companies contacted, our investigative staff was able to have a discussion with a representative for 19 of these organizations. For the other six companies, we either did not receive a response to a phone message or our phone calls to the organization were not answered.\nTo learn more about the types of products and services that may be provided to enable someone to meet the financial eligibility criteria for VA pension benefits, we also interviewed attorneys and financial planners, as well as representatives from the National Association of Insurance Commissioners. To identify the implications of transferring assets to qualify for VA pension benefits, we spoke with attorneys, representatives of veterans and elderly advocacy groups, state and local government officials, and family members of pension claimants that we were referred to who used the services of organizations to apply for these benefits. To learn about any investigations involving the practices of some of these companies, we spoke with officials from VA’s Office of Inspector General and officials from state attorneys general offices in California, Iowa, Montana, Oregon, Pennsylvania, Texas, and Washington.\nWe conducted this performance audit from July 2011 to May 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The Department of Veterans Affairs (VA) provides pension benefits to eligible veterans and surviving spouses whose income and assets are below program thresholds. However, current VA regulations permit claimants to transfer excess assets prior to applying. Organizations market financial Products and services to help prospective pension claimants transfer excess assets and become financially eligible for these benefits. An investigator from our Forensic Audits and Investigative Service team had phone conversations with representatives from 19 of these organizations to learn if the organization would transfer a claimant’s excess assets, the types of services provided, and any fees charged. (See appendix I for more information on our scope and methodology.) Because VA’s pension benefits are meant for claimants with financial need, we selected portions of three of these calls that show organizations transfer significant assets to help claimants qualify for the benefits, and the types of services they provide to do so. The full transcripts of these three calls are provided below.\nCall 1: Caller is a GAO investigator phoning on behalf of his fictitious 86-year-old father who was a veteran, seeking VA pension benefits, who wants to learn about the services provided by the company. The company representative describes how his father can qualify for these benefits, despite having significant assets. (Whereupon, an outgoing call was placed by the GAO investigator to a company representative.)\nCOMPANY REPRESENTATIVE: .\nGAO INVESTIGATOR: Hello?\nCOMPANY REPRESENTATIVE: Hello, this is .\nGAO INVESTIGATOR: Hey, , this is .\nCOMPANY REPRESENTATIVE: Hey, , how are you doing?\nGAO INVESTIGATOR: I’m doing good. I got your messages. I’m sorry, it’s just been a little nuts.\nCOMPANY REPRESENTATIVE: Not a problem.\nGAO INVESTIGATOR: You still there?\nCOMPANY REPRESENTATIVE: Yeah, I’m here. Yes.\nGAO INVESTIGATOR: I was calling — it’s your brother or your brother-in-law that I spoke to?\nCOMPANY REPRESENTATIVE: My brother-in-law.\nGAO INVESTIGATOR: Yeah, I’m trying to make a decision here with my father. We are going to have to, you know, make some decisions on what we’re going to do with him. And I just wanted to see, you know, before we go draining all his resources, what our options are.\nCOMPANY REPRESENTATIVE: Okay. You don’t — he’s not in a community yet or he is?\nGAO INVESTIGATOR: He’s not, he’s still living at his house.\nCOMPANY REPRESENTATIVE: Okay.\nGAO INVESTIGATOR: But, you know, he’s got a lot of, you know, physical limitations, he’s got difficulty hearing, and he can’t really move around, so you know – COMPANY REPRESENTATIVE: Did his doctor say he needs assistance from another person on a regular basis?\nGAO INVESTIGATOR: Well, I imagine. I mean, I didn’t ask that question, specifically, but I’m sure he would. I mean, right now, you know, we’re kind of trying to take care of him ourselves, and you know, we’ve got somebody helping, but we’re going to need something more full time.\nCOMPANY REPRESENTATIVE: Yeah. You guys are helping out with cooking, cleaning. Is he still able to drive or no?\nGAO INVESTIGATOR: No.\nCOMPANY REPRESENTATIVE: Okay. So he needs transportation. You know, these are the things they are looking for. Did you say his vision is an issue?\nGAO INVESTIGATOR: No, his hearing, is what I said.\nCOMPANY REPRESENTATIVE: (Laughter) I’m sorry.\nGAO INVESTIGATOR: And his, not yours.\nCOMPANY REPRESENTATIVE: (Laughter) Well, maybe mine, a little bit.\nAnyhow, yeah, the VA kind of looks at, you know, daily activities — the activities of daily living. And if he can’t do some of those things, he needs assistance, you know, then he can qualify for the benefit.\nThey don’t mean if somebody is completely bedridden or handicapped, they just mean if somebody needs assistance and help with some parts of their life.\nWhat we would be able to do – we have people that are still able to drive and live at home, but they can’t do certain — they can’t carry the bags from the car if they go grocery shopping, because they don’t have the dexterity or the strength.\nGAO INVESTIGATOR: All right.\nCOMPANY REPRESENTATIVE: So, you know, the VA looks at it and says, they can’t even go shopping for themselves, they can’t carry the bags from the car, they can’t lift them, you know, how are they going to get them into the house?\nGAO INVESTIGATOR: Well, I’m sure that’s not a problem. I mean, he definitely is, you know, he needs help with just going to the bathroom, getting in and out of bed and stuff like that.\nCOMPANY REPRESENTATIVE: Yeah. He needs help getting in and out of bed, getting to the bathroom, those are the things they’re looking at. Absolutely, he needs this assistance, and he can qualify for the benefit.\nAnd everything else is just about preparing yourself for the benefit, doing the paperwork and so forth.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: And that a process, in and of itself. What I would suggest is get together, you know. This is — this doesn’t— this isn’t like a one-time sit-down and it’s all done, you know. This can take several weeks, and sometimes even up to six weeks, to get all the paperwork completed.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: So you know, but it’s a matter of getting started. You know, and that’s what I — you know, if your dad needs assistance, and he was a wartime Veteran, we can get him the benefit. All right?\nGAO INVESTIGATOR: Okay. Well, you know what, my big concern – yeah, you know, which I mentioned to your brother-in-law is, um — you know, he’s got some assets, and I don’t know how that affects things.\nCOMPANY REPRESENTATIVE: You know, the assets come into play, and that’s part of the process. We would explain all that to you – what, what — where you need to go, how — what needs to be done.\nIdeally, an accredited attorney that we – that we work with, he’ll have that conversation with you. He’ll explain that to you in more detail.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: But anyone — and I will just tell you this. The VA allows you to qualify, regardless of what your assets are. And I’ve had people with over a million dollars qualify for this benefit.\nGAO INVESTIGATOR: Wow.\nCOMPANY REPRESENTATIVE: So you know, you’ll hear you can only have this much money, you can do this. You’ll even be told you don’t qualify.\nGAO INVESTIGATOR: And how do you do that, though, I mean, that’s what I don’t understand.\nCOMPANY REPRESENTATIVE: Well, you have to reposition the assets, that’s all. You know, like I said, that’s — that’s part of what the attorney will talk about.\nFrom a process standpoint, I’ll gather all the information that we need from you, what will go on the VA application. And we will get a letter back from our VA-accredited attorney, and he will outline and tell you you do or you don’t qualify.\nSome people qualify immediately; other people, like in your situation, if your family has some assets, you may have to jump through some hoops in order to get the benefit.\nBut the VA outlines it and says, this is what you’re allowed to do, in order to qualify.\nAnd, you know, we’ll share that with you. We’ll show you exactly what you need to do, how to do it, because it has to be done a certain way in order to qualify.\nLook at this as kind of something you’re going to do one time, all right? This isn’t like doing your taxes, you know, where you need to remember it to understand it for next year.\nYou are going to do this once, and it’s going to be out of your life.\nGAO INVESTIGATOR: Okay. Here’s a question that I have. Does he still have control of the assets?\nCOMPANY REPRESENTATIVE: Your family will.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: Yeah, your family will. I mean, all his money, his monthly money, will go right into his checking account, just like it probably does, Social Security, pension, whatever. The VA benefit will go right into his checking account. All that money will keep going right into his account, and he will have access to that.\nGAO INVESTIGATOR: Okay, all right. Okay, just so I understand it, so you’re just talking about putting it under a different name or are you putting it in a special account?\nCOMPANY REPRESENTATIVE: , here’s the thing. I can’t get into all that with you over the phone.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: It will get so complicated and so confusing.\nThis conversation that I need to have with you will take about an hour, just to get the process started, and then we will get into all that stuff.\nEvery person I have tried to help with this benefit, when they try to get to the — like into the high school level questions, before understanding the kindergarten and grade school level questions, they never get the benefit, because they can’t — they can’t under —they get so confused.\nSo it’s almost like, once you’ve seen a dead body you can’t unsee it, and you can’t focus on anything else. And so what I’m trying to share with you, you know, if you just, you know, take a bite at a time, you know, like the old saying, you can’t eat an elephant in one bite, we need just a bite of your time.\nYou will get through this and you’ll get the money.\nBut if we try to jump ahead, you know, I’ll tell you, it’s never been successful.\nGAO INVESTIGATOR: Okay. What – COMPANY REPRESENTATIVE: And I hope you understand. I’m just giving you my expertise and experience in this.\nWe do over — we submit over four hundred apps a month, and everybody gets the benefit, so we know how to do it, we know how to get it done.\nAnd nothing is going to be a surprise to you. Everything is going to be here, this is your option. If you want this, you’ve got to do this.\nAnd then it’s up for you to decide. But it’s just a matter of getting you to that point where you have all the facts, so you can make a decision.\nAnd so the questions you’re asking are all valid, you know, they are all the questions that we’ll be delving into very deeply. If you need a CPA involved, we have a CPA on our team. We have our attorney on our team that I use, . He’ll be a part of all the conversations if we need, so all throughout.\nAnd none of that is costing you any money, because that’s part of my fee.\nBut what I’m saying is, all those questions that you have now, when you are ready for the answers, we’ll have those conversations. But right now, you’re not ready for the answers. It’s difficult to understand this, why this, what that?\nAll those answers you are going to get from me right now are going to create more and more questions, and things are going to get so confusing for you.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: This process is already confusing enough, I’ve got to tell you.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: There are some three hundred to four hundred thousand applications a month — I mean, I shouldn’t say a month. The VA has over — between three hundred and four hundred thousand applications backlogged, sitting there, because people didn’t do the process right, and it will take them up to two years to get approved.\nYou know, that — that’s — it is difficult. It has to be done a certain way, and I’ll get you there. I promise, I’ll get you there, but you just have to go through it step-by-step.\nGAO INVESTIGATOR: Okay. Well, the only other question I have then is the cost. What is the cost involved?\nCOMPANY REPRESENTATIVE: If there is any cost, it would be with the attorney. They charge — they’ll charge a fee for setting up certain documents, and we’ll get to that, as well.\nThe worst case, let’s say your dad, he has a house, and you’re not able to sell the house. See, while he’s living in it, they don’t care that he owns a home, but when he’s out of the house, they consider it an asset.\nWe have to — we’ll have to do something with the house, as well. If you were planning on selling it, fine.\nIf you weren’t planning on selling it, that’s fine, too, but we’ll have to address it.\nThe worst case scenario would be about fourteen hundred bucks. That’s a worst case scenario.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: And when you understand what that all entails, you’ll be like, geez, fourteen hundred bucks, let’s find out tomorrow. That’s another thing, you know, when you understand everything that you get with that.\nAnd he’ll make sure everything is done the right way so that the VA can never come back at you, seeing that the house is protected, your mother is protected, you know.\nI’m just saying, there’s a whole lot to it, and to try to answer it over the phone is more than tough.\nGAO INVESTIGATOR: Okay. All right. So there’s no — that’s just an attorney fee? I mean, there’s no fee for you?\nCOMPANY REPRESENTATIVE: Exactly.\nGAO INVESTIGATOR: There’s no fee for you, at all?\nCOMPANY REPRESENTATIVE: No, not at all.\nGAO INVESTIGATOR: Does the VA pay you or something?\nCOMPANY REPRESENTATIVE: Hang on a second. Let me do this. I hate to try to get you — are you busy during the day?\nGAO INVESTIGATOR: Ummmm.\nCOMPANY REPRESENTATIVE: Is there like an hour of time that you and I can get together and get the process started, so I can show you how — how it all works?\nGAO INVESTIGATOR: Yeah, I mean, probably, but probably not until, you know, after the holidays.\nCOMPANY REPRESENTATIVE: Okay. Then let’s do this. If you have your schedule, my schedule is tied up until the second week of January, already filled with seminars and things to — so people can come and see me. The second week I have at least two seminars, and I usually have thirty to forty people at each seminar.\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: And then about half of those people sit down with me and want to go to the next step.\nGAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: So if I do two or four presentations, I mean, I’ve got thirty to fifty appointments during the second week of January. So if you and I can get together in the first week, I can get you started before all that mess starts.\nGAO INVESTIGATOR: Okay. Well, I wonder if it wouldn’t be beneficial to go to one of the seminars?\nCOMPANY REPRESENTATIVE: Well, the seminar is in .\nGAO INVESTIGATOR: In where?\nCOMPANY REPRESENTATIVE: In , but really, what I do there is more of a blanket meeting.\nIf you already know you have a situation, you already know you have an interest, I go over that same information that I go over in the seminar. But the seminar, it’s just information, and I will be giving that to you face-to-face, and be able to collect the information and get started on the process.\nGAO INVESTIGATOR: Okay. Yeah, I mean, I don’t have a lot of questions, you know, I just want to know what types of Products : you’re talking about that we would — where the assets would go, how — I mean, are we talking about – COMPANY REPRESENTATIVE: It all depends on your dad’s needs. Right now we don’t know – I don’t know anything about your situation. I don’t know what your costs are, I don’t know what his expenses, his needs are. I don’t have any idea what the cash flow management requirements will be – GAO INVESTIGATOR: Yeah.\nCOMPANY REPRESENTATIVE: — this year, next year, five years down the road. You know, as a financial advisor, you know, I come from the banking industry, where I worked in the trust department, and my clients were all multi, multi-millionaires. And all I did for them was identify what their needs were going to be year in and year out, into the future – GAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: — protecting their assets, so that they knew that money was going to be there (unintelligible). Like your dad, the last thing he wants to do is have his nest egg at risk.\nGAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: He’s going to need — he’s going to need income from it to maybe offset some of the cost of his retirement community, perhaps.\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: I don’t know, you know, I don’t have any answers, at this point, because I don’t know what his needs are, what your family needs are, you know, how many kids are there, who all is involved.\nGAO INVESTIGATOR: I mean, basically, it’s just him. I mean, he’s got his Social Security, and then, if he qualifies for the VA Pension, he would have that. So I imagine that would be enough income for him. So it’s just a matter of doing something with the assets, so he doesn’t lose it. So – COMPANY REPRESENTATIVE: Exactly. And that’s something you and I will discuss and work on. Are you — are you handling his affairs now?\nGAO INVESTIGATOR: Yeah, uh-huh.\nCOMPANY REPRESENTATIVE: So you take care of all of his bills?\nGAO INVESTIGATOR: Yeah.\nCOMPANY REPRESENTATIVE: So you are the person who understands best, you know, what your parents, you know, what the family, you know, your father, your mother, your parents, what their requirements are.\nNow your mother has passed; is that correct?\nGAO INVESTIGATOR: Yes, uh-huh.\nCOMPANY REPRESENTATIVE: Okay, so we’re just talking about your dad here.\nGAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: So here’s — the VA just increased the payment to the Veteran, single Veteran, to right around seventeen hundred a month, tax-free, so it’s a pretty substantial benefit; that’s over twenty thousand dollars a year.\nIf you are looking at his — looking at what his Social Security is – GAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: — you add that, plus his VA, it may cover his long-term care facility.\nGAO INVESTIGATOR: Uh-huh, yeah, his Social Security is twelve hundred, so you’re talking about somewhere close to almost three thousand dollars a month.\nCOMPANY REPRESENTATIVE: Yeah, exactly, so that’s not bad, that’s not bad. Now it depends on what kind of community he would be looking at, but you know, that’s. . .\nYou know, the hardest part is getting started, and then once you get to a certain point, you’ll be like, yeah, I get it, I get it, now I understand, this is what we do.\nLet me ask you, is Tuesday the 3rd or is Wednesday the 4th a better day for you?\nGAO INVESTIGATOR: Well, probably Wednesday will be better for me.\nCOMPANY REPRESENTATIVE: And you’re in ?\nGAO INVESTIGATOR: Yes.\nCOMPANY REPRESENTATIVE: Okay. How does 10 a.m. work?\nGAO INVESTIGATOR: Are you talking about coming down to me or where?\nCOMPANY REPRESENTATIVE: Yeah, absolutely, I’d come to you.\nGAO INVESTIGATOR: That sounds good, tentatively. I’ve got to check and make sure that — I have to check a couple things here, but I mean, it sounds good.\nCOMPANY REPRESENTATIVE: What address is the best place to meet you?\nGAO INVESTIGATOR: Well, you know, I’m guessing that it might be just as good to do it at the office. I’ll tell you what, are you going to be around this afternoon?\nCOMPANY REPRESENTATIVE: Yeah, do you want to give me a call back?\nGAO INVESTIGATOR: Yeah, let me give you a call back. Let me check the schedule and make sure it’s good. I think it would probably be easier just to do this at the office.\nCOMPANY REPRESENTATIVE: Okay. What city is it?\nGAO INVESTIGATOR: I’m sorry?\nCOMPANY REPRESENTATIVE: What city is your office in?\nGAO INVESTIGATOR: In .\nGAO INVESTIGATOR: Near .\nCOMPANY REPRESENTATIVE: Near , okay, (unintelligible). All right, good.\nGive me a call back just to confirm if 10 a.m. works. If I don’t answer, just leave a message. I may go out and do some shopping (unintelligible).\nGAO INVESTIGATOR: All right. I’ll just leave a message on your voicemail.\nCOMPANY REPRESENTATIVE: Yeah, and — good.\nGAO INVESTIGATOR: Sounds good.\nCOMPANY REPRESENTATIVE: All right, .\nGAO INVESTIGATOR: Thanks for your time, I appreciate it.\nCOMPANY REPRESENTATIVE: Nice talking to you.\nGAO INVESTIGATOR: Alright, Bye.\nCall 2: Caller is a GAO investigator phoning on behalf of his fictitious 86-year-old father who was a veteran, seeking VA pension benefits, who wants to learn about the services provided by the company. The company representative describes how his father can qualify for these benefits, despite having significant assets. (Whereupon, an outgoing call was placed by the GAO investigator to a company representative.)\nCOMPANY REPRESENTATIVE: Hello? Hello?\nGAO INVESTIGATOR: Hi.\nCOMPANY REPRESENTATIVE: Hi. This is . Did somebody call this number?\nVA benefits.\nCOMPANY REPRESENTATIVE: Okay. What can I help you with?\nGAO INVESTIGATOR: Well, I’m just trying to figure out my — this is for my father.\nCOMPANY REPRESENTATIVE: Uh-huh.\nGAO INVESTIGATOR: And, you know, he’s not currently getting benefits. He gets Social Security.\nCOMPANY REPRESENTATIVE: Right.\nGAO INVESTIGATOR: But, you know, I was — I’m trying to see if maybe he could qualify for benefits. But the problem is he’s got, you know, some assets, and I’m not sure, you know, if that precludes him from getting benefits or not. So I wanted to talk to somebody – COMPANY REPRESENTATIVE: No. No. Is he — does he need some help around the house or has he got some medical or physical impairments – GAO INVESTIGATOR: Yeah.\nCOMPANY REPRESENTATIVE: — right now?\nGAO INVESTIGATOR: Yeah. I mean, he’s 86. I mean, mentally he’s fine. But, you know, physically he needs a lot of help in just, you know, walking and getting in and out of bed.\nCOMPANY REPRESENTATIVE: Okay.\nGAO INVESTIGATOR: And, I mean, yeah, he needs help.\nCOMPANY REPRESENTATIVE: Sure. If you will — if you will do me a favor, I’m going to send you — do you have an e-mail address?\nGAO INVESTIGATOR: Well, not really. But, I mean, I can probably get something. But what do you need?\nCOMPANY REPRESENTATIVE: Well, I was going to send you a little form, and if you can just spend a few minutes and fill it out, then I can tell you if your father is available for benefits or not.\nGAO INVESTIGATOR: Okay. I mean, I mean, basically I’m assuming he – COMPANY REPRESENTATIVE: I probably could do this — I could do this over the phone, too. But right now I’m just going and jumping on a conference call. So I can call you back and I can ask you the questions I need to ask you, if you want. Maybe in — I’d say within a couple of hours I can get back with you.\nGAO INVESTIGATOR: Okay. Yeah, that might work.\nCOMPANY REPRESENTATIVE: Okay. It is a means-tested and an asset-tested – uh, benefit, but – um, essentially there are legal work-arounds. And if you know, it’s basically you have to put together a good presentation for the Veterans Administration. And that’s what we do. We help people um — position assets and coordinate the presentation effort to the VA. So there’s really not many kinds — if, in fact, your father has lost some of the activities of daily living, then we really can’t get him qualified. So I’ll just – GAO INVESTIGATOR: Yeah.\nCOMPANY REPRESENTATIVE: — make a short explanation like that.\nGAO INVESTIGATOR: Yeah. And just to kind of make it short, I mean, his income isn’t the thing, because he’s only getting Social Security. But he’s got assets that are probably — between his house and some savings and stuff, he’s probably, you know, a little bit over $500,000.\nAnd I’m wondering if that precludes him from qualifying.\nCOMPANY REPRESENTATIVE: No. No, it doesn’t, especially if he’s got a little bit of uh — flexibility. How much is the house worth? The house is really not an issue at all.\nGAO INVESTIGATOR: Yeah, that’s probably about 200,000.\nCOMPANY REPRESENTATIVE: Oh, so you have 300 in other stuff? Okay.\nYeah, I’ve qualified people with that — beyond $700,000 worth of liquid assets. So that’s not the issue. But sometimes the older folks, you know, your father being 82 – GAO INVESTIGATOR: Eighty-six.\nCOMPANY REPRESENTATIVE: Eighty-six, I’m sorry. Sometimes they — oh, they’re not — what would be the word? They’re sometimes control freaks, meaning sometimes what we have to do is retitle assets. He would still be totally in control of them, but not under his direct purvey.\nSo if he can understand the strategy, he could understand that, you know, he’s entitled to the benefit. It could be — he’s single right now?\nGAO INVESTIGATOR: Yeah, yeah. His wife is dead.\nCOMPANY REPRESENTATIVE: Okay. So, you know, basically he performed for his country. If he was able to get aid and attendance, he would get real close to — actually, this year is $19,736 per year. And if that means something to him, then we can help him out. If it doesn’t, then he’ll just have to go through spend-down and spend it.\nSo we can — we can make it work, but he’s got to be willing to help us. Okay?\nWe can’t force people to do something that they’re not wanting to do.\nGAO INVESTIGATOR: I got it.\nCOMPANY REPRESENTATIVE: Okay. It’s real simple – GAO INVESTIGATOR: What sorts of things are you talking about? I mean, where do we put it?\nCOMPANY REPRESENTATIVE: Well, for instance, do you have power of attorney for him right now?\nGAO INVESTIGATOR: Well, I don’t. But, you know, he’s pretty — he’s pretty lucid. I mean, I — I can probably get it.\nCOMPANY REPRESENTATIVE: Well, typically speaking, for people that have had a child or relative assigned a power of attorney, then they’ve kind of realized that, you know, if something happens, they may need some help. Somebody acting in their financial capacity if they get in a situation where they can’t perform or somebody to make some medical decisions for them.\nSo at that point in time, they’ve kind of acquiesced to the fact that, you know, at this point in my life, I need a little bit of help.\nSo I was going to say, if he’d already given you power of attorney, then essentially what he said is, you know, he trusts you.\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: And if that’s the case, then essentially it’s going to be that type of a relationship where things may be put into special types of trusts where he is still — where you would have a fiduciary responsibility to him. So it’s a contractual obligation. It’s — all the money is for the benefit of him, but it’s not under his direct control.\nNow, that’s not necessarily the only way it can be done. There are also what we call care contracts where essentially he can kind of prepay in a contractual manner for his future care. It gets it out of his immediate possession and would help qualify for those types of benefits.\nSo there’s a myriad of strategies. I work with an attorney. We’ll make sure it works for you. But he just has to understand that either he wants to get the benefit or he doesn’t. If he does, we can make it work. If he doesn’t, then that’s okay, too.\nGAO INVESTIGATOR: Right. Well, I mean – COMPANY REPRESENTATIVE: It’s up to him.\nGAO INVESTIGATOR: — I don’t think he wants to lose his assets. And, you know, you know, we don’t want him to lose his assets. And that’s — that’s the biggest concern now.\nCOMPANY REPRESENTATIVE: Right. There’s — there’s a — yeah, well, he will if he needs the care. Then the other issue you have coming up, too, of course, is sometimes folks that mostly qualify for the benefit will essentially possibly qualify for Medicaid, too. And what that means is that, yes, I mean, if his expenses go to $6-7-8-9- 10,000 a month, then he will lose his assets unless he does something to protect them. So we can help out in that regard, too.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: It’s — you really don’t have — you don’t have an e-mail address really?\nGAO INVESTIGATOR: Well, I can get one for you, yeah. I’m not real computer — I’m not a computer guy. That’s all.\nCOMPANY REPRESENTATIVE: Okay. Well, I can appreciate that. We probably — I’m thinking here — is this your cell number?\nGAO INVESTIGATOR: Uh-huh. Uh-huh.\nCOMPANY REPRESENTATIVE: You wouldn’t be able to print it if I gave it to you GAO INVESTIGATOR: Do you have something on your web site?\nCOMPANY REPRESENTATIVE: I don’t have a — I don’t have the form embedded. Let’s just talk in a couple of hours. I’ll ask you the question. You know, I can tell pretty much right now that I can help you out. It’s just a matter to the extent where you need to ask your father — well, probably before you talk to me again. Say, Hey, Dad, you know, I talked to an accredited VA application guy, and he says that, you know, we can get you the benefit but there is some strategy involved. And if you want to hear it, fine. If not, that’s okay, too.\nYou know, that’s just really what you need to do with this.\nGAO INVESTIGATOR: All right. What do you guys charge for that?\nCOMPANY REPRESENTATIVE: Well, for the — there’s two ways. Let’s just leave it at a thousand — $1,050, okay?\nGAO INVESTIGATOR: Just a straight fee?\nCOMPANY REPRESENTATIVE: Yeah, $1,050. Of course, what we really want to do is to be able to – we can give you the recommendations and turn you loose, and you go out there on the street and try to implement it.\nBut, you know, you probably really want to kind of go through us and let us help you in the full way. I will send you enough information and the attorney’s information so that you’ll understand that we really are a full-fledged service organization and can really help you through this mix.\nAnd then, you know, once we help you out, you can either go down to the local VA office and have them fill out the paperwork. Is your father — is your father in the same town as you or is he — where is your father?\nGAO INVESTIGATOR: Yeah, he’s not that far away. About, you know, seven, eight miles away.\nCOMPANY REPRESENTATIVE: Okay. Where — where are you located?\nGAO INVESTIGATOR: I’m actually in north .\nCOMPANY REPRESENTATIVE: Oh, are you? What part?\nGAO INVESTIGATOR: Well, are you familiar with at all?\nCOMPANY REPRESENTATIVE: Yes. I went to so – GAO INVESTIGATOR: Oh, no kidding.\nCOMPANY REPRESENTATIVE: Yeah. And my sister lives in right now, actually.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: And actually we lived in for a few years when I was real young. Yeah, I’m familiar with . I’m a native of . So, yeah, we can help out. So I wish you had some kind of an e-mail.\nGAO INVESTIGATOR: Well, let me see if I can do something. I mean, you know, my brother might have something that I can — I can use.\nCOMPANY REPRESENTATIVE: Okay. Yeah, because, really, this is a family discussion. You know, all the kids — how many kids are there besides you?\nGAO INVESTIGATOR: Just me and my brother.\nCOMPANY REPRESENTATIVE: All right. So you guys are really going to need to put your heads together and say, hey, this makes sense for us or it doesn’t. You know, dad is going to have to cooperate or he’s not. And, you know, sometimes, to be honest with you — I deal with older folks, you know — they just don’t give a rat’s fanny. And so you can’t make the horse drink, you know.\nGAO INVESTIGATOR: I don’t think – COMPANY REPRESENTATIVE: But if he wants to protect his asset – GAO INVESTIGATOR: Yeah, I mean, he’s — you know, mentally he’s fine. I don’t think that’s going to be a problem. I mean, he – COMPANY REPRESENTATIVE: All right. Well, if he wants to protect his assets – GAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: Most of the time — most of the time they want their kids to wind up with the money. And sometimes, you know, they don’t care as much. But I can’t get in your father’s head, so you need to kind of ask him if that’s the case. If he wants to protect the money, you can have him protect the money.\nGAO INVESTIGATOR: Okay. All right.\nCOMPANY REPRESENTATIVE: Okay?\nGAO INVESTIGATOR: Sounds good. All right. I appreciate it. Well, let me see if I can get an e-mail address and give you a buzz back.\nCOMPANY REPRESENTATIVE: All right. Hey, let me do this. Let me give you my cell number, please, so you should be — because I’m in and out so much. It’s – GAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: — .\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: .\nGAO INVESTIGATOR: Okay. All right. Got it.\nCOMPANY REPRESENTATIVE: All right, buddy. Take care.\nGAO INVESTIGATOR: I’m sorry. What did you say your name — what did you say your name was again? I’m sorry.\nGAO INVESTIGATOR: . Oh, that’s right,.\nCOMPANY REPRESENTATIVE: , . Yeah. All right.\nGAO INVESTIGATOR: Okay. Thank you.\nCOMPANY REPRESENTATIVE: Okay. Thank you. Bye now.\nCall 3: Caller is a GAO investigator phoning on behalf of his fictitious 86-year-old father who was a veteran, seeking VA pension benefits, who wants to learn about the services provided by the company. The company representative describes how his father can qualify for these benefits, despite having significant assets. (Whereupon, an outgoing call was placed by the GAO investigator to a company representative.)\nSPEAKER ONE: , , can I help you?\nGAO INVESTIGATOR: Yeah, I hope so. I want to talk to somebody about possibly getting VA benefits for my father.\nCOMPANY REPRESENTATIVE: Okay. And your name?\nGAO INVESTIGATOR: My name is .\nCOMPANY REPRESENTATIVE: Hi, . Can you tell me a little bit about your dad’s situation?\nGAO INVESTIGATOR: Well, he’s a World War II veteran.\nCOMPANY REPRESENTATIVE: Okay.\nGAO INVESTIGATOR: He’s 86 years old. Are you there?\nCOMPANY REPRESENTATIVE: What is the nature of his illness?\nGAO INVESTIGATOR: I’m sorry?\nCOMPANY REPRESENTATIVE: Can you tell me about his illness, please.\nGAO INVESTIGATOR: Well, you know, aside from getting old?\nCOMPANY REPRESENTATIVE: Yeah.\nGAO INVESTIGATOR: He’s having a lot of — he can’t walk too well.\nHe’s got a lot of, you know, joint problems and stuff like that.\nSo he can’t — he needs a lot of help getting in and out of bed, taking baths and stuff like that.\nHe’s also got — he doesn’t hear very well.\nCOMPANY REPRESENTATIVE: And how old is your dad?\nGAO INVESTIGATOR: He’s 86.\nCOMPANY REPRESENTATIVE: God bless him.\nI guess just wearing out.\nCOMPANY REPRESENTATIVE: Where does he live? Is he living with you or is he in a facility?\nGAO INVESTIGATOR: No, he’s got a place, he’s got a house.\nCOMPANY REPRESENTATIVE: Ok. Are you planning on leaving him at the house, staying at the house?\nIs he going to have any in-home health care coming in?\nGAO INVESTIGATOR: Yeah, I mean, in-home, I would think, because I mean, mentally he’s fine.\nCOMPANY REPRESENTATIVE: Have you checked with an in-home health care agency to come to the house?\nGAO INVESTIGATOR: Well, yeah, he’s got people coming in already.\nCOMPANY REPRESENTATIVE: He does. Okay.\nGAO INVESTIGATOR: I mean, that’s kind of why I’m – COMPANY REPRESENTATIVE: I see. The reason why I ask those questions is that in order to get VA benefits, called Aid and Attendance, which is a benefit that the government will pay up to nineteen fifty per month, tax-free, and the government usually pays that 9 months out from the time we apply.\nAnd you get also a retroactive, so it would be 8 months on top of that.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: It’s that they need to have something in place like in-home health care already being used or about to be used, or he lives in an assisted-living facility or a nursing home.\nAnd those are key. One of those three things have to be in place or about to be in place.\nGAO INVESTIGATOR: He is getting help already at the house. I mean, that’s one of the things.\nI mean, we’re spending a lot of money.\nAnd you know, he’s got — he’s got some assets, but I mean, as far as income, all he’s got is his Social Security.\nCOMPANY REPRESENTATIVE: Tell me about his Social Security. What is coming in per month, as far as income?\nGAO INVESTIGATOR: He’s got eleven fifty coming in a month.\nCOMPANY REPRESENTATIVE: Okay. Anything else?\nGAO INVESTIGATOR: Well, no, because he’s got some — you know, he owns his own house.\nCOMPANY REPRESENTATIVE: Right. I’m just asking; I don’t know your situation.\nBut eleven fifty a month in Social Security. No other income is coming in.\nNo savings?\nGAO INVESTIGATOR: No, he’s got some savings and stuff, but I mean, I’m concerned, again, he’s going to lose all that.\nCOMPANY REPRESENTATIVE: Right.\nSee, how we work — first of all, I’m accredited by the VA. And what we do is we plug into the software to see what dad qualifies for.\nAnd what we plug into the software is money going in, money going out, money saved, illnesses, what his illness issues are, in other words, what the home health care agency is doing for dad.\nAll of that plays a major role in crunching the numbers to see what dad qualified for.\nAnd in most cases, , it’s not a matter of if he qualifies, it’s a matter of how much.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: That’s going to have to be our next conversation.\nI’m just trying to get a little information to see if I can guide you in the right direction.\nMy question to you regarding the home health care, do you have an idea what they’re charging you per month?\nGAO INVESTIGATOR: Well, you know, it’s probably around a little over two thousand, maybe twenty-five hundred a month.\nCOMPANY REPRESENTATIVE: Okay. And so here’s what you have, .\nYou have more money going out than coming in, as far as income.\nGAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: So you have a shortfall of about fourteen hundred dollars, thirteen fifty, a month going out for care.\nAnd that’s a good thing, when it comes to applying for the VA benefits.\nThere’s other factors, I’m just giving you kind of an overview.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: And it could be, you know, dad may qualify for up to the full nineteen fifty a month.\nI don’t care if twenty-five hundred is coming in, and twenty-five hundred is going out the door, the software, with all of the bells and whistles of what we have to plug into it, it may kick out that dad needs nineteen fifteen a month.\nGAO INVESTIGATOR: Okay, but here’s the problem.\nCOMPANY REPRESENTATIVE: He may have a shortfall of fourteen hundred.\nGAO INVESTIGATOR: Yeah, but here’s my concern though, is that he’s got — he owns his own house, and then he’s got like a mutual fund and he’s got some savings.\nAnd of course, that’s not going to last very long with this negative, you know, income that he’s got going on.\nCOMPANY REPRESENTATIVE: Correct.\nGAO INVESTIGATOR: But how is he going to qualify for anything with those assets?\nCOMPANY REPRESENTATIVE: Well, the VA has different scenarios.\nFor example, the VA will allow us to do estate planning to reposition the assets so he can qualify.\nThe VA may be able to allow him to keep a certain amount.\nHow much money are we talking about in savings or stocks or bonds or mutual funds total?\nJust off the top of your head. You don’t have to be exact.\nGAO INVESTIGATOR: I’m guessing he’s got maybe ninety thousand in savings and about two hundred — about a quarter of a million, probably, in mutual funds.\nA little over two fifty, two sixty maybe.\nCOMPANY REPRESENTATIVE: All right. So if he’s not opposed, there’s like several scenarios.\nSo let’s just talk about money. Those with assets of which we would call your dad.\nIs he opposed to repositioning the assets to where — are you the power-of- attorney, ?\nGAO INVESTIGATOR: Like I say, he’s got his mental facilities, so I’m not.\nI mean, I could be, but I mean, at this point, he’s still able to function for himself.\nCOMPANY REPRESENTATIVE: Well, your issues here are you have about a quarter of a million dollars plus cash.\nThe government is going to want him to use his money first, if we don’t do estate planning, which we’re allowed to do, according to the VA parameters.\nGAO INVESTIGATOR: Okay, so what does that mean? Where — what would you do?\nCOMPANY REPRESENTATIVE: What that means is basically is repositioning the assets to where – it may – and I don’t — again, the software tells us what we can and can’t do.\nBut I’m just going to give you a — kind of a hypothetical.\nUh — For example, you may be able to reposition, reallocate those funds into a trust that , Jr. — if you’re a Jr. – I’ll just – , you – GAO INVESTIGATOR: .\nCOMPANY REPRESENTATIVE: — would be the trustee of.\nAnd we’re allowed to apply for VA benefits the day after, by reallocating those funds, so that dad can qualify.\nAnd he may get nineteen fifty a month, tax-free, plus retroactive, for the 8 months waiting.\nSo he may get a full check of about almost twenty something thousand dollars, and the funds thereafter come each month to you tax-free.\nDoes he want that? I don’t know.\nThose are some of the scenarios that the software will kick out, and let us know what we can and can’t do.\nBut the bottom line is, if you went to the VA directly and told them — because you would have to be forthright, and tell them that you had this money — they would reject you immediately, until you spend down to your last fifteen hundred dollars.\nOr there are options that you could do.\nAnd that’s where an accredited VA claims agent comes in, myself, because we work with attorneys that do estate planning that are able to do these type of things.\nSo those are the questions you want to talk to your dad about, even though he may have his faculties, and he may be able to make decisions.\nIs he willing to pull the trigger and let you make the decisions? Because that’s what he may have to do.\nGAO INVESTIGATOR: Well, I’m just – COMPANY REPRESENTATIVE: I’m just giving you one of the scenarios.\nBut our niche is that we deal with people with assets, if they are willing to let the power-of-attorney make those decisions, then we can apply for VA benefits without a hiccup.\nGAO INVESTIGATOR: Okay, all right.\nCOMPANY REPRESENTATIVE: So those are the questions that I probably would talk to my dad about.\nGAO INVESTIGATOR: He’s pretty reasonable.\nCOMPANY REPRESENTATIVE: Because quite frankly, there is a gap.\nAnd dad, who knows, can get worse, and then you may have to put him into a nursing — an assisted-living facility, which is twice what you’re paying now.\nEstate, or do you want to spend it down?\nAnd those are the questions — those are hard questions to ask.\nCOMPANY REPRESENTATIVE: The economy.\nGAO INVESTIGATOR: Yeah, and we’re putting out more than, you know, he’s only got a little bit coming in with the social security. That’s not covering it.\nCOMPANY REPRESENTATIVE: No, that’s right. And what these types of estate planning devices, that’s allowed, according to the VA, it’s real simple.\nI mean, they make it very clear that the — by the way, are you the power-of- attorney?\nGAO INVESTIGATOR: I don’t have a power-of-attorney, but I can probably get one.\nCOMPANY REPRESENTATIVE: I would do that yesterday. I would — forget whether we met each other or not. You need to get that done.\nWhat I would suggest — can I make a suggestion?\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: Go to Office Depot – GAO INVESTIGATOR: Yes.\nCOMPANY REPRESENTATIVE: — get a general power-of-attorney in place.\nHave a notary notarize it, which will make it legally binding that day of notary.\nAnd now you have a power-of-attorney in place, so that if anything happens to dad, God forbid, he has a stroke and he becomes mentally incapacitated, you’ve already got something in writing where you can make decisions for him, and you don’t have to go through the court system.\nGAO INVESTIGATOR: That makes sense.\nCOMPANY REPRESENTATIVE: So I would do that immediately. And I would tell dad. He wouldn’t be opposed to that, would he?\nCOMPANY REPRESENTATIVE: That’s doesn’t change. I mean, he still makes his own decisions, even with the power-of-attorney in place.\nThe power-of-attorney is only in case he does become incapacitated.\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: Okay. You are basically doing preventive medicine. And that’s what we’re suggesting here.\nIf the software kicks out — and I don’t know until I get a fact-finder filled out by you in detail, and it’s an 8-page fact-finder, it takes me about 7 hours with the attorney to go through all this.\nAnd we don’t charge to fill out the VA forms.\nWe do not charge to represent dad for the VA benefits, but we do charge a flat rate to do the seven hours, eight hours of due diligence to figure out what is going to be the right avenue, because they are only going to have one scenario that’s going to fit dad’s situation, once we get that fact-finder in.\nBecause once we get that fact-finder in, the software tells us exactly what we can and can’t do.\nGAO INVESTIGATOR: All right. And how much is that? What’s the cost of that?\nCOMPANY REPRESENTATIVE: Fifteen hundred dollars.\nGAO INVESTIGATOR: Fifteen hundred, okay.\nCOMPANY REPRESENTATIVE: But it’s not a matter of if dad qualifies, it’s a matter of how much.\nI will tell you, because he’s a living vet, our experience from the software, the software will kick back between sixteen to nineteen hundred dollars that he would qualify for, because he’s a living vet,. whereas if it was mom, and dad was dead, the surviving spouse always gets less.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: Now if dad qualifies for the nineteen fifty — let’s just use that as an example — times, ah, he’ll get a check on the ninth month, if we apply for it yesterday, and got everything in place, he would get a check from the government for seventeen thousand five hundred fifty dollars, tax-free.\nAnd then, each month thereafter, he would get nineteen fifty coming in, each month, tax-free.\nGAO INVESTIGATOR: Whoa.\nCOMPANY REPRESENTATIVE: That’s how that works. I’m here to tell you, that for fifteen hundred dollars, you’ll get your money back on the first month that you apply, basically.\nGAO INVESTIGATOR: Yeah, yeah.\nCOMPANY REPRESENTATIVE: But once we do what we need to do, and if he’s not objected — objecting to the reallocating and repositioning of those funds, because quite frankly, at 86, I know he has two hundred and fifty thousand in mutual funds, but you know, that’s a concern to me right there, because of the loss and what’s going on in the economy.\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: So is he willing to pull the trigger and get it out of harm’s way, so that he would get between 4 to 6 percent, and not — and not at any risk?\nBecause if we do reposition the funds, it’s very likely that it has to be an account that cannot go backwards.\nGAO INVESTIGATOR: All right. So what type of thing are you talking about?\nCOMPANY REPRESENTATIVE: It could be CDs, it could be annuities, but the point is, it has to be an account that’s protected, that can’t go backwards.\nThere’s not an attorney, that I know that’s accredited, that would will take any case that’s going to be tied into stocks, bonds, or mutual funds, because they can lose their base, they can lose their principal, they can lose their gains.\nAnd the attorney signs off on that stuff, when he represents the VA.\nGAO INVESTIGATOR: Okay. And if he’s putting it into something, and he’s getting 4 to 6 percent, does that money go to him or where does that go?\nCOMPANY REPRESENTATIVE: If it stays into the account, it goes to him.\nHow it works, basically, , it’s that the power-of-attorney is the decision maker with dad.\nYou become the trustee.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: You are the pivot, you are the person we go to.\nBecause everything has to be reallocated out of dad’s name, titled to the trust, so that controls it, cuts the checks.\nDad’s allowed to keep money in his account, that’s not a question. It’s a question of how much is he allowed to keep in his account.\nThat depends on the software coming back and telling us what he’s allowed to keep, what he’s not allowed to keep.\nGAO INVESTIGATOR: Uh-huh, uh-huh.\nCOMPANY REPRESENTATIVE: Do you follow?\nGAO INVESTIGATOR: If I use any of that money for him or for me, I have to count that as income?\nCOMPANY REPRESENTATIVE: Great question. Let’s talk about for him first.\nIf you use the money for him — first of all, the Trust will Dad has what? — am I correct by saying he has over two fifty, combined, like three forty?\nGAO INVESTIGATOR: Yeah. Well, like I say, he’s got about ninety in savings and another two — maybe about two sixty in a mutual fund.\nCOMPANY REPRESENTATIVE: So three fifty he has total.\nGAO INVESTIGATOR: Okay, yeah.\nCOMPANY REPRESENTATIVE: So what would happen, in this Trust account, visualize it as there’s a checkbook access.\nIn the checkbook access, you’re able — you’re going to have up to three fifty, what’s going to be liquid is going to be roughly about close to a hundred and fifty thousand dollars, or a hundred thousand minimum.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: So that’s for incidentals, for dad’s needs, for whatever. It doesn’t make a difference.\nI don’t have to know what it’s for.\nGAO INVESTIGATOR: Okay. But if I use that, does somebody, either I or him, have to count that as income?\nCOMPANY REPRESENTATIVE: Well, if he cashes in his – are these IRAs? Do you know?\nIRAs, non-401(k)s, non-retirement plans – GAO INVESTIGATOR: Right.\nCOMPANY REPRESENTATIVE: — then, no, you could use them into the account —, and they could be taxable— for whatever, it’s not countable as income.\nBut if they are IRAs, then you would have to cash in the IRAs and then it would become income.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: But the other account, when it’s put into the put and keep account — let’s say you have three hundred and fifty thousand.\nA hundred to a hundred fifty goes into the checkbook access.\nThe other two hundred or whatever goes into a put and keep account earning four to six percent.\nGAO INVESTIGATOR: Is that like an annuity or something?\nCOMPANY REPRESENTATIVE: That doesn’t earn any interest. That’s accessible dollars, liquid dollars, when you need it for emergency.\nThe other account will earn 4 to 6 percent.\nSo it depends on what you want to put into that other account, and how much you want to keep liquid.\nGAO INVESTIGATOR: Okay. Well, the account that’s earning 4 to 6 percent, what is that in? Is that an annuity or what is that?\nCOMPANY REPRESENTATIVE: It would be an annuity that has accessibility to it, but it’s tax-free, it’s not being — it’s not being taxed.\nGAO INVESTIGATOR: Okay. All right. But I wouldn’t have access to that money?\nCOMPANY REPRESENTATIVE: You will have access to that money. Each year you have access to it, up to 10 percent free withdrawal, with no penalty.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: And if — but that’s why we want to keep some of that money out in the Trust account checkbook, that is basically accessible, totally liquid.\nSo the software will kick out what we can and can’t do.\nI’m projecting that probably a hundred and fifty of it, up to a hundred and fifty, could be liquid.\nNow you may not need a hundred and fifty liquid. So the more you put into the annuity, the more interest you’re going to earn on those funds.\nGAO INVESTIGATOR: Uh-huh.\nCOMPANY REPRESENTATIVE: That’s a decision you have to make with dad.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: But from my experience on the software, I’ve seen between, - a hundred and fifty or a hundred thousand go into the annuity — checking account, and the rest goes into the annuity.\nGAO INVESTIGATOR: Uh-huh.\nWell, hopefully, you’re talking this VA thing.\nIs that really — the nineteen or whatever that he would qualify for, is that a pension or what is that?\nCOMPANY REPRESENTATIVE: It’s — it’s — I’m sorry. It’s going to be considered what is called Aid and Attendance.\nGAO INVESTIGATOR: Okay.\nCOMPANY REPRESENTATIVE: It’s aiding him with him attendance for his care, and that is the home health care.\nRemember, I mentioned that there’s three things that have to be in place in order for us even to apply for the VA benefits called Aid and Attendance.\nAnd that he is already getting aid, you know, from a home health care, or assisted-living or in a nursing home.\nGAO INVESTIGATOR: Uh-huh. All right.\nCOMPANY REPRESENTATIVE: And so we’re applying for specifically that.\nThat’s all I deal with.\nI don’t deal with any of the other benefits that the VA has.\nGAO INVESTIGATOR: Okay. All right, all right.\nCOMPANY REPRESENTATIVE: But you do have some obstacles. You have some issues that you need to discuss with dad.\nIf you’re interested, I believe that it’s a fit.\nIt’s not a matter of if he qualifies, it’s a matter of how much. But the computer will tell us what we can and can’t do.\nAnd then, if you like, I can e-mail you the fact-finder and the information. There’s two forms I would send to you that you would send back to me, signed, with a check, and the address is on the fact-finder.\nIf you like, I can e-mail it to you, if you have an e-mail address.\nGAO INVESTIGATOR: I’ll tell you what, I want to talk to him about it first.\nCOMPANY REPRESENTATIVE: Okay, great. Just keep us in mind. You have our number; give us a call.\nGAO INVESTIGATOR: Okay. I’m trying to think if I have any other questions for you. I was just trying to write down a couple things here.\nAll right, I mean, I guess that’s it.\nCOMPANY REPRESENTATIVE: The problem that you have right now is that you have assets.\nWe have to definitely — I know, from experience, that if you have assets, there may be a strong possibility of repositioning some of those assets.\nAnd there’s a way to reposition some to the trust and there’s a way to reposition some to dad, and there’s a way to reposition to .\nGAO INVESTIGATOR: Right, right.\nCOMPANY REPRESENTATIVE: That all comes from the software, once it kicks it out.\nGAO INVESTIGATOR: All right. And you said that the cost is fifteen hundred COMPANY REPRESENTATIVE: Flat rate, yeah, no extra costs.\nGAO INVESTIGATOR: All right. Well, let me talk to him and I’ll get back to you.\nCOMPANY REPRESENTATIVE: All right. Nice meeting you, .\nGAO INVESTIGATOR: Thank you for your time.\nCOMPANY REPRESENTATIVE: Bye bye.", "", "", "Daniel Bertoni, (202) 512-7215 or bertonid@gao.gov.", "", "VA Enhanced Monthly Benefits: Recipient Population Is Changing and Awareness Could be Improved. GAO-12-153. Washington D.C.: December 14, 2011.\nVA’s Fiduciary Program: VA Plans to Improve Program Compliance and Policies, but Sustained Management Attention is Needed. GAO-10-635T. Washington, D.C.: April 22, 2010.\nVA’s Fiduciary Program: Improved Compliance and Policies Could Better Safeguard Veterans’ Benefits. GAO-10-241. Washington, D.C.: February 26, 2010.\nVeterans’ Benefits: Improved Management Would Enhance VA’s Pension Program. GAO-08-112. Washington, D.C.: February 14, 2008.\nMedicaid Long Term Care: Few Transferred Assets before Applying for Nursing Home Coverage; Impact of Deficit Reduction Act on Eligibility Is Uncertain. GAO-07-280. Washington D.C.: March 26, 2007.\nMedicaid: Transfer of Assets by Elderly Individuals to Obtain Long-Term Care Coverage. GAO-05-968. Washington D.C.: September 2, 2005." ], "depth": [ 1, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "h0_title h1_title", "h0_full h1_full", "h0_full", "h0_full", "h0_full", "h0_full h1_full", "h1_title", "h1_full", "h1_full", "h1_full", "h0_full h2_full", "h3_full", "h3_full", "h3_full", "h0_full h2_full h1_full", "", "", "", "", "", "" ] }	{ "question": [ "Why is the VA's pension program inadequate in regards to addressing the needs of its veterans?", "How have other programs addressed this issue of inequality?", "How does VA's program fail to meet Medicaid's standard of ensuring only those who need benefits receive them?", "What are the major shortcomings of VA's assessment for eligibility?", "What happens as a result of the form not asking for income sources?", "Why does the VA not verify all the information it does request?", "In what ways does the access to information gathered by the VA’s fiduciary program and the VA pension claims processors differ?", "How does the VA \"get away with\" such glaring issues?", "How do private organizations help some claimants find a way to still claim benefits even when they do not meet financial eligibility requirements?", "What did GAO do in order to affirm their claim that there are many people abusing the VA program, and what did they find?", "How did these organizations advise the GAO investigators to manage their \"assets\"?", "What are the drawbacks to these work-arounds, especially given that many veterans fall into the elderly demographic?", "How do these services affect the veteran's eligibility for Medicaid?", "What is the overarching purpose of the VA pension program?", "What did Congress ask GAO to look at regarding the VA pension program?", "How did GAO review the pension program?", "How can Congress address the issue of VA issuing benefits to those who do not require them?", "What are the specific steps which Congress should require of VA when assessing who receives benefits?", "How did VA respond to GAO's recommendations?", "What did VA cite in response to GAO's claim?" ], "summary": [ "The Department of Veterans Affairs’ (VA) pension program design and management do not adequately ensure that only veterans with financial need receive pension benefits. While the pension program is means tested, there is no prohibition on transferring assets prior to applying for benefits.", "Other means-tested programs, such as Medicaid, conduct a look-back review to determine if an individual has transferred assets at less than fair market value, and if so, may deny benefits for a period of time, known as the penalty period. This control helps ensure that only those in financial need receive benefits.", "In contrast, VA pension claimants can transfer assets for less than fair market value immediately prior to applying and be approved for benefits. For example, GAO identified a case where a claimant transferred over a million dollars less than 3 months prior to applying and was granted benefits.", "Also, VA’s process for assessing initial eligibility is inadequate in several key respects. The application form does not ask for some sources of income and assets such as private retirement income, annuities, and trusts. Also, the form does not ask about asset transfers—information VA needs to determine whether these assets should be included when assessing eligibility. In addition, VA does not verify all the information it does request on the form.", "As a result, VA lacks complete information on a claimant’s financial situation.", "For example, VA does not routinely request supporting documents, such as bank statements or tax records, unless questions are raised.", "VA’s fiduciary program, which appoints individuals to manage the financial affairs of beneficiaries who are unable to do so themselves, collects financial information that may affect some pension recipients’ eligibility, but VA pension claims processors do not have access to all this information.", "Further, guidance on when assets should be included as part of a claimant’s net worth is unclear; and VA claims processors must use their own discretion when assessing eligibility for benefits, which can lead to inconsistent decisions.", "GAO identified over 200 organizations that market financial and estate planning services to help pension claimants with excess assets meet financial eligibility requirements for these benefits. These organizations consist primarily of financial planners and attorneys who offer products such as annuities and trusts.", "GAO judgmentally selected a nongeneralizable sample of 25 organizations, and GAO investigative staff successfully contacted 19 while posing as a veteran’s son seeking information on these services. All 19 said a claimant can qualify for pension benefits by transferring assets before applying, which is permitted under the program. Two organization representatives said they helped pension claimants with substantial assets, including millionaires, obtain VA’s approval for benefits.", "About half of the organizations advised repositioning assets into a trust, with a family member as the trustee to direct the funds to pay for the veteran’s expenses. About half also advised placing assets into some type of annuity.", "Some products and services provided, such as deferred annuities, may not be suitable for the elderly because they may not have access to all their funds for their care within their expected lifetime without facing high withdrawal fees.", "Also, these products and services may result in ineligibility for Medicaid for a period of time.", "The VA pension program is intended to provide economic benefits to wartime veterans and survivors with financial need.", "GAO was asked to examine (1) how the design and management of VA’s pension program ensure that only those with financial need receive pension benefits and (2) what is known about organizations that are marketing financial products and services to enable veterans and survivors to qualify for VA pension benefits.", "GAO’s study included a review of VA’s policies and procedures, site visits to VA’s three Pension Management Centers, and online research and interviews of organizations that market financial and estate planning services to help veterans and survivors qualify for VA pension benefits.", "Congress should consider establishing a look-back and penalty period for pension claimants who transfer assets for less than fair market value prior to applying, similar to other federally supported means-tested programs.", "VA should (1) request information about asset transfers and other assets and income sources on application forms, (2) verify financial information during the initial claims process, (3) strengthen coordination with VA’s fiduciary program, and (4) provide clearer guidance to claims processors assessing claimants’ eligibility.", "In its comments on this report, VA concurred with three of GAO’s recommendations and concurred in principle with one, citing concerns about the potential burden on claimants and recipients of verifying reported financial information.", "In its comments on this report, VA concurred with three of GAO’s recommendations and concurred in principle with one, citing concerns about the potential burden on claimants and recipients of verifying reported financial information. VA agreed to study the issue further." ], "parent_pair_index": [ -1, -1, 1, -1, 3, 3, 3, 3, -1, -1, 1, -1, 3, -1, -1, 1, -1, 0, -1, 2 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 0, 0, 0, 3, 3, 3, 3 ] }
GAO_GAO-14-526	{ "title": [ "Background", "CAP Goal Leaders Reported Performance on Goals, but Many Lacked Key Information to Demonstrate Progress", "CAP Goal Leaders Described What Contributed to Goal Achievement, but in Some Cases Information Was Incomplete", "CAP Goal Leaders Identified Milestones for Tracking Progress, but in Some Cases Milestones Were Missing Key Information", "OMB and Goal Leaders Established Processes for Reviewing Cross- Agency Priority Goal Progress, but Not All Review Processes Were Consistent with Requirements and Leading Practices", "OMB Established a Quarterly Process for Reviewing Progress on CAP Goals, but Did Not Consistently Outline Improvement Strategies Where Goal Achievement Was at Risk", "CAP Goal Leaders Established Processes to Review Progress, but Their Consistency with Leading Practices and Their Effects on Performance and Collaboration Varied", "Some Goal Leaders Used Review Processes Broadly Consistent with Leading Practices, and Noted Their Positive Effects on Performance, Accountability, and Collaboration", "Other Goal Leaders Did Not Use Review Processes Consistent with the Full Range of Leading Practices for Reviews", "Some Goal Leaders Reported Minimal Effects on Performance and Collaboration", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Interim Cross-Agency Priority Goals and Goal Statements", "Goal Broadband", "Closing Skills Gaps", "Cybersecurity", "Data Center Consolidation", "Energy Efficiency", "Entrepreneurship and Small Business", "Exports Improper Payments", "Job Training", "Real Property", "Science, Technology, Engineering, and Mathematics (STEM) education", "Strategic sourcing", "Sustainability", "Veteran Career Readiness", "Appendix III: Interagency Group Membership and Meeting Frequency and Purpose", "Closing Skills Gaps", "Cybersecurity", "Data Center Consolidation", "Goal or sub-goal Energy Efficiency Entrepreneurship and Small Business Improve Access to Government Information and Services Sub-Goal", "Commercialization of Federal Research Grants Sub-Goal", "Streamlining Pathways for Immigrant Entrepreneurs Sub- Goal", "Small Business Procurement Sub-Goal", "Goal or sub-goal Exports", "Improper Payments", "Job Training", "Real Property", "Sustainability", "Science, Technology, Engineering, and Mathematics (STEM) Education", "Strategic Sourcing", "Goal or sub-goal Veteran Career Readiness", "Appendix IV: Description of Interim Cross- Agency Priority Goal Review Processes", "Goal Broadband", "Energy Efficiency", "Science, Technology, Engineering, and Mathematics (STEM) Education", "Appendix V: Full Text for Interactive Figure 2 on Frequency of Data Reporting for Cross- Agency Priority Goals’ Overall Planned Levels of Performance", "Data reported for primary performance goal", "Cross-Agency Priority Goal Exports Data reported for primary performance goal", "Broadband", "Cross-Agency Priority Goal Improper Payments", "Data reported for primary performance goal", "Entrepreneurship and Small Businesses", "Data reported for primary performance goal", "Job Training", "Data reported for primary performance goal", "Real Property", "Data reported for primary performance goal", "Science, Technology, Engineering, and Math (STEM) Education", "Cross-Agency Priority Goal Data reported for primary performance goal", "Veteran Career Readiness", "Data reported for primary performance goal", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "GPRAMA requires OMB to coordinate with agencies to develop long- term, outcome-oriented federal government priority goals for a limited number of crosscutting policy areas and management improvement areas every 4 years. Furthermore, with the submission of the fiscal year 2013 budget, GPRAMA required OMB to identify a set of interim priority goals.interim CAP goals, 9 of which were related to crosscutting policy areas and 5 of which were management improvement goals.\nThe President’s 2013 budget submission included a list of 14 The CAP Goal Leader. As required by GPRAMA, each of the interim CAP goals had a goal leader responsible for coordinating efforts to achieve each goal. CAP goal leaders were given flexibility in how to manage these efforts, and were encouraged by OMB to engage officials from contributing agencies by leveraging existing inter-agency working groups, policy committees, and councils. For information on the position of the goal leader and the interagency groups used to engage officials from agencies contributing to each interim CAP goal, see figure 1. For more information on the interagency groups used to engage agency officials in efforts related to each goal, see appendix III.\nAccording to OMB and PIC staff, because CAP goal leaders were responsible for managing efforts related to the achievement of the goals as part of a larger portfolio of responsibilities, staff from the PIC, OMB, and—in some cases—from agencies with project management responsibilities, provided additional capacity for coordinating interagency efforts and overseeing the process of collecting, analyzing, and reporting data. Specifically, PIC staff provided logistical support, assisting with the regular collection of data, updates to Performance.gov, and the development of CAP goal governance structures and working groups. They also provided support in the area of performance measurement and analysis. For example, PIC staff supported the Exports goal leader by informing discussions of how to measure the success and impact of export promotion efforts, providing expertise in the development and selection of appropriate performance measures, and assisting in the collection and analysis of relevant data.\nProgress Reviews. GPRAMA also requires that the Director of OMB, with the support of the PIC, review progress towards each CAP goal with the appropriate lead government official at least quarterly. Specifically, the law requires that these should include a review of progress during the most recent quarter, overall trends, and the likelihood of meeting the planned level of performance. As part of these reviews, OMB is to assess whether relevant agencies, organizations, program activities, regulations, tax expenditures, policies, and other activities are contributing as planned to the goal. The law also requires that OMB categorize the goals by risk of not achieving the planned level of performance and, for those at greatest risk of not meeting the planned level of performance, identify strategies for performance improvement.\nIn an earlier evaluation of the implementation of quarterly performance reviews at the agency level, we found that regular, in-person review meetings provide a critical opportunity for leaders to use current data and information to analyze performance, provide feedback to managers and staff, follow up on previous decisions or commitments, learn from efforts to improve performance, and identify and solve performance problems.\nAs part of this work we also identified nine leading practices that can be used to promote successful performance reviews at the federal level. To identify these practices, we conducted a review of relevant academic and policy literature, including our previous reports. We refined these practices with additional information obtained from practitioners at the local, state, and federal level who shared their experiences and lessons learned.\nNine Leading Practices That Can Be Used to Promote Successful Performance Reviews\nLeaders use data-driven reviews as a leadership strategy to drive performance improvement.\nKey players attend reviews to facilitate problem solving.\nReviews ensure alignment between goals, program activities, and resources.\nLeaders hold managers accountable for diagnosing performance problems and identifying strategies for improvement.\nThere is capacity to collect accurate, useful, and timely performance data.\nStaff have skills to analyze and clearly communicate complex data for decision making.\nRigorous preparations enable meaningful performance discussions.\nReviews are conducted on a frequent and regularly scheduled basis.\nParticipants engage in rigorous and sustained follow-up on issues identified during reviews.\nReporting Requirements. In addition to requiring quarterly reviews, GPRAMA requires that OMB make information available on “a single website” (now known as Performance.gov) for each CAP goal on the results achieved during the most recent quarter, and overall trend data compared to the planned level of performance. In addition, information on Performance.gov is to include an assessment of whether relevant federal organizations, programs, and activities are contributing as planned, and, for those CAP goals at risk of not achieving the planned level of performance, information on strategies for performance improvement.\nNew CAP Goals. As required by GPRAMA, in March 2014, OMB announced the creation of a new set of CAP goals in the fiscal year 2015 budget. It then identified 15 CAP goals with 4-year time frames on Performance.gov—7 mission-oriented goals and 8 management-focused goals. Five goal areas—Cybersecurity; Open Data; Science, Technology, Engineering, and Mathematics (STEM) Education; Strategic Sourcing; and Sustainability (renamed Climate Change (Federal Actions))—were carried over from the set of interim CAP goals, while the other 10 are new goal areas. OMB stated on Performance.gov that more detailed action plans for each of the goals, including specific metrics and milestones that will be used to gauge progress, will subsequently be released. The new CAP goals will also have co-leaders; one from an office within the Executive Office of the President (EOP) and one or more from federal agencies. According to OMB staff, this change was made to ensure that CAP goal leaders can leverage the convening authority of officials from the EOP while also drawing upon expertise and resources from the agency level.", "GPRAMA Requirements for Establishing Planned Performance for CAP Goals GPRAMA requires the Director of OMB to establish, in the annual federal government performance plan, a planned level of performance for each CAP goal for the year in which the plan is submitted and the next fiscal year, as well as quarterly performance targets for the goals.\nGPRAMA Requirements for Reporting CAP Goal Performance Information GPRAMA requires the Director of OMB to publish on Performance.gov information about the results achieved during the most recent quarter and trend data compared to the planned level of performance for each CAP goal.\nOMB released the federal government performance plan on Performance.gov concurrently with the fiscal year 2013 budget submission that identified the 14 interim CAP goals. The information on Performance.gov included a goal statement for each of the interim goals that established an overall planned level of performance. During the two- year interim goal period, OMB addressed the requirement to report on results achieved during the most recent quarter for each of the CAP goals by publishing 5 sets of quarterly updates to the interim CAP goals on Performance.gov. The first set of updates, for the fourth quarter of fiscal year 2012, was published in December 2012 and the final set of updates, for the fourth quarter of fiscal year 2013, was published in February 2014. These documents described general accomplishments made to date, specific actions completed, or both. The updates to the Broadband CAP goal, for instance, included short descriptions of general progress made towards each of the five strategies identified for achieving the goal, as well as specific milestones accomplished.\nThe quarterly updates did not, however, consistently identify required interim planned levels of performance and data necessary to indicate progress being made toward the CAP goals. Updates to eight of the goals included quarterly, biannual, or annual data that indicated performance achieved to date toward the target identified in the goal statement. Three of the eight goals (Cybersecurity, Energy Efficiency, and Strategic Sourcing) also contained the required annual or quarterly targets that defined planned levels of performance, which allowed for an assessment of interim progress. For example, the Cybersecurity goal’s updates stated that the goal would not be met within its established time frame, and provided quarterly performance data compared to quarterly targets for the entirety of the goal period to support the statement. In contrast, the updates for the other five goals did not contain annual or quarterly targets, which made it difficult to determine whether interim progress towards the goals’ overall planned levels of performance was being made. For example, updates to the Exports goal included data on the total amount of U.S. exports by quarter for calendar years 2012 and 2013 but did not include a target level of performance for those years or quarters. Therefore, it was unclear whether the goal’s overall planned level of performance of doubling U.S. exports by the end of 2014 is on track to be met. Furthermore, updates to six interim CAP goals did not include trend data to indicate progress being made towards the goals’ overall planned levels of performance.\nFigure 2 below identifies the frequency with which data on CAP goal performance were reported, as well as the overall performance CAP goal leaders reported making compared to the goal’s planned level of performance through the fourth quarter of fiscal year 2013.\nThrough our review of information on Performance.gov and interviews with managers of the six interim CAP goals that did not report any data on progress towards the stated goal, we identified reasons that included:\nLack of quantitative planned level of performance (targets). The Entrepreneurship and Small Business CAP goal lacked a quantitative performance target. The quarterly updates to the goal explained that efforts were focused on the goal’s 10 sub-goals. Most of these sub- goals, however, also lacked quantitative performance targets. The deputy goal leader told us that some of the sub-goals did not have quantitative targets by design, as goal managers thought it more appropriate to use qualitative milestones to track progress towards them. The quarterly updates to the “Streamline immigration pathways for immigrant entrepreneurs” sub-goal lacked a quantitative target but had a range of qualitative milestones. For example, the Department of Homeland Security and the Department of State established a milestone to identify reforms needed to ease the application and adjudication processes for visas available to certain immigrant entrepreneurs.\nUnavailable data. Some CAP goal managers told us that the data needed to assess and report progress toward their goals’ performance targets were unavailable or not yet being collected. For example, a manager of the Job Training CAP goal told us that staff had not established a baseline number of participants served by federal job training programs against which progress towards the goal could be tracked. In addition, managers of the Real Property CAP goal told us that they did not have data available for tracking progress toward the goal of holding the federal real property footprint at its fiscal year 2012 baseline level.\nWhere key data were not reported, some goal managers took actions to obtain previously unavailable data or developed an alternative approach for assessing progress.\nJob Training CAP Goal. The first quarterly update for the Job Training CAP goal, published on Performance.gov in December 2012, stated that federal agencies were surveyed to compile a list of all job training programs in the federal government, including the number of participants served by those programs, and that a working group was developing a baseline for measuring progress towards the goal of preparing 2 million workers with skills training by 2015. A goal manager told us that the deputy goal leader and staff from the PIC gathered baseline information for most of the programs within the scope of the CAP goal, but that they were unable to complete the efforts by the end of the goal period.\nReal Property CAP Goal. Managers of the Real Property CAP goal told us that they worked to establish a baseline and metrics for measuring future performance and would be able to report on progress after the goal period ended.\nClosing Skills Gaps CAP Goal. A manager of the Closing Skills Gaps goal told us that the goal’s managers decided early on that it did not make sense for each of the goal’s identified mission-critical occupations to have the same skills gaps reduction target. Instead, managers of the goal’s sub-goals identified efforts to reduce skills gaps in their specific occupations. They identified an individual targeted level of performance for that effort and collected and reported data on progress made towards the target. For instance, managers of the Acquisitions sub-goal established a target for increasing the certification rate of GS-1102 contract specialists to 80 percent. The final quarterly status update to the Closing Skills Gaps CAP goal reported that the target was met and the certification rate increased to 81 percent.\nVeteran Career Readiness CAP Goal. The leader of the Veteran Career Readiness CAP goal told us that efforts were made to collect data to assess the veteran employment situation. For instance, she said that an interagency data-gathering working group reviewed sources of available data, integrated those data – such as the unemployment rate for various sub-populations of veterans – into dashboards for senior leadership review, and made proposals to improve data availability. In addition, the Army led a working group to develop a more complete picture of veterans receiving unemployment compensation. She said that these and other efforts led to a concerted effort to improve the availability of data, and to develop and implement metrics measuring career readiness and attendance in a veteran career transition assistance program. However, no data to track progress towards the overall goal were reported during the interim goal period.\nAs we have previously reported, no picture of what the federal government is accomplishing can be complete without adequate performance information. However, OMB and CAP goal leaders did not identify interim planned levels of performance or targets for most of the interim CAP goals. Furthermore, they established a number of CAP goals for which data necessary to indicate progress towards the goal could not be reported. In so doing, they limited their ability to demonstrate progress being made towards most of the CAP goals and ensure accountability for results from those who helped to manage the goals.", "GPRAMA Requirement for Establishing Milestones GPRAMA requires the Director of OMB to establish, in the federal government performance plan, clearly defined quarterly milestones for the CAP goals.\nGPRAMA Requirement for Reporting on Contributions towards Cross-Agency Priority Goals GPRAMA requires that OMB identify the agencies, organizations, program activities, regulations, tax expenditures, policies, and other activities that contribute to each CAP goal on Performance.gov. It also requires OMB to make available on the website an assessment of whether relevant agencies, organizations, program activities, regulations, tax expenditures, policies, and other activities are contributing as planned.\nIn the status updates that were published on Performance.gov, managers of each of the CAP goals reported the general approaches, strategies, or specific initiatives being employed to make progress towards the achievement of the goal, as well as the departments, agencies, and programs that were expected to contribute to goal achievement. For example, the leader of the Science, Technology, Engineering, and Mathematics (STEM) Education CAP goal identified a number of general strategies for making progress towards the achievement of its goal of increasing the number of graduates in STEM subjects by 1 million over the next 10 years, such as “Address the mathematics preparation gap that students face when they arrive at college” and “Identifying and supporting the role of technology and innovation in higher education.” In addition, the goal leader identified a number of programs and goals within four departments and agencies that were likely to contribute in part or in whole to the goal. Figure 3 below illustrates how this information was presented in the update to the STEM Education CAP goal for the fourth quarter of fiscal year 2013.\nIn a May 2012 report on our work related to the CAP goals, we noted that information on Performance.gov indicated additional programs with the potential to contribute to each of the CAP goals may be identified over time. We then recommended that OMB review and consider adding to the list of CAP goal contributors the additional departments, agencies, and programs that we identified, as appropriate. OMB agreed with the recommendation, and in the quarterly updates to the CAP goals published in December 2012 and March 2013, OMB added some of the departments, agencies, and programs we identified in our work to some CAP goals’ lists of contributors. For example, we had noted that 12 member agencies of the Trade Promotion Coordinating Committee had not been identified as contributors to the Exports CAP goal. OMB added additional information about contributors to the Exports goal in the update published in December 2012.\nDuring our review, in some cases CAP goal managers told us about additional organizations and program types that contributed to their goals, but which were not identified on Performance.gov or in our previous report. For example, the leader of the STEM Education CAP goal told us that representatives from the Smithsonian Institution led an interagency working group that contributed to key efforts towards achieving the goal. Although the CAP goal updates indicate that the Smithsonian Institution is involved in federal STEM education efforts, it was not identified in a dedicated list of contributors to the goal. We have previously found that federal STEM education programs are fragmented across a number of agencies. We continue to believe that the federal government’s efforts to ensure STEM education programs are effectively coordinated must include all relevant efforts. Furthermore, the leader of the Broadband CAP goal told us that he is aware that tax deductions available to businesses making capital investments contributed to the goal by incentivizing investments in broadband. We have long referred to such deductions, along with other reductions in a taxpayer’s liability that result from special exemptions and exclusions from taxation, credits, deferrals of tax liability, or preferential tax rates, as tax expenditures. As we have previously reported, as with spending programs, tax expenditures represent a substantial federal commitment to a wide range of mission areas. We have recommended greater scrutiny of tax expenditures. Periodic reviews could help determine how well specific tax expenditures work to achieve their goals and how their benefits and costs compare to those of programs with similar goals. As previously mentioned, GPRAMA also requires OMB to identify tax expenditures that contribute to CAP goals. However, tax expenditures were not reported as contributors to the Broadband CAP goal in the quarterly status updates published on Performance.gov.", "Leading practices state that a clear connection between goals and day-to- day activities can help organizations better articulate how they plan to accomplish their goals. In addition, a clear connection between goals and the programs that contribute to them helps to reinforce accountability and ensure that managers keep in mind the results their organizations are striving to achieve. Milestones—scheduled events signifying the completion of a major deliverable or a set of related deliverables or a phase of work—can help organizations demonstrate the connection between their goals and day-to-day activities and that they are tracking progress to accomplish their goals. Organizations, by describing the strategies to be used to achieve results, including clearly defined milestones, can provide information that would help key stakeholders better understand the relationship between resources and results.\nGAO-13-174; GAO-13-228; and GAO, Managing for Results: Critical Issues for Improving Federal Agencies’ Strategic Plans, GAO/GGD-97-180 (Washington, D.C.: Sept. 16, 1997). actions, however, lacked clear time frames for completion. Figure 4 below illustrates the “next steps” identified for the Strategic Sourcing CAP goal in the update for the third quarter of fiscal year 2013.\nCompletion status: The Real Property CAP goal update for the second quarter of fiscal year 2013 identified two planned actions as “next steps.” “After agencies submit their Revised Cost Savings and Innovation Plans to OMB, OMB will evaluate agency plans to maintain their square footage baselines, while balancing mission requirements,” and “Updates on agency square footage baselines and projects are forthcoming and will be posted on Performance.gov.” These two actions were again identified as “next steps” in the update for the third quarter of fiscal year 2013, but no update was provided on the status of the actions.\nBy establishing planned activities that, in many of the CAP goal updates, did not have information about their alignment with the strategies they supported, their time frames for completion, or their completion status, CAP goal leaders did not fully demonstrate that they had effectively planned to support goal achievement or were tracking progress toward the goal or identified milestones.\nOMB did not issue formal guidance to CAP goal leaders on the types of information that were to be included in the CAP goal updates, including information about contributors and milestones. Standards for internal control in the federal government emphasize the importance of documenting policies and procedures to provide a reasonable assurance that activities comply with applicable laws and regulations, and that managers review performance and compare actual performance to planned or expected results and analyze significant differences.staff told us they provided an implementation plan template to goal leaders, which outlined the data elements to be reported in the quarterly status updates. The template was also used to collect information for internal and public reporting. Some CAP goal managers told us that OMB or PIC staff, in their role supporting the collection, analysis, and presentation of data on CAP goal performance, occasionally provided feedback on the information that the individuals submitted in draft updates that OMB reviewed before they were published on Performance.gov. For example, one CAP goal manager told us that during a review of an update submission PIC staff told him that he should develop additional milestones to be completed during a specific future fiscal year quarter.\nThis is in contrast to the detailed guidance that OMB issued on the types of information that agencies must provide for the updates for agency priority goals (APG), which are also published quarterly on Performance.gov. The APG guidance includes explicit instructions for agencies to identify, as appropriate, the organizations, regulations, tax expenditures, policies, and other activities within and external to the agency that contribute to each APG, as well as key milestones with planned completion dates for the remainder of the goal period. Because guidance for the types of information that should have been included in the CAP goal updates was never formally established, CAP goal leaders were at a heightened risk of failing to take into account important contributors to the goal and providing incomplete information about milestones that could help demonstrate progress being made.", "", "GPRAMA Requirement for OMB Progress Reviews GPRAMA requires that, not less than quarterly, the Director of OMB, with the support of the PIC, shall review progress on the CAP goals, including progress during the most recent quarter, overall trends, and the likelihood of meeting the planned level of performance. GPRAMA also requires that, as part of these reviews, OMB categorize goals by their risk of not achieving the planned level of performance and, for those goals most at risk of not meeting the planned level of performance, identify strategies for performance improvement.\nAs required by GPRAMA, OMB reviewed progress on CAP goals each quarter, beginning with the quarter ending June 30, 2012. This review process consisted of the collection of updated information for each CAP goal by OMB or PIC staff, and the development of a memorandum for the Director of OMB with information on the status of the CAP goals. To develop these memorandums, OMB staff told us that approximately 6 weeks after the end of each quarter, OMB and PIC staff worked with CAP goal leaders to collect updated data and information on goal metrics and milestones, and to update the narratives supporting the data. CAP goal leaders, or staff assisting leaders with the management of efforts related to the goal, would provide this information to OMB using a template for the status updates ultimately published on Performance.gov. In addition to the memorandums developed for the Director of OMB, OMB published more detailed information through the quarterly status updates available on Performance.gov.\nOMB and PIC staff told us that to support OMB’s quarterly review efforts, PIC staff were to conduct assessments rating the overall health of implementation efforts and goal leader engagement. They were also to assess the execution status of each goal, including the quality and trend of performance indicators. One purpose of these assessments was to identify areas where risks, such as goal leader turnover, could affect the ability to achieve the planned level of performance. Consistent with this intent, several of the quarterly OMB review memorandums we examined highlighted turnover in goal leader or deputy goal leader positions as risks, and suggested the need to find or approve replacements. Although PIC staff have been tasked with assessing these elements of CAP goal implementation, and said that there was a shared understanding between involved staff as to how these assessments would be carried out, the PIC has not documented its procedures or criteria for conducting these assessments. Standards for internal control in the federal government emphasize the importance of documenting procedures, including those for assessing performance. Without clearly established criteria and procedures, PIC staff lack a means to: consistently assess implementation efforts and execution across all goals; bring any deficiencies, risks, and recommended improvements identified to the attention of leadership; and ensure consistent application of criteria over time.\nWhile these quarterly review memorandums identified one goal as being at risk of not achieving the planned level of performance, and identified other instances where progress on goals had been slower than planned, the memorandums did not consistently outline the strategies that were being used to improve performance or address identified risks. For example, the Cybersecurity CAP goal was the one goal specifically described as being at risk of not achieving the planned level of performance, both in these memorandums and in the status updates on Performance.gov. Specifically, the memorandum for the third quarter of fiscal year 2012 identified the risk of not achieving the planned level of performance, and outlined seven specific risks facing the goal and the steps being taken to mitigate them. Similarly, the memorandum for the second quarter of fiscal year 2013 also acknowledged that some agencies were at risk of not meeting their Cybersecurity CAP goal targets. However, in contrast to the earlier memorandums, no information was included about the specific steps that were being taken to mitigate these risks, although information on planned and ongoing actions to improve government-wide implementation was included in the milestones section of the status update for that quarter on Performance.gov.\nThe memorandum for the fourth quarter of fiscal year 2012 also acknowledged that the pace of progress on the STEM Education and Closing Skills Gaps goals had been slower than expected. While the memorandum stated that additional OMB attention was needed to support implementation and assure sufficient progress, no information on the specific strategies being employed to improve performance was mentioned. According to OMB staff, however, these memorandums were used to inform subsequent conversations with OMB leadership, which would build on the information presented in the memorandums.\nFurthermore, because the data necessary to track progress for some goals were unavailable, the Director of OMB would not have been able to consistently review progress for all CAP goals, or make a determination about whether some CAP goals were at risk of meeting their planned levels of performance. This fact was acknowledged in the quarterly review memorandums for quarters one and two of fiscal year 2013, which acknowledged that progress on three goals (Entrepreneurship and Small Business, Job Training, and STEM Education) was difficult to track, and that additional work was needed on data collection. However, no information on the specific steps that were being taken to address these shortcomings was included. A lack of specific information about the steps being taken to mitigate identified risk areas and improve performance could hinder the ability of OMB leadership—and others—to adequately track the status of efforts to address identified deficiencies or risks and to hold officials accountable for taking necessary actions.", "GPRAMA Requirement for Goal Leader and Agency Involvement in Progress Reviews As part of the quarterly review process, GPRAMA requires that the Director of OMB review each priority goal with the appropriate lead government official, and include in these reviews officials from the agencies, organizations, and program activities that contribute to the achievement of the goal.\nAccording to OMB staff, to encourage goal leaders and contributing agencies to take ownership of efforts to achieve the goals, OMB gave goal leaders flexibility to use different approaches to engage agency officials and review progress at the CAP-goal level. While guidance released by OMB in August 2012 encouraged goal leaders to leverage existing interagency working groups, committees, and councils in the management of the goals as much as practicable, it did not include information on the purpose of reviews, expectations for how reviews should be conducted to maximize their effectiveness as a tool for performance management and accountability, or the roles that CAP goal leaders and agency officials should play in the review process. Again, standards for internal control in the federal government emphasize the importance of documenting procedures for reviewing performance against established goals and objectives.\nThis is in contrast to the detailed guidance that OMB released for agency priority goal and agency strategic objective reviews, which outlined the specific purposes of the reviews, how frequently they should be conducted, the roles and responsibilities of agency leaders involved in the review process, and how the reviews should be conducted. We also found that this guidance for reviews at the agency level was broadly consistent with the leading practices for performance reviews that we previously identified. While no official guidance was published to guide how reviews involving goal leaders and staff from contributing agencies could be conducted for the CAP goals, OMB staff said the principles of the guidance released for agency reviews, which reflected many of the leading practices, was referenced in conversations with CAP goal leaders and teams.\nOMB has emphasized that flexibility is needed to ensure that goal leaders can use review processes that are appropriate given the scope of interagency efforts, the number of people involved, and the maturity of existing reporting and review processes. The guidance for agency reviews gave agencies flexibility to design their performance review processes in a way that would fit the agency’s mission, leadership preferences, organizational structure, culture, and existing decision- making processes. In our previous work, we detailed how several federal agencies had implemented quarterly performance reviews in a manner consistent with leading practices, but which were also tailored to the structures, processes, and needs of each agency. In this way, flexible implementation of review processes is possible within a framework that encourages the application of leading practices.\nA lack of clear expectations for how progress should be reviewed at the CAP-goal level resulted in a number of different approaches being used by goal leaders to engage officials from contributing agencies to review progress on identified goals and milestones, ranging from regular in- person review meetings led by the CAP goal leader to the review of written updates provided to the goal leader by officials from contributing agencies. See appendix IV for more detailed information on the various processes used by goal leaders to collect data on, and review progress towards, identified goals.", "Instituting review processes consistent with the leading practices we previously identified can help ensure that reviews include meaningful performance discussions, provide opportunities for oversight and accountability, and drive performance improvement. Taken together, these leading practices emphasize the importance of leadership involvement in the review process, data collection and review meeting preparation, participation by key officials, and rigorous follow-up.\nThrough our evaluation of how goal leaders and contributing agency officials reviewed progress towards the interim goals, we identified two CAP goals—Cybersecurity and Closing Skills Gaps—and one sub-goal— the Entrepreneurship and Small Business sub-goal on improving access to government services and information (BusinessUSA sub-goal)—where goal managers instituted in-person review processes with officials from contributing agencies that were broadly consistent with the full range of leading practices for reviews, which we have summarized in four categories below. The processes used by other CAP goal leaders to engage agency officials in the review of progress did not reflect the full range of leading practices.\nLeadership Involvement. Leading practices indicate that leaders should use frequent and regular progress reviews as a leadership strategy to drive performance improvement and as an opportunity to hold people accountable for diagnosing performance problems and identifying strategies for improvement. The direct and visible engagement of leadership is vital to the success of such reviews. Leadership involvement helps ensure that participants take the review process seriously and that decisions and commitments can be made. The goal leaders managing the Cybersecurity and Closing Skills Gaps goals, as well as the BusinessUSA sub-goal, were directly involved in leading in-person reviews for these goals, and in using them as opportunities to review progress, identify and address performance problems, and hold agency officials accountable for progress on identified goals and milestones, as detailed in table 1.\nData Collection and Review Meeting Preparation. Leading practices also indicate that those managing review processes should have the capacity to collect, analyze, and communicate accurate, useful, and timely performance data, and should rigorously prepare for reviews to enable meaningful performance discussions. The collection of current, reliable data on the status of activities and progress towards goals and milestones is critical so that those involved can determine whether performance is improving, identify performance problems, ensure accountability for fulfilling commitments, and learn from efforts to improve performance. The ability to assess data to identify key trends and areas of strong or weak performance, and to communicate this to managers and staff effectively through materials prepared for reviews, is also critical. As detailed in table 2, those supporting the Cybersecurity and Skills Gap goals, and the BusinessUSA sub-goal, instituted processes to regularly collect and analyze data on progress towards identified goals and milestones, and to ensure these data would be communicated through materials prepared for review meetings.\nParticipation by Key Officials. Leading practices indicate that key players involved in efforts to achieve a goal should attend reviews to facilitate problem solving. This is critical as their participation enables those involved to break down information silos, and to use the forum provided by the review to communicate with each other, identify improvement strategies, and agree on specific next steps. Reviews for both the Cybersecurity and Closing Skills Gaps CAP goals, and the BusinessUSA sub-goal, were structured so that relevant agency officials playing a key role in efforts to carry out the goal were included, as detailed in table 3.\nReview Follow-Up. Leading practices indicate that participants should engage in sustained follow-up on issues identified during reviews, which is critical to ensure the success of the reviews as a performance improvement tool. Important follow-up activities include identifying and documenting specific follow-up actions stemming from reviews, those responsible for each action item, as well as who will be responsible for monitoring and follow-up. Follow-up actions should also be included as agenda items for subsequent reviews to hold responsible officials accountable for addressing issues raised and communicating what was done. Goal managers for the Cybersecurity and Closing Skills Gap CAP goals, as well as the BusinessUSA sub-goal, took steps to follow up on action items identified in these meetings, and to ensure that steps were taken towards their completion, as detailed in table 4.\nReview Effects. Goal leaders and managers we interviewed said that these review processes were valuable in driving improved performance, establishing a greater sense of accountability for progress on the part of contributors, and in providing a forum for interagency communication and collaboration. For example, according to DHS staff involved in the management of the Cybersecurity CAP goal, implementation of Personal Identity Verification (PIV) requirements across the federal government had been stagnant for several years prior to the introduction of cybersecurity as a CAP goal. The review process was used to hold agencies accountable for improved PIV implementation, which helped bring an increased focus on the issue and drive recent progress. Since the reviews were instituted in 2012, DHS has reported improved PIV adoption in civilian agencies, which has increased from 1.24 percent in fiscal year 2010, to 7.45 percent in fiscal year 2012, to 19.67 percent in the fourth quarter of fiscal year 2013. According to data from DHS, while still falling short of the target, this has contributed to the overall increase in PIV adoption across the federal government—including both civilian agencies and the Department of Defense—from 57.26 percent in fiscal DHS year 2012 to 66.61 percent in fourth quarter of fiscal year 2013.staff also added that agencies generally had not previously collaborated on cybersecurity issues or worked to identify best practices. According to DHS staff, the reviews have created an important point of collaboration between DHS, OMB, National Security Staff, and agencies, and provided an opportunity to inform agencies of best practices and connect them with other agencies that are meeting their targets to learn from them.\nSimilarly, OPM officials and sub-goal leaders involved in the management of the Closing Skills Gap CAP goal said that the quarterly review meetings were a critical means to ensure sub-goal leaders and staff were demonstrating progress. Having sub-goal leaders report out on progress, and hear about the progress made in other sub-goal areas, provided additional pressure for continuous improvement and the need to remain focused on driving progress towards their goals. Having the goal leader lead the review was also a way to demonstrate leadership commitment to the achievement of each sub-goal. According to OPM officials and sub- goal leaders, the review meetings also served as an important forum for discussing innovative approaches being taken to address skills gaps in different areas, opportunities for collaboration to address challenges shared by different sub-goals, and how leaders could leverage the efforts of other sub-goals to drive progress on their own.\nThe BusinessUSA sub-goal leader said that having it as the basis for a CAP sub-goal elevated the cross cutting nature of the initiative. In addition to reviewing performance information and the status of deliverables, discussions at inter-agency Steering Committee meetings were used to discuss how contributors could work together to meet the initiative’s performance goals. This communication and coordination led to connections between agencies and to discussions about how programs could be working in a more integrated way. For example, these discussions were used to identify ways that programs could more effectively integrate program information on the BusinessUSA website to increase customer satisfaction.", "We found that the processes used by other CAP goal leaders to engage agency officials in the review of progress, which are summarized in appendix IV, did not reflect the full range of leading practices. For example, the process for reviewing progress on the Job Training CAP goal involved staff from the PIC collecting updates on recent milestones from agencies, which were then compiled in the quarterly status update and reviewed by the goal leader. This approach was used by the goal leaders for the Broadband and STEM Education CAP goals to review progress as well. While goal leaders and managers for these goals indicated that they used the collection and review of information as an opportunity to communicate with officials from contributing agencies, this approach contrasts with OMB guidance for reviews of agency priority goals, which states explicitly that performance reviews should not be conducted solely through the sharing of written communications. As OMB noted in its guidance, in-person engagement of leaders in performance reviews greatly accelerates learning and performance improvement, and personal engagement can demonstrate commitment to improvement, ensure coordination across agency silos, and enable rapid decision making.\nWhile not employing the full range, goal leaders for a number of goals did use processes that reflected one or more leading practices. For example, many CAP goal leaders led or participated in interagency meetings with representatives of contributing agencies. While these were used to facilitate interagency communication and collaboration on the development of plans and policies, it was unclear whether many of these meetings were consistently used to review progress on identified CAP goals and milestones. The goal leader for the Strategic Sourcing CAP goal used processes that reflected leadership involvement, participation by key officials, and the collection and analysis of relevant data. Specifically, according to goal managers, the goal leader led regular meetings of the Strategic Sourcing Leadership Council (SSLC), which were attended by senior procurement officials from eight agencies that combine to make up almost all of the federal government’s total procurement spending.\nTo prepare for each SSLC meeting, staff from OMB’s Office of Federal Procurement Policy (OFPP) held a meeting for supporting staff from each agency, who would then prepare the SSLC member from their agency for the issues to be discussed in the SSLC meeting. OFPP also established a regular data collection process where each agency would report on its adoption and spending rates for two strategic sourcing options, which would then be used for the purposes of reporting on the CAP goal. However, it was unclear how regularly, if at all, SSLC meetings were used to engage agency officials in the review of data on agency adoption of, and spending on, strategic sourcing options, or how regularly meetings were used to review progress that was being made towards the CAP goal. It was also unclear what mechanisms, if any, were used to ensure rigorous follow-up on issues raised in these meetings, a key leading practice, as there were no official meeting minutes maintained. The lack of an official record could hinder follow-up and accountability for any identified actions that need to be taken.", "Representatives of some goals stated that it was difficult to isolate the impact of the CAP goal designation, and its associated reporting and review requirements, on performance and collaboration. According to some goal managers, because their interim goals were based on initiatives that had been previously established in executive orders or Presidential memorandums, much of the interagency activity supporting their efforts would have happened without the CAP goal designation and its reporting and review requirements. For example, a manager for the Data Center Consolidation CAP goal told us that the previously established Federal Data Center Consolidation Initiative was used to drive progress and that the CAP goal designation and quarterly reporting and review requirements had little impact. Similarly, Job Training CAP goal managers said that interagency collaboration on job training issues had been established prior to the creation of the CAP goal, that the goal’s reporting and review requirements were incidental to the contributors’ ongoing work, and that it did not add an additional level of accountability for the completion of job training initiatives. However, this is a goal where no data were reported to demonstrate its impact on federal job training programs, and which was identified in multiple OMB reviews as having slower than anticipated progress due, in part, to extended periods of time in which there was no deputy CAP goal leader to provide support necessary to improve coordination and collaboration.\nWhile many CAP goal leaders and staff we interviewed noted the progress they had made with their existing interagency meetings and approaches, a lack of clear expectations or guidance for how review processes at the CAP goal level should be carried out can lead to a situation where reviews are implemented in a manner that is not informed by, or fully consistent with, leading practices. This could result in missed opportunities to realize the positive effects on performance and accountability that can stem from the implementation of review processes that regularly and consistently involve leaders and agency officials in the analysis of performance data to identify and address performance deficiencies, and use rigorous follow-up to ensure accountability for commitments.", "Many of the meaningful results that the federal government seeks to achieve require the coordinated efforts of more than one federal agency. GPRAMA’s requirement that OMB establish CAP goals offers a unique opportunity to coordinate cross-agency efforts to drive progress in priority areas. That opportunity will not be realized, however, if the CAP goal reporting and review requirements and leading review practices are not followed. The reporting and review requirements for the CAP goals, and leading practices for the reviews, are designed to ensure that relevant performance information is used to improve performance and results, and that OMB and goal leaders actively lead efforts to engage all relevant participants in collaborative performance improvement initiatives and hold them accountable for progress on identified goals and milestones.\nOMB reported performance information in the quarterly CAP goal status updates it published on Performance.gov. While updates for most goals reported data on performance towards the identified planned level of performance, the information in the updates did not always present a complete picture of progress towards identified goals and milestones. For example, while updates for 8 of the 14 goals included data that indicated performance towards the identified overall planned level of performance, only 3 also contained annual or quarterly targets that allowed for an assessment of interim progress. Updates for the other 6 of the 14 goals did not report on performance towards the goal’s primary performance target because the goal was established without a quantitative target or because goal managers were unable to collect the data needed to track performance. In other cases, planned activities that were identified as contributing to the goal were sometimes missing important elements, including alignment with the strategies for goal achievement they supported, a time frame for completion, or information on their implementation status. The incomplete picture of progress that many of the updates gave limited the ability of goal leaders and others to ensure accountability for the achievement of targets and milestones.\nHolding regular progress reviews that are consistent with GPRAMA requirements and the full range of leading practices can produce positive effects on performance and collaboration. Engaging contributors in regular reviews of data on performance can help ensure interagency efforts are informed by information on progress towards identified goals and milestones, which can be used to identify and address areas where goal or milestone achievement is at risk. Reviews can also be used to reinforce agency and collective accountability for the achievement of individual and shared outcomes, helping to ensure that efforts to improve performance or address identified risks are implemented. Lastly, reviews can be used to foster greater collaboration, ensuring opportunities for communication and coordination between officials involved in efforts to achieve shared outcomes. While OMB and CAP goal leaders instituted processes for reviewing progress on the interim CAP goals, if GPRAMA requirements and leading practices for reviews are not consistently followed, it may result in missed opportunities to improve performance, hold officials accountable for achieving identified goals and milestones, and ensure agency officials are coordinating their activities in a way that is directed towards the achievement of shared goals and milestones.", "We recommend that the Director of OMB take the following three actions: Include the following in the quarterly reviews of CAP goal progress, as required by GPRAMA: a consistent set of information on progress made during the most recent quarter, overall trends, and the likelihood of meeting the planned level of performance; goals at risk of not achieving the planned level of performance; and the strategies being employed to improve performance.\nWork with the PIC to establish and document procedures and criteria to assess CAP goal implementation efforts and the status of goal execution, to ensure that the PIC can conduct these assessments consistently across all goals and over time.\nDevelop guidance similar to what exists for agency priority goal and strategic objective reviews, outlining the purposes of CAP goal progress reviews, expectations for how the reviews should be carried out, and the roles and responsibilities of CAP goal leaders, agency officials, and OMB and PIC staff in the review process.\nTo ensure that OMB and CAP goal leaders include all key contributors and can track and report fully on progress being made towards CAP goals overall and each quarter, we recommend that the Director of OMB direct CAP goal leaders to take the following four actions: Identify all key contributors to the achievement of their goals; Identify annual planned levels of performance and quarterly targets for each CAP goal;\nDevelop plans to identify, collect, and report data necessary to demonstrate progress being made towards each CAP goal or develop an alternative approach for tracking and reporting on progress quarterly; and\nReport the time frames for the completion of milestones; the status of milestones; and how milestones are aligned with strategies or initiatives that support the achievement of the goal.", "We provided a draft of this report for review and comment to the Director of OMB, the Secretaries of Commerce and Homeland Security, the Director of the Office of Personnel Management, the Administrator of the Small Business Administration, as well as the officials we interviewed to collect information on the interim CAP goals from the Council on Environmental Quality, Department of Education, Department of Labor, Department of Veterans Affairs, National Science Foundation, and the Office of Science and Technology Policy. OMB and PIC staff provided oral comments on the draft, and we made technical changes as appropriate. OMB staff generally agreed to consider our recommendations. For example, while they said that OMB and PIC staff will continue to work directly with CAP goal leaders to convey suggested practices for reviewing performance, they will consider referencing principles and practices for data-driven performance reviews in future Circular A-11 guidance related to the management of CAP goals. Furthermore, while they noted that quantitative performance data for some key measures may not available on a quarterly basis, they said that they will continue to work to develop more robust quarterly targets. Officials or staff from the Departments of Commerce and Veterans Affairs, and the Office of Science and Technology Policy provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the Director of OMB as well as appropriate congressional committees and other interested parties. The report is also available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions concerning this report, please contact me at (202) 512-6806 or mihmj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI.", "This report is part of our response to a mandate that we evaluate the implementation of the federal government priority goals under the GPRA Modernization Act of 2010 (GPRAMA). Due to the timing of our work, we focused on the implementation of the reporting and review requirements for the 14 interim cross-agency priority (CAP) goals established in February 2012.about progress made towards the interim CAP goals; and (2) how, if at all, quarterly progress reflected GPRAMA requirements and leading practices for data-driven reviews, as well as how they contributed to improved cross-agency performance and collaboration.\nSpecifically, this report assesses (1) what is known To address these objectives, we interviewed representatives of 13 of the 14 interim goals. For 8 of the 13 goals we spoke directly with the goal leader or deputy goal leader, along with, in some cases, staff from Office of Management and Budget (OMB) and agencies involved in supporting efforts related to the goals. For the other five goals (Closing Skills Gaps, Cybersecurity, Data Center Consolidation, Exports, and Job Training) we met with agency officials or OMB staff playing a key role in the management of interagency efforts related to the CAP goal. During these interviews, we asked officials questions concerning how the goal leader and officials from contributing agencies reviewed progress on the goal; the interagency groups used to engage agency officials and manage efforts related to the goal; the role that staff from OMB and the Performance Improvement Council (PIC) played in the review process; and any impact the CAP goal designation and review processes had on performance, collaboration, and accountability. We also participated in interviews with the goal leaders of 11 agency priority goals that were aligned with, or identified as a contributor to, a CAP goal.\nTo further address the first objective, and assess what is known about progress made toward the interim CAP goals, we analyzed information on identified performance metrics and milestones included in the quarterly status updates for each CAP goal published on Performance.gov. We also analyzed relevant information collected through our interviews with CAP goal leaders, deputies, and supporting staff. We compared the data and information made available through the quarterly status updates with requirements in GPRAMA that Performance.gov include information for each goal on results achieved during the most recent quarter and overall trend data. To assess the reliability of performance data and information available through Performance.gov we collected information from OMB and PIC staff, and CAP goal representatives, about data quality control procedures. We determined that the data and information were sufficiently reliable for our analysis of what was reported on Performance.gov about progress towards identified goals and milestones.\nTo address the second objective, we reviewed quarterly review memorandums developed for OMB leadership for five quarters, from the third quarter of fiscal year 2012 to the third quarter of fiscal year 2013.We compared the contents of these review memorandums with requirements for the OMB quarterly reviews established in GPRAMA. We also interviewed staff from OMB and the PIC to discuss the various approaches being used to review progress at the CAP-goal level, the data collection and review process, and the role of the PIC in supporting the quarterly review process.\nTo further address the second objective we reviewed (where available) documents created for interagency meetings, such as meeting agendas, presentation materials, meeting notes, and attendee lists. We also observed one quarterly review meeting held for the Closing Skills Gap goals, and conducted interviews with sub-goal leaders from the Closing Skills Gaps and Entrepreneurship and Small Business CAP goals. These interviews were used to learn more about the involvement of officials from contributing agencies in the quarterly review process for each CAP goal, the processes that had been established to review progress at the sub- goal level, and to gain a more complete picture of participating agency officials’ perceptions of the impact of the CAP goals and review processes.\nWe selected these sub-goals through a two-part process. Of the eight CAP goals for which we had completed interviews through the end of 2013, the team selected one goal for which the goal leader held quarterly meetings dedicated to reviewing progress toward the CAP goal with the goal’s contributors (Closing Skills Gaps). The team also selected a second goal for which the goal leader used a review process that did not rely on quarterly meetings between the goal leader and contributing agencies (Entrepreneurship and Small Business). To ensure that the team would have at least one goal representing each type of goal, the team also ensured that one goal would be an outcome-oriented policy goal and one goal would be a management goal. For both the Closing Skills Gaps and Entrepreneurship and Small Business CAP goals the team then selected four sub-goals for interviews. For the Closing Skills Gaps CAP goal the team interviewed the sub-goal leaders for the Economist; Information Technology/Cybersecurity; Science, Technology, Engineering, and Mathematics (STEM) Education; and Human Resources sub-goals. For the Entrepreneurship and Small Business CAP goal the team held interviews with the sub-goal leaders for the sub-goals to “Accelerate commercialization of Federal research grants,” “Advance federal small business procurement goals,” “Improve access to government services and information,” and “Streamline immigration pathways for immigrant entrepreneurs.” These were selected to ensure that the team would capture sub-goals in which a range of approaches for measuring and reviewing progress were being used. Specifically, sub- goals were selected to ensure the team would have some that did, and did not, hold regular meetings, and some that did, and did not, track quantitative measures of performance or milestones with time frames. Our selection of these sub-goals was nonstatistical and therefore our findings from these interviews are not generalizable to the other CAP goals.\nWe compared what we learned about review processes at the CAP goal and sub-goal levels, through interviews and the collection of documentation, used by leaders from each goal against leading practices for performance reviews previously identified by GAO.\nBecause the scope of our review was to examine the implementation of quarterly progress reviews, we did not evaluate whether these goals were appropriate indicators of performance, sufficiently ambitious, or met other dimensions of quality.\nWe conducted our work from May 2013 to June 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "Goal Statement As part of expanding all broadband capabilities, ensure 4G wireless broadband coverage for 98 percent of Americans by 2016.", "Close critical skills gaps in the federal workforce to improve mission performance. By September 30, 2013, close the skills gaps by 50 percent for three to five critical federal government occupations or competencies, and close additional agency-specific high risk occupation and competency gaps.", "Executive branch departments and agencies will achieve 95 percent implementation of the administration’s priority cybersecurity capabilities by the end of FY 2014. These capabilities include strong authentication, trusted Internet connections, and continuous monitoring.", "Improve information technology service delivery, reduce waste, and save $3 billion in taxpayer dollars by closing at least 2,500 data centers by fiscal year 2015.", "Increase energy productivity (amount of real gross domestic product in dollars/energy demand) 50 percent by 2030.", "Increase federal services to entrepreneurs and small businesses with an emphasis on 1) startups and growing firms and 2) underserved markets.", "Double U.S. exports by the end of 2014.\nThe federal government will achieve a payment accuracy rate of 97 percent by the end of 2016.", "Ensure our country has one of the most skilled workforces in the world by preparing 2 million workers with skills training by 2015 and improving the coordination and delivery of job training services.", "The federal government will maintain the fiscal year 2012 square footage baseline of its office and warehouse inventory.", "In support of the president’s goal that the U.S. have the highest proportion of college graduates in the world by 2020, the federal government will work with education partners to improve the quality of STEM education at all levels to help increase the number of well- prepared graduates with STEM degrees by one-third over the next 10 years, resulting in an additional 1 million graduates with degrees in STEM subjects.", "Reduce the costs of acquiring common products and services by agencies’ strategic sourcing of at least two new commodities or services in both 2013 and 2014, that yield at least a 10 percent savings. In addition, agencies must increase their use of Federal Strategic Sourcing Initiative vehicles by at least 10 percent in both fiscal years 2013 and 2014.", "By 2020, the federal government will reduce its direct greenhouse gas emissions by 28 percent and will reduce its indirect greenhouse gas emissions by 13 percent by 2020 (from 2008 baseline).", "By September 30, 2013, increase the percent of eligible service members who will be served by career readiness and preparedness programs from 50 percent to 90 percent in order to improve their competitiveness in the job market.", "Goal leaders for 13 of 14 cross-agency priority (CAP) goals leveraged interagency groups for the purposes of coordinating efforts designed to contribute to progress on the cross-agency priority goal. This appendix includes information on the membership of these interagency groups, the frequency with which they met, and the purposes of those meetings.\nMembership Fourteen agencies with federal property management or transportation funding responsibilities, and broadband or other related expertise.\nTo discuss best practices on broadband-related land management issues, and actions to implement an executive order on accelerating broadband infrastructure deployment.\nSenior officials from agencies considered major spectrum stakeholders and users of spectrum, including the Departments of Defense, Justice, Homeland Security (DHS), Commerce, and the National Aeronautics and Space Administration (NASA).\nTo provide advice on spectrum policy and strategic plans, discuss commercial transfer of federal agency spectrum, and resolve issues affecting federal/non-federal users.", "To review progress on performance metrics and actions taken to close skills gaps in each of the six sub- goal areas.", "Officials from National Institute of Standards and Technology, General Services Administration (GSA), DHS, National Security Staff, Office of Management and Budget (OMB) and Performance Improvement Council.\nTwice each quarter Beginning in 2013, a meeting was held each quarter prior to the collection of data on agency progress on cybersecurity metrics. Another was held after data had been collected and analyzed to review and discuss agency progress.", "Data center consolidation program managers from 24 federal agencies.\nTo identify and disseminate key information about solutions and processes to help agencies make progress towards data center consolidation goals.", "Interagency group No interagency groups were used to manage efforts related to this goal.\nInteragency groups were used to manage efforts at the sub-goal level.\nSenior-level representatives from 24 participating agencies.\nTo oversee strategy, resources and timetables for the development of the BusinessUSA website, resolve interagency issues and ensure department/agency viewpoints are represented.\nMid-to-senior level program, technology and customer service managers from 24 participating agencies.\nTo assist the BusinessUSA program management office coordinate the design, development, and operation of the BusinessUSA website, and to track and monitor performance metrics on customer service and outcomes.", "SBIR/STTR program managers from11 agencies, and coordinating officials from Small Business Administration (SBA) and Office of Science and Technology Policy (OSTP)\nTo discuss the development of SBIR/STTR program policy directives, the implementation of requirements, outreach and access to the programs, and program best practices.", "To provide updates on relevant agency activities and identify opportunities for interagency collaboration.", "To share best practices for expanding contracting to small and disadvantaged businesses, and reviewing progress on agency simplified-acquisition threshold goals.\nTo provide officials from the White House, SBA, Commerce, and OMB with an opportunity to meet with senior agency leaders and discuss the steps agencies are taking to increase small business contracting.", "Membership Principals (cabinet secretaries and deputies) and staff from 20 agencies involved in export policy, service, finance, and oversight.\nTo review progress on deliverables supporting the National Export Strategy, communications, and the status of individual export promotion initiatives.", "Bi-weekly to monthly To review the status of agency implementation of Do Not Pay requirements and milestones, and guidance for implementation.\nOfficials from agencies with “high-priority” programs, as designated by OMB.\nTo discuss the government- wide improper payment initiative and overall strategy.", "To discuss expanding access to job training performance data, and opportunities to promote its use at the local, state, and federal levels.", "Among other policy discussions, to discuss the development of agency “Freeze the Footprint” plans.", "To discuss policy to guide the federal government on sustainability issues, and to discuss sustainability goals.", "Every 4-6 weeks, during the development of the 5-year strategic plan.\nTo develop a 5-year strategic plan for federal support for STEM education.", "Representatives from Departments of Defense, Energy, and Veterans Affairs (VA), DHS, HHS, GSA, NASA, and SBA.\nTo discuss the development and adoption of strategic sourcing options.", "To review ongoing policy initiatives and opportunities for collaboration between agencies.\nTo develop and implement a redesigned veterans transition program.", "", "", "meetings with officials from each agency. According to OMB staff, during these reviews participants reviewed metrics from across the agency’s information technology portfolio, which included, in some cases, those related to data center consolidation. Each quarter staff supporting the goal leader would collect updated information on contributing agency priority goals for the purposes of updating the quarterly status update. Each quarter the deputy goal leader would collect updated information on goals and milestones from the leaders of each of 10 sub-goals for the purposes of developing the quarterly status update. The deputy goal leader would follow-up with sub-goal leaders or agency officials, as necessary, to address issues or questions about the status of efforts. The goal leader would then review and approve the quarterly status update. Some sub-goal leaders would hold in-person meetings with officials from contributing agencies to, among other things, review progress on identified goals and milestones. See appendix III for information on interagency groups that were used to manage efforts for four of the sub-goals. Each quarter the goal leader, with the assistance of staff from Commerce and the PIC, would collect updated information on relevant agency metrics and activities for the purposes of updating the quarterly status update. Periodic meetings of the Export Promotion Cabinet/Trade Promotion Coordinating Committee, and its Small Business and other working groups, were also used to discuss the status of export promotion efforts and progress on specific deliverables. Each year OMB would collect and report data on agency improper payment rates. Staff from the OMB Office of Federal Financial Management led monthly meetings with agency representatives to discuss the implementation of the Do Not Pay initiative, which was designed to contribute to the reduction of improper payments. The Department of Treasury, as the agency leading implementation of the Do Not Pay initiative, would track agency progress on implementation milestones.", "Each quarter staff from the PIC would collect updated information on progress towards agency milestones, and work with the goal leader on the development of the quarterly status update. After this goal was revised in the second quarter of 2013, a new review process to track agency adherence to the goal was under development by OMB. Twice a year the Council on Environmental Quality (CEQ) would collect and review quantitative and qualitative data on agency progress towards established sustainability goals, including the reduction of agency greenhouse gas emissions. Following the collection of these data, the goal leader hosted meetings of the Steering Committee on Federal Sustainability, which were used to discuss federal sustainability policy and progress on sustainability goals. According to CEQ staff, the goal leader and CEQ staff would meet with representatives from agencies about sustainability issues on an ad hoc basis. In instances where there was a gap between an agency’s actual performance and the target established in that area, the goal leader, or other staff from CEQ, would meet with officials from that agency to discuss ways to address the performance gap. Each quarter the goal leader would collect updated information on agency milestones for inclusion in the quarterly status updates. Progress on some identified strategies to achieve the goal, such as the National Science Foundation’s efforts to improve undergraduate STEM education, were reviewed at the agency level. After progress was reviewed at the agency level the information was passed onto the goal leader and reported publicly in the quarterly status update. Each quarter the General Services Administration would collect data on agency adoption and spending rates for the Federal Strategic Sourcing Initiative (FSSI) solutions for domestic delivery and office supplies. The Strategic Sourcing Leadership Council met bi-monthly to guide the creation and adoption of new FSSI options, and, as part of that effort, might review quarterly data on agency adoption and spending rates. According to the goal leader, each month staff from the Departments of Defense and Veterans Affairs, and the PIC, would provide data for “one-pagers” and other status update documents with key pieces of relevant information, such as the veterans’ unemployment rate and the number of active employers on the Veteran’s Job Bank. These one-pagers would be used to inform regular Interagency Policy Council (IPC) discussions, along with more specific briefing memorandums, which were used to cover the latest issues, keep stakeholders focused on overall outcomes, and to inform discussion around specific outliers. Some of the data in these one-pagers would also be incorporated into the quarterly status updates.\nMore frequently, issue papers and data analysis were provided to Veterans Employment Initiative (VEI) Task Force and IPC members as needed to address topical issues.\nOngoing milestone reviews held by the VEI Task Force and its associated working groups on Education, Employment, Transition, and Entrepreneurship, provided an opportunity to discuss strategies being employed to improve performance.", "This appendix includes the print version of the text and rollover graphics contained in interactive figure 2.\nOverall Planned Level of Performance …achieve 95 percent implementation of the Administration’s priority cybersecurity capabilities by the end of fiscal year 2014.\nData reported for primary performance goal …save $3 billion in taxpayer dollars by closing at least 2500 data centers by fiscal year 2015.", "“Agencies have already closed 640 data centers…”", "Overall Planned Level of Performance Double U.S. exports by the end of 2014.\nFrequency of Data Reporting for Overall Goal Quarterly …agencies’ strategic sourcing of at least two new commodities or services in both 2013 and 2014, that yield at least a 10 percent savings… In addition, agencies must increase their use of Federal Strategic Sourcing Initiative vehicles by at least 10 percent in both fiscal years 2013 and 2014.", "…ensure 4G wireless broadband coverage for 98 percent of Americans by 2016.", "Overall Planned Level of Performance …achieve a payment accuracy rate of 97 percent by the end of 2016.", "“Data Not Reported”", "Increase federal services to entrepreneurs and small businesses with an emphasis on 1) startups and growing firms and 2) underserved markets.", "“Data Not Reported”", "", "“Data Not Reported”", "The Federal Government will maintain the fiscal year 2012 square footage baseline of its office and warehouse inventory.", "“Data Not Reported”", "…increase the number of well-prepared graduates with STEM degrees by one-third over the next 10 years, resulting in an additional 1 million graduates with degrees in STEM subjects.", "Frequency of Data Reporting for Overall Goal “Data Not Reported”", "", "“Data Not Reported”", "", "", "In addition to the contact named above, Elizabeth Curda (Assistant Director) and Adam Miles supervised the development of this report. Virginia Chanley, Jehan Chase, Steven Putansu, Stacy Ann Spence, and Dan Webb made significant contributions to this report. Deirdre Duffy and Robert Robinson also made key contributions." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 3, 3, 3, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2 ], "alignment": [ "h1_full", "h0_full", "", "", "h2_title h1_title", "h1_full", "h2_title", "h2_full", "h2_full", "h2_full", "h0_full h2_full", "h0_full", "", "h0_full h3_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "How has the government codified the needs of its CAP goals for OMB to implement?", "What did OMB do to implement GPRAMA?", "What were the findings of OMB in regards to their goals?", "How did OMB fail to fully implement the GPRAMA?", "How did these shortcomings affect the achievement of the goals?", "What does GPRAMA do to ensure the reviews are as effective as possible?", "How did OMB establish GPRAMA's requirements?", "How has the OMB failed to fully uphold GPRAMA guidelines in these cases?", "What are the ramifications of the failure of the OMB to fully implement GPRAMA's requirements?", "How did the OMB evaluate their CAP goals?", "What were the wide results of these reviews?", "Why were other review processes not as effective as the previous processes?", "What about these effective review processes work to evaluate the CAP goals?", "Why are these components necessary for an effective review and what are the ramifications for not using them?", "How does this report attempt to clarify the shortcomings of GAO?", "What does this report assess about GAO's evaluation of GPRAMA's implementation?", "How did GAO address the objectives of GPRAMA?", "How did GAO use this data in their assessment?" ], "summary": [ "The GPRA Modernization Act of 2010 (GPRAMA) requires the Office of Management and Budget (OMB) to coordinate with agencies to: (1) establish outcome-oriented, federal government priority goals (known as cross-agency priority, or CAP, goals) with annual and quarterly performance targets and milestones; and (2) report quarterly on a single website now known as Performance.gov the results achieved for each CAP goal compared to the targets.", "In February 2012, OMB identified 14 interim CAP goals and subsequently published five quarterly updates on the status of the interim CAP goals on Performance.gov.", "While updates for eight of the goals included data that indicated performance towards an overall planned level of performance, only three also contained annual or quarterly targets that allowed for an assessment of interim progress. Updates for the other six goals did not report on progress towards a planned level of performance because the goals lacked either a quantitative target or the data needed to track progress.", "The updates on Performance.gov also listed planned activities and milestones contributing to each goal, but some did not include relevant information, including time frames for the completion of specific actions and the status of ongoing efforts.", "The incomplete information in the updates provided a limited basis for ensuring accountability for the achievement of targets and milestones.", "GPRAMA also requires that OMB—with the support of the Performance Improvement Council (PIC)—review CAP goal progress quarterly with goal leaders.", "OMB instituted processes for reviewing progress on the goals each quarter, which involved the collection of data from goal leaders and the development of a memorandum for the OMB Director. However, the information included in these memorandums was not fully consistent with GPRAMA requirements.", "For example, GPRAMA requires OMB to identify strategies for improving the performance of goals at risk of not being met, but this was not consistently done.", "Without this information, OMB leadership and others may not be able to adequately track whether corrective actions are being taken, thereby limiting their ability to hold officials accountable for addressing identified risks and improving performance.", "At the CAP-goal level, goal leaders for two CAP goals and one sub-goal instituted in-person progress reviews with officials from contributing agencies that were broadly consistent with the full range of leading practices for reviews, such as leadership involvement in reviews of progress on identified goals and milestones, and rigorous follow-up on issues identified through these reviews.", "In these cases, goal managers reported there were positive effects on performance, accountability, and collaboration.", "In contrast, review processes used by other goal leaders did not consistently reflect the full range of leading practices.", "Effective review processes consistently engage leaders and agency officials in efforts to identify and address performance deficiencies, and to ensure accountability for commitments.", "Thus, not using them may result in missed opportunities to hold meaningful performance discussions, ensure accountability and oversight, and drive performance improvement.", "This report responds to GAO's mandate to evaluate the implementation of GPRAMA.", "It assesses (1) what is known about progress made towards the interim CAP goals; and (2) how, if at all, quarterly progress reviews reflected GPRAMA requirements and leading practices for reviews, as well as how reviews contributed to improved cross-agency performance and collaboration.", "To address these objectives, GAO analyzed CAP goal status updates and other documents from OMB and CAP goal progress-review meetings, and interviewed OMB staff and CAP goal representatives.", "GAO compared this information to GPRAMA requirements and to leading practices for performance reviews previously reported on by GAO." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, -1, 1, 2, -1, 0, -1, -1, 3, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4, 4, 1, 1, 1, 1 ] }
GAO_GAO-18-576T	{ "title": [ "Background", "NASA Acquisition Life Cycle for Space Flight Projects", "NASA Acquisition Management as a High- Risk Area", "Portfolio Cost and Schedule Deteriorated but Extent of Cost Growth Is Unknown", "Portfolio Average Launch Delays Increased, but NASA Lacks a Current Orion Program Cost Estimate to Determine Extent of Cost Growth", "NASA Is Likely to Encounter Additional Cost Growth and Schedule Delays", "GAO Contact and Staff Acknowledgments", "Appendix I: Descriptions of National Aeronautics and Space Administration Major Projects Reviewed in GAO’s 2018 Assessment" ], "paragraphs": [ "", "The life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into phases, phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. Formulation culminates in a review at key decision point C, known as project confirmation, where cost and schedule baselines are established and documented in a decision memorandum. Figure 1 depicts NASA’s life cycle for space flight projects.\nAt the time of our review in May 2018, NASA had a portfolio of 26 major projects (see table 1). See appendix I for a brief description of each project.", "NASA acquisition management is an area that we monitor on our high- risk list. Our high-risk series is a biennial report that keeps focused attention on government operations with greater vulnerabilities to fraud, waste, abuse, and mismanagement or that are in need of transformation to address economy, efficiency, or effectiveness challenges. In 1990, we first designated the area as high risk because there was little emphasis on end results, product performance, and cost control; the acquisition process itself was cumbersome and time-consuming; and NASA found itself procuring expensive hardware that did not work properly. For example, in April 1990, NASA deployed the $1.5 billion Hubble Space Telescope and soon after, the agency discovered that the primary mirror had been manufactured in the wrong shape, severely degrading some of the telescope’s scientific capabilities.\nSubsequently, we and other organizations, including the National Academy of Sciences and NASA’s Office of the Inspector General, found that NASA’s cost estimates were overly optimistic. Our reviews also found that NASA continued to experience significant cost and schedule growth due, in part, to not having a disciplined cost estimating process.\nIn 1992, we reviewed the cost and schedule performance of 29 NASA programs and found that 25 of those programs experienced cost growth that ranged from 14 to 426 percent above their initial estimates. Further, the median estimate change for all programs was an increase of 77 percent. General reasons that NASA provided for the cost growth included insufficient definition studies, program and funding instability, overly optimistic assumptions by program officials, and unrealistic contractor estimates. The more specific reasons for the cost growth we found included program redesigns, technical complexities, budget constraints, and incomplete cost estimates.\nIn 2004, we reviewed the cost and schedule performance of 27 NASA programs and found that 17 of the programs experienced cost growth. Cost growth for 10 of the 17 programs was over 25 percent.\nWe found that considerable change in NASA’s program cost estimates—both increases and decreases—indicated that NASA lacked a clear understanding of how much its programs cost and how long they will take to achieve their objectives. Further, we found that NASA’s basic cost-estimating processes—an important tool for managing programs—lacked the discipline needed to ensure that program estimates are reasonable.\nIn more recent years we have found that NASA’s leadership was focused on improving acquisition outcomes and had taken some steps to improve its management.\nIn 2006, NASA established a management review process to enable NASA’s senior management to more effectively monitor a project’s performance, including cost, schedule, and cross-cutting technical and nontechnical issues.\nIn 2009, NASA began requiring that NASA major programs and projects develop a joint cost and schedule confidence level (JCL) prior to project confirmation in order to ensure that cost and schedule estimates were realistic and projects thoroughly planned for anticipated risks. The JCL is a point-in-time estimate that, among other things, includes all cost and schedule elements, incorporates and quantifies known risks, assesses the impacts of cost and schedule to date, and addresses available annual resources. NASA policy generally requires that projects be baselined and budgeted at the 70 percent confidence level.\nIn 2012, the agency established metrics to more consistently measure a project’s design progress and, in 2014, we found that most major projects in the portfolio were tracking and reporting those metrics. In addition, experts with whom we met confirmed that NASA’s metrics are valid measures to assess design maturity in space systems.\nSince 2015, we have observed a positive trend of higher numbers of projects maturing technologies prior to preliminary design review. Demonstrating that technologies will work as intended in a relevant environment serves as a fundamental element of a sound business case, and projects falling short of this standard often experience subsequent technical problems. Our best practices work has shown that maturing technologies prior to preliminary design review can minimize risks for projects entering development, which lowers the risk of subsequent cost growth and schedule delays.\nWe believe that many of these steps NASA has taken contributed to the largely positive trend of cost and schedule performance for NASA’s portfolio of major projects between 2013 and 2017. In our May 2017 assessment of major projects, we found that out of 16 projects in development, 5 experienced cost growth and 4 experienced schedule delays over their development cost and schedule baselines. Both of these measures were at or near the lowest levels we have reported since we began our annual assessments in 2009.\nHowever, we also found in our February 2017 high risk update that NASA needed to do more with respect to anticipating and mitigating risks— especially with regard to large programs, estimating and forecasting costs for its largest projects, and implementing management tools. We highlighted several actions that would be critical to improving NASA’s acquisition outcomes, including the following:\nEnsuring that NASA conducted adequate and ongoing assessments of risks for larger programs because the impacts of any potential miscalculations will be felt across NASA’s portfolio.\nEnsuring that NASA understood long-term human exploration program costs. While the three major human exploration programs— Orion, SLS, and the Exploration Ground Systems (EGS)—have been baselined, none of the three programs has a baseline that covers activities beyond the second planned flight. Long-term estimates, which could be revised as potential mission paths are narrowed and selected, would provide decision makers with a more informed understanding of costs and schedules associated with potential agency development paths.\nEnsuring that program offices regularly and consistently updated their JCL across the portfolio. As a project reaches the later stages of development, especially integration and testing, its risk posture may change. An updated project JCL would provide both project and agency management with data on relevant risks that can guide project decisions.\nEnsuring that NASA continued its efforts to build capacity in areas such as cost and schedule estimating and measuring contractor performance.\nFurther, in our 2016 and 2017 assessments of major projects, we found that while the cost and schedule performance of NASA’s portfolio was improving, a number of large, complex projects were in or would soon be entering the integration and test phase—the phase in development that often reveals unforeseen challenges that can lead to cost and schedule growth. In May 2017, projects in this phase included all three human spaceflight programs and the James Webb Space Telescope (JWST). Subsequently, we found that these programs experienced delays during this phase of development. For example, in December 2017, NASA announced a 13- to 19-month delay for the first integrated mission of Orion, SLS, and EGS. This mission is referred to as Exploration Mission 1 (EM-1) and will not have crew. In addition, in December 2017, we found that the JWST project continued to make progress towards launch, but the program was encountering technical challenges that required both time and money to fix and may lead to additional delays. Subsequently, the JWST project delayed its launch readiness date by at least 19 months from October 2018 to May 2020.", "The cost and schedule performance of NASA’s portfolio of major projects deteriorated between May 2017 and May 2018, but the extent of cost growth is unknown. NASA lacks a current cost estimate for its Orion crew capsule—one of the largest programs in the portfolio—but expects the program will exceed its cost baseline when NASA updates the program’s life-cycle cost estimate. Because the Orion program accounts for about 22 percent of all development costs, even a small percentage of cost growth for the Orion program could significantly affect portfolio cost performance. The known negative cost and schedule performance is largely driven by the cost and schedule growth of four projects—SLS, EGS, Space Network Ground Segment Sustainment (SGSS) and Mars 2020—that experienced technical problems compounded by programmatic challenges. Together, these projects experienced $638 million in cost growth and 59 months in aggregate schedule delays. Two projects—JWST and ICESat-2—experienced schedule delays due to technical challenges identified during integration and test. Another 3 projects—NASA Indian Space Research Organisation Synthetic Aperture Radar (NISAR), ICON, and GRACE-FO—experienced cost growth or delays largely due to factors outside of the projects’ control, such as launch vehicle delays.", "The average launch delay increased from 7 months in our May 2017 report to 12 months in our May 2018 report—the highest schedule delay we have reported to date. We were not able to determine the extent of portfolio cost growth this year because NASA does not have a current cost estimate for the Orion program—one of the largest programs in its portfolio—and officials expect the cost to increase. As of June 2017, the Orion program’s development cost was about $6.6 billion; based on that estimate, it accounts for 22 percent of the portfolio’s estimated $30.1 billion of development costs. As a result, a small percentage of cost growth for the Orion program could significantly affect cost performance. Even without including Orion cost growth, the overall development cost growth for the portfolio of 17 development projects increased to 18.8 percent, up from 15.6 percent in 2017 (see figure 2).\nSenior-level NASA officials told us they expect that the Human Exploration and Operations Mission Directorate and the Orion program will complete an updated life-cycle cost estimate in June 2018. This would be approximately 10 months after the program raised to senior-level officials’ attention that the program expects cost growth over its cost baseline during an August 2017 briefing concerning potential cost increases related to the launch delay for EM-1. In early June 2018, NASA officials said that they had not yet completed the updated life-cycle cost estimate.\nIn our May 2018 report, we found that 7 of 17 NASA major projects had stayed within cost and schedule estimates since our 2017 annual assessment of major projects, but 9 projects experienced cost growth or schedule delays and cost growth is expected for the Orion program. Table 2 provides data on the cost and schedule performance between our May 2017 and 2018 reports for the 17 major projects in development that have cost and schedule baselines.\nThe deteriorating cost and schedule performance of the portfolio in 2018 is the result of four projects—SLS, EGS, SGSS, and Mars 2020—addressing technical challenges that were compounded by risky programmatic decisions; two projects—JWST and ICESat-2—experiencing delays due to technical challenges identified during integration and test; and three projects—NISAR, ICON, and GRACE-FO—experiencing cost growth or delays largely due to factors outside of the projects’ control.\nWe elaborate on these three scenarios below.\nTechnical challenges compounded by risky programmatic decisions. Together, SLS, EGS, SGSS, and Mars 2020 experienced $638 million in cost growth and 59 months in aggregate schedule delays due to technical problems that were compounded by programmatic challenges since our May 2017 report. The SLS and EGS programs experienced cost growth and schedule delays associated with EM-1, their first combined mission along with the Orion program. We have found for several years that the human spaceflight programs—Orion, SLS, and EGS—are making progress maturing designs and building hardware, but also are experiencing some significant engineering and manufacturing challenges. For example, the SLS program ran into numerous challenges completing the welding of its core stage element in 2017. The program stopped welding on the core stage for months to identify and resolve low weld strength in the liquid oxygen and liquid hydrogen tanks due to low weld strength measurements found in the liquid oxygen tanks caused by a program and contractor decision to change the weld tool configuration during fabrication. The EGS program also experienced technical challenges, including with the design and installation of the ground support equipment and the 10 umbilicals that connect SLS and Orion to the Mobile Launcher—which supports the assembly, testing, and servicing of SLS and provides the platform on which SLS and Orion will launch.\nFinally, although the Orion program has not yet reported cost growth, it also experienced technical challenges. These challenges included software and hardware delays, and at least 14 months of delays with the European Service Module—which provides air, water, power, and propulsion to Orion during in-space flight—since the element’s critical design review in June 2016. In April 2017, we found that, according to program officials, the delays with the service module were largely due to NASA, the European Space Agency, and the European Space Agency contractor underestimating the time and effort necessary to address design issues for the first production service module and the availability of parts from suppliers and subcontractors. NASA expects the Orion program to experience cost growth over its cost baseline to the second combined mission, Exploration Mission 2 (EM-2). However, the extent of the growth is unknown because, as noted above, NASA is currently revising the program’s life-cycle cost estimate.\nTechnical challenges such as these are not unusual for large-scale programs, especially human exploration programs that are inherently complex and difficult. However, we have found that NASA has made programmatic decisions—including establishing low cost and schedule reserves, managing to aggressive schedules, and not following best practices for earned value management or creating reliable cost and schedule baselines—that have compounded the technical challenges (see table 3). As a result, the three human spaceflight programs have been at risk of cost and schedule growth since NASA approved their baselines.\nIn December 2017, NASA announced the new internal launch readiness date for EM-1 is now December 2019, and has allocated 6 months of schedule reserve available to extend the date to June 2020 for possible manufacturing and production schedule risks. This represents a delay of 13-19 months for EM-1. It is too soon to know if NASA has addressed the programmatic challenges identified above. We will continue to follow up through future reviews.\nSimilarly, the SGSS project experienced new cost growth of $59.5 million and delayed its completion by 21 months. Project officials attributed the cost growth and delays to the contractor’s incomplete understanding of its requirements, which led to poor contractor plans and late design changes. But project management has been a challenge as well. The project has historically struggled to manage contractor performance and has faced both contractor and project staffing shortfalls, as we found in our prior reports starting in 2013. For example, NASA managers noted concerns with contractor plans and staffing estimates in 2013 during project confirmation. In March 2015, we found that the project was being rebaselined due to the contractor’s poor cost and schedule performance and in order to conform with limitations that NASA placed on the funding available to the contractor in fiscal years 2014 and 2015. The contractor was also operating with a limited number of staff at that time. In May 2017, we found that the project continued to experience contractor performance problems and had experienced cost growth and schedule delays over the 2015 rebaseline even as the project decreased its scope. In addition, the project experienced staff shortfalls in key areas, such as systems engineering and business management.\nThe Mars 2020 project experienced $12.9 million in development cost growth, but no schedule delays. The cost growth was primarily due to technical challenges on a technology demonstration instrument and higher than anticipated integration costs for an entry, descent, and landing instrument. Both instruments are funded by the Human Exploration and Operations and Space Technology Mission Directorates. NASA officials attributed the cost growth of the technology demonstration instrument—which is designed to convert carbon dioxide to oxygen—to the complexity of the technology development for the effort. At the project’s preliminary design review in February 2016, a critical technology for the technology demonstration instrument did not meet the recommended level of maturity, which we have found can increase risk for systems entering product development. The project had matured the technology to this recommended level by its critical design review in February 2017. However, as a result of the focus on maturing this particular technology, other components of the instrument fell behind the planned schedule. Project costs for Mars 2020 also increased for an entry, descent, and landing instrument, due, in part, to cost increases for integration and to add additional staff to the instrument team to maintain schedule.\nFinally, the Radiation Budget Instrument project would have likely exceeded its cost baseline if NASA had not decided to cancel the project in January 2018. According to NASA’s cancellation memorandum, the project was canceled because of continued cost growth, technical issues, and poor contractor performance. In 2017, we found that the project was working to an aggressive schedule, and the prime contractor continued to experience cost overruns even after NASA added a deputy project manager and increased site visits and meetings with the contractor. Subsequently, the project—which was developing an instrument to be hosted on a National Oceanic and Atmospheric Administration satellite— determined that it would not be able to meet its delivery date for integration with the satellite without requiring additional funding in excess of the project’s cost baseline if other technical issues arose. In its cancellation memorandum, NASA stated continuing to fund the project from within the Earth Science Division budget would slow other important activities.\nTechnical challenges identified during integration and test. The JWST and ICESat-2 projects experienced technical challenges during integration and test that delayed their schedules. Both projects were previously rebaselined before entering system-level integration and testing, and the current schedule delays are beyond the new schedules that NASA set for the projects in 2011 for JWST and in 2014 for ICESat- 2.\nThe JWST project delayed its launch readiness date by at least 19 months from October 2018 to May 2020. NASA announced two delays for the project since our portfolio-wide review in May 2017. First, as we found in February 2018, the project delayed its launch readiness date by up to 8 months primarily due to the integration of the various spacecraft elements taking longer than expected. Specifically, execution of spacecraft integration and test tasks, due to complexity of work and cautious handling given the sensitivity of flight hardware, was slower than planned. In addition, before the delay, the project used all of its schedule reserves to its prior launch readiness date. This was the result of various contractor workmanship errors, particularly with respect to the spacecraft propulsion systems, as well as the resolution of various technical issues, including a test anomaly on the telescope and sunshield hardware challenges. Second, in March 2018, NASA announced that it had delayed the project’s launch readiness date by an additional 11 months to approximately May 2020 and planned to establish an external independent review board to analyze the project’s organizational and technical issues to inform a more specific launch time frame.\nThe announcement also stated that after a new launch date is established, NASA would provide a new cost estimate that may exceed the $8 billion congressional cost cap that was established in 2011. NASA plans to finalize the project’s cost and schedule estimate by the end of June 2018. Because the additional delays were announced while a draft of our May 2018 report was with NASA for comment, we plan to follow up on the reasons for the additional delays and the results of the analysis in a future review.\nIn our prior assessments of JWST, we have made recommendations with regard to improving cost and schedule estimating, updating risk assessments, and strengthening management oversight. NASA has generally agreed and taken steps to implement a number of our recommendations. For example, in December 2015, we recommended that the JWST project require contractors to identify, explain, and document anomalies in contractor-delivered monthly earned value management reports. NASA concurred with this recommendation and, in February 2016, directed the contractors to implement the actions stated in the recommendation. However, NASA did not implement some recommendations, which if implemented, may have provided insight into the challenges it now faces. For example, in December 2012, we recommended the JWST project update its JCL. Although NASA concurred with this recommendation, it did not take steps to implement it. An updated JCL may have portended the current schedule delays, which could have been proactively addressed by the project.\nThe ICESat-2 project delayed its launch readiness date by 4 months from June to October 2018 due to technical issues with its only instrument, the Advanced Topographic Laser Altimeter System. A key part in the instrument’s lasers failed during instrument environmental testing, which delayed the project’s system integration review—the start of system-level integration and test. The manufacturer determined the primary cause of the anomaly was a flaw in the design of the mount that ensures a component of the optical module remains in a specific, precise position. The spare flight laser encountered the same problem during earlier testing, which indicated a systemic problem. The project redesigned and repaired the lasers and is proceeding through integration and test.\nExternal factors. External factors—including responding to requests for additional data collection and delays due to launch-vehicle related issues—contributed to cost increases or schedule delays for the NISAR, ICON, and GRACE-FO projects.\nThe NISAR project experienced cost growth as the result of an increase in the scope of data collection in response to additional data needs being identified by an interagency working group. The additional data include soil moisture and natural hazard data that would be of value for other federal agencies and the science community. NASA officials said the additional funding for development would be used to upgrade the ground stations so that they can receive the additional data at a higher downlink data rate and volume.\nThe ICON project missed its committed launch readiness date because of an accident involving its launch vehicle. In January 2017, two of the Pegasus launch vehicle’s three stages were involved in a transport accident. The stages were subsequently returned to the launch vehicle contractor facility for inspection and testing, and no damage was found. The project had been on track to launch early. Subsequently, in September 2017, an anomaly found in testing of the launch vehicle bolt cutter assemblies resulted in additional delays. NASA had planned to launch ICON in mid-June 2018, but recently announced a delay after off-nominal data was observed from the rocket during transit to the launch site. NASA announced a new launch date would be determined at a later date.\nThe GRACE-FO project delayed its launch readiness date from February to May 2018 due to issues with its planned launch vehicle and launch site. The launch vehicle is the responsibility of NASA’s partner on the project—German Research Centre for Geosciences (GFZ). GRACE-FO had planned to launch at a Russian launch site. In February 2016, GFZ reported that it was notified by the Russian Federal Space Agency that the Dnepr launch vehicle was no longer available for GRACE-FO. GFZ, in June 2016, arranged to launch the two GRACE-FO spacecraft, along with commercial satellites, on a SpaceX Falcon 9. On May 22, 2018, GRACE-FO launched from Vandenberg Air Force Base in California.\nIn addition, the Commercial Crew Program also experienced delays, which are not included above because the program does not have a schedule baseline. Since the award of the current Commercial Crew contracts in September 2014, the program, Boeing, SpaceX, and multiple independent review bodies have all identified the contractors’ delivery schedules as aggressive. In February 2017, we found that Boeing and SpaceX had determined that neither could meet their original 2017 dates for NASA to certify their systems for human spaceflight. In January 2018, we found that both contractors had notified NASA that final certification dates have slipped again and are now in the first quarter of calendar year 2019. The Commercial Crew Program’s schedule analysis indicates that certification may be further delayed to December 2019 for SpaceX and February 2020 for Boeing.", "The composition of the portfolio in the coming years is expected to include large and complex projects, putting NASA at risk of continued cost increases and schedule delays. Specifically, NASA plans to have complex projects enter the development portfolio in the next few years as it holds confirmation reviews and set cost and schedule baselines. This includes the Europa Clipper project and potentially the Wide-Field Infrared Survey Telescope (WFIRST) project. In February 2018, the President’s 2019 Budget Request proposed canceling the WFIRST project due to the project’s significant costs and higher priorities in the agency. However, the project may continue if funding is received. Together, preliminary estimates indicate that these two projects could cost as much as $7.8 billion. In addition, NASA expects to begin other large, complex projects like the Lunar Orbital Platform-Gateway— currently being discussed as a space station or outpost in lunar orbit— and a Europa Lander project in the coming years. A December 2017 space policy directive also instructed NASA to return astronauts to the moon for long-term exploration and to pursue human exploration of Mars and the broader solar system.\nTo its credit, NASA recently took steps to put a process in place to control the costs of two projects while in formulation, which may prove useful if properly executed.\nThe Europa Clipper project implemented a process whereby cost growth threats would be offset by descoping instruments in whole or in part. For example, if an instrument exceeds its development cost by 20 percent, the project would propose a descope option to NASA that brings instrument cost below that threshold. NASA had not descoped any instruments as of our May 2018 report.\nThe WFIRST project is responding to findings from an independent review that was conducted to ensure the mission’s scope and required resources are well understood and executable. The review found that the mission scope is understood, but not aligned with the resources provided and concluded that the mission is not executable without adjustments and/or additional resources. For example, the study team found that NASA’s current forecasted funding profile for the WFIRST project would require the project to slow down activities starting in fiscal year 2020, which would result in an increase in development cost and schedule. NASA agreed with the study team’s results and directed the project to reduce the cost and complexity of the design in order to maintain costs within the $3.2 billion preliminary cost target.\nBut even with these efforts, NASA’s cost and schedule performance may be further tested in upcoming years as some expensive, complex projects linger in the portfolio longer than expected.\nAs previously discussed, the Orion program expects cost growth and faces other schedule and technical risks as it moves through the integration and test phase for EM-1 into at least 2019 and then through 2023 for EM-2. As of August 2017, NASA officials expected that new hardware and addressing development challenges would be the factors contributing to increased cost for the program. For example, there was a cost impact when the program moved from a single-piece, or monolithic, heatshield design to one that employs blocks in order to improve its structural strength. Program officials said they are also assessing schedule delays for EM-2, and noted that the EM-2 launch date depends on the outcome of the EM-1 launch date.\nThe SLS and EGS programs continue to face cost, schedule, and technical risks as they move through the integration and test phase into at least 2019. For example, SLS will have to complete a “green run” test which requires multiple first-time efforts. Specifically, the test is the culmination of the development effort and includes the core stage integration with its four main engines, fully fueling with cryogenic hydrogen and oxygen, and then firing all four engines for about 500 seconds. NASA currently has no schedule reserve to its target December 2019 launch readiness date for two key areas in the core stage schedule. First, there is no reserve between the end of core stage production and the delivery of the core stage to the test facility. Second, there is no reserve between the end of the testing and delivery to Kennedy Space Center for final integration and testing prior to launch.\nAs previously discussed, the JWST project is at risk of exceeding its congressional cost cap, and faces schedule risks as it completes its remaining integration and test work. These activities have taken considerably longer than planned due to a variety of challenges, including reach and access limitations on the flight hardware. Additionally, the project faces significant work ahead. For example, the project must complete integration of spacecraft element hardware and conduct deployment and environmental tests of the integrated sunshield and spacecraft. Further, it must integrate the telescope element with the spacecraft element to form the JWST observatory, and complete another set of challenging environmental tests on the full integrated observatory. At the same time, the project will need to mitigate dozens of remaining hardware and software risks to acceptable levels and address the project’s many potential single point failures to the extent possible.\nThe SGSS project expects to experience additional cost growth through the final acceptance review because the full scope of the effort has not been included in the cost. NASA only approved its new cost estimate through the initial operational readiness review, currently planned for September 2019. A project official said NASA headquarters asked the project to determine if there are ways to reduce the cost between the operational readiness review and the final acceptance review. NASA plans to conduct an independent review of the project in mid-2018 to inform a decision on whether to continue the project past the operational readiness review. If NASA decides to continue the project past this review, additional cost growth is expected for SGSS when NASA revisits project costs through future budget cycles.\nIn closing, NASA continues to make improvements to the acquisition management of its portfolio of major projects. However, the deterioration of the cost and schedule performance of NASA’s portfolio this year and the likelihood of additional cost growth and schedule delays demonstrate the need for NASA to continue to take actions to further reduce acquisition risk as we and others have recommended. Continuing to improve cost and schedule estimating tools and practices—such as by providing projects with sufficient cost and schedule reserves to address risks and unforeseen technical challenges and ensuring that program offices regularly and consistently update their JCLs across the portfolio— could help to better position NASA for improved outcomes. We look forward to continuing to work with NASA and this subcommittee in addressing these issues.\nChairman Babin, Ranking Member Bera, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.", "If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Contracting and National Security Acquisitions at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; Laura Greifner; Erin Kennedy; Miranda Riemer; Roxanna T. Sun; and Alyssa Weir.", "Appendix I: Descriptions of National Aeronautics and Space Administration Major Projects Reviewed in GAO’s 2018 Assessment Project description The Commercial Crew Program facilitates and oversees the development of safe, reliable, and cost-effective crew transportation systems by commercial companies to carry NASA astronauts to and from the International Space Station. The program is a multi-phase effort that started in 2010. During the current phase, the program is working with two contractors— Boeing and SpaceX—that will design, develop, test, and operate the crew transportation systems. Once NASA determines the systems meet its standards for human spaceflight—a process called certification—the companies will fly up to six crewed missions to the space station.\nThe DART project plans to travel to the near-Earth asteroid Didymos, a binary system, and impact the smaller of the two bodies. NASA will assess the deflection result of the impact for potential future use on other potentially hazardous near-Earth objects. The project responds to near-Earth object guidance by the Office of Science and Technology Policy to better understand our impact mitigation posture, and to recommendations by the National Research Council Committee to conduct a test of a kinetic impactor. The DART mission is part of the Asteroid Impact and Deflection Assessment, which is an international collaboration with the European Space Agency.\nThe Europa Clipper mission aims to investigate whether the Jupiter moon could harbor conditions suitable for life. The project plans to launch a spacecraft in the 2020s, place it in orbit around Jupiter, and conduct a series of investigatory flybys of Europa. The mission’s planned objectives include characterizing Europa’s ice shell and any subsurface water, analyzing the composition and chemistry of its surface and ionosphere, understanding the formation of its surface features, and surveying sites for a potential landed mission.\nThe EGS program is modernizing and upgrading infrastructure at the Kennedy Space Center and developing software needed to integrate, process, and launch the Space Launch System (SLS) and Orion Multi-Purpose Crew Vehicle (Orion). The EGS program consists of several major construction and facilities projects including the Mobile Launcher, Crawler Transporter, Vehicle Assembly Building, and launch pad, all of which need to be complete before the first uncrewed exploration mission using the SLS and Orion vehicles.\nThe GRACE-FO mission will continue and expand upon the 2002 GRACE mission, which ended science operations in October 2017. The system, which consists of two spacecraft working together to obtain scientific measurements, will provide high-resolution models of Earth’s gravity field and insight into water movement on and beneath the Earth’s surface for up to 5 years. These models will provide rates of ground water depletion and polar ice melt and enable improved planning for droughts and floods. GRACE-FO is a collaborative effort with the German Research Centre for Geosciences.\nThe ICESat-2 mission is a follow-on mission to ICESat that will measure changes in polar ice-sheet mass and elevation. The measurements will provide researchers a better understanding of the mechanisms that drive polar ice changes and their effect on global sea level. ICESat-2’s upgraded laser instrument will allow the satellite to make more frequent measurements and provide better elevation estimates over certain types of terrain than ICESat.\nInSight is a Mars lander with two primary objectives. It is intended to further understanding of the formation and evolution of terrestrial planets by determining Mars’s size, its composition, and the physical state of the core; the thickness of the crust; and the composition and structure of the mantle, as well as the thermal state of the interior. It will also determine the present level of tectonic activity and the meteorite impact rate on Mars. InSight is based on the Phoenix lander design. Phoenix successfully landed on Mars in 2008.\nProject description The ICON observatory will orbit Earth to explore its ionosphere—the boundary region between Earth and space where ionized plasma and neutral gas collide and react. Its four instruments will make direct measurements and use remote sensing to further researchers’ understanding of Earth’s upper atmosphere, the Earth-Sun connection, and the ways in which Earth weather drives space weather.\nJWST is a large, infrared-optimized space telescope designed to help understand the origin and destiny of the universe, the creation and evolution of the first stars and galaxies, and the formation of stars and planetary systems. It will also help further the search for Earth-like planets. JWST will have a large primary mirror composed of 18 smaller mirrors and a sunshield the size of a tennis court. Both the mirror and sunshield are folded for launch and open once JWST is in space. JWST will reside in an orbit about 1 million miles from the Earth.\nLandsat 9 is the next satellite in the Landsat series Program, which provides a continuous space-based record of land surface observations to study, predict, and understand the consequences of land surface dynamics, such as deforestation. The program is a collaborative, joint mission between NASA and the U.S. Geological Survey. The Landsat data archive constitutes the longest continuous moderate-resolution record of the global land surface as viewed from space and is used by many fields, such as agriculture, mapping, forestry, and geology.\nLCRD is a technology demonstration mission with the goal of advancing optical communication technology for use in deep space and near-Earth systems. LCRD will demonstrate bidirectional laser communications between a satellite and ground stations, develop operational procedures, and transfer the technology to industry for future use on commercial and government satellites. NASA anticipates using the technology as a next generation Earth relay as well as to support near-Earth and deep space science, such as the International Space Station and human spaceflight missions. The project is a mission partner and will be a payload on a U.S. Air Force Space Test Program satellite.\nLow Boom Flight Demonstrator (LBFD) LBFD is a flight demonstration project planned to demonstrate that noise from supersonic flight—sonic boom—can be reduced to acceptable levels, allowing for eventual commercial use of overland supersonic flight paths. Plans include multiple flights beyond fiscal year 2022 to gather community responses to the flights and to create a database to support development of international noise rules for supersonic flight.\nLucy will be the first mission to investigate the Trojans, which are a population of never- explored asteroids orbiting in tandem with Jupiter. The project aims to understand the formation and evolution of planetary systems by conducting flybys of these remnants of giant planet formation. The Lucy spacecraft will first encounter a main belt asteroid—located between the orbits of Mars and Jupiter—and then will travel to the outer solar system where the spacecraft will encounter six Trojans over an 11-year mission. The mission’s planned measurements include asteroid surface color and composition, interior composition, and surface geology.\nMars 2020 is part of the Mars Exploration Program, which seeks to further understand whether Mars was, is, or can be a habitable planet. Its rover and science instruments will explore Mars and conduct geological assessments, search for signs of ancient life, determine potential environmental habitability, and prepare soil and rock samples for potential future return to Earth. The rover will include a technology demonstration instrument designed to convert carbon dioxide into oxygen. Mars 2020 is based heavily on the Mars Science Laboratory, or Curiosity, which landed on Mars in 2012 and remains in operation.\nProject description NISAR is a joint project between NASA and Indian Space Research Organisation (ISRO) that will study the solid Earth, ice masses, and ecosystems. It aims to address questions related to global environmental change, Earth’s carbon cycle, and natural hazards, such as earthquakes and volcanoes. The project will include the first dual frequency synthetic aperture radar instrument, which will use advanced radar imaging to construct large-scale data sets of the Earth’s movements. NISAR represents the first major aerospace science partnership between NASA and ISRO.\nOrion is being developed to transport and support astronauts beyond low-Earth orbit, including traveling to Mars or an asteroid. The Orion program is continuing to advance development of the human safety features, designs, and systems started under the Constellation program, which was canceled in 2010. Orion is planned to launch atop NASA’s Space Launch System. The current design of Orion consists of a crew module, service module, and launch abort system.\nPSP will be the first NASA mission to visit a star. Using the gravity of Venus, the spacecraft will orbit the Sun 24 times and gather information to increase knowledge about the solar wind, including its origin, acceleration, and how it is heated. PSP instruments will observe the generation and flow of solar winds from very close range and sample and take measurements of the Sun’s outer atmosphere, where solar particles are energized. To achieve its mission, parts of the spacecraft must be able to withstand temperatures exceeding 2,500 degrees Fahrenheit and endure blasts of extreme radiation. The project was formerly named Solar Probe Plus, or SPP, and was renamed in May 2017.\nPACE is a polar-orbiting mission that will use advanced global remote sensing instruments to improve scientists’ understanding of ocean biology, biogeochemistry, ecology, aerosols, and cloud properties. PACE will extend climate-related observations begun under earlier NASA missions, which will enable researchers to study long-term trends on Earth’s oceans and atmosphere, and ocean-atmosphere interactions. PACE will also enable assessments of air and coastal water quality, such as the locations of harmful algae blooms.\nPsyche will be the first mission to visit a metal asteroid and aims to understand a previously unexplored component of the early building blocks of planets: iron cores. The project plans to orbit the Psyche asteroid to determine if it is a planetary core, characterize its topography, assess the elemental composition, and determine the relative ages of its surface regions.\nRBI is a scanning radiometer that NASA planned to launch on the National Oceanic and Atmospheric Administration’s (NOAA) Joint Polar Satellite System 2. RBI’s planned mission was to support global climate monitoring by continuing measurements of the Earth’s reflected sunlight and emitted thermal radiation made by NASA and NOAA satellites over the past 30 years. This data was intended to represent one of two key sets of measurements needed to determine whether the Earth is warming or cooling.\nThe Restore-L project will demonstrate the capability to refuel on-orbit satellites for eventual use by commercial entities. Specifically, Restore-L plans to autonomously rendezvous with, inspect, capture, refuel, adjust the orbit of, safely release, and depart from the U.S. Geological Survey’s Landsat 7 satellite. Landsat 7 can extend operations if successfully refueled, but it is planned for retirement if the technology demonstration is unsuccessful.\nSLS is intended to be NASA’s first human-rated heavy-lift launch vehicle since the Saturn V was developed for the Apollo program. SLS is planned to launch NASA’s Orion spacecraft and other systems on missions between the Earth and Moon and to enable deep space missions, including Mars. NASA is designing SLS to provide an initial lift capacity of 70 metric tons to low-Earth orbit, and be evolvable to 130 metric tons, enabling deep space missions. The 70-metric-ton capability will include a core stage, powered by four RS-25 engines, and two five-segment boosters. The 130-metric-ton capability will use a new upper stage and evolved boosters.\nProject description The SGSS project plans to develop and deliver a new ground system for one Space Network site. The Space Network provides essential communications and tracking services to NASA and non-NASA missions. Existing systems, based on 1980s technology, are increasingly obsolete and unsustainable. The new ground system will include updated systems, software, and equipment that will allow the Space Network to continue to provide critical communications services for the next several decades. The Space Network is managed by the Space Communication and Navigation program.\nThe SWOT mission will use its wide-swath radar altimetry technology to take repeated high- resolution measurements of the world’s oceans and freshwater bodies to develop a global survey. This survey will make it possible to estimate water discharge into rivers more accurately, and help improve flood prediction. It will also provide global measurements of ocean surface topography and variations in ocean currents, which will help improve weather and climate predictions. SWOT is a joint project between NASA and the French Space Agency—the Centre National d’Etudes Spatiales.\nTESS will use four identical, wide field-of-view cameras to conduct the first extensive survey of the sky from space for transiting exoplanets—or planets in other solar systems. The mission’s goal is to discover these exoplanets during transit, the time when the planet’s orbit carries it in front of its star as viewed from Earth. The project plans to discover rocky and potentially habitable Earth-sized and super-Earth planets orbiting nearby bright stars for further evaluation through ground- and space-based observations by other missions, such as JWST.\nWFIRST is an observatory designed to perform wide-field imaging and survey of the near- infrared sky to answer questions about the structure and evolution of the universe, and expand our knowledge of planets beyond our solar system. The project will use a telescope that was originally built and qualified by another federal agency. The project plans to launch WFIRST in the mid-2020s to an orbit about 1 million miles from the Earth. The project is also planning a guest observer program, in which the project may provide observation time to academic and other institutions.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 2, 2, 1, 2, 1, 1, 1 ], "alignment": [ "h2_title h3_title", "", "h3_full h2_full", "h0_full h2_title h1_title h3_title", "h0_full h3_full h2_full h1_full", "h2_full", "", "" ] }	{ "question": [ "How has NASA's performance in terms of projects in recent years changed?", "How have the costs of NASA's programs changed in recent years?", "What is an example of this discrepancy?", "How have these recent tendencies affected NASA's timely output of projects?", "How have NASA's projects been affected by the cost growth and schedule delay tendencies?", "How has NASA failed to manage these projects in an effective way?", "What were the setbacks of this mismanaged project?", "What kinds of delays occurred due to NASA's mismanagement of projects?", "How did these technical difficulties cause delays?", "How has GAO evaluated NASA's schedule in regards to these widespread delays?", "What times in the project schedule are most likely to incur higher costs and delays?", "How did GAO attempt to respond to NASA's increase in costs and schedules?", "How has NASA performed recently in response to GAO's designation?", "What has GAO found despite NASA's seemingly positive progress?" ], "summary": [ "The cost and schedule performance of the National Aeronautics and Space Administration's (NASA) portfolio of major projects has deteriorated, but the extent of cost performance deterioration is unknown.", "The cost and schedule performance of the National Aeronautics and Space Administration's (NASA) portfolio of major projects has deteriorated, but the extent of cost performance deterioration is unknown.", "NASA expects cost growth for the Orion crew capsule—one of the largest projects in the portfolio—but does not have a current cost estimate.", "In addition, the average launch delay for the portfolio was 12 months, the highest delay GAO has reported in its 10 years of assessing major NASA projects (see figure below).", "Four projects encountered technical issues that were compounded by risky program management decisions.", "For example, the Space Launch System and Exploration Ground Systems programs are large-scale, technically complex human spaceflight programs, and NASA managed them to aggressive schedules and with insufficient levels of cost and schedule reserves.", "This made it more difficult for the programs to operate within their committed baseline cost and schedule estimates.", "Two projects ran into technical challenges that resulted in delays in the integration and test phase.", "For example, in December 2017, GAO found that the James Webb Space Telescope project encountered delays primarily due to the integration of the various spacecraft elements taking longer than expected, as well as the need to resolve technical issues during testing.", "GAO has previously found that integration and testing is when projects are most at risk of incurring cost and schedule growth.", "GAO has previously found that integration and testing is when projects are most at risk of incurring cost and schedule growth.", "GAO designated NASA's acquisition management as a high-risk area in 1990 after a history of persistent cost growth and schedule slippage in many of NASA's major projects.", "In more recent years, GAO found that NASA had taken some steps to improve its management, and, in May 2017, GAO found that projects were continuing a generally positive trend of limiting cost and schedule growth.", "But at the same time, GAO noted that many of these projects, including some of the most expensive ones, were approaching the phase in their life cycles when cost and schedule growth is most likely." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, 1, -1, 0, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 4, 4, 4, 5, 5, 5, 5, 0, 0, 0 ] }
GAO_GAO-14-639	{ "title": [ "Background", "Goal Leaders Are Carrying out Their Roles and Responsibilities on Goal Progress, but Their Performance Plans Do Not Always Hold Them Directly Accountable", "Goal Leaders are Generally Highly-Placed within Their Organizations and Reported a Range of Roles and Responsibilities", "Goal Leaders Report Varied Effects from Goal Leader Designation, but Identified Benefits in Conjunction with Other Related GPRAMA Requirements", "Deputy Goal Leaders Were Designated for Most, but Not All, Priority Goals", "Performance Plans of Goal Leaders and Deputy Goal Leaders Generally Did Not Fully Reflect Priority Goals", "Quarterly Performance Reviews and Informal Mechanisms Serve as Additional Accountability Mechanisms", "Goal Leaders Collaborate with a Diverse Array of Organizations and Use Different Types of Programs to Drive Progress on Their Agencies’ APGs, but Continue to Miss Opportunities for Further Collaboration", "Goal Leaders Collaborate with a Diverse Array of Organizations on Goal Progress", "Some Goal Leaders Reported That Relevant Contributors to Their APGs Are Not Included in Their Agencies’ Quarterly Performance Reviews", "Goal Leaders Recognized the Contributions Different Types of Programs Made to Their APGs, but There Are Limited Mechanisms for Sharing Information Across Agencies", "Goal Leaders Have Focused Less Attention on Identifying Relevant Tax Expenditures", "Goal Leaders Identified Some Common Challenges and Practices in Goal Management, but Share This Information to a Limited Extent", "Goal Leaders Identified Some Common Challenges and Practices in Managing Goals, but Have Limited Exchange of Information with Other Goal Leaders", "The PIC Has Focused Its Efforts on PIOs, but Has Additional Opportunities to Engage Goal Leaders", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: GAO Sample of Agency Priority Goals for 2012-2013", "Department of Housing and Urban Development: Preserve affordable rental housing.", "Department of Housing and Urban Development: Prevent foreclosures.", "Agency/ Goal Department of Justice: Reduce gang violence.", "Department of State/U.S. Agency for International Development: Procurement reform. Department of State/U.S. Agency for International Development: Economic statecraft. Department of State/U.S. Agency for International Development: Food security.", "Agency/ Goal Department of Transportation: Reduce risk of aviation accidents.", "Appendix II: Objectives, Scope and Methodology", "Appendix III: Comments from the Social Security Administration", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "GPRAMA added new requirements for setting and achieving agency goals. Every 2 years, GPRAMA requires the heads of certain agencies to identify a subset of agency goals to be identified as APGs. These goals are to reflect the highest priorities of the agency and are to have clearly- defined milestones and ambitious targets that can be achieved within 2 years. GPRAMA also directs agencies to describe how goals are to be achieved, including the processes, training, skills and technology, and the human, capital, information, and other resources and strategies required to meet them. In addition, they are to identify performance indicators to be used in measuring progress, among other things. The first round of APGs was publicly reported in February 2012, and they were to be completed by the end of fiscal year 2013. New APGs, for 2014 and 2015, were published on Performance.gov in March 2014. According to OMB staff, approximately 40 percent of the APGs for 2014 and 2015 were carried over from and focus on the same areas as the APGs from 2012 and 2013, although they typically have updated targets for achievement. In conjunction with these goal-setting requirements, GPRAMA also established a requirement that, for each APG, agencies identify an agency official–the goal leader–responsible for goal achievement.\nGPRAMA and OMB guidance describe responsibilities and specific tasks for goal leaders, including that they participate in quarterly performance reviews (QPR) (see table 1). OMB also directs agencies to identify a deputy goal leader to support the goal leader, though it does not provide details of the responsibilities or specific tasks of the deputy position.\nIn addition, the Office of Personnel Management (OPM) has identified core competencies for key roles under GPRAMA, including the goal leader. These competencies are illustrated in figure 1. OPM has also identified executive core qualifications for Senior Executive Service officials. Some of the competencies for the executive core qualification for building coalitions, such as partnering, are the same as those OPM identified as core competencies for agency priority goal leaders. Several of these competencies are also consistent with ones we identified in our For prior work as important attributes for collaborative leadership.example, these leadership competencies included communication, building and maintaining relationships, and setting a vision.\nUnder GPRAMA agencies are to make information on APGs available to OMB for online publication. This information, which includes APG strategies, performance indicators, progress updates, and identification of the relevant goal leader, is published on Performance.gov. Agencies are to update information on each APG at least quarterly. Agencies are also to identify programs and activities that contribute to each APG. These include organizations, program activities, regulations, policies, and other activities, both internal and external to the agency. OMB also directs agencies to include, as appropriate, tax expenditures in their identification of programs that contribute to their APGs.\nGPRAMA also established in law the Performance Improvement Council (PIC), chaired by OMB’s Deputy Director for Management and composed of performance improvement officers from various federal agencies. According to PIC staff, officials from a broad range of agencies, both large and small, participate in the PIC. The PIC is charged with facilitating the exchange of successful performance management practices among agencies and assisting OMB in implementing certain GPRAMA requirements (among other responsibilities).\nAlthough this report focuses on the goal leaders for APGs, similar positions exist for other types of goals as well. At the agency level, OMB directs agencies to designate leaders for each agency strategic objective, which reflects the outcomes or impacts the agency is intending to achieve. OMB’s 2013 guidance directs agencies to conduct annual strategic reviews of progress toward strategic objectives to inform their decision making, starting in 2014. At the government-wide level, GPRAMA requires a lead official to be identified for each cross-agency priority (CAP) goal. CAP goals either focus on issues that cut across agency boundaries or on management improvement across the federal government. Each of the 15 CAP goals announced in the President’s 2015 budget has a leader within the Executive Office of the President and within a related agency. Although these other types of goal leaders exist, throughout this report, when we refer to goal leaders we are only referring to goal leaders for the APGs.", "", "The goal leaders for the goals in our sample were, in general, placed at high levels within their agencies and so were in senior leadership positions that enabled them to drive progress on their APGs. For example, of the 46 goal leaders we interviewed, 7 were heads or acting heads of agencies and 9 were agency assistant secretaries or acting assistant secretaries. Most (28) of the 46 goal leaders we interviewed were in career positions and the remainder (18) were political appointees. This high placement of goal leaders is consistent with OMB guidance, which states that goal leaders should be officials with the authority to coordinate across an agency or program. It is also a practice supported by our prior work, in which we noted that personal involvement of top agency leadership is important to successful management. The Administrator of the Federal Aviation Administration (FAA), who is the goal leader for the Department of Transportation’s (DOT) Reduce Risk of Aviation Accidents APG, told us that, in his opinion, having a goal leader who is also the head of an agency is important because he or she has the authority to engage agency employees to achieve the goal. As an example, FAA officials provided us with a list of the Administrator’s site visits to FAA facilities around the country. According to DOT, aviation fatality rates—this APG’s performance measure—are at historic lows and have continued to drop over time.the importance of having goal leaders at a high enough level that they have authority within their agencies, some noted the importance of balancing that with the need for a goal leader who has the time for close, regular involvement with the goal.\nWhile officials we interviewed noted Goal leaders we interviewed provided many examples of ways in which they fulfill goal leader responsibilities required by OMB guidance, including laying out strategies to achieve the goal, managing execution, regularly reviewing performance, engaging others as needed, and making course corrections as appropriate. They also engage in other activities. For example, the Associate Administrator of the Office of Disaster Assistance at the Small Business Administration (SBA), who is also the goal leader for the Process Disaster Assistance Applications Efficiently APG, told us that he and others at SBA started developing strategies and targets in 2011, prior to the beginning of the fiscal year 2012-2013 agency priority goal cycle. He said that it was important to consider reasonable targets as part of setting and implementing the APG. This meant determining a feasible target for the percentage of disaster assistance applications the agency would aim to receive electronically as part of goal setting. SBA reported on Performance.gov that the rate of applications filed electronically had more than doubled from fiscal year 2011 to 2013, when 55 percent of applications were filed electronically. In addition, the Department of the Treasury’s (Treasury) Fiscal Assistant Secretary, who was also the goal leader for the agency’s Increase Electronic Transactions with the Public to Improve Service, Prevent Fraud, and Reduce Costs APG, said that a significant part of his work involved providing information to the public through press releases and working with consumer and community groups to make them aware of the changes coming with regard to electronic transactions. Treasury officials provided us with examples of press releases and other public communications, as well as a list of the Fiscal Assistant Secretary’s meetings with advocacy groups and other stakeholders related to the goal. The fiscal year 2015 President’s budget highlighted progress made under this goal, noting that increased electronic transactions had helped the government get money to beneficiaries and into the economy faster, and reduced costs associated with collections.\nGAO-13-228. In this report we identified several leading practices for conducting QPRs through a review of relevant academic and policy literature, and with input from practitioners at the local, state, and federal levels. through 2013. In addition, the Bureau of Indian Affairs (BIA) within the Department of the Interior (Interior) had been collecting data on crime before the Reduce Violent Crime in Indian Communities goal was designated an APG. But, officials told us that the APG designation led to an increased focus on data use. For example, officials developed crime rate profiles identifying locations where crimes were historically committed, including information on times of day and days of week, and used that information to shift police assignments and target proactive measures. According to information reported by Interior on Performance.gov, BIA, working with tribes, met most of its violent crime rate targets in fiscal years 2012 and 2013 for five of the six communities originally targeted under the APG.", "A majority of the goal leaders we interviewed said the goal leader designation had positive effects on goal progress and achievement. Goal leaders and other officials identified one or more benefits that derived from the designation, frequently saying that it provided greater visibility for the goal, facilitated coordination, heightened focus on the goal, or improved access to resources. For example, a deputy goal leader at the Federal Railroad Administration, part of DOT, said that goal leader and deputy goal leader designations are valuable in the context of competing priorities at the department. He said that the designation and related requirements elevate the goal, provide additional structure, and communicate the department’s commitment to it. DOT reported on Performance.gov that the agency initiated construction on five passenger rail corridors and 37 individual projects during fiscal years 2012 and 2013 for the deputy goal leader’s Advance the Development of Passenger Rail in the United States APG. Additionally, the Assistant Secretary for Elementary and Secondary Education, who is the goal leader for two of the Department of Education’s (Education) APGs–Demonstrate Progress in Turning Around the Nation’s Lowest-Performing Schools and Improve Outcomes for all Children from Birth through Third Grade–said that her designation as goal leader has caused her to think more about the goals and how they relate to other aspects of the department’s work and to think more strategically across the whole Office of Elementary and Secondary Education. According to data reported by Education on Performance.gov, under the APG targeting the lowest-performing schools (489 schools receiving Education’s School Improvement Grants), those schools demonstrated at least 10 percent increases in reading or math scores during fiscal years 2012 and 2013. Education also reported that under the APG focusing on improved outcomes, 24 states implemented plans to collect and report disaggregated data on children entering public school kindergarten as part of a comprehensive assessment system.\nAbout a third of the goal leaders we interviewed told us that the goal leader designation did not affect goal achievement. In several cases, goal leaders noted the difficulty they had differentiating their role as goal leader from the work they would otherwise be doing as part of their other roles. For example, the Department of Housing and Urban Development’s (HUD) Acting Assistant Secretary of the Office of Community Planning and Development, who was one of the goal leaders for the agency’s Reducing Homelessness APG, told us that the goal leader designation was more a description of his continuing role leading agency efforts on homelessness rather than a significant change in responsibility or position. In addition, some APGs continued work begun under other, prior agency goals, and in some cases represent issues that have been agency priorities for years. For example, several of the agency priorities represented by the APGs in our sample had also been reflected in agency high priority performance goals, which were in place prior to GPRAMA’s enactment. Several goal leaders cited the close correspondence between the APG focus and agency mission as a reason that the designation of goal leaders made little difference in how the agency carried out its work in support of the goal. For example, the Acting Director of the U.S. Patent and Trademark Office, who was also the goal leader for the Department of Commerce’s Advance Commercialization of New Technologies by Reducing Patent Application Pendency and Backlog APG, told us that the goal leader designation did not have a significant effect because the APG is a firmly-established part of her agency’s mission. According to information reported by the Department of Commerce on Performance.gov, the agency reduced pendency for first and final actions and reduced its patent backlog during fiscal years 2012 and 2013.\nFor more information, see http://archive-goals.Performance.gov/goal_detail/HHS/373. funded water conservation projects that enabled nearly 250,000 acre feet of water savings during fiscal years 2012 and 2013.", "OMB guidance directs agencies to identify a deputy goal leader to support each goal leader, and agencies naming a political appointee as a goal leader are encouraged to name a career senior executive as the deputy. Twenty-eight of the 46 goal leaders we interviewed were in career positions and 18 were political appointees. OMB staff told us that this guidance is in place for several reasons. Primarily, it is due to the importance of having a person in place who is close to the work being done on APGs and who can spend the time needed to implement and follow up on related tasks. OMB staff said that the agency sees the deputy goal leader as the person who can perform the important function of connecting APG leadership and strategy with actual implementation. OMB also directed agencies to appoint deputy goal leaders because the position may help provide continuity in the event that the goal leader leaves the agency, and also provides a point of contact for OMB, particularly in situations in which the designated goal leader is very highly placed in the agency. OMB staff told us that OMB does not monitor whether agencies formally designate deputies or systematically collect information, including contact information, on them. Instead, staff said that they identify and use deputy goal leaders as points of contact when they find it necessary.\nDeputy goal leaders for the APGs in our sample supported day-to-day goal management and provided continuity during times of transition. Most (35 of 46) of the goal leaders we interviewed had deputy goal leaders.These goal leaders and their deputies most commonly characterized deputies’ roles as involving day-to-day management of the goal or managing data collection, analysis, and presentation for QPRs and other purposes. In some cases deputies also participated in budget management, and developing goals or strategies. Deputies also played a role during goal leader transitions. For example, the Department of Justice’s (DOJ) National Coordinator for Child Exploitation, Prevention and Interdiction, who also leads the agency’s Protect Those Most in Need of Help—With Special Emphasis on Child Exploitation and Civil Rights APG, explained that her deputy goal leader had provided useful support when she started in the goal leader position, especially in terms of helping her to understand APG performance measures and how they fit into her work. Additionally, two of the goal leaders we interviewed had originally been deputy goal leaders, and had taken on the goal leader role when the previous goal leader left the position. Our analysis of APGs found that there had been somewhat higher rates of turnover among goal leaders than deputies between the time the APGs were published in February 2012 and completed at the end of September 2013. Of the 47 APGs in our sample, 20 (slightly more than 40 percent) had a change in goal leader during this time period. Of the 37 APGs that had deputy goal leaders assigned, 11 (31 percent) had a change in deputy goal leader over this time period.\nAlthough most of the goal leaders we interviewed had formal deputy goal leaders in place, 11 of the 46 (24 percent) did not. Those goal leaders who did not have deputy goal leaders generally reported that they had other staff who fulfilled similar roles. For example, none of the goal leaders at HUD have deputy goal leaders, but the Director of HUD’s Performance Management Division told us that an analyst from the agency’s Office of Strategic Planning and Management is assigned to each APG. The analyst ensures that APGs comply with GPRAMA requirements. Although other agency staff may fulfill many of the roles that a deputy goal leader would, officially designating a deputy goal leader would be consistent with OMB’s view that deputies serve a key role in implementing APGs. In addition, this designation is especially important if there is additional turnover in the goal leader position in the future.", "or serving in them temporarily, so we excluded these plans from our analysis. In all, we obtained and analyzed 32 goal leader performance plans. We obtained performance plans from all 38 deputy goal leaders for the APGs in our sample, but excluded three from our analysis because the officials were new to the position and their performance plans had not been updated to reflect it. In all, we analyzed 35 deputy goal leader performance plans.\nAccording to our assessment of goal leaders’ performance plans, agencies are not fully using performance plans as a tool to align APGs and goal leader expectations, or make goal leaders accountable for progress on and achievement of APGs. The 32 goal leader performance plans we analyzed reflected responsibility for goal outcomes to a varying extent. They covered a range of responsibilities, but many did not reference the APG at all, and few of them explicitly held goal leaders responsible for goal outcomes. Specifically, less than half (12 of 32) of the plans specified that the official was responsible for the APG, and 1 of the 32 linked goal leaders’ performance standards to goal outcomes. Some goal leaders said that although their plans did not include specific references to their APGs, responsibility was implied because the APG was covered under broader responsibilities. We found that this was the case in almost half (14 of 32) of the plans we analyzed. Figures 2 and 3 show excerpts from two goal leaders’ performance plans. The performance plan in figure 2 clearly links performance standards to specific APG outcomes, while the performance plan in figure 3 has a weaker connection to the two APGs under the goal leader’s responsibility. For example, the performance plan does not specifically mention the APG or any of its performance measures.\nOur analysis of deputies’ performance plans showed that they also reflected responsibility for APGs to a varying extent. In general, the 35 deputy goal leader performance plans we reviewed did not establish a strong connection to APGs and did not make deputies accountable for goal outcomes. Our analysis found that 15 of 35 plans named the officials as the deputy goal leader or explicitly made them responsible for the APG and 1 of 35 linked deputies’ performance standards to goal outcomes. Some officials noted that although deputies’ performance plans did not specifically mention APGs, they did include responsibility for activities that supported the goal. We found this to be the case for nearly half of the performance plans we reviewed. Specifically, 14 deputies’ plans identified them as responsible for activities that could contribute to the goal, but did not reference the goal, goal outcomes, or broader areas of activity that could subsume the goal. For example, the performance plan for one of the deputy goal leaders on OPM’s Ensure High Quality Federal Employees APG specifies that she is responsible for improving and implementing guidance related to the Pathways Program, a streamlined process for hiring new federal employees.\nAgencies that use performance plans that lack a strong linkage to APG outcomes may be missing opportunities to promote accountability. Although APGs may fall under goal leaders’ broader responsibilities, specifically including the APG and its outcomes in goal leaders’ and deputies’ performance plans would help ensure that they are evaluated on and held accountable for goal progress. Our prior work makes clear the importance of tying performance standards to agency goals and making leadership accountable for goal outcomes. This is especially important, since APGs are to reflect the highest priorities of the agency.", "While not all deputy and goal leader performance plans had clearly stated relationships to APGs, goal leaders we interviewed identified other mechanisms that they felt held them accountable for progress on APGs. These include personal reputation, accountability to agency and other leadership, and QPR meetings. For example, the Assistant Secretary of Labor for Occupational Safety and Health, who is goal leader for two APGs (Reduce Worker Fatalities and Develop a Model Safety and Return-to-Work Program), told us that the interest of Congress and DOL’s Inspector General, in their respective oversight roles, both operate to hold him accountable. In addition, the Federal Railroad Administrator, who is the goal leader for the Department of Transportation’s (DOT) Advance the Development of Passenger Rail in the United States APG, told us that the agency’s regulatory review meetings, which the agency also uses to meet the GPRAMA requirement that agencies review priority goal progress at least quarterly, act as an additional accountability mechanism. He said that the Deputy Secretary and other agency officials place considerable importance on these meetings and that it was personally important to him that he perform well at them, including being able to respond to all questions. While these other mechanisms offer additional accountability, our previous work has shown that performance plans offer particular benefits. For example, performance plans can allow performance managers to (1) document that performance standards align with agency goals; (2) hold employees accountable for achieving specific and measurable results; and (3) make clear distinctions in performance.", "", "Many of the meaningful results that the federal government seeks to achieve require the coordinated efforts of more than one federal agency, level of government, or sector. OMB’s guidance states that goal leaders should be authorized to coordinate across an agency or program to achieve progress on a goal. Our recent work on interagency collaboration identified leadership competencies related to collaborating effectively, including the ability to work well with others, build and maintain relationships, and communicate openly with a range of stakeholders.\nThe goal leaders we interviewed reported many examples of collaborating with other entities to drive progress on their APGs. Table 2 provides some examples of how goal leaders reported collaborating with a diverse array of entities.", "OMB guidance and leading practices for conducting quarterly performance reviews (QPR) note the importance of agencies including all relevant contributors to APGs in these reviews. As shown below, we have made a prior related recommendation.\nGAO Has Previously Recommended That OMB and the PIC Help Agencies Include External Contributors in Quarterly Performance Reviews In February 2013, we made the following recommendation. OMB staff agreed with our recommendation. As of June 2014, OMB and Performance Improvement Council (PIC) staff reported that agencies continue to work to implement this recommendation through a PIC working group that is intended to help agencies share best practices for conducting QPRs, but did not have a specific timeframe in place for full implementation: To better leverage agency quarterly performance reviews as a mechanism to manage performance toward agency priority and other agency-level performance goals, the Director of OMB—working with the PIC and other relevant groups—should identify and share promising practices to help agencies extend their QPRs to include, as relevant, representatives from outside organizations that contribute to achieving their agency performance goals.\nHowever, some goal leaders we interviewed reported that APG contributors from other federal agencies, and even different components within the same federal agency, were not included in these reviews. The goal leader for the Department of the Interior’s (Interior) Reduce Violent Crime in Indian Communities APG–the Assistant Secretary for Indian Affairs–reported that he and his staff work with the Department of Justice (DOJ) on the goal, but that DOJ officials are not part of Interior’s QPRs.Interior officials explained that they meet with DOJ officials in other settings. In another example, the Department of Labor (DOL) has designated two officials–the Assistant Secretary for Occupational Safety and Health and the Assistant Secretary for Mine Safety and Health–as co-goal leaders for the Reduce Worker Fatalities APG. The Assistant Secretary for Mine Safety and Health told us that he and the Assistant Secretary for Occupational Safety and Health have separate QPRs with the Deputy Secretary to discuss progress on their joint APG. In commenting on a draft of this report, DOL officials noted that this is because the Mine Safety and Health Administration covers only mining and the Occupational Safety and Health Administration covers other industries, and that the two programs have separate outcome metrics for the APG reported on Performance.gov. However, the Assistant Secretary for Mine Safety and Health told us that Occupational Safety and Health Administration officials do not attend the reviews of the Mine Safety and Health Administration. OMB guidance and our prior work state that agencies should, as appropriate, include relevant personnel within and outside the agency who contribute to the accomplishment of each APG.\nOur interviews with goal leaders did, however, identify one case in which a goal leader reported that external contributors to the goal attended the agency’s QPR meeting. Two Department of Housing and Urban Development (HUD) goal leaders who share responsibility for the Reducing Homelessness APG, which includes reducing homelessness among veterans, reported collaborating with officials from the U.S. Interagency Council on Homelessness and the Department of Veterans Affairs, which also has an APG focused on reducing veterans’ homelessness. HUD officials told us that every 6 months officials from the U.S. Interagency Council on Homelessness and the Department of Veterans Affairs attend HUD’s QPRs. driven performance reviews, OMB officials cited this example of two agencies that had been using the QPRs to collaborate on their APGs.\nIn our previous work on data- In cases where relevant personnel were not included in QPRs, the goal leaders we interviewed emphasized that their agencies use other means to collaborate with external contributors to their APGs. However, leading practices for conducting QPRs underscore the value of agencies extending their QPRs to include, as relevant, external contributors. We observed that these reviews have the benefit of bringing together the leadership and all the key players to solve problems. Moreover, when key players are excluded from QPRs, agencies will need to rely on potentially duplicative parallel coordination mechanisms. Thus, we continue to believe our prior recommendation has merit, and that OMB and PIC efforts to work with agencies to fully address it would strengthen these QPRs.\nHUD refers to their QPRs as “HUDStat.”", "GPRAMA requires the agency head and chief operating officer, with the support of the performance improvement officer, to assess whether relevant organizations, program activities, regulations, policies, and other activities are contributing as planned to the agency’s APGs, and to identify these contributing programs for publication on Performance.gov. Our previous work has identified more specific examples of different program types the federal government uses to achieve many of its goals: direct services, government contracts, grants, regulations, research and development, and tax expenditures. Table 3 provides more specific definitions of these program types and also provides examples from our interviews of how goal leaders reported different program types contributed to their APGs.\nGPRAMA requires that agencies do more than simply identify the different program types that contribute to an APG. An agency must also assess whether each relevant program type is contributing as planned to the APG. This requirement is important because our previous work has identified long-standing difficulties agencies have faced in measuring performance across various program types. For example, in prior work, we have found that some grant-making agencies have faced difficulties in validating and verifying the data grant recipients report and establishing performance measures.recommendation.\nGAO Has Previously Recommended That OMB and the PIC Help Agencies Share Information Related to Measuring Program Types In June 2013, we made the following recommendation. As of June 2014, OMB and PIC staff reported taking initial steps to implement this recommendation through action plans they are developing for certain cross-agency priority goals, including those focused on customer service and strategic sourcing. OMB staff did not have a specific time frame in place for fully implementing the recommendation. “Given the common, long-standing difficulties agencies continue to face in measuring the performance of various types of federal programs and activities—contracts, direct services, grants, regulations, research and development, and tax expenditures—we… recommend the Director of OMB work with the PIC to develop a detailed approach to examine these difficulties across agencies, including identifying and sharing any promising practices from agencies that have overcome difficulties in measuring the performance of these program types. This approach should include goals, planned actions, and deliverables along with specific time frames for their completion, as well as the identification of the parties responsible for each action and deliverable.”\nOur discussions with goal leaders identified some examples of specific analyses agencies had done to assess the contributions a particular program type made to APGs. For example, Interior’s Deputy Secretary reported that the Bureau of Reclamation (Reclamation) is requiring specific information from grant applicants on how to quantify the benefits, such as water savings, if the federal government selects a particular project to receive funding under Interior’s Increase the Available Water Supply in the Western States APG.estimates grant applicants provide to measure progress towards its APG, as described in the text box below.\nHow Interior is Analyzing the Contributions a Grant Made to its APG An irrigation district in Montana requested $103,000 in federal grant money for a project the district estimated would save 4,158 acre feet of water each year. Interior says a team of Reclamation employees assessed the district’s water savings estimate and decided the project would receive federal funding. After a financial assistance agreement was executed, Interior officials then reported the 4,158 acre feet of estimated water savings towards the department’s overall goal of saving a cumulative total of 350,000 acre feet of water by the end of fiscal year 2011. The Interior report adds that Reclamation employees are seeking to validate the estimates for certain projects by taking measurements before construction begins and then again after construction to measure actual water savings.\nFor the APG for fiscal years 2012 and 2013, Interior measures cumulative water savings since 2009, so this project contributed to the APG.\nHowever, other goal leaders we interviewed reported that their agencies are either not analyzing the contributions different program types are making or, in other cases, continue to face challenges in measuring the performance of different program types. For example, HUD officials we interviewed told us that grants contribute to the Preserve Affordable Rental Housing APG, but that grants have not been a significant part of HUD’s conversations about goal progress. The information HUD provided on Performance.gov indicated that grants are used in combination with other programs, such as vouchers and tax expenditures, to provide rental assistance. However, the performance indicators HUD identified on Performance.gov measured the total number of families served by different HUD programs. These indicators did not break out the number of families served through grants, thereby making it more difficult to analyze the contributions grants made to the APG. In other cases, goal leaders described challenges they have faced in measuring the performance of certain types of programs. For example, the Federal Aviation Administration’s (FAA) Associate Administrator for Aviation Safety observed that it is difficult to know for certain whether a particular regulation prevented an aviation accident from occurring in regards to DOT’s Reduce Risk of Aviation Accidents APG. She emphasized that there has been a lot of progress made in improving aviation safety and pointed to data that show a very low risk of passenger fatalities on commercial air carriers. However, she considered it hard to measure the precise effect a particular regulation or safety initiative had on the outcome that has been identified for this APG.\nWe discussed with several goal leaders the extent to which they have shared information with officials in other agencies working with similar types of programs, such as grants and regulations, on common challenges in measuring the performance of these types of programs. Overall, our discussions did not identify any government-wide working groups that would allow officials from different agencies to share this sort of information, but a small number of goal leaders interviewed identified some more limited mechanisms for sharing this information:\nFAA’s deputy goal leader for DOT’s Reduce Risk of Aviation Accidents APG told us that he also sits on the department’s Safety Council, which provides a forum for FAA officials to share their regulatory experience with other DOT agencies, including the Federal Transit Administration–which has less experience with regulations. The DOT deputy goal leader reported that the benefits of attending the Safety Council meetings are learning from and sharing experiences between and among departmental agencies and being able to apply this information to the agency priority goal. DOT officials noted that the Safety Council is limited to DOT agencies and does not include other federal agencies with regulatory responsibilities.\nSocial Security Administration (SSA) officials who were responsible for the Reduce Supplemental Security Income Overpayments APG told us they had participated in a now-inactive PIC working group on benefits processing during the tenure of an earlier goal leader. The Benefits Processing working group focused on promoting consistency in agencies’ benefits processing, but OMB staff had previously told us that this group no longer regularly meets because it had completed its tasks.been helpful.\nThe SSA officials we interviewed indicated that this group had We continue to believe our prior recommendation has merit, and that OMB and PIC actions to fully address it would provide a more comprehensive assessment of how various types of programs contribute to agency goals.", "Since 2012, OMB guidance has directed agencies to identify as appropriate the tax expenditures that contribute to their APGs and report this information for publication on Performance.gov. This is important because tax expenditures represent a significant federal investment. Based on Department of the Treasury (Treasury) estimates for fiscal year 2013, the federal government had forgone approximately $1.1 trillion in tax revenue through 169 tax expenditures, an amount which approaches the size of federal discretionary spending. The tax revenue that the government forgoes is viewed by many analysts as spending channeled through the tax system. Since 1994, we have recommended greater scrutiny of tax expenditures, as periodic reviews could help determine how well specific tax expenditures work to achieve their goals and how their benefits and costs compare to those of spending programs with similar goals. In 2005, we recommended that OMB, in consultation with Treasury, more fully incorporate tax expenditures into federal Since then, OMB guidance has shown some performance management.progress in addressing how agencies should incorporate tax expenditures in strategic plans and annual performance plans and reports. OMB addressed this recommendation by updating its guidance in 2012 to require agencies to identify appropriate tax expenditures, as described above. OMB also reported in its 2013 update to this guidance that it will work with Treasury to align tax expenditure information with the APGs.\nHowever, our 2013 review of the extent to which agencies implemented certain requirements related to the APGs indicated that OMB and agencies may be missing opportunities to identify tax expenditures that contribute to APGs. In our 2013 report on APGs, we found that only one agency had identified two relevant tax expenditures for one of its APGs. As shown below, we made a recommendation to address this issue.\nGAO Has Previously Recommended That OMB Ensure Agencies Identify Tax Expenditures That Contribute to Agency Priority Goals In April 2013, we made the following recommendation. OMB staff agreed with our recommendation and said in June 2014 that they are working to implement the recommendation, for example, by engaging with staff at the Department of the Treasury. As of June 2014, OMB staff did not have a specific time frame for fully addressing the recommendation. “As OMB works with agencies to enhance Performance.gov to include additional information about APGs, we recommend that the Director of OMB ensure that agencies adhere to OMB’s guidance for website updates by providing complete information about the organizations, program activities, regulations, tax expenditures, policies, and other activities—both within and external to the agency—that contribute to each APG.”\nOur review of the information agencies provided on Performance.gov and our discussions with goal leaders indicated that agencies and goal leaders continue to provide Congress and the public with limited information about the contributions of tax expenditures on Performance.gov. Specifically, we found that five APGs in our sample had related tax expenditures based on our prior work. However, for a variety of reasons, only the two discussed below identified relevant tax expenditures on Performance.gov:\nHUD identified tax credits that subsidize the building and rehabilitation of rental housing as contributing programs to the Preserve Affordable Rental Housing APG.\nAlthough the Department of Energy did not identify them as contributing programs, the department mentioned two tax expenditures in its discussion of how it measured performance of the Make Solar Energy as Cheap as Traditional Sources of Electricity APG.\nFor a third APG, HUD did not identify relevant tax expenditures as contributing to its Prevent Foreclosures APG on Performance.gov. But, one of the APG’s goal leaders acknowledged the relevance of a tax expenditure and told us that the agency had worked to support its extension. Specifically, HUD’s Deputy Assistant Secretary for the Office of Single Family Housing noted that borrowers could potentially owe taxes if HUD’s efforts resulted in their receiving a reduction in the Our previous work noted that Congress principal on their mortgage. enacted a tax expenditure in 2007 that allowed taxpayers to generally exclude from taxable income forgiven mortgage debt to assist taxpayers facing foreclosure.consulted with Treasury to suggest that this tax expenditure be extended by Congress.\nHUD officials reported that their agency had We have previously found that tax expenditures relate to other APGs in our sample. However, for these APGs, agencies chose measures to assess goal progress and achievement that did not involve tax expenditures. As a result, agencies did not include information on tax expenditures related to the APGs on Performance.gov.\nThe Department of Education Improve Students’ Ability to Afford and Complete College APG: We have previously described the importance of tax expenditures for helping students and families pay for college. However, the deputy goal leader, who is the Chief of Staff in the Office of the Undersecretary of Education, told us that tax expenditures were not a factor in his agency’s strategy to implement this goal, which was primarily to develop a web-based college scorecard that is intended to help users learn about a specific college’s affordability and value. The deputy goal leader explained that Congress specified in statute a specific formula for his agency to use to calculate the average net price of attending a particular college, which does not include tax expenditures that may reduce the net price many students pay.\nThe Environmental Protection Agency (EPA) Reduce Greenhouse Gas Emissions from Cars and Trucks APG: EPA officials told us that some tax incentives relate to the APG’s broader goal of reducing greenhouse gas emissions. We have previously reported on tax incentives that may affect greenhouse gas emissions from cars and trucks, including those for plug-in electric-drive motor vehicles and for biodiesel fuel. However, the strategy that EPA developed for this goal focused on implementing greenhouse gas emissions standards for cars and trucks. For example, the APG’s performance measures included the number of tests EPA conducted to confirm the validity of manufacturers’ greenhouse gas emission test results. EPA officials explained that, therefore, tax incentives were not central to this APG’s progress and achievement.\nWe continue to believe our prior recommendation that OMB ensure agencies identify relevant tax expenditures on Performance.gov has merit, and that OMB actions to fully address it would provide a more comprehensive assessment of how tax expenditures contribute to agency goals.", "", "Goal leaders we interviewed identified several common challenges in managing APGs. The most commonly-cited challenge was constrained resources, including those resulting from spending reductions under sequestration. A little more than one-third (16 of 46) of the goal leaders we interviewed cited resource constraints as a challenge in managing their goals. For example, the Department of the Interior’s (Interior) Assistant Secretary for Policy, Management and Budget, who was the goal leader for the Support Youth Employment APG, told us that sequestration had affected progress on her APG. The sequester cuts took effect in March of 2013, the same time that Interior bureaus were planning youth hiring for the summer. The goal leader told us that as a result, Interior bureaus’ youth hiring was lower than expected. This is consistent with our prior work, in which we found that Interior officials said that a hiring freeze instituted in response to sequestration had adversely affected the department’s ability to achieve this APG. According to information Interior reported on Performance.gov, the department’s youth hiring in fiscal year 2013 was nearly 20 percent lower than prior year levels, and it did not achieve this APG. Additionally, the Deputy Administrator for Defense Nuclear Nonproliferation, who was the goal leader for the Department of Energy’s Make Significant Progress Toward Securing the Most Vulnerable Nuclear Materials Worldwide within Four Years APG, told us that budget uncertainties complicate goal-setting. Although GPRAMA states that APGs should have ambitious targets, the goal leader told us that these uncertainties may provide an incentive for agencies to set goal targets lower than they otherwise would. Other commonly-cited challenges included difficulty identifying meaningful measures of goal progress and issues with data, such as problems with consistency and availability.\nGoal leaders we interviewed also identified common practices that they said were helpful in managing APGs. Some of these were related to GPRAMA requirements. For example, more than a quarter (14 of 46) of goal leaders identified practices related to measuring goal progress, such as assigning responsibility for meeting milestones, as helpful in managing APGs. GPRAMA states that APGs are to have clearly defined quarterly milestones and balanced performance measures for assessing goal progress. Goal leaders emphasized the importance of not only developing measures but developing ones that are meaningful and reliable indicators of goal progress. For example, the Chief Operating Officer at the Office of Personnel Management (OPM), who led the agency’s Ensure High Quality Federal Employees APG, said that she had worked to make sure the agency used appropriate and consistent measures to track goal progress. Other commonly-cited practices include several related to coordination across an agency or program, which OMB guidance specifies that goal leaders should have the authority to do. Goal leaders noted effective methods of coordination such as reaching out to agency field staff, employee unions, and non-federal entities. Goal leaders also identified practices that stem from the GPRAMA requirement that agencies review APG progress quarterly. As noted earlier, goal leaders cited benefits from quarterly performance review (QPR) meetings, which they said have promoted coordination, accountability, and attention to goal progress, and have provided opportunities to get feedback directly from agency leaders.\nGoal leaders reported that they share information on APG challenges and practices for managing their goals, although information sharing outside of their agencies is generally limited to officials with whom they are already working. They reported several examples of sharing information within their agencies, most frequently through agency meetings, such as QPRs. For example, the Director of the National Aeronautics and Space Administration’s (NASA) International Space Station Division, who is the goal leader for the agency’s Sustain Operations and Full Utilization of the International Space Station APG, told us that the agency’s baseline performance review meetings, through which the agency holds QPRs, have facilitated his sharing of lessons learned with another NASA goal leader whose APG also involves human space flight. Goal leaders also provided some examples of sharing information with officials outside of their agencies. In these cases, most examples involved sharing information with officials with whom they work on issues related to their APGs. These include members of interagency councils and committees focused on issues related to their APGs, and officials from agencies doing work related to the APG. For example, the Associate Administrator of the Small Business Administration’s Office of Government Contracting and Business Development, who is the goal leader for the agency’s Increase Small Business Participation in Government Contracting APG, told us that he shares information with officials from other agencies involved in small business contracting through interagency groups such as the White House Small Business Procurement Group.", "The Performance Improvement Council’s (PIC) duties, which are detailed in GPRAMA and OMB guidance, include facilitating among agencies the exchange of practices that have led to performance improvements, and developing tips, tools, training, and other capacity-building mechanisms to strengthen agency performance management and facilitate cross-agency learning and cooperation. As specified by GPRAMA, the PIC is chaired by OMB’s Deputy Director for Management and composed of the performance improvement officers (PIO) from the 24 Chief Financial Officers Act agencies, as well as any other PIOs and individuals identified by OMB. Our prior work found that the PIC holds two types of meetings— a “principals only” meeting open only to PIOs and a broader meeting open to PIOs and other agency staff. In addition, the PIC sponsors working groups focused on issues related to implementation of GPRAMA, such as internal agency reviews. The PIC also conducts government- wide training on specific topics, such as strategic planning.\nGAO-13-356. goal leader reported participating in the PIC as a member of several of its working groups.\nOMB and PIC staff explained that the PIC interacts with agency PIOs and deputy PIOs as their primary points of contact, so staff generally do not reach out directly to agency priority goal leaders. OMB and PIC staff said that they see the PIO as the key official in managing agency performance, and focus on PIOs and their staff because of the importance of equipping them with the capability to provide support within their agencies on a variety of issues. Additionally, they focus on the PIO rather than other officials to avoid undercutting the PIO’s relevance. In line with this, several goal leaders we interviewed noted that interactions with the PIC are handled by other offices within their agencies, such as performance offices. They rely on these staff to pass along relevant information. For example, the Chief of NASA’s Strategic Planning and Performance Management Branch explained that either she or the agency’s PIO attends PIC meetings, and then shares relevant information with goal leaders and others within the agency. NASA officials provided us with copies of a monthly newsletter that the agency uses to distribute information internally on performance management. The August 2013 newsletter included information on the latest version of OMB’s Circular A- 11, and on upcoming deadlines for activities related to the agency’s APGs, performance plans, and other products.\nAlthough the PIC has focused to date on working with PIOs to share information with agencies, OMB and PIC staff identified several examples of information sharing with goal leaders. OMB and PIC staff provided us with examples of products the PIC developed for goal leaders, including a guide to best practices for setting milestones, a priority goal setting guide, and a priority goal evaluation tool, designed to help agencies set APGs and drive discussion around them. Additionally, they said that they held meetings with agency PIOs shortly after the APGs for 2012 and 2013 were set, and that these meetings included goal leaders. Agenda items included a discussion of agencies’ performance management approaches and selected APGs. Additionally, the PIC provided us with copies of agendas from PIC meetings, including a January 2012 meeting at which there was a goal leader panel. A former goal leader of one of the APGs in our sample told us that she participated in the panel and provided a copy of her talking points, which focused on her experience working on previous agency goals and factors she identified for success. PIC staff also told us that they invited goal leaders to a recent meeting they held in February 2014 focused on implementing successful strategic reviews.\nAlthough the PIC has developed products and information aimed at goal leaders, it may be missing opportunities to facilitate greater information sharing among them. As described earlier in this report, goal leaders we interviewed have encountered common challenges in managing APGs, and also identified practices that may be useful to other goal leaders and deputy goal leaders. Additionally, goal leaders of APGs of similar program types may be interested in sharing information. For example, several of the APGs in our sample relied on program types such as grants, contracts, regulations, and research and development. Although goal leaders reported sharing information within their agencies and with outside officials working on issues related to their goals, they and their deputy goal leaders lacked the means to identify and share information with other goal leaders who are facing similar challenges or interested in similar topics. The deputy goal leader for DOT’s Advance the Development of Passenger Rail in the United States APG told us that he would find it useful to discuss common issues with others working on APGs, in particular related to performance measures. As highlighted earlier, our prior work has found that agencies have experienced common issues in measuring various types of programs, and recommended that the Director of OMB work with the PIC to develop a detailed approach to examine these difficulties, including identifying and sharing any promising Such an approach could also include direct outreach by OMB practices.and the PIC to goal leaders and deputy goal leaders.", "Senior agency officials’ commitment to and accountability for improving performance are important factors in determining the success of performance and management improvement initiatives. GPRAMA’s provision that agencies assign responsibility for achieving APGs—which reflect agencies’ highest priorities—to goal leaders is a powerful mechanism for promoting greater involvement and accountability in performance management. Although goal leaders we interviewed cited several positive effects of the goal leader designation and related GPRAMA requirements, there are areas where goal leader effectiveness could be improved. These lessons learned may also be relevant for leaders of other high-level goals, such as agency strategic objectives and government-wide cross-agency priority goals.\nFirst, a number of the goal leaders we interviewed did not have deputy goal leaders, although OMB guidance states that they should. OMB staff also stated that the deputy performs the important function of connecting goal strategy with goal implementation. Additionally, a little more than 40 percent of the APGs in our sample had changes in goal leaders between February 2012 and September 2013. This level of turnover may be higher as the current presidential administration nears an end and goal leaders who are political appointees leave their positions. Officially designating a deputy goal leader provides clear responsibility and accountability for goal achievement, and as shown already, deputies can help provide continuity during times of goal leader transition.\nAnother missed opportunity in implementing the goal leader role is to fully utilize performance plans as an accountability mechanism for both goal leaders and their deputies. Performance plans are a tool for ensuring that officials are evaluated on and held accountable for defined outcomes, but the majority of the performance plans we reviewed did not fully reflect responsibility for APGs. Although other mechanisms, such as QPRs, also promote accountability, agencies that do not clearly link goal leader and deputy performance plans with APGs may be missing opportunities to ensure that goal leaders and deputies are held accountable for goal progress. Because APGs by definition reflect the highest priorities of each agency, accountability is especially important.\nGoal leaders also identified several common challenges and practices related to managing APGs, but may be missing opportunities to share this information with their peers across government. We found that they have shared this information to some extent within their agencies and with officials from outside agencies who are working on similar issues. However, they lacked a means through which to identify others facing similar challenges or interested in similar topics. One such missed opportunity concerns sharing information among goal leaders about how to measure the performance of similar types of programs, such as grants, that multiple agencies use to drive progress on their APGs. Similarly, our review indicates that there are different views among goal leaders and agencies on how to implement OMB’s requirement that they identify and make public information about tax expenditures that contribute to APGs. The PIC, which is charged with facilitating the exchange of information among agencies, could play a greater role in fostering information sharing on these issues and others among goal leaders and deputy goal leaders to help improve agency performance.", "To ensure goal leader and deputy goal leader accountability, we recommend that the Director of OMB work with agencies to take the following two actions:\nAppoint a deputy goal leader to support each agency priority goal leader.\nEnsure that agency priority goal leader and deputy goal leader performance plans demonstrate a clear connection with agency priority goals.\nTo better promote the sharing of information among goal leaders and their deputies, we recommend that the Director of OMB work with the PIC to further involve agency priority goal leaders and their deputies in sharing information on common challenges and practices related to agency priority goal management.", "We provided a draft of this report to the Director of the Office of Management and Budget (OMB) and to the 24 agencies that developed agency priority goals (APG) for 2012 and 2013. A full list of these agencies is shown in appendix I. OMB staff provided us with oral comments and generally agreed with our findings, conclusions, and recommendations. OMB staff, as well as officials from the Department of Health and Human Services, National Aeronautics and Space Administration, and Office of Personnel Management (OPM) also provided technical comments, which we incorporated, as appropriate.\nOn July 1, 2014 our liaison from the Department of Labor’s (DOL) Office of the Assistant Secretary for Policy e-mailed us a summary of DOL officials’ comments on the draft report. DOL officials disagreed with some of the findings, conclusions, and recommendations in our draft report. We discuss their specific comments and our evaluation of them below:\nDOL officials raised concerns about our characterization of the department’s quarterly performance reviews (QPR) for the Reduce Worker Fatalities APG, which is jointly led by two goal leaders, each from a different DOL component agency. DOL officials stated that our report implies that DOL’s practice of conducting separate reviews of safety and health agencies is a barrier to coordination of efforts to achieve the shared APG. In response, we made changes to the draft report to include the DOL officials’ views on the purposes of their separate reviews. Regardless of the formats of agencies’ performance reviews, however, both OMB guidance and our prior work emphasize the importance of including relevant contributors to APGs in these reviews.\nDOL officials stated that they believe our report gives the incorrect impressions that 1) organizing QPRs by components is a shortcoming, and 2) the sole purpose of QPRs is to manage APGs. As we previously explained, we do not take issue with DOL holding QPRs by component, and agree with DOL officials that this format is not a shortcoming. We also agree that QPRs may focus on broader issues than APGs. For both of these issues, what is important is that QPRs include relevant APG contributors.\nDOL officials commented on our discussion of including external parties in QPRs. They stated that they have other sufficient ways of collaborating with outside contributors. They do not believe it would be beneficial to include stakeholders with very specific concerns in a detailed policy and operations review of all agency component performance management issues in these reviews. In response, we clarified in the report that both OMB guidance and our prior work emphasized including relevant external goal contributors in these performance reviews.\nDOL officials stated that they consider figure 1, which lists goal leader competencies identified by OPM, to be misleading because it implies that the goal leader position is new. They suggested that we remove the figure. They referenced our finding that some officials were already serving in a similar role before becoming goal leaders. While this is true, the GPRA Modernization Act of 2010 established the goal leader position in law and assigned specific responsibilities to goal leaders. Figure 1 depicts the goal leader competencies described in OPM’s January 2012 memorandum for chief human capital officers. So, we retained this figure in the report.\nDOL officials raised concerns about whether the report includes sufficient evidence to support our conclusion that additional OMB and Performance Improvement Council (PIC) outreach to goal leaders and deputies would improve goal management. As we stated in the report, while we acknowledged that the PIC has already conducted some limited outreach to agency goal leaders, we found that goal leaders and their deputies could benefit from additional information sharing facilitated by the PIC. OMB staff agreed with our recommendation related to this finding, so we did not make any changes to the report to address this concern.\nFinally, DOL officials recommended removing or revising our recommendation that OMB ensure that agencies have deputy goal leaders in place because they felt it implies that the designation of a deputy drives goal achievement. Our recommendation is based on several factors, including OMB guidance requiring agencies to assign deputy goal leaders, and OMB staff’s view that deputies perform the important function of connecting APG leadership and strategy with implementation, as discussed in our report. Furthermore, OMB staff agreed with this recommendation, so we did not make any changes to the report to address this concern.\nThe following agencies had no comments on the draft report: Department of Agriculture, Army Corps of Engineers – Civil Works, Department of Commerce, Department of Defense, Department of Education, Department of Energy, Environmental Protection Agency, General Services Administration, Department of Homeland Security, Department of Housing and Urban Development, Department of the Interior, Department of Justice, National Science Foundation, Small Business Administration, Social Security Administration, Department of State, Department of Transportation, Department of the Treasury, U.S. Agency for International Development, and the Department of Veterans Affairs. The written response from the Social Security Administration is reproduced in appendix III.\nWe are sending copies of this report to the Director of OMB as well as appropriate congressional committees and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-6806 or mihmj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "Agency/ Goal Department of Agriculture: Assist rural communities build and maintain prosperity through increased agricultural exports. Army Corps of Engineers – Civil Works: Help facilitate commercial navigation by providing safe, reliable, highly cost-effective, and environmentally-sustainable waterborne transportation systems.\nArmy Corps of Engineers – Civil Works: Improve the current operating performance and asset reliability of hydropower plants in support of Executive Order 13514. Department of Commerce: Advance commercialization of new technologies by reducing patent application pendency and backlog.\nJames R. Hannon, Chief, Operations and Regulatory Community of Practice Teresa Rea, Acting Under Secretary of Commerce for Intellectual Property and Acting Director of the United States Patent and Trademark Office Department of Commerce: Expand broadband service to communities. Lawrence Strickling, Assistant Secretary for Department of Defense (DOD): Reform DOD’s acquisition process.\nDepartment of Defense: Improve energy performance.\nDepartment of Education: Improve outcomes for all children from birth through third grade.\nDepartment of Education: Demonstrate progress in turning around the nation’s lowest-performing schools. Department of Education: Improve students’ ability to afford and complete college. Department of Energy: Make significant progress toward securing the most vulnerable nuclear materials worldwide within 4 years.\nDepartment of Energy: Reduce the cost of batteries for electric drive vehicles to help increase the market for plug-in hybrids and all-electric vehicles and thereby reduce petroleum use and greenhouse gas emissions.\nDepartment of Energy: Make solar energy as cheap as traditional sources of electricity.\nAgency/ Goal Department of Energy: Prioritization of scientific facilities to ensure optimal benefit from federal investments. Environmental Protection Agency: Clean up contaminated sites and make them ready for use. Environmental Protection Agency: Reduce greenhouse gas emissions from cars and trucks. General Services Administration: Manage customer agency real estate portfolio needs in a cost-effective and environmentally sustainable manner.\nDepartment of Health and Human Services: Reduce foodborne illness in the population.\nDepartment of Health and Human Services: Increase the number of health centers certified as patient centered medical homes.\nDepartment of Health and Human Services: Improve health care through meaningful use of health information technology. Department of Homeland Security: Improve the efficiency of the process to detain and remove criminal aliens from the United States. Department of Housing and Urban Development: Reducing homelessness.", "Position vacant at the time of our interviews (we met instead with the performance improvement officer and deputy performance improvement officer)", "Department of the Interior: Build the next generation of conservation and community leaders by supporting youth employment at the Department of the Interior.\nDepartment of the Interior: Reduce violent crime in Indian communities.\nDepartment of the Interior: Enable capability to increase the available water supply in the western states through conservation related programs to ensure adequate and safe water supplies.\nDepartment of Justice: Protect those most in need of help - with special emphasis on child exploitation and civil rights.", "Department of Labor: Create a model safety and return-to-work program.\nDepartment of Labor: Reduce worker fatalities.\nNational Aeronautics and Space Administration: Sustain operations and full utilization of the International Space Station.\nNational Aeronautics and Space Administration: Develop the nation’s next generation human space flight system to allow for travel beyond low earth orbit. National Science Foundation (NSF): Increase opportunities for research and education through public access to high-value digital products of NSF-funded research.\nOffice of Personnel Management: Reduce federal retirement processing time. Office of Personnel Management: Ensure high quality federal employees.\nKenneth Zawodny, Jr., Associate Director, Retirement Services Angela Bailey, Chief Operating Officer (note: at the time of our interview, Ms. Bailey’s title was Associate Director of Employee Services)\nSmall Business Administration: Increase small business participation in government contracting.\nSmall Business Administration: Process disaster assistance applications efficiently.\nSocial Security Administration: Reduce Supplemental Security Income overpayments. Department of State/U.S. Agency for International Development: Democracy, human rights, and good governance.", "", "Department of Transportation: Advance the development of passenger rail in the United States.\nDepartment of the Treasury: Increase electronic transactions with the public to improve service, prevent fraud, and reduce costs. Department of Veterans Affairs: Assist in housing 24,400 (12,200 per year) additional homeless veterans and reduce the number of homeless veterans to 35,000 in 2013, to be measured in the January 2014 point-in- time homelessness count.", "The GPRA Modernization Act of 2010 (GPRAMA) requires GAO to review the act’s implementation. This report is part of a series of reviews planned around the requirement. The objectives of this report are to: (1) evaluate the roles and responsibilities of agency priority goal leaders in managing goal progress and the extent to which they are held accountable for achievement of priority goals; (2) review the extent to which priority goal leaders collaborate with other programs and agencies that contribute to the achievement of the priority goals; and (3) describe any challenges and practices identified by priority goal leaders in managing goals, and evaluate the extent to which they exchange this information with other priority goal leaders.\nTo achieve our objectives, we focused our review on the goal leaders for a random sample of agency priority goals (APG) for 2012 and 2013. There were 103 APGs for 2012 and 2013, across 24 agencies. The number of APGs per agency ranged from two to eight. The sample we selected included nearly half (47) of these APGs. We chose our sample to ensure that it included at least one goal from each of the 24 agencies and approximately half of the total number of APGs per agency. Although our sample represented a significant portion of APGs and goal leaders, we did not generalize information to the population of APGs or goal leaders. Appendix I includes a list of the APGs in our sample and the associated goal leaders we interviewed.\nTo inform our work on all three objectives, we reviewed GPRAMA and related Office of Management and Budget (OMB) guidance, along with our prior work on performance management roles, APGs, and interagency collaboration. We also reviewed information on APGs and goal leaders published on Performance.gov, a government-wide performance website. We used information from Performance.gov throughout the engagement, but all references to data from Performance.gov in this report are as of May 23, 2014, the date we most recently downloaded information from the website. To assess the reliability of APG information available through Performance.gov, we collected information from agencies and reviewed relevant documentation and our prior work. We concluded that information from the website was sufficiently reliable for the purpose of drawing our sample of APGs and providing contextual information on APGs. We did not evaluate agency data on goal progress to determine if APG progress they described to us and on Performance.gov was accurate. But, we did ask agency officials to verify information on goal progress we report from Performance.gov.\nWe conducted semistructured interviews with the goal leaders for 43 of the 47 APGs in our sample, for a total of 46 goal leaders. The number of goal leaders does not equal the number of goals because some goals had more than one leader, while some goal leaders were responsible for more than one goal in our sample. In most cases where there was more than one goal leader, we interviewed all goal leaders. The one exception was for a goal for which the agency had identified two goal leaders, but noted that one was the primary goal leader. In that case, we only interviewed that official. The goal leaders for the other four APGs in our sample had either left their agencies or were about to leave at the time of our interviews. For these goals, we interviewed other agency officials who were knowledgeable about the goals, such as deputy goal leaders and performance management staff. Two of the departing goal leaders provided us with written responses to our questions. We also interviewed Performance Improvement Council (PIC) and OMB staff.\nTo address our first objective, we obtained and analyzed documentation from goal leaders related to their roles and responsibilities, such as records showing how they track and communicate goal progress. We also obtained individual performance plans from all goal leaders and deputy goal leaders who had relevant plans—32 goal leaders and 35 deputy goal leaders—and analyzed them to understand how they are used to hold officials accountable for goal progress. We focused our analysis on how closely expectations in the plans were aligned to the APG for which the officials were responsible. Specifically, we evaluated (1) whether the plans specify that officials are responsible for the APG; (2) whether performance standards are linked to APG outcomes; (3) if the plans include broad responsibilities for an office or mission area under which the APG is likely to fall; and (4) if they hold officials responsible for one or more activities that could contribute to progress on the APG. To assess goal leader and deputy goal leader performance plans, we reviewed our prior work on individual and organizational performance. We also reviewed our prior work on data-driven performance reviews (also referred to as quarterly performance reviews) as part of our examination of accountability mechanisms for goal achievement and goal leaders’ collaboration. We also reviewed Office of Personnel Management (OPM) guidance and regulations on performance management, although we recognize that not all of the performance plans we reviewed were within the coverage of OPM guidance and regulations. To further address this objective, we also included questions in our interviews with goal leaders about their roles and responsibilities, deputy goal leader roles and responsibilities, accountability for goal achievement, and their assessments of the effects of the goal leader designation. We also included related questions in our interview with OMB and PIC staff.\nTo address our second objective, we obtained and analyzed documentation from goal leaders related to collaboration, such as minutes and agenda of meetings during 2012 and 2013 at which APGs were discussed, and records of agency analysis of different program types that contribute to APGs, such as grants. To determine how agencies are identifying and analyzing the contribution of tax expenditures to their APGs, we identified five APGs in our sample that For this subset of APGs, have a close connection to tax expenditures.we included questions during our interviews with goal leaders and their staff about agencies’ consideration of tax expenditures. We also asked goal leaders about how they coordinate within and outside of their agencies, and how they identify and analyze the contributions of different program types. We asked related questions in our interview with OMB and PIC staff.\nTo address our third objective, we obtained and analyzed examples of ways in which goal leaders shared information, such as talking points used at presentations and copies of e-mail between agencies and OMB and the PIC. We included questions in our interviews with goal leaders about what they consider to be promising practices and lessons learned in managing APGs, and the extent to which they and deputy goal leaders share this type of information within and outside of their agencies. We also asked OMB and PIC staff about actions the PIC has taken to reach out to and facilitate information exchange among goal leaders.\nWe conducted our work from June 2013 to July 2014 in accordance with generally accepted government audit standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Sarah Veale, Assistant Director, and Kathleen Padulchick, Analyst-in-Charge, supervised the development of this report. Jenny Chanley, Karin Fangman, Erik Kjeldgaard, Michael O’Neill, and Cynthia Saunders made significant contributions to all aspects of this report." ], "depth": [ 1, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 2, 2, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_title", "h0_full", "h0_full", "h0_full", "h0_full", "", "h0_title h1_title", "", "", "h1_full", "h0_full h1_full", "h2_title", "h2_full", "h2_full", "h0_full h2_full h1_full", "", "h2_full h1_full", "", "", "", "", "", "", "h0_full", "", "", "", "" ] }	{ "question": [ "How did GAO seek to get the best information in their reviews by controlling who they interviewed?", "What did these goal leaders cite as evidence for their success?", "How are deputy goal leaders enlisted for this title and what are their responsibilities?", "What were GAO's major findings in terms of goal leaders from their report?", "How did the lack of a formal deputy goal leader affect these agencies in their APGs?", "How does the OMB hold goal leaders accountable for their agencies' goals?", "How can a performance plan ensure accountability of the goal leaders?", "What was the effect on APGs of inter-agency collaboration between goal leaders?", "How did the implementation of other programs contribute to goal leaders' APGs?", "What have agencies de-prioritized in terms of reaching their APGs in their reports?", "Why are these findings important to GAO regarding the implementation of GPRAMA?", "How, if at all, did goal leaders describe the challenges in managing their APGs?", "How has the OMB attempted to facilitate greater sharing of information by and between goal leaders?", "Why doesn't the PIC focus their attention on the goal leaders themselves?", "Why is the PIC's role to facilitate information sharing helpful to the goal leaders in achieving their APGs?" ], "summary": [ "Agency priority goal leaders GAO interviewed were generally highly-placed within their agencies—for example, several were heads of agencies—and reported a range of responsibilities related to managing agency priority goals (APG), such as laying out goal strategies.", "A majority of the goal leaders said the goal leader designation had benefits for their APGs, such as greater visibility for the goal. Several also believed that there were benefits to designating the goal leader position in conjunction with other requirements from the GPRA Modernization Act of 2010 (GPRAMA), such as reviewing priority goal progress at least quarterly.", "The Office of Management and Budget (OMB) directs agencies to appoint deputy goal leaders. Deputy goal leaders manage day-to-day implementation of APGs and provide continuity in the event of goal leader turnover.", "From the time the APGs were published in February 2012 to the end of fiscal year 2013 (when they were to have been achieved), about 40 percent of the APGs GAO examined had a change in goal leader, while about 30 percent had a change in the deputy position. In addition, although most of the 46 goal leaders GAO interviewed had formal deputy goal leaders in place, 11 (24 percent) did not.", "Without a designated deputy goal leader, agencies lack a formally designated official to fill a key role in goal implementation.", "Individual performance plans are one of several mechanisms to provide goal leader and deputy goal leader accountability for APGs. Most goal leaders and all deputy goal leaders had performance plans. These plans covered a range of responsibilities, but generally did not fully reflect their APGs. In fact, many did not refer to the APG.", "Performance plans that link more directly to APGs could help ensure that officials are evaluated on and held responsible for APG progress and outcomes.", "Goal leaders collaborated with officials from outside their agencies to drive progress on APGs. However, some goal leaders reported that these outside contributors were not included in the quarterly performance reviews.", "Goal leaders also reported that a variety of different types of programs, such as grant and regulatory programs, contributes to their APGs. However, they reported few mechanisms for sharing information with other agencies related to assessing these programs.", "Further, for a variety of reasons agencies have focused less attention on identifying the tax expenditures that contribute to their APGs.", "These findings are consistent with prior recommendations GAO made to OMB regarding GPRAMA implementation. OMB has taken some steps to address the recommendations.", "Goal leaders identified some common challenges and practices in managing APGs, but shared this information to a limited extent. For example, goal leaders commonly cited resource constraints as a challenge, and practices related to measuring goal progress as helpful.", "One of the roles of the Performance Improvement Council (PIC), a council made up of agency performance improvement officers and chaired by OMB, is to facilitate information exchange.", "The PIC has shared tools and information with goal leaders; however PIC staff's primary points of contact are agencies' performance improvement officers and their deputies. Overall, goal leaders and their deputies have had little direct interaction with the PIC.", "More direct outreach from PIC staff could facilitate information sharing among goal leaders and their deputies, and help ensure that they do not miss opportunities to better manage their APGs." ], "parent_pair_index": [ -1, 0, -1, -1, 3, -1, 5, -1, -1, -1, 2, -1, -1, 1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5 ] }
GAO_GAO-16-559	{ "title": [ "Background", "The Frequency and Extent of Unauthorized Grazing on Agency Lands Are Largely Unknown, and Its Effects May Include Rangeland Degradation", "Agency Databases Identified Nearly 1,500 Incidents of Unauthorized Grazing Where Formal Action Was Taken from 2010 to 2014", "Agencies Report Handling Most Unauthorized Grazing Incidents Informally and Do Not Record Them in Their Databases", "Unauthorized Grazing May Degrade Rangelands under Certain Conditions and Can Cause Conflicts between the Agencies, Ranchers, and Stakeholders, among Other Effects", "Agencies’ Efforts to Detect, Deter, and Resolve Unauthorized Grazing Have Shortcomings That Limit Their Effectiveness", "BLM and the Forest Service Have Similar Detection and Deterrence Efforts, but Effectiveness Is Limited for Various Reasons", "Compliance Inspections", "Penalties for Unauthorized Grazing", "Willful and Repeated Willful Violations", "Permit Modifications", "Citations", "BLM and Forest Service Regulations Do Not Provide Flexibility for the Agencies’ Preferred Practice of Informal Resolution for Unauthorized Grazing", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Grazing Information for the Bureau of Land Management and U.S. Forest Service", "Acres and AUMs of Grazing", "Permits and Leases by Size", "Calculation of Grazing Fees and Unauthorized Grazing Penalties for BLM’s and the Forest Service’s Western States", "Appendix III: Detailed Information on the Extent and Frequency of Unauthorized Grazing", "BLM Range Program Data", "BLM Law Enforcement Data", "Forest Service Range Program Data", "Forest Service Law Enforcement Data", "Appendix IV: Comments from the Department of Agriculture", "Appendix V: Comments from the Department of the Interior", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The federal government manages about 640 million acres of land in the United States, including lands in national forests, grasslands, parks, refuges, reservoirs, and military bases and installations. Of the total federal lands, BLM and the Forest Service manage about 450 million acres for multiple uses, including grazing, timber harvest, recreation, minerals, water supply and quality, and wildlife habitat. BLM’s 12 state offices manage nearly 250 million acres in 12 western states, and the Forest Service’s 9 regional offices manage more than 190 million acres across the nation (see figs. 1 and 2). The majority of federal lands are located in the western half of the country.\nThe federal government has managed grazing on federal lands for more than 100 years. Following the passage of the Taylor Grazing Act of 1934, the Department of the Interior created the Division of Grazing, later renamed the Grazing Service, to administer provisions of the act. Subsequently, the Grazing Service was merged with the General Land Office to form BLM. The act was passed to stop degradation of public lands caused by overgrazing and soil deterioration; to provide for the orderly use, improvement, and development of public lands; and other purposes. The act also provided for the issuance of permits and leases for these lands and set requirements for the distribution of funds received from grazing. The Forest Service managed grazing under its general authorities until 1950, when Congress enacted the Granger-Thye Act, specifically authorizing the Secretary of Agriculture to issue grazing permits on national forest lands and other lands under the department’s administration. Additional laws affecting grazing on both BLM and western Forest Service lands were enacted in the 1970s.\nBLM’s and the Forest Service’s range grazing programs administer livestock grazing for permittees. Agency law enforcement assists when necessary—primarily to address grazing violations by nonpermittees that cannot be handled administratively. To provide access to grazing, the agencies divide their rangelands into allotments, which can vary in size from a few acres to hundreds of thousands of acres. Because of the land ownership patterns that occurred when the lands were settled, the allotments can be adjacent to private lands or intermingled with private lands. Under its authorities, BLM issues permits for grazing in allotments within its grazing districts and leases for grazing on BLM-administered lands outside grazing districts. To be eligible for a permit or lease on one of BLM’s allotments, ranchers, among other things, are required to own or control land or water, called a base property, to which preference for obtaining a permit or lease is attached. The Forest Service, which does not have grazing districts, uses permits to authorize grazing in its allotments. To be eligible for a permit under Forest Service policy, ranchers, among other things, must own base property and the livestock to be permitted. The agencies’ permits and leases specify the number and type of livestock allowed on the allotments, the time and duration of use for grazing, and special conditions or use restrictions. Agency field office staff conduct compliance inspections to help ensure that permittees are meeting the terms and conditions of their permits or leases. The agencies may modify permits or leases if range conditions are being degraded or suspend or cancel them if permit conditions are violated.\nWith a few minor exceptions, permittees pay a grazing fee for the use of the federal land. The grazing fee BLM and the Forest Service charge in western states is based on a formula that was originally established by law to prevent economic disruption and harm to the western livestock industry, among other things. The formula expired after 7 years but was extended indefinitely by Executive Order 12,548 and has been incorporated into the agencies’ regulations. The fee derived from the formula is generally lower than the fees charged by other agencies, states, and private ranchers. In grazing year 2016, BLM charged ranchers $2.11 per animal unit month for horses/cattle and $0.42 for sheep and goats; the Forest Service charged the same rates per head month. According to the National Agricultural Statistics Service, based on the average private grazing land lease rate per animal unit month, the commercial value of forage in western states ranged from $9 to $39 in grazing year 2016. As we found in September 2005, the total grazing fees generated by federal agencies amounted to less than one-sixth of the agencies’ expenditures to manage grazing in 2004. We found that BLM and the Forest Service use most of the grazing fee receipts for range protection and improvements and deposit some receipts to the Department of the Treasury’s general fund, with some receipts distributed to states and counties. See appendix II for additional information on grazing, permits, and fees for BLM and the Forest Service.\nUnauthorized grazing includes instances in which livestock owners graze on BLM or Forest Service allotments without a permit or lease, as well as instances in which those with permits or leases violate the terms and conditions of those documents, such as by grazing more livestock than allowed by permit, grazing in areas that are closed to livestock, or grazing during unauthorized times of the year. It may be unintentional (non-willful) on the part of the livestock owner, such as when livestock stray through an unlatched gate into an area where they are not permitted to graze, or it may be intentional (willful or repeated willful) such as when a livestock owner purposefully grazes livestock in a manner that is not allowed by a permit or grazes livestock without obtaining a permit once or multiple times.\nUnder their applicable regulations, BLM and the Forest Service may address unauthorized grazing by charging permittees penalties for unauthorized grazing; revising their permits; impounding livestock; or taking action that could lead to criminal penalties, most commonly for nonpermittees, as follows:\nBLM’s grazing regulations establish three levels of unauthorized grazing—non-willful, willful, and repeated willful—with progressively higher penalties for each level. The regulations require that BLM send out a written notice for every potential unauthorized grazing incident. Under certain circumstances, BLM can approve a nonmonetary settlement for non-willful unauthorized grazing. For willful and repeated willful incidents, in addition to the monetary penalties—the value of the forage consumed—the regulations specify that the offender shall be charged for any damages to the land and reasonable agency expenses incurred to resolve the violation, and BLM shall suspend or cancel all or portions of the grazing permit for repeated willful incidents. BLM may impound and dispose of livestock if the owner is unknown or the permittee fails to remove the livestock when ordered. BLM also has the authority to cite permittees and nonpermittees for grazing violations that subject them to criminal penalties.\nThe Forest Service’s grazing regulations require the agency, except in certain circumstances, to determine a grazing use rate for unauthorized grazing. The regulations define unauthorized grazing as (1) livestock not authorized by permit to graze upon the land, (2) an excess number of livestock grazed by permittees, or (3) permitted livestock grazed outside the permitted grazing season or allotment. Under the regulations, the Forest Service can cancel or suspend a permit if the permittee does not comply with provisions and requirements in the grazing permit or applicable regulations. The agency can impound and dispose of unauthorized livestock or livestock in excess of those authorized by a grazing permit if they are not removed from the area within the periods prescribed by regulation. The Forest Service also has the authority to cite permittees and nonpermittees for grazing violations that subject them to criminal penalties.\nIn our December 1990 report on unauthorized grazing on BLM lands, we found that BLM had no systematic method for detecting unauthorized grazing, and when offenses were detected, penalties were rarely assessed. We made five recommendations to improve the effectiveness of the BLM’S unauthorized grazing detection and deterrence efforts:\nDevelop an unauthorized grazing detection strategy that will (1) establish detection as a workload measure and a reportable accomplishment for which managers are held accountable, (2) use visits to randomly selected allotments to provide systematic compliance coverage, and (3) target additional follow-up visits for those livestock operators who have a history of repeated violations.\nEither (1) ensure that penalties are assessed for all non-willful unauthorized grazing violations as provided for in BLM regulations or (2) amend BLM regulations to establish a procedure for the informal resolution of non-willful unauthorized grazing violations at the local level.\nRequire that all unauthorized grazing incidents—including those now handled informally—be documented and made part of the permanent unauthorized grazing file.\nEnsure that field staff impose the penalties required under BLM regulations for willful and repeated willful unauthorized grazing.\nDevelop a management information system to provide timely, reliable, and adequate information on such things as (1) the number of compliance visits conducted, (2) the number and level of violations identified, and (3) how each violation is resolved, including those resolved informally.\nBLM agreed with the recommendations and implemented one of the five by developing an unauthorized grazing detection strategy. The agency took steps toward implementing some of the others, but did not fully implement the remaining four recommendations.", "The frequency and extent of unauthorized grazing on BLM and Forest Service lands are largely unknown because according to agency officials the agencies prefer to handle most incidents informally and do not record them. The agencies’ databases contained information on nearly 1,500 incidents of unauthorized grazing where formal action was taken by the agencies’ range program or law enforcement field staff for grazing years 2010 through 2014. Unauthorized grazing incidents were recorded in the range management databases when a penalty for unauthorized grazing was billed to a permittee by program staff and in the law enforcement databases when a formal report or notice was entered by a law enforcement officer. However, agency field staff told us that most incidents they identify are handled informally—their preferred practice— and are not recorded in their databases or consistently recorded in paper files. Agency field staff told us that unauthorized grazing can severely degrade the range under certain conditions, such as drought, and also told us of other effects, such as creating conflicts between the agencies’ staff, ranchers, and other stakeholders.", "The agencies’ databases identified nearly 1,500 incidents of unauthorized grazing where formal action was taken by range program staff or by agency law enforcement officers for grazing years 2010 through 2014; BLM data identified a total of 859 incidents, and Forest Service data identified 618 incidents (see table 1).\nThe agencies’ grazing program field staff generally handle unauthorized grazing by permittees through their administrative process, and law enforcement officers primarily handle unauthorized grazing by those without permits through warnings or criminal citations. Each agency has separate range management and law enforcement databases. For example, unauthorized grazing is recorded in BLM’s range management database when a formal action is taken to send a bill to a permittee for penalties—and in some cases charges for damage to the land or to recoup the administrative expenses of the agency—for incidents of unauthorized grazing. In some cases, BLM may include penalties for more than one incident of unauthorized grazing in one bill. The Forest Service’s range management database contains incidents where a formal action was taken to send a bill for penalties for unauthorized grazing incidents. The law enforcement databases of both agencies contain incidents where formal documentation, such as an incident report (record of observation), warning notice, or violation notice was prepared by a law enforcement officer and entered into the database. See appendix III for detailed information on the extent and frequency of unauthorized grazing formally reported in the agencies’ databases.", "The full extent and frequency of unauthorized grazing is unknown because most unauthorized grazing incidents identified by the agencies’ range program field staff are handled informally and are not recorded in their databases, according to agency officials. We found that these incidents were inconsistently documented in their paper files. The databases do not include incidents that are informally resolved with telephone calls or by visits from the agency program staff to the permittees asking them to remove their livestock from areas where they are not permitted. Staff we interviewed from all 22 BLM and Forest Service field offices told us they prefer such informal resolutions, particularly for incidents that appear to be non-willful and involve a few head of livestock with no resource damage. Agency staff said that these types of incidents account for the majority of unauthorized grazing they encounter. According to these field staff, the informal resolution allows them to resolve the problem quickly and remain focused on higher-priority activities, such as preparing environmental analyses, while maintaining collaborative and cooperative relations with permittees, who field staff said are largely compliant with their permits.\nAgency field staff from both agencies told us that they maintain paper files for permittees that may contain notes on informally resolved unauthorized grazing incidents that are not included in the databases, or may record a telephone call to a permittee in their telephone log. However, they said that such information is not consistently recorded in the permittee files, in part because they do not consider recording such information a priority. As a result, the agencies do not have complete information on unauthorized grazing and therefore may not have the documentation needed to deal with any instances of repeat offenders appropriately. Federal internal control standards call for agencies to clearly document all transactions and other significant events in a manner that allows the documentation to be readily available for examination. This provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel, as well as a means to communicate that knowledge as needed to external parties, such as external auditors. Until the agencies require that all incidents of unauthorized grazing be recorded, including those incidents resolved informally, BLM and the Forest Service will not have a complete record of unauthorized grazing incidents for tracking patterns of any potential repeat offenders.", "Unauthorized grazing may create various effects, such as severely degrading rangelands under certain conditions. Joint BLM/Forest Service riparian area management guidance states that compliance monitoring of grazing is critical because just a few weeks of unauthorized grazing can set back years of progress in restoring riparian areas—such as the narrow bands of green adjoining rivers, streams, or springs. Agency field staff we interviewed from 17 out of the 22 offices told us that under certain circumstances, unauthorized grazing can be more damaging than permitted grazing, such as when livestock are allowed into closed riparian areas during times of low precipitation or drought or graze in pastures earlier than permitted in the spring when grass is first sprouting. Stakeholders told us that the loss of native grass through unauthorized overgrazing may allow invasive species such as cheatgrass to grow, creating a potential fire hazard, or may result in a loss of habitat for threatened species such as sage grouse. During our field visits, we observed locations where unauthorized grazing had resulted in severely damaged natural springs, overgrazed meadows, and trampled streambeds. Agency field staff provided photographs showing unauthorized grazing in protected habitat areas and the effects of overgrazing from unauthorized use (see figs. 3, 4, and 5).\nAgency staff and stakeholders told us that unauthorized grazing can strain relationships and cause conflicts among various groups. Various stakeholders, such as range protection advocates and others, told us that they often observe unauthorized livestock grazing on the agencies’ allotments in the course of their resource monitoring or other activities and notify agency field staff. They are frustrated when it appears that the agencies do not take action. Agency staff we interviewed from 15 out of the 22 field offices told us that they are not always able to confirm and take action on such reporting because it is not timely or lacks specificity, and many staff said that following up to confirm such reports takes them away from higher-priority responsibilities. Agency staff also told us that permittees get frustrated if they do not take prompt action to stop unauthorized grazing by others, such as nonpermittees, which can also lead to conflicts among ranchers, for example, if a nonpermittee’s stray livestock consume the forage on a permittee’s allotment through unauthorized grazing. According to a wild horse advocate we interviewed, the advocate had experienced threats from ranchers engaged in unauthorized grazing on the range while the advocate was working with BLM to protect and manage the horses.\nAgency field staff and stakeholders told us there are only a small number of confrontational ranchers who do not recognize the agencies’ authority to manage the range and engage in willful unauthorized grazing, but they are concerned that the problem will grow. Agency field staff we interviewed from 5 out of the 22 field offices told us that high-profile cases of intentional unauthorized grazing and related antigovernment protests can affect agency decision making regarding enforcement, and staff at 4 out of the 22 field offices told us that not taking enforcement action on violators is likely to encourage more unauthorized grazing. For example, staff at one Forest Service office in Oregon told us that they were prepared to suspend a rancher’s permit for repeated unauthorized grazing violations but decided not to because of the standoff by antigovernment activists at Malheur National Wildlife Refuge. Agency staff we interviewed from 6 of the 22 field offices told us that lack of support from higher-level managers for strong enforcement action does not incentivize field staff to act on unauthorized grazing and, in some cases, lowers staff morale. The leaders of two stakeholder groups, Western Watersheds Project and Public Employees for Environmental Responsibility, jointly wrote a letter to the Secretary of the Interior in 2015 to express concern about the lack of effective range management of BLM lands in Nevada because of what they characterized as higher-level pressure on local managers to accept ranchers’ demands when settling unauthorized grazing incidents; agency staff from three of the local offices we spoke with shared this concern. BLM responded to the stakeholders’ letter on behalf of the Secretary, stating that the agency is committed to collaborating with permittees to resolve problems that reflect the interests of affected communities while also ensuring that public lands are managed and conserved for the future.\nAgency field staff we interviewed from 14 out of the 22 offices told us they generally do not have safety concerns while performing their duties, or did not mention any such concerns, even with the potential for confrontational tactics by some ranchers. BLM and Forest Service law enforcement officials told us that the overall trend for assaults and threats to agency staff had been down in recent years, but they do not track assaults and threats specifically related to grazing incidents. However, BLM field staff in Southern Nevada were directed by the state office not to visit grazing allotments after an armed standoff with a rancher over the agency’s impoundment of his cattle for unauthorized grazing. At one BLM field office we visited in Northern Nevada, there was a protest site established across the street in response to the office’s efforts to enforce unauthorized grazing regulations (see fig. 6). Field staff told us that as a result of a statewide BLM assessment, the office upgraded its security to include video cameras, card key locks, and entrance barricades.\nFinally, unauthorized grazing that is not detected or not formally acted on when identified cannot be billed penalties for unauthorized grazing, resulting in forgone revenues. The agencies track penalties for unauthorized grazing billed and collected but do not track those forgone. Based on information from the agencies’ databases, BLM and the Forest Service collected nearly $450,000 for unauthorized grazing in grazing years 2010 through 2014. BLM collected about $426,000 and has a balance due of about $8,000 for unauthorized grazing during that time frame. The Forest Service collected about $24,000 and reported no balance due for the same time frame.", "BLM and the Forest Service undertake similar efforts to detect and deter unauthorized grazing, such as conducting compliance inspections on grazing allotments and charging penalties for unauthorized grazing, but agency field staff told us that such efforts have limited effectiveness for various reasons. While it is the preferred practice of agency field staff to resolve incidental unauthorized grazing informally, BLM and Forest Service regulations do not provide agency staff with the flexibility to resolve incidents informally with no written notice of violation and no penalty for unauthorized grazing charged.", "BLM and the Forest Service have undertaken a number of similar efforts to detect and deter unauthorized grazing. These include conducting compliance inspections, charging penalties for unauthorized grazing, issuing willful and repeated willful violations, modifying permits, and issuing criminal citations. However, BLM and Forest Service field staff we spoke with said that these efforts can have limited effectiveness in practice for various reasons, such as field staff being unavailable to conduct compliance inspections because of other priorities or the penalty for unauthorized grazing being lower than the current commercial value of forage.", "Field staff from both agencies told us that conducting compliance inspections is one of their more effective efforts for detecting and deterring unauthorized grazing. Specifically, staff we interviewed from 16 of the 22 agency offices said that compliance inspections are always or usually effective in detecting unauthorized grazing, and staff from 13 of the 22 said that such inspections are always or usually an effective deterrent. However, field office staff we spoke with told us that they have a limited number of knowledgeable staff—in part because of significant staff turnover, including transfers and retirements—administering vast acres of rangeland, and growing workloads that require multitasking and spending significant time in the office. In addition, grazing allotments are often in remote locations that can take hours to access by vehicle, horseback, or hiking. As a result, they said that compliance inspections are not a top priority and some allotments are seldom visited, which may diminish inspections’ deterrent effect. The number of field range staff available to conduct compliance inspections declined for both agencies from 2010 to 2014—from 1,829 to 1,795 for BLM and from 443 to 399 for the Forest Service. On average, each BLM range staff member is responsible for approximately 85,000 acres, and each Forest Service range staff member is responsible for approximately 255,000 acres. At one BLM field office in Utah, field staff told us that 2 range staff are responsible for 2 million acres and that competing work priorities often keep these staff in the office rather than out in the field. Many field staff said they focus inspections on areas with a history of compliance issues but that some unauthorized grazing likely goes undetected.", "Agency field staff—primarily those from the Forest Service—told us that penalties for unauthorized grazing are too low under current agency policy to act as an effective deterrent. Field staff we interviewed from 6 out of the 9 Forest Service offices and 4 out of the 13 BLM offices said that penalties for unauthorized grazing are rarely or never an effective deterrent. As a result, some told us that there are permittees who view the penalties for unauthorized grazing as a cost of doing business because paying the penalties is cheaper than seeking forage elsewhere. For example, Forest Service staff at one field location told us that they are reluctant to send a bill for penalties for unauthorized grazing because it shows how low the penalty is and may encourage additional unauthorized grazing.\nWe found that for grazing years 2008 through 2014, the Forest Service penalty for unauthorized grazing was $2.51 or less per head month, which was substantially less than BLM’s penalty for unauthorized grazing. The Forest Service calculates this penalty using the same formula that it and BLM use each year to calculate the permitted grazing fee. The formula for the permitted fee has a preset base value of $1.23 and other input values, such as the prices of private forage and beef cattle, which can vary annually. To calculate its penalty for unauthorized grazing using this formula, the Forest Service applies a higher preset base value of $3.80 rather than $1.23. (For more detailed information on the formula and calculation, see app. II.) For grazing years 2009 through 2012, the Forest Service’s unauthorized grazing penalty formula calculation would have resulted in a negative number or a number lower than the permitted grazing fee. To address this situation, a Forest Service official told us that the agency decided to hold the penalty for unauthorized grazing at $2.24 per head month until the formula calculation resulted in a higher penalty. In contrast, as shown in table 2, the BLM penalty for non-willful unauthorized grazing—based on commercial forage rates in each state— ranged from $8 to $33.50 per animal unit month for grazing years 2008 through 2014, and BLM doubled the penalty for willful incidents and tripled it for repeated willful incidents. In addition, with higher-level offensives (willful and repeated willful), BLM regulations require unauthorized grazing bills to also include “all reasonable expenses incurred by the United States in detecting, investigating, resolving violations, and livestock impoundment costs.”\nCompared to BLM’s penalties, the Forest Service penalty for unauthorized grazing is less likely to be a deterrent for unauthorized grazing, and the differing penalty structures result in inconsistency between the two federal agencies. As we noted in March 2003, penalties generally should be designed in such a way as to serve as a deterrent for unauthorized activities. Forest Service regulations incorporate Office of Management and Budget guidance, which directs that a fair market value be obtained for all services and resources provided to the public through establishment of a system of reasonable fee charges. By adopting a penalty structure for unauthorized grazing use that is, similar to BLM’s, based on the current commercial value of forage (a fair market value), the Forest Service’s penalty for unauthorized grazing can better serve as a deterrent to such grazing and be consistent with BLM’s penalty.\nThe Forest Service recognized that its formula for calculating its penalty for unauthorized grazing was problematic in grazing year 2009 when the formula produced a negative value. A Forest Service official told us that the agency is considering options for revising the penalty as part of its ongoing update of grazing guidance, but the update has not been completed because of higher priorities. The Forest Service does not have a time frame for when the penalty for unauthorized grazing will be revised, according to agency officials. Until the Forest Service revises its penalty for unauthorized grazing to reflect current forage rates, similar to BLM’s, the penalty has limited value as a deterrent to unauthorized grazing.", "BLM field staff generally told us that willful and repeated willful unauthorized grazing incidents are rare; most unauthorized grazing is incidental and non-willful. However, staff we interviewed from 3 of the 13 BLM field offices who had encountered willful and repeated willful unauthorized grazing incidents said that such violations are difficult to support because staff must prove that the unauthorized grazing was the fault of the livestock owner and show that a record of prior willful violations existed for repeat offenses, per agency regulations and policy. As mentioned previously, because BLM staff generally prefer informal resolution for most incidents of unauthorized grazing, there may not be a paper trail documenting repeated incidents. In some offices this was exacerbated by staff turnover. Specifically, field staff we interviewed from 7 of the 22 offices told us that institutional knowledge is lost when staff depart who are familiar with the extent and circumstances of unauthorized grazing that was resolved informally. As a result, BLM staff told us that they generally only pursue willful or repeated willful violations for the most egregious, long-term cases of unauthorized grazing.\nAgency regulations also direct BLM staff to collect reasonable agency expenses for resolving willful and repeated willful incidents, but field staff told us that they have discretion in determining what is reasonable and therefore may not charge violators for agency expenses. For example, field staff said that they may agree to waive the expenses if they were insignificant or to make it less likely that the permittee will appeal the decision. Our review of willful and repeated willful unauthorized grazing incidents in BLM’s grazing program database from grazing years 2010 through 2014 found that the administrative expenses were billed to violators in 98 out of 164, or 60 percent, of such incidents. We reviewed the paper file documentation for BLM’s 24 willful and 3 repeated willful unauthorized grazing cases in grazing year 2014, and found that in most cases field staff had documented how they determined the appropriate penalties and expenses to bill.", "Agency staff and cattlemen’s association representatives told us that the agencies’ policies for modifying permits, such as reducing the number of permitted livestock for an allotment or suspending or canceling the permits, are likely to be the greatest deterrent to unauthorized grazing, in part because they directly affect the permittees’ livelihoods. Field staff we interviewed from 18 of the 22 offices said that permit modifications are always or usually an effective deterrent. In practice, field staff from 19 of the 22 said that they generally view this as a last resort penalty and seldom modify, suspend, or cancel permits for unauthorized grazing in part because the warning is usually sufficient to obtain compliance. In one example, Forest Service staff at an office in Nevada said they had canceled only one permit, for a permittee with a particularly long record of persistent unauthorized grazing. Staff said that a warning about the potential for permit action is generally enough to achieve immediate compliance in almost all detected unauthorized grazing cases involving permittees.", "According to agency field staff, misdemeanor criminal citations are primarily issued to nonpermittees for unauthorized grazing and can be an effective deterrent. However, law enforcement officers and program staff we interviewed from 5 out of the 22 offices told us that federal attorneys may choose not to prosecute citations or the courts may lower the penalties, which may diminish the effectiveness of this deterrent. For example, a Forest Service law enforcement officer in Utah said that circuit courts typically lower penalties to a couple hundred dollars or less, which is below the cost of buying forage elsewhere. Furthermore, law enforcement officers and program staff we interviewed from 7 out of the 22 offices told us that when on patrol the officers are generally focused on higher priorities, such as public safety. In addition, staff from 7 of the 22 offices we interviewed said that the officers usually do not have knowledge of permit conditions and therefore do not know when livestock should or should not be in a certain location.", "BLM and Forest Service regulations do not provide field staff of both agencies with the flexibility to follow their preferred practice of informally resolving unauthorized grazing incidents with no written notice of violation and no penalty for unauthorized grazing. We recommended in 1990 that BLM either ensure that all penalties are assessed for non-willful unauthorized grazing, as provided for in its regulations, or amend its regulations to establish a procedure for informal resolution. The agency amended its regulations to add the option for the nonmonetary resolution of certain non-willful incidents, but the amendment did not remove the requirement for a written notice of violation. Forest Service regulations do not specifically require a written notice of violation but require that a penalty be determined; nonmonetary resolution is not an option. As a result, informal resolution with no written notice and no penalty—the preferred practice for field staff in dealing with unauthorized grazing—is not allowed for under either agency’s regulations.\nWhile not provided for under the regulations, most agency field staff told us that informal resolution is the most effective way to achieve the objective of quickly resolving non-willful unauthorized grazing with minimal conflict, and is the most efficient use of their time given multiple higher-priority responsibilities. As discussed in federal internal control standards, program operations are effective and efficient in achieving agency objectives when they produce the intended results and minimize the waste of resources. Management is responsible for designing the policies and procedures to fit an entity’s circumstances and building them in as an integral part of the entity’s operations. BLM and Forest Service officials stated that handling incidental unauthorized grazing informally is necessary and effective because they have limited staff and permittees tend to be largely compliant. However, the agencies have not established in regulations procedures for such informal resolution or alternatively taken steps to ensure that staff comply with existing regulations as written. By amending the regulations to establish procedures for the informal resolution of violations of the grazing regulations at the local level, agency management could achieve the objective of quickly resolving incidental unauthorized grazing with minimal conflict, in a manner consistent with its regulations and with the most efficient use of the agency’s resources. Alternatively, rather than amending their existing regulations to match their practices, the agencies could change their practices to comply with their existing regulations. BLM officials told us that the agency has faced challenges in revising its grazing regulations, including the incorporation of our 1990 recommendations; the most recent revision was enjoined by the court from implementation in 2006 after it was challenged by interest groups. The Code of Federal Regulations currently contains the enjoined regulations; agency officials plan to replace these regulations with the regulations that were in effect prior to the court’s action but have not set a date for completing the process.\nFurthermore, BLM has not updated its Unauthorized Grazing Use Handbook since 1987—in part because of the enjoined regulations— and it contains guidance that differs in some cases from the existing regulations. For example, the handbook does not reference the option of nonmonetary settlement for certain non-willful unauthorized grazing incidents that is contained in the regulations. In addition, the handbook description of penalties differs from that in the regulations for willful violations—the regulations state that the rate is twice the value of forage consumed, while the handbook states that the rate is three times the value of forage consumed. Furthermore, the regulations state that the value of damages to public lands shall be included in settlement for willful and repeated willful violations, and the handbook states generally that the value of damages “must be charged,” without specifying which violations must incur the charge. As a result, staff using the handbook may not be consistently following the regulations. Federal internal control standards call for agency management to periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. Without revising the agency’s grazing guidance to make it consistent with the grazing regulations, BLM does not have reasonable assurance that its staff consistently apply the grazing regulations.", "BLM and the Forest Service face the daunting task of effectively managing grazing on millions of acres of remote rangeland with a limited number of field staff who have multiple responsibilities and competing priorities. Given the large number of acres and permits managed under the agencies’ programs, the number of unauthorized grazing incidents that are formally reported is relatively small, and the reportedly larger number of incidents that are resolved informally and not recorded in any database or consistently recorded in paper case files are most often considered by agency field staff to be incidental and quickly remedied with minimal impact on range resources. By amending the regulations to establish procedures for the informal resolution of non-willful violations of the grazing regulations at the local level, agency management could achieve the objective of quickly resolving incidental unauthorized grazing with minimal conflict, in a manner consistent with its regulations and with the most efficient use of the agency’s resources. Alternatively, rather than amending their existing regulations to match their practices, the agencies could change their practices to comply with their existing regulations. While it may be reasonable for the agencies to handle incidental unauthorized grazing informally, given their limited staff and a largely compliant pool of permittees, it is important that each agency’s practices accurately reflect its grazing regulations to ensure clarity and consistency in application for staff and permittees.\nFurthermore, without recording the incidents of unauthorized grazing that are informally resolved, neither agency has complete information on the extent and frequency of unauthorized grazing for tracking patterns of any potential repeat offenders. In addition, until BLM revises its grazing guidance to make it consistent with the grazing regulations, the agency does not have reasonable assurance that its staff consistently apply the regulations. Finally, until the Forest Service revises its unauthorized grazing penalty structure to reflect the current value of forage, similar to BLM, the deterrent effect of the penalty will be limited, and some ranchers will continue to view the penalty as a cost of doing business.", "To improve the effectiveness of BLM’s efforts to track and deter unauthorized grazing, we recommend that the Secretary of the Interior direct the Director of BLM to take the following three actions: amend the regulations on unauthorized grazing use—43 C.F.R.\nSubpart 4150 (2005)—to establish a procedure for the informal resolution of violations at the local level, or follow the existing regulations by sending a notice of unauthorized use for each potential violation as provided by 43 C.F.R. § 4150.2(a) (2005); record all incidents of unauthorized grazing, including those resolved informally; and revise the agency’s Unauthorized Grazing Use Handbook to make it consistent with 43 C.F.R. pt. 4100 (2005).\nTo improve the effectiveness of the Forest Service’s efforts to track and deter unauthorized grazing, we recommend that the Secretary of Agriculture direct the Chief of the Forest Service to take the following three actions: amend the regulations on range management—36 C.F.R. pt. 222—to provide for nonmonetary settlement when the unauthorized or excess grazing is non-willful and incidental, or follow the existing regulations by determining and charging a grazing use penalty for all unauthorized and excess use when it is identified as provided by 36 C.F.R. § 222.50(a) and (h); record all incidents of unauthorized grazing, including those resolved informally; and adopt an unauthorized grazing penalty structure that is based, similar to BLM’s, on the current commercial value of forage.", "We provided the Departments of Agriculture and the Interior with a draft of this report for their review and comment. In its written comments, reproduced in appendix IV, the Forest Service generally concurred with our findings and recommendations. In its comments, the Forest Service stated that it has taken preliminary steps toward updating its guidance to field units, including guidance for unauthorized grazing penalties similar to BLM’s. In its written comments reproduced in appendix V, the Department of the Interior generally concurred with our findings and recommendations. In its comments, the Department of the Interior stated that it will revise its guidance to better describe procedures for following existing regulations, to provide procedures for documenting and recording all unauthorized grazing incidents, and will ensure that its guidance is consistent with its regulations. The Department of the Interior also provided technical comments that were incorporated, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Agriculture and the Interior, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI.", "Our objectives were to (1) describe what is known about the frequency and extent of unauthorized grazing, and its effects, and (2) examine the Bureau of Land Management’s (BLM) and the U.S. Forest Service’s efforts to detect, deter, and resolve unauthorized grazing.\nTo describe the frequency and extent of unauthorized grazing, we analyzed the agencies’ unauthorized grazing data, and to describe the effects of such grazing, we reviewed documentation, interviewed agency officials and stakeholder group representatives, and conducted site visits at agency field office locations. We collected data from BLM’s and the Forest Service’s range management, financial, and law enforcement databases on the frequency and extent of unauthorized grazing for grazing years 2010 through 2014, the most recent and complete data available at the time of our review. We also collected information on grazing acres, usage, and permits, which came from different years depending on what was the most recently available at the time of our request. For BLM, we obtained range management data from its Rangeland Administration System; financial data on unauthorized grazing bills from its Collection and Billing System; and law enforcement data from its Incident Management, Analysis, and Reporting System. For the Forest Service, we obtained range management and billing data from its INFRA system and law enforcement data from its Law Enforcement and Investigations Management Attainment Reporting System. We assessed the data provided by the agencies based on our review of database system documentation and discussions with agency database stewards and found the data to be sufficiently reliable for our purposes.\nWe conducted in-person and telephone interviews with staff in 22 of the 218 agency field office locations in eight western states where most such grazing had occurred. We selected the 22 offices from among the agency field offices that had the highest numbers of unauthorized grazing incidents or that had been recommended by stakeholders. From the 22 selected offices, we conducted site visits to 6 offices located in Nevada and Wyoming to interview agency range management and law enforcement staff about the extent of unauthorized grazing and the agencies’ policies and practices for addressing it, as well as to review paper case files and observe the effects of unauthorized grazing on federal lands. We also conducted telephone interviews with staff in 16 of the 22 BLM and Forest Service field locations in California, Colorado, Idaho, Nevada, New Mexico, Oregon, and Utah. Our interview results are not generalizable to all agency field office locations and grazing lands and instead are illustrative cases of the office locations reporting the highest numbers of unauthorized grazing incidents. Tables 3 and 4 provide more information about the agency field office locations where we conducted interviews.\nTo obtain the views of interested stakeholders, we conducted interviews with representatives of 11 stakeholder groups, including telephone interviews with cattlemen’s association representatives in California, Colorado, Nevada, New Mexico, and Oregon. We also conducted telephone interviews with representatives of other stakeholders, including Public Employees for Environmental Responsibility, Forest Service Employees for Environmental Ethics, Western Watersheds Project, Wildlands Defense, and others, such as a wild horse advocate. We selected these groups based on information provided by agency officials or other stakeholder groups involved in grazing issues; in one case, we spoke with a stakeholder who contacted us after learning of our review. We qualitatively analyzed agency and stakeholder interviews for common themes and patterns to describe how the agencies address unauthorized grazing and the effectiveness of these policies and practices. We coded interviews using qualitative data analysis software that allows organization and analysis of information from a variety of sources. Our coding process involved one independent coder putting information into initial categories and a second independent coder verifying that initial work. The coders discussed and resolved any discrepancies in coding.\nTo examine the agencies’ efforts to detect, deter, and resolve unauthorized grazing, we analyzed federal laws to identify agency requirements for addressing such grazing as well as the agencies’ regulations, policies, and practices. We qualitatively analyzed information obtained in agency and stakeholder interviews for common themes and patterns to describe how the agencies address unauthorized grazing and the effectiveness of their efforts. We compared the agencies’ policies to their practices in the field, compared the policies’ objectives with their outcomes, and assessed the internal controls for the policies and practices. We also compared the agencies’ policies and practices to our recommendations in our December 1990 report to evaluate whether those recommendations have made or could make improvements in the detection and deterrence of unauthorized grazing.\nWe conducted this performance audit from May 2015 to July 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "This appendix provides detailed information on grazing permits, leases, fees, and penalties on lands managed by the Bureau of Land Management (BLM), within the Department of the Interior, and the U.S. Forest Service, within the Department of Agriculture. Specifically, the information includes acres available for grazing on lands the agencies manage, the animal unit months (AUM) approved for grazing, and the AUMs billed for BLM and the Forest Service; BLM and Forest Service permits and leases by size; and information on BLM and Forest Service grazing fees for permitted grazing and penalties for unauthorized grazing. The agencies are in two different departments and their grazing programs are covered by different laws and regulations. Therefore, the agencies maintain their own databases and, in some cases, track different data elements. As a result, consistent information was not always available from the two agencies, and in some cases the information provided was from different years depending on what was the most recently available at the time of our request.", "This section provides an overview of the most recent information available at the time of our review on grazing that occurred on BLM and Forest Service lands. The acres of BLM and Forest Service land available for grazing each year can change, depending on the results of environmental assessments conducted on grazing allotments, and the amount of grazing that is allowed each year can change, depending on annual assessments of forage and range conditions. Both agencies measure the number of acres of their lands available for grazing by allotment each year, but the two agencies use different terms to measure the amount of grazing. BLM calls this amount active or authorized, and the Forest Service calls this amount permitted. Similarly, BLM refers to the amount of grazing that it bills for annually—which can vary from the amount it authorizes because of range or climate conditions—as billed, and the Forest Service refers to this amount of grazing as authorized.\nWe use “AUMs approved” to refer to the amounts of grazing authorized by BLM and permitted by the Forest Service and “AUMs billed” to refer to the amount of grazing for which BLM billed ranchers and the amount of grazing authorized each year on Forest Service lands. Table 5 shows the acres and AUMs approved as of January 2016 and AUMs grazed for BLM’s field offices in fiscal year 2014, the most recent year available.\nTable 6 shows the acres of grazing available, approved AUMs, and billed AUMs in grazing year 2015 for Forest Service administrative offices and grasslands. The data on acres include acres in active and vacant allotments but not in allotments that have been closed that are not available for grazing. The data on AUMs include data that the Forest Service calls head months. Unlike BLM, the Forest Service uses two methods to tally the amount of grazing that occurs—AUMs and head months. The agency uses AUM to refer to the amount of forage consumed by different types of livestock, while it uses the term head months to refer to the number of livestock (head) that are grazed and that are subject to billing. We used the Forest Service head month data because they are equivalent to the BLM’s data on billed AUMs, but we used AUM to simplify the comparison with BLM’s grazing data.", "Because the number of AUMs per permit or lease can vary greatly, the number of AUMs controlled by permittees or lessees also varies greatly. Tables 7 through 9 show the number of BLM and Forest Service permits and leases, and AUMs, by permit size. Multiple permits or leases may be contained on a single allotment, just as one permit or lease may span multiple allotments. In addition, several ranchers may share one permit or lease, just as one rancher may possess multiple permits or leases; therefore, the number of permits and leases does not necessarily correlate to the total number of ranchers. Table 7 shows the size of BLM permits and leases, using approved AUMs as of December 2015. The data do not include permits and leases with less than two AUMs.\nTable 8 shows Forest Service permits for cattle for regions with lands in western states (regions 1 through 6). The data do not include horses or other livestock and do not include permits with fewer than two AUMs of grazing for cattle.\nForest Service sheep permits are shown in table 9. For the purposes of conversion, five sheep equal one AUM. In addition to the sheep, an insignificant number of horses are included in the data because, in some cases, permittees may keep a horse for herding the sheep.", "Historically, BLM and Forest Service permitted grazing fees were established to achieve different objectives—to recover administrative expenses or to reflect livestock prices, respectively—but the agencies began using the same approach to setting fees in 1969. Over the years, the agencies, as well as outside entities, have conducted numerous studies attempting to establish a permitted grazing fee that meets the objectives of multiple parties. As of March 2016, the permitted grazing fee for BLM and the Forest Service in 16 western states is based on a formula which incorporates factors that take into account ranchers’ ability to pay and was established in 1978 based on studies conducted in the 1960s and 1970s.\nIn 2016, the permitted grazing fee for lands managed by BLM and the Forest Service in 16 western states was $2.11 per AUM—or the amount of forage needed to sustain a cow and her calf for 30 days. This permitted grazing fee is set annually according to a formula established in the Public Rangelands Improvement Act of 1978 and extended indefinitely by Executive Order 12,548 that has been incorporated into the agencies’ regulations. The formula is as follows: Fee = $1.23 x (FVI +BCPI – PPI)/100 where $1.23 = the base value, or the difference between the costs of conducting ranching business on private lands, including any grazing fees charged, and public lands, not including grazing fees. The costs were computed in a 1966 study that included 10,000 ranching businesses in the western states.\nFVI = Forage Value Index, or the weighted average estimate of the annual rental charge per head per month for pasturing cattle on private rangelands in 11 western states (Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, Washington, and Wyoming) divided by $3.65 per head month (the private grazing land lease rate for the base period of 1964-68) and multiplied by 100.\nBCPI = Beef Cattle Price Index, or the weighted average annual selling price for beef cattle (excluding calves) in the 11 western states divided by $22.04 per hundredweight (the beef cattle price per hundred pounds for the base period of 1964-68) and multiplied by 100.\nPPI = Prices Paid Index, for selected components from the Department of Agriculture’s National Agricultural Statistics Service’s Index of Prices Paid by Farmers for Goods and Services, adjusted by different weights (in parentheses) to reflect livestock production costs in the western states [fuels and energy (14.5), farm and motor supplies (12.0), autos and trucks (4.5), tractors and self-propelled machinery (4.5), other machinery (12.0), building and fencing materials (14.5), interest (6.0), farm wage rates (14.0), and farm services (cash rent) (18.0)].\nThe Public Rangelands Improvement Act of 1978 limited the annual increase or decrease in the resulting fee to 25 percent. It also established the fee formula for a 7-year trial period and required that the effects of the fee be evaluated at the end of that period. Although the permitted grazing fee formula under the act expired in 1986, the use of the fee formula was extended indefinitely by Executive Order 12,548 and incorporated into the agencies’ regulations. The executive order requires the Secretaries of the Interior and Agriculture to establish permitted grazing fees according to the act’s formula, including the 25 percent limit on increases or decreases in the fee. In addition, the order established that the permitted grazing fee should not be lower than $1.35 per AUM.\nTo calculate its penalty for unauthorized grazing, the Forest Service uses the same formula as for the permitted fee but replaces the base value of $1.23 with a higher base value of $3.80. In addition, the Forest Service does not apply the 25 percent limit on the annual increase or decrease in the penalty and does not set a lower limit on the penalty as with the permitted fee formula (see table 10). In contrast, BLM bases its penalties for unauthorized on the state by state commercial value of forage. According to the National Agricultural Statistics Service, based on the average private grazing land lease rate per AUM, the state-by-state commercial value of forage in western states ranged from $9 to $39 in grazing year 2016.", "This appendix provides detailed information on the extent and frequency of unauthorized grazing incidents and charges recorded in the Bureau of Land Management’s (BLM) and the U.S. Forest Service’s range management and law enforcement databases, for grazing years 2010 through 2014. BLM, within the Department of the Interior, and the U.S. Forest Service, within the Department of Agriculture, are in two different departments and their grazing programs are covered by different laws and regulations. Therefore, the agencies maintain their own databases and, in some cases, track different data elements. As a result, consistent information was not always available from the two agencies.", "BLM’s range management database contained records of 433 unauthorized grazing incidents that occurred in grazing years 2010 through 2014 and were settled and billed by December 28, 2015 (the date the data were queried) (see table 11). Incidents not billed by December 28, 2015, are not included, nor are incidents that were resolved nonmonetarily. The number of incidents ranged from 76 in Idaho to 5 in Arizona.\nThe bills identified for the 433 incidents in BLM’s range management database included 466 charges for different types of unauthorized grazing; non-willful (unintentional), willful (intentional), and repeated willful, each of which is charged at a different rate (see table 12). The total charges (466) exceeds the total number of incidents settled and billed (433) because each bill can include charges for more than one type of unauthorized grazing and for more than 1 grazing year. Non-willful unauthorized grazing was the most common type in grazing years 2010 through 2014, accounting for 299—or 64 percent—of the charges recorded; willful unauthorized grazing was 31 percent of the total, and repeated willful was 5 percent.\nBLM’s unauthorized grazing bills included charges for unauthorized grazing penalties; administrative charges for costs of the agency’s response; and other charges, fees, and interest. As of March 1, 2015, BLM had billed about $441,000 for unauthorized grazing charges in grazing years 2010 through 2014 (see table 13). BLM had collected about $426,000 of the amount; after adjustments, about $8,000 of the charges remained due.\nBLM’s range management database contained records of nearly 53,000 grazing compliance inspections performed by agency field staff during grazing years 2010 through 2014 (see table 14). Of the nearly 53,000 inspections, about 1,500—or 3 percent—identified possible noncompliance. Possible noncompliance means noncompliance was suspected but not yet confirmed by the individual completing the compliance inspection and was identified for further investigation. Therefore some inspections recorded as a finding of possible noncompliance, upon further investigation, may not have resulted in a finding of a violation.", "BLM’s law enforcement database contained records of 426 incidents where formal documentation, such as an incident report (record of observation), warning notice, or violation notice, was prepared by a law enforcement officer and entered into the database in grazing years 2010 through 2014 (see table 15). The number of incidents ranges from 71 in Wyoming to 17 in Arizona and Utah. From grazing years 2010 through 2014, the year with the most incidents recorded in the law enforcement database was 2013; 123 incidents were recorded, or nearly 30 percent of the 426 total incidents. According to agency officials, some of the data may include incidents that were miscoded as grazing related when entered into the law enforcement database, and a small proportion of the incidents include violations of grazing permits other than unauthorized grazing, such as supplementing the existing forage with additional livestock feed.", "The Forest Service’s range management database contained records of 190 unauthorized grazing incidents in grazing years 2010 through 2014 (see table 16). The number of incidents is based on the number of bills issued and also includes some unauthorized grazing incidents confirmed by Forest Service field offices as having occurred where no bill was issued. Additional incidents may have occurred that were not billed and were not entered in the Forest Service database. The number of incidents ranged from 65 in the Southwestern Region to 2 in the Southern Region.\nThe 190 incidents identified primarily by bills in the Forest Service’s range management database included charges for different types of unauthorized grazing incidents, excess use (by a permittee), and unauthorized use (by a nonpermittee) (see table 17). Excess use by permittees was the most common incident type in grazing years 2010 through 2014, accounting for 173—or 91 percent—of the incidents recorded; unauthorized use was 9 percent of the total.\nThe Forest Service’s unauthorized grazing bills included charges for excess use and unauthorized use. The Forest Service collected a total of about $24,000 from these charges in grazing years 2010 through 2014; nearly $18,000 from excess use by permittees, and about $6,000 from unauthorized use by nonpermittees (see table 18). The amount collected includes credits used by livestock owners to pay excess or unauthorized use charges.", "The Forest Service’s law enforcement database contained records of 428 incidents where formal documentation, such as an incident report (record of observation), warning notice, or violation notice, was prepared by a law enforcement officer and entered into the database in grazing years 2010 through 2014 (see table 19). The number of incidents ranges from 102 in the Intermountain Region to 24 in the Pacific Northwest and Eastern Regions.\nFrom grazing years 2010 through 2014, the year with the most unauthorized grazing incidents recorded in the Forest Service’s law enforcement database was 2013; 100 incidents were recorded, or about 23 percent of the 428 total incidents (see table 20).", "", "", "", "", "In addition to the contact named above, Jeffery D. Malcolm (Assistant Director), Brad C. Dobbins, Karen (Jack) Granberg, and Katherine M. Killebrew made key contributions to this report. Important contributions were also made by Kevin S. Bray, Martin (Greg) Campbell, Elizabeth Martinez, Alana R. Miller, and Cynthia M. Saunders." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 3, 3, 3, 3, 3, 2, 1, 1, 1, 1, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_full", "h0_full", "h0_full", "", "h1_full", "h1_title", "", "h1_full", "", "", "", "h1_full", "", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "Why is the scope of unauthorized grazing on BLM and U.S. Forest Service lands mostly unknown?", "How was this information determined; in other words, how do these agencies report incidents of formal action taken against unauthorized grazing versus informal action?", "Why do these agencies rely on informal resolution so frequently?", "How does this informal handling of incidents affect the agencies' data?", "How can these agencies attempt to get the most accurate information of their incidents of unauthorized grazing?", "How did GAO determine the provisions for agencies' practices regarding livestock's unauthorized grazing?", "What did the agencies inform GAO about in regards to these practices?", "How could amending GAO's regulations help these agencies?", "What else does the government officially do to manage this unauthorized grazing, and how effective is it?", "Why are the official efforts of BLM and the forest service ineffective?", "How can the Forest Service's punishment for unauthorized grazing be made effective?", "How did GAO analyze unauthorized grazing on BLM's and the Forest Service's land?", "What did GAO do in order to complete their report?", "What does GAO's report outline about unauthorized grazing?", "How did GAO gather data for this report?" ], "summary": [ "The frequency and extent of unauthorized grazing on Bureau of Land Management (BLM) and U.S. Forest Service lands are largely unknown because according to agency officials, the agencies prefer to handle most incidents informally (e.g., with a telephone call) and do not record them.", "The agencies' databases contained information on nearly 1,500 incidents of unauthorized grazing where formal action was taken by the agencies' range program or law enforcement staff for grazing years 2010 through 2014 (March 1 to February 28). Unauthorized grazing incidents were recorded in the agencies' databases when the agencies billed a penalty for unauthorized grazing or prepared a law enforcement report.", "However, agency staff told GAO that they handle most incidents informally—their preferred practice—and do not record them in databases or consistently in paper files, because, in part, they do not consider it a priority.", "As a result, the agencies have incomplete information on the extent of unauthorized grazing. Federal internal control standards call for clear documentation of all transactions and other significant events.", "Federal internal control standards call for clear documentation of all transactions and other significant events. Until the agencies require that all incidents of unauthorized grazing be recorded, including those incidents resolved informally, BLM and the Forest Service will not have a complete record of unauthorized grazing incidents with which to identify any potential pattern of violations.", "GAO found that the agencies' preferred practice of informally resolving unauthorized grazing is not provided for under agency regulations. Specifically, the regulations do not provide the flexibility to resolve incidents informally without a written notice of violation (in the case of BLM) and without charging unauthorized grazing penalties (in the case of the Forest Service).", "Most agency staff told GAO that informal resolution is the most effective way to resolve non-willful unauthorized grazing (e.g., when livestock stray outside of their permitted area and graze in an unauthorized area). As discussed in federal internal control standards, program operations are effective and efficient in achieving agency objectives when they produce the intended results and minimize the waste of resources.", "By amending regulations to establish a procedure for the informal resolution of minor infractions, the agencies could achieve the objective of efficiently resolving such incidents with minimal conflict within its regulatory authority. Alternatively, rather than amending their existing regulations to match their practices, the agencies' could change their practices to comply with their existing regulations.", "In addition, BLM and the Forest Service undertake similar efforts to detect and deter unauthorized grazing, such as conducting compliance inspections and assessing penalties for unauthorized grazing, but agency staff said that such efforts have limited effectiveness.", "For example, most of the Forest Service staff GAO interviewed said that unauthorized grazing penalties are too low to act as an effective deterrent. Under current policy, the Forest Services' unauthorized grazing penalty formula calculated a negative number or a number less than the permitted grazing fee for grazing years 2009 through 2012.", "By adopting an unauthorized grazing penalty structure that is, like BLM's, based on the current price of private forage, the Forest Service's unauthorized grazing penalty can better serve as a deterrent to such grazing.", "GAO was asked to examine unauthorized grazing. This report (1) describes what is known about the frequency and extent of unauthorized grazing, and its effects, and (2) examines the agencies' efforts to detect, deter, and resolve unauthorized grazing.", "GAO analyzed 5 years of the most recent data available on incidents where the agencies had taken formal action on unauthorized grazing (grazing years 2010 through 2014); examined federal laws and agency regulations, policies, and practices; and interviewed by telephone or site visit officials in a nongeneralizable sample of 22 agency field offices in eight western states where most unauthorized grazing had occurred.", "This report (1) describes what is known about the frequency and extent of unauthorized grazing, and its effects, and (2) examines the agencies' efforts to detect, deter, and resolve unauthorized grazing.", "GAO analyzed 5 years of the most recent data available on incidents where the agencies had taken formal action on unauthorized grazing (grazing years 2010 through 2014); examined federal laws and agency regulations, policies, and practices; and interviewed by telephone or site visit officials in a nongeneralizable sample of 22 agency field offices in eight western states where most unauthorized grazing had occurred." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 0, 0, -1, 3, 4, -1, -1, -1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 1, 1, 1, 1 ] }
CRS_R44551	{ "title": [ "", "Introduction", "Estimating the Economic Effects of Trade Agreements", "Costs and Benefits of Trade", "Data Limitations", "Current Trade Arrangements", "Anticipated Changes in Trade Patterns", "Potential Changes in Employment", "Labor Supply", "Firm and Job Turnover", "Job Churning", "Adjustment Costs", "Trade Models", "Overview of Economic Estimates of the TPP", "United States International Trade Commission", "Peterson Institute for International Economics", "World Bank", "Tufts University, Global Development and Environment Institute", "Basic Assumptions", "Other Assumptions", "Adjustment Costs", "GPM Model Limitations", "Wages and the Distribution of Income", "Anticipated Economic Gains", "Government Policies and Trade", "Other Estimates", "Issues for Congress" ], "paragraphs": [ "", "In February 2016, the United States signed the Trans-Pacific Partnership (TPP) with 11 countries: Canada, Mexico, Chile, Peru, Japan, Australia, New Zealand, Singapore, Malaysia, Vietnam, and Brunei. The TPP, now subject to approval and implementation by Congress, is termed by its participants as a comprehensive and high-standard agreement, designed to eliminate and reduce trade barriers and establish and enhance trade rules and disciplines among the parties. If implemented, it would be the largest plurilateral FTA by value of trade, encompassing roughly 40% of world GDP, and could serve further to integrate the United States in the dynamic Asia-Pacific region. As a \"living agreement,\" it has the potential to negotiate new rules and expand its membership. It could also mark a shift to the negotiation of \"mega-regional\" trade liberalization agreements in lieu of bilateral FTAs and broader multilateral trade liberalization in the World Trade Organization (WTO).\nIn considering TPP and other trade agreements, discussions often focus on potential economic effects, and especially on potential gains or losses in employment. In addition, some observers have tied U.S. trade deficits to existing U.S. free trade agreements (FTAs) by arguing that the agreements have worsened the trade deficit and, thereby, have negatively affected U.S. employment and wages. According to many economists, trade in general provides economy-wide net positive benefits for consumers as a whole and for producers, especially for firms in export-oriented industries. They also note, conversely, that economic adjustment costs stemming from lower trade barriers may be highly concentrated, affecting some workers, firms, and communities disproportionately. The relationship between trade and jobs, however, is complicated and subject to a number of different and, at times, opposing forces. In addition, impediments in local labor markets may raise adjustments costs for some workers, firms, and communities in ways that may not be fully reflected in traditional trade models.\nThis report examines recent studies on the potential economic impact of the TPP. It also provides a limited discussion of the role of trade agreements in the economy and examines selected studies on the impact of TPP. For a broader treatment of some of these issues see CRS Report R44546, The Economic Effects of Trade: Overview and Policy Challenges , by James K. Jackson.\nIn general, economists and others use various economic models and approaches to estimate the magnitude of changes in U.S. economic activity and employment that could arise from a trade agreement. Both proponents and opponents of trade agreements often cite the results of these studies to support their respective positions. These models, however, differ in the estimates they produce, reflecting different assumptions and differences in the structure of the models themselves. While all the various models and approaches have strengths and weaknesses, although not always in equal proportions, they vary in the degree to which they reflect economic reality, and they are highly sensitive to the assumptions they use.", "The TPP, considered by participants to be a high-standard and comprehensive agreement, is designed to eliminate and reduce trade barriers and establish and enhance trade rules and disciplines of the trading system among the parties to the agreement. The agreement covers goods, services, investment, and a number of other issues including trade facilitation, digital trade, intellectual property rights, and standards, or technical barriers to trade. Due to the limitations of data and other theoretical and practical issues involved with services, investment, and non-tariff barriers, most estimates of the economic and employment effects of trade and trade agreements focus narrowly on the goods sector, where data on trade and tariff rates are available, to estimate how demand for these goods may change as a result of changes in tariffs. Accordingly, such estimates do not represent the total impact of the agreement on the economy.", "Most economists argue that liberalized trade creates both economic costs and benefits, as indicated in Table 1 , but that the long-run net effect on the economy as a whole is positive. They contend that the economy as a whole operates more efficiently as a result of competition through international trade and that consumers throughout the economy benefit by having available to them a wider variety of goods and services at varying levels of quality and price than would be possible in an economy closed to international trade. They also contend that trade may have a long-term positive dynamic effect on an economy that enhances both production and employment. In addition, trade agreements of the type currently being negotiated by the United States comprise a broad range of issues that could have far-ranging economic effects on trade and commercial relations over the long run between the negotiating parties, particularly for developing and emerging economies.\nMost economists acknowledge that international trade and trade agreements can entail some negative effects through greater access to markets and increased competition, with the effects falling more heavily on some workers and firms. Generally, the costs and benefits associated with trade agreements do not accrue to the economy at the same speed; costs to the economy are felt in the initial stages of the agreement, while benefits to the economy accrue over time. The expected costs to the economy in the form of job losses and downward pressure on wages in some sectors and some segments of the labor force are experienced in the initial stages of the agreement, while the anticipated benefits to the economy in terms of enhanced consumer welfare and improvements in resource utilization accrue over time.\nIn addition, while research is ongoing, most economists have concluded that trade liberalization, or international trade more broadly, has not been a major factor affecting the distribution of income, whether in the United States, or in other economies, developed or developing. Some economists also estimate that international trade and trade liberalization have a different impact on workers in various occupations in the economy, termed by some as the occupational exposure to international trade. This means that trade liberalization can have a disproportionate impact on workers and firms not only in different sectors of the economy, but even within the same industry. Such types of microeconomic analysis at the firm level generally are not within the scope of trade models.", "The lack of data in areas other than direct trade in goods and services means that data on traded goods and some services can drive policy debates. Economists and others face numerous challenges in their efforts to estimate precisely the economic and employment effects that are associated with agreements that reduce or eliminate barriers to trade and investment flows, including non-tariff barriers to trade in services and other sectors. Trade in services, in particular, is characterized by a broad array of formal and informal barriers that complicate efforts to translate the barriers into tariff-equivalent values. Also, little analysis has been done to date on the potential economic effects of removing or reducing technical barriers to trade. Reduced barriers to trade in services potentially could have a large and positive impact on the U.S. economy, since informal barriers to trade in services are numerous, the United States is highly competitive in a number of services sectors, and U.S. direct investment abroad often spurs exports.\nThe economic environment within which trade occurs is also being constantly shaped by domestic and international activities in ways that may be difficult to model and may not be fully reflected in the time series data that are the fundamental building blocks of trade models. For instance, the sharp decline in energy and raw material prices in 2015-2016 and the slowdown in global trade since 2011 are altering the global economy in ways that arguably exceed any potential trade agreement. It is unlikely that the complete effects of these changes have been fully reflected in global economic and trade data. Trade models also do not explicitly incorporate exchange rates, in part due to the difficulty involved in estimating future movements in exchange rates. Such models, therefore, rely on existing trade patterns that may limit their ability to estimate the impact of new trade patterns that could arise from a multi-country agreement.\nTrade models also generally treat exports and imports as strictly domestic or foreign goods. However, the rapid growth of global value chains (GVCs) and intra-industry trade (importing and exporting goods in the same industry) have significantly increased the amount of trade in intermediate goods in ways that challenge traditional concepts of domestic versus foreign firms and blur the distinction between exports and imports. For instance, foreign value added accounts for about 28% of the content on average of global exports. As a result of the growth in GVCs, traditional methods of counting trade may obscure the actual sources of goods and services and the allocation of resources that are used in producing those goods and services. Trade in intermediate goods also means that imports may be essential for exports and that countries that impose trade measures restricting imports may negatively affect their own exports. This complex process of cross-border production and trade in intermediate goods also utilizes a broad range of services in ways that have expanded and redefined the role that services play in international trade. Increased trade in intermediate goods has also meant that the number of jobs in the economy tied directly and indirectly to international trade has increased in ways that are not captured fully by trade models.", "Efforts to estimate the economic impact of the proposed TPP are further complicated by the existence of overlapping trade agreements among the TPP countries: the United States already has FTAs with six TPP partners: Australia, Canada, Chile, Mexico, Peru, and Singapore. In addition, Singapore, Malaysia, Vietnam, and Brunei are members of the ASEAN (Association of Southeast Asian Nations) FTA. Such agreements have both trade creating and trade diverting dimensions that can interact in tandem or in opposite ways that may complicate the trade environment. While it may not be possible for any trade model to incorporate all the economic effects that potentially could arise from overlapping trade agreements, such agreements may be reshaping trade patterns that ostensibly could be enhanced further by the TPP.\nIn addition to the direct economic effects expected to result from cuts in tariffs, the TPP may offer additional long-term indirect benefits to bilateral and regional trade through changes in domestic non-tariff trade barriers that form the structure under which trade is conducted. In broad terms, the TPP incorporates rules and disciplines for open, transparent, non-discriminatory treatment for participants. These rules are expected to reduce market-distorting activities that not only reduce the overall level of trade, but create market inefficiencies. Some TPP participants have indicated that they intend to use the rules and disciplines in the TPP to support a reform agenda within their own economies. To the extent that countries undertake such reforms, the TPP potentially could provide long-term economic benefits to the countries themselves and to other TPP participants.", "Preferential multi-country trade agreements, such as the TPP, generally are expected to alter trade relations among the participants, stimulate economic growth, and improve overall economic welfare. By eliminating and reducing tariffs, trade agreements alter the external market conditions under which nations trade, while removing internal trade barriers alters the domestic structure under which trade is organized and conducted. Removing formal barriers to trade, primarily in the form of tariffs and quotas, directly lowers the prices of traded goods and thereby increases competition. In turn, lower prices are expected to alter trade patterns by increasing the amount of trade that occurs (trade creation) and by shifting trade away from countries that are not party to the agreement to those that are in the agreement (trade diversion). As a result, trade agreements may alter the composition of trade among a nation's various trading partners and alter the mix of goods and services that are traded. At times, countries are motivated to participate in trade agreements to forestall this type of trade diversion.\nThe magnitude of trade creation and trade diversion effects that may arise from the TPP are expected to depend on a number of factors, including the difference between pre-and post-agreement tariff rates, the speed with which tariff cuts are implemented, and other external economic factors that may affect global trade as a whole. In addition, the impact of tariff cuts under the TPP may be muted to some extent by the multiplicity of trade agreements that already exist among the participants and the already-low average tariff rates that are characteristic of trade among a number of the participants, although countries may have currently high tariffs on specific products.\nFor some countries, trade agreements may serve as a driving force for economic change in ways that cannot be quantified. Comprehensive free trade agreements as they currently are negotiated by the United States and others include a range of policy issues that have potentially significant cross-border implications, including trade in goods and services, investment, regulatory and other non-tariff barriers, government procurement, e-commerce, agricultural barriers, intellectual property rights, state-owned enterprises, worker rights, and the environment. As such, these trade agreements potentially can serve as catalysts for economic growth and development in ways that can affect a nation's economy beyond what would be predicted from traditional trade models. This can be particularly important for developing countries that are trying to raise their own standards and see trade agreements as important tools for integrating themselves into regional and global economies and for implementing domestic economic reforms. In addition, trade agreements may attempt to standardize such governance issues as dispute resolution procedures that work to enforce and ensure that trade commitments are implemented.", "Estimating the impact of trade and trade agreements on employment and wages in the economy is particularly challenging, because trade is only one among a number of factors that affect the overall level of employment and wages in an economy in both the short run and long run. In addition, most trade models lack the detailed industry and employment data that are necessary to make forecasts beyond broad categories of employment to identify specific jobs that may be affected positively or negatively. It is also difficult in most circumstances to disentangle the myriad number and types of forces within the economy that can affect employment and wages at the micro, or firm, level. Additionally, a broad range of internal and external activities can affect national economies to a greater degree than most trade agreements in ways that cannot be factored in ahead of time. These activities can complicate efforts to derive cause and affect relationships.\nMost economists argue that macroeconomic forces within the economy are the dominant factors that shape trade and foreign investment relationships. Nevertheless, changes at the microeconomic level associated with new technologies can affect particular industries or sectors of the economy in ways that are unrelated to international trade. In addition, changes in currency exchange rates, technology, interest rates, and the business cycle, among other things, can affect the overall state of the economy in ways that can outweigh the effects of trade agreements, given the already highly open nature of the U.S. economy. For the United States, exports account for about 13% of U.S. GDP and support over 11 million jobs, or about 8% of a total of 141 million workers in the U.S. economy. Imports also support a broad spectrum of jobs, including wholesale and retail trade, transportation, and various other services, among others. As a result of the small share of trade-related jobs in the U.S. economy relative to other sectors, most economists argue that international trade is only one among a number of forces that determine total U.S. employment, real wages, or the distribution of income.", "Over the long run, the national birth rate, improvements in productivity, and flows of immigration/emigration, among other things, affect the overall supply of labor in the economy. Although trade agreements arguably have no impact on the fundamental supply of labor in the economy, the level and extent of globalization of the economy has broadened the definition of the labor market. As a result, the labor market itself has become more globalized, especially with the opening of major markets to international trade and the growing use of new technologies. The shares of national income that go to labor as wages also depend on the overall demand for labor in the economy relative to the supply and the overall level of utilization of the other factors of production in the economy, all of which can change over the course of the business cycle and during periods of pronounced structural transformation.\nAs an economy expands, greater demands are placed on labor and other factors of production. At some stages of the business cycle, labor may reap a larger share of the rewards of production, while at other stages, a greater share of the rewards may accrue to the owners of production. In addition, structural changes in the economy can reshuffle capital and labor in the economy in ways that may alter the share of income that goes to labor and capital. Such structural changes also can reflect changes in technology that place a greater emphasis on certain types of skills. In addition, as technology is spread internationally, emerging economies can similarly experience improvements in productivity that may place additional competitive pressures on U.S. workers in some industries and at some skill levels. While such structural changes can be unsettling to some workers and sectors of the economy, other conditions such as economic stagnation are potentially more unsettling since all workers and sectors in the economy would be affected negatively.", "In a dynamic economy such as the United States, firms and jobs are constantly being created and replaced as some economic activities expand, while others contract, reflecting both microeconomic and macroeconomic developments. These processes would be expected to occur during the implementation period of a trade agreement, but they would occur even in the absence of international trade. This constant change, however, complicates efforts to isolate the impact of a trade agreement on the structure of the economy from other dynamic forces that are constantly reshaping the economy. Moreover, various industries and sectors evolve over time at different speeds, reflecting differences in technological advancement, productivity, and efficiency. International trade may add to these forces to provide added impetus to both growing and declining industries.\nThose sectors of the economy that are the most successful in developing or incorporating new technological advancements generate greater economic rewards and are capable of attracting greater amounts of capital and labor. In contrast, those sectors or individual firms that lag behind are less capable of attracting capital and labor and confront ever-increasing competitive challenges. Indeed, depending on the overall state of the economy, some sectors may need to relinquish some capital and labor in order for others sectors to grow to avoid economic stagnation. Also, advances in communications, technology, and transportation have facilitated a global transformation of economic production into sophisticated supply chains that span national borders and defy traditional concepts of trade that potentially can involve a greater share of the labor force in trade-related activities. How firms respond to these challenges likely will determine their long-term viability in the market place.", "Another factor that complicates attempts to equate a specific trade agreement, or even trade in general, with job gains or losses in the economy is the constant turnover in jobs, referred to as \"churn,\" taking place in the U.S. economy. At the plant level, job openings may come from new business openings or expansions at existing facilities, including those that are used to support increased exports. Job losses may come from voluntary departures, involuntary discharges, or business closures for any reason, including bankruptcy, personal choice, an inability to compete in the domestic market, import competition, or production shifts. In 2015, there was an average of 141.1 million jobs in the U.S. economy, of which 11.7 million jobs, or about 8%, were supported directly and indirectly by exports. At the same time, there were 7.6 million gross jobs gained in the economy and 6.7 million gross jobs lost, accounting for 5.4% and 4.8%, respectively, of the total number of jobs in the economy. This combined share of 14.3% (the combined shares of gross jobs gained and lost) reflects annual churning in the labor market, or an amount that is greater than both the number of jobs in the economy that are supported by exports and the projected impact on labor that potentially could arise from the TPP.", "International trade may not have a determinative role in shaping the U.S. economy as a whole, but economic theory recognizes that trade can affect the economy through a number of channels, including through increased competition. Economic theory also recognizes that some workers, firms, and communities in the economy may experience a disproportionate share of the short-term adjustment costs associated with shifts in resources stemming from greater international competition. There may also be instances in which foreign firms engage in unfair competition or trade-distorting practices. Most trade models do not contain enough consumer information to estimate these potential costs and benefits or enough industry and employment data to determine which specific jobs or which specific firms might be affected negatively or positively by a particular trade agreement. Although the attendant adjustment costs for businesses and workers are difficult to measure, some estimates indicate that they potentially are significant over the short-run. For some communities, closed plants can result in depressed commercial and residential property values and lost tax revenues, with effects on schools, public infrastructure, and community viability.\nSome estimates indicate that the short-run costs to workers who attempt to switch occupations or switch industries in search of new employment opportunities as a result of trade-related dislocations may be \"substantial.\" In a study of the impact of trade liberalization on occupations, a number of economists used detailed microeconomic data to conclude that trade liberalization has a small effect on wages and jobs at the industry level, but that it provided an additional impetus within the economy for workers to shift their employment among sectors of the economy, particularly from the manufacturing sector to the services sector. The study also concluded that workers who switched jobs as a result of trade liberalization generally experienced a reduction in their wages, particularly in occupations where workers performed routine tasks. These negative income effects were especially pronounced in occupations exposed to imports from lower-income countries. In contrast, occupations that were associated with exports, generally higher skilled jobs, experienced a positive relationship between rising incomes and the growth in export shares.", "Trade models used to analyze FTAs are part of a class of economic models referred to as computable general equilibrium models (CGE) that incorporate data on trade and a range of domestic economic variables, including an industry input-output (I-O) table, employment, and labor data, on as many as 100 countries. The most commonly used CGE economic model and database is the Global Trade Atlas Project (GTAP), located at Purdue University, that is used to estimate changes in trade (exports and imports) from changes in tariff rates and tariff rate quotas. CGE trade models are widely used and have proven to be helpful in estimating the effects of trade liberalization in such sectors as agriculture and manufacturing where the barriers to trade are more easily identifiable and quantifiable. The United States International Trade Commission (USITC), economists Peter A. Petri and Michael G. Plummer, and the World Bank all use the GTAP model for their simulations. In contrast, economists Jeronim Capaldo and Alex Izurieta use a different model to develop their estimates of the impact of TPP. Due to the unique nature of the model and the approach used by Capaldo and Izurieta, this model and its estimates are given a relatively lengthy treatment in this report.\nCGE models are long-run microeconomic models that have been used widely and tested thoroughly. The models provide estimates of the distribution of potential gains and losses expressed as proportional effects (percentage increases or decreases in trade) for various sectors, relative to certain baseline economic projections. Modelers argue that the microeconomic approach is justified because trade policies operate through microeconomic channels by tracing changes in trade policy to national productivity levels, wages, and incomes. Although the limitations of the models are well-known (see earlier sections), the models arguably represent a rigorous, data-centric approach to estimating the economic effects of trade agreements. Trade models also use data that represent well-established trade relationships between countries, which means they are limited in their ability to estimate the impact of a new trade agreement on goods or services that previously had not been traded due to barriers or on trade between countries that previously had a limited trade relationship.\nGiven the size and complexity of the CGE models, they must necessarily operate with a number of assumptions. One such assumption is that the economies in question are operating at full employment. While some experts question the assumption of full employment, it does not seem unreasonable considering the long-term time frame generally required for most trade agreements to be fully implemented. During this time, the economy would be expected to return to its long-term growth path at or near full employment. Over the estimating period, a persistently low level of unemployment is unlikely to have a significant impact on the results of the models, given the multitude of other assumptions involved in generating the estimates. In addition, during the implementation period, it seems questionable to assume that the rate of unemployment would persist at levels that would be high enough to have a significant impact on the estimates. In most cases, either the economy would be expected to return to full employment solely through market forces, or the government would be expected to intervene by adopting Keynesian-style stimulative macroeconomic policies (changes in tax rates or government spending) to move the economy toward full employment.\nAs a result of the large number of countries that often are included in trade models and the vast amounts of trade data used, the models necessarily must sacrifice some level of precision in their estimating abilities. The models are intended to provide insight into the mechanisms by which changes in tariffs or other parameters may affect changes in trade flows among a set of countries. As a consequence, trade models aggregate vast amounts of data into a manageable size, for instance by reducing more than 17,000 individual commodities into about 50 categories and over 150 countries into 29 different country and geographic regions. As a result, tariffs in the models represent weighted averages of tariffs for the commodities that are aggregated into these basic groups. This procedure tends to mask the importance of those products within the aggregate that have high tariffs rates, which often are the target of new trade agreements.\nTrade models generally do not incorporate assumptions about the speed with which tariff changes affect the relevant economies, leaving it to the modelers to make assumptions about how quickly changes in tariff rates will be passed along in goods prices and about the timing of any adjustments. These models also make no assumptions about the basic input-output structure of the economy and do not attempt to adjust this structure to account for economic or technical changes that lead an industry to substitute one factor for another. This assumption is important, because standard economic theory indicates that changes in goods prices, whether from changes in tariff rates or from some other source, give rise to changes in the demand for labor and capital and, therefore, that price changes ultimately will alter the basic input-output structure of the economy. Since most large trade models originally were developed with the intent of analyzing the economic effects of such broad multi-country trade agreements as the Uruguay Round, this lack of precision was not considered to be an important drawback. However, this lack of precision may be an issue when the models are used to estimate the effects of bilateral and plurilateral free trade agreements where the overall amount of trade, and therefore the impact of the agreement, generally would be expected to be less than that of a WTO-style multilateral agreement.\nTrade models such as the CGE differ from large macroeconomic models that are used to forecast changes in the rate of growth of gross domestic product (GDP), wages, taxes, or jobs. As a result, trade models do not yield precise estimates of the number of jobs that will be affected by any particular trade agreement. In response, some groups have used various methods and proxy estimators to assess the potential impact of trade agreements on jobs, which have produced a wide range of estimates. As examples of these approaches, some groups have used such indicators as trade deficits, or estimates of the number of jobs in the economy that are supported by exports, to develop estimates of the impact of trade and trade agreements on jobs in the economy. These models may face important limitations of data and theoretical and practical issues that make it difficult to derive precise estimates of the impact of a particular trade agreement on the economy.", "This section provides an overview of various studies, their assumptions and a description of the models used to estimate the economic impact of the proposed TPP on U.S. trade, employment, and GDP relative to a baseline projection. The studies were selected because they are widely cited and are affecting the public policy debate about TPP.", "The United States International Trade Commission (ITC) is tasked by Congress to provide economic assessments of U.S. trade agreements: it released a comprehensive assessment of the economic impact of the TPP agreement in May 2016. The ITC used the GTAP model (see above) to estimate changes in trade (exports and imports) from changes in tariff rates and tariff rate quotas. The ITC also adjusted the GTAP model to provide a more detailed estimate of the impact of the TPP on foreign investment and trade in services. In addition, the ITC:\nUsed a qualitative approach to estimate the economic impact commitments on government procurement, competition, state-owned enterprises, and intellectual property. Made some assumptions about the evolution of the U.S. and world economies without the TPP in five-year steps to 2047, including a straight-line projection of annual U.S. growth rate of 2%. Attempted to make the traditional GTAP model more dynamic by incorporating projections of capital accumulation, labor availability, and growth rates for population and gross domestic product (GDP) developed by the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), and the International Labor Organization (ILO). The model simulations also include potential trade policy changes that would be expected to occur in the absence of TPP. Modified the standard GTAP model to include the 12 TPP countries and to include various regions and 56 industry sectors. Adjusted the model to account for dynamic labor supply effects by assuming that labor supply would expand or contract as real wages rise or fall and that skilled and unskilled labor would receive the largest share of the gains in GDP. The GTAP model does not capture the employment and age effects in the short run, but reflects such changes in its long-run forecasts The simulations assume that nations are at full employment and will take full advantage of reduced tariffs and increases in tariff-rate quotas.\nThe results of the GTAP model are expressed as proportional effects (percentage increases or decreases or changes in dollar amounts) for a number of variables, relative to a projection of the economy, which serves as the baseline condition for the modelling exercise. According to this analysis, by 2032, U.S. annual real income would be $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher, annual employment would be 0.07 percent higher (128,000 full-time equivalents), and the capital stock would increase by 0.18% with TPP, as indicated in Table 2 .\nThe ITC also estimated the share of the dynamic U.S. economy-wide effects of TPP by 2032 related to three groups of provisions: traded goods, services, and investment on five economic areas—real income, GDP, exports, imports, and employment—indicated in Figure 1 . This analysis indicates that the largest share of the overall gains from TPP arise from provisions related to traded goods (reductions in tariffs, tariff quotas, and non-tariff measures).\nIn addition, annual U.S. exports and U.S. imports with TPP partners are projected to be $57.2 billion (5.6%) and $47.5 billion (3.5%) higher, respectively, relative to baseline projections, as indicated in Table 3 . Of this amount, annual exports and imports with new FTA partners under TPP are projected to increase by $34.6 billion (18.7%) and $23.4 billion (10.4%), respectively by 2032. This data indicate that the majority of growth in U.S. exports is with new TPP partners. Overall, annual U.S. exports to the world are projected to increase by $27.2 billion and imports are projected to increase by $48.9 billion by 2032 under TPP, reflecting projected increases in U.S. real incomes, changes in real international prices, and some diverting of trade away from non-TPP countries toward TPP countries.\nSimilar to previous studies of FTAs, the ITC analysis of the TPP estimated the effects of liberalizing tariffs and nontariff measures (NTMs) on goods. The largest U.S. tariff reductions for TPP countries that currently do not have a trade agreement with the United States are for certain footwear, sugars and sugar-containing products, titanium downstream products, and wearing apparel. The largest reduction in tariffs on U.S. exports by TPP countries that currently do not have a trade agreement with the United States include exports of beef, footwear, and corn grain.\nThe ITC study also examined the effects of TPP on specific industries. According to this analysis, gains in output and employment would be driven by changes in the agriculture and food sector, while output and employment in the manufacturing, natural resources and energy sectors would fall slightly as resources would be shifted from these sectors to other sectors in the economy, as indicated in Table 4 . Shifts in employment and changes in the use of resources reflect the changes in tariff rates that would provide incentives for resources to shift from other sectors of the economy to those sectors in which foreign tariff rates were reduced. Global U.S. exports of services were estimated to be $4.8 billion higher by 2032, while services exports to TPP countries was projected to be 10.8 % ($16.6 billion) higher, and exports of services to non-TPP countries were projected to be 1.9% ($11.8 billion) lower.\nThe ITC study also examined the effects of the agreement on removing certain non-tariff measures on trade in services and cross-border investment among member economies. In order to estimate changes in services trade as a result of the TPP, ITC adjusted the standard GTAP model to reflect the impact of liberalizing cross border trade in services by estimating the tariff equivalent value of existing barriers to trade in services. This estimating process used data published in academic articles and an indirect approach to derive tariff equivalents of barriers to trade in services. The TPP would remove restrictions on trade in services on a negative list basis, meaning that all services that are not explicitly excepted would be covered by the agreement's provisions. In addition, it includes broad disciplines on ensuring the ability to transmit data across borders and prohibiting data-localization measures (except for services). These estimates indicate that output for the U.S. services sector would be $42.3 billion higher (0.1% increase) under TPP relative to the 2032 baseline, as indicated in Table 5 . Services exports were projected to increase by 0.6% and services imports by 1.2% by 2032. Employment in all services sectors except transportation was projected to be higher by 2032 under TPP.\nThe ITC adjusted its modelling process to account for potential changes in direct investment that could stem from the TPP. The ITC used a four-step process to make its estimate. In the first step, the ITC calculated how much the TPP would change investment restrictions by using the OECD's (Organization for Economic Cooperation and Development) foreign direct investment Regulatory Restrictiveness Index [RRI], which covers 42 sectors and subsectors in 31 countries. Next, the ITC calculated how changes in the RRI would affect foreign affiliate sales for host countries and foreign affiliate home countries. In the third step, the ITC used a modified GTAP model to calculate how changes in foreign affiliate sales would affect productivity in each sector in each TPP country. Finally, the ITC estimated how the changes in productivity would affect macroeconomic variables in the United States. Since the United States is considered to be largely open to foreign direct investment, the ITC concluded that TPP is not expected to alter investment inflows in a significant way. The United States does not have FTAs with five of the TPP countries (Brunei, Japan, Malaysia, New Zealand, and Vietnam); the ITC estimates that the TPP could increase U.S. direct investment into these countries.", "An analysis conducted by Peter A. Petri and Michael G. Plummer and published by the Peterson Institute for International Economics also used the GTAP model, assumed full employment, and made some adjustments to the standard GTAP model to estimate the economic impact of the TPP. These adjustments generated a more positive impact on trade in services and a greater response by foreign investment than the ITC study. This estimate concluded that the agreement would increase U.S. income and directly generate jobs in the U.S. economy. The study also estimated that the TPP could increase U.S. annual GDP by $131 billion, or 0.5% of GDP, and could increase annual exports by $357 billion, or 9.1% of U.S. exports, by 2030 when the TPP would be expected to be fully in force, as indicated in Table 6 .\nIn the short run, the model scenario estimated that the potential for unemployment in the U.S. economy would be equivalent to about 0.1% of U.S. annual GDP. This increase in GDP is comprised of four components: (1) increased flows in foreign direct investment; (2) reduced non-tariff barriers (NTBs) to trade in goods; (3) reduced in non-tariff barriers to trade in services; and (4) cuts in tariff rates, as indicated in Figure 2 . Similar in some respects to the ITC study, which attributed the largest gains from TPP to provisions in the agreement that affect traded goods, the authors estimate that the largest economic gains from TPP will arise from reductions in non-tariff barriers (NTBs) for goods and services. While incorporating estimates of NTBs allows for a more complete analysis, it also introduces an increased degree of uncertainty, since the value of NTBs is not observed directly, but must be estimated. Also, the authors estimate that annual global GDP will increase by $492 billion by 2030, and Japan, Malaysia, and Vietnam will experience large increases in GDP, in large part because they are the countries with the highest existing trade barriers in certain sectors. Countries potentially experience the largest economic gains from trade agreements by lowering trade barriers and increasing domestic competition.\nAmong non-TPP countries, Europe is projected to experience an increase in GDP of about $50 billion by 2030, due to increased exports to TPP countries that experience gains in real incomes and by increases in exports of services due to liberalization of services trade and foreign investment by TPP members. China, India, and Thailand, which are direct competitors to TPP countries, are projected to lose income. South Korea is projected to lose some of the economic gains it has experienced under the South Korea-United States FTA, as indicated in Figure 3 .\nThe authors also estimate that the TPP likely will raise U.S. wages, and alter the composition of jobs in the economy, but not alter the overall level of U.S. employment, similar to the estimates by the ITC. Both capital and labor are expected to benefit from the agreement, although labor's share is projected to increase somewhat more as a proportionate share of the total amount of benefits. Given these benefits, the authors argue that each year the agreement is delayed will result in a $94 billion permanent loss to the U.S. economy. The authors further estimate that the agreement could add about 19,000 jobs annually to the overall number of jobs gained and lost annually in the economy, or jobs that are eliminated in one sector, but added in another, or job churn. The authors also project that using a different and more expansive, but potentially unrealistic, approach would be to estimate all jobs that are directly and indirectly displaced by imports, which potentially could total 53,000 U.S. jobs, adding an estimated 0.1% to annual labor market turnover.\nThe estimates by Petri, et. al. are based on projections of annual growth in GDP and national income for the participants in the TPP agreement from 2015 to 2030, relative to the baseline projections, with a large share of the benefits accruing after 2020. The model incorporates provisions agreed upon in the final version of the agreement, but also necessarily incorporates some subjective assessments of the nature and economic impact of the 30 chapters that comprise the agreement. The analysis also projects increased inward and outward investment flows, reflecting reduced barriers to foreign investment and a more attractive investment climate. This analysis projects that U.S. exports of certain types of goods will increase, including, primary goods (agriculture and mining), advanced manufacturing, and services, while imports are expected to increase in labor-intensive manufacturing products and in some types of services.\nAccording to the authors, the projection of investment flows in the model attempts to reflect the dynamic nature of economic activity in the TPP economies by assuming that the agreement potentially could induce additional firms into exporting. Such an assumption likely would make the estimated impact of the agreement larger than would projections using models that did not incorporate this assumption. This assumption also would require a number of subjective decisions, since trade models generally do not contain the types of microeconomic behavioral data on firms that would be necessary to forecast accurately which firms might decide to engage in exporting directly as a consequence of a particular trade agreement. The model also relies on estimates of the annual value of national income for the participants that stems from the trade agreement and a projection of the annual rates of GDP growth for the countries involved.\nThe authors projected U.S. GDP in 2025 of $20 trillion and by dividing the GDP projection by the projected number of workers in the U.S. labor force in 2025 of 168 million, they derive an equivalent value of $121,000 ($20 trillion / 168 million) for the average income for each U.S. worker in 2025. The authors also estimate the FTA will generate annual gains in income for the U.S. economy that will rise to $59 billion annually, rising slowly to reach $79 billion annually by 2025. The authors argue that the estimated annual income effect can be equated to an annual increase in employment, which some observers have interpreted to mean that the data imply a net positive annual gain in employment over the baseline projection of 487,000 jobs ($59 billion / $121,000) by 2025, more than twice the number of annual job gains projected by the ITC.\nThe authors argue, however, that the estimated employment effects will consist primarily of shifts in employment among sectors of the economy as a result of the full employment assumption. The authors caution that\nthe trade-employment relationship is complicated and not well understood. For one thing, the relationship is very sensitive to underlying macroeconomic circumstances. The macroeconomic analysis of employment effects, in turn, requires very different models from those used to understand the microeconomics of international competition.\nThe authors also state that they purposely did not attempt to estimate the number of jobs that might arise from the agreement. They argue that \"[t]he reason we don't project employment is that, like most trade economists, we don't believe that trade agreements change the labor force in the long run. The consequential factors are demography, immigration, retirement benefits, etc. Rather, trade agreements affect how people are employed, and ideally substitute more productive jobs for less productive ones and thus raise real income.\"", "Another estimate of the potential economic impact of the TPP was published by the World Bank, based in part on the study by Petri and Plummer, who served as co-authors. The estimate also used the GTAP model, with some adjustment, and the full employment assumption. These adjustments assume that trade in goods and services will increase as a result of regulatory convergence among TPP and non-TPP members. The model simulation projects that by 2030 relative to baseline projections, the TPP would increase member country GDP on average by 1.1%, ranging from over 8% for Vietnam to 0.5% for the United States, or about the same as the projections by Petri and Plummer for the Peterson Institute, as indicated in Figure 4 . This upward shift in GDP stems from model simulations that the agreement would stimulate a shift in resources towards more productive firms and sectors and expand export markets, as indicated by conventional trade theory. The impact on members of the North American Free Trade Agreement (NAFTA: United States, Canada, and Mexico) would be about 0.6% of GDP, due to the low share of trade in GDP, primarily in the United States, and the already-low average tariff rates.\nSpillover effects on non-TPP countries are expected to be small, but positive as a result of greater regulatory harmonization. For non-TPP members, the trade diversion effects are projected to be limited, as a result of the large share of trade that currently occurs among TPP countries. Consequently, aggregate losses to non-TPP countries are estimated to amount to 0.1% of GDP by 2030. Only South Korea, Thailand, and some other Asian economies are expected to experience losses exceeding 0.3% of GDP. The study also projects that the agreement will lift trade among the TPP members by 11% by 2030.\nAccording to the authors, the benefits of the agreement will materialize slowly, but accelerate towards the end of the projection period. These benefits would be derived mostly from reductions in non-tariff measures and measures that benefit services. The authors estimate that 15% of the projected increase in GDP would be due to lower tariff rates, while non-tariff measures would account for 53% of the increase in exports of goods and 51% of the increase in exports of services. This estimate also \"allows for the emergence of trade in products not previously traded between pairs of countries.\"\nThe authors adopt three assumptions that are important to deriving their results:\n1. Cumulative rules of origin —are expected to encourage regional production networks. The authors estimate that the rules of origin will lead to the replacement of 40% of imported inputs with higher-cost inputs from TPP members to qualify for low TPP tariffs. 2. Existing services barriers —estimated indirectly from bilateral trade flows, based in part on results from the U.S.-South Korea FTA. 3. Non-discriminatory trade liberalization —more transparent regulatory approaches are expected to facilitate increased trade with non-TPP members.\nThe authors expect that over the long run the TPP will accelerate shifts among the various sectors of the economy. For advanced economies, these shifts likely will favor traded services, advanced manufacturing, and for some resource-rich economies, primary products and investments. Developing countries are projected to experience growth in manufacturing, especially in unskilled labor-intensive industries, and in some production of primary products. These shifts translate into a higher value placed on skilled workers in the advanced economies and an increase in wages of unskilled workers in developing economies. For the United States, the authors project that changes in real (adjusted for inflation) wages are expected to be small as wages for unskilled and skilled wages increase by 0.4% and 0.6%, respectively, by 2030, or that wages for skilled workers are expected to rise by more than wages for unskilled workers.\nThis approach attempts to incorporate the effects of the agreement's rules of origin and potential economic benefits that arise from greater regulatory convergence among the TPP members. The authors conclude that a common rules approach will increase intra-regional trade in affected industries. In the model, trade with non-TPP members depends on existing standards in non-member counties and on hypothetical mutual recognition agreements on the rules of origin. Such agreements would provide limited preferential treatment to some trade with non-TPP members, but such countries currently are not party to the agreement. As a result of changes in regulatory standards alone, trade with non-TPP members are projected to vary by the level of economic development. Trade with non-TPP developed economies is expected to increase, while trade with non-TPP developing economies is expected to decrease, because firms in developing countries are expected to be hurt more by more stringent regulatory standards in some markets and are less able to gain from the types of economies of scale that are available to firms in developed economies. Trade between TPP and non-TPP countries is also expected to be affected by rules of origin with countries that have adopted mutual recognition with permissive rules of origin and are likely to fare better than countries with more restrictive rules.\nThe authors conclude by arguing that\nAgainst the background of slowing trade growth, rising non-tariff impediments to trade, and insufficient progress in global negotiations, the TPP represents an important milestone. The TPP stands out among FTAs for its size, diversity, and rulemaking. Its ultimate implications, however, remain unclear. Much will depend on whether the TPP is quickly adopted and effectively implemented, and whether it triggers productive reforms in developing and developed countries. Broader systemic effects, in turn, will require expanding such reforms to global trade, whether through TPP enlargement, competitive effects on other trade agreements, or new global rules.", "Tufts University's Global Development and Environment Institute sponsored another study of the economic impact of the TPP, using the United Nations Global Policy Model (GPM). This study differs markedly from the previous studies, because the GPM model is not a GTAP-type CGE model and the structure of the model and the assumptions that are used differ substantially from those used in the three previous examples. As a result of these differences, the authors reach the non-standard conclusion that all TPP members will experience job losses, which are projected to total 771,000 jobs, with the largest losses occurring in the United States, as indicated in Table 7 .\nThe study also estimates that the TPP will negatively affect growth and employment in non-TPP countries, with Europe losing 879,000 jobs and non-TPP developing countries projected to lose about 4.5 million jobs by 2025. The authors argue that these effects increase the risk of \"global instability and a race to the bottom, in which labor incomes will be under increasing pressure.\" The authors also argue that their model is based on \"more realistic assumptions about economic adjustment and income distribution,\" than the standard CGE model. They term their model a \"demand-driven, global econometric\" macroeconomic model, compared with the microeconomic feature of the GTAP model. Previously, the authors used this model to develop estimates of the Trans-Atlantic Trade and Investment Partnership (T-TIP), a study that has come under critical review by trade economists.", "The authors reject the standard CGE model on a number of grounds. In particular, they argue that the standard model (1) incorporates \"dubious\" assumptions about full employment; (2) does not distinguish between wage-earners and profit-earners in ways that obscure potential changes in the distribution of income; (3) assumes that real wages increase at the same rate as the growth in productivity; (4) assumes constant balances in the government account and in the current account; and (5) assumes that there will be an increase in foreign direct investment. Due to these assumptions and the nature of the GPM model, the analysis that follows is necessarily more detailed and expansive than that for the previous studies, which are more conventional in their approach.\nThe UN GPM model is not a trade model under conventional definitions in large part because the model uses very little trade data. Similar to other models, the UN model provides estimates of the impact of the TPP on a limited number of individual countries (the United States, Japan, Mexico, Australia, Canada, and New Zealand, in the case of this analysis), while it aggregates all other countries into regional blocs. In contrast to the GTAP model, however, the GRM model includes only four broad international trade sectors: energy products; primary commodities; manufacturing; and services. The authors argue that this aggregation is not significant, because their study focuses on \"macroeconomic impacts.\"\nIn deriving their results, the authors borrow estimates from other studies, generated primarily from CGE models, of the potential trade effects of the TPP, since the GPM model itself does not contain enough trade data to generate such estimates. As previously explained, CGE models typically estimate changes in goods trade only unless they are modified to estimate changes in services trade, investment, or consumer welfare. The authors offer the unconventional conclusion that the TPP will result in job losses not only in each TPP country, but negative dislocations in non-TPP countries as well. Without a detailed explanation of the results by the authors, it is difficult to assess how the model derived the results, or how various assumptions may have affected the results. The authors proceed by\nFollowing the \"widely held belief\" that TPP would affect international competition by \"pushing countries to increase trade performance.\" This is accomplished by producers in each country lowering their prices and cutting their costs in order to preserve their market shares. The authors \"assume\" that this process would lower nominal unit labor costs through the combined actions of business managers and \"policymakers\" who negotiate lower wages; Contending that this process would affect the distribution of income between labor and business profits in favor of profits for businesses, thereby lowering labor's share of income, because the TPP would affect the incentives for countries to \"tilt income distribution in favor of profits,\" which the authors analyze by \"estimating the impact of changes in unit labor costs on international market shares;\" Assuming that economic sectors of the economy that are affected negatively by the TPP agreement would create a demand shortfall in the economy, because, as a sector contracts, \"other sectors may suffer as well,\" leading to \"large job losses and drive the economy into recession;\" Arguing that the TPP would push firms and other borrowers to seek higher returns in order to avoid losing investors. The authors assume that a higher profit rate necessarily requires a lower labor share of income; Asserting that inflows of foreign income \"depend on a country's fiscal policy,\" which would require countries to adjust to attract foreign capital; and Concluding by asserting that, \"since all TPP countries would want to preserve their market shares, we assume that they will engage in a race to the bottom, pushing labor shares downward across the whole TPP bloc.\"", "This series of steps requires assumptions and assertions that, in a number of cases, contradict standard economic concepts, often without explanation or the requisite theoretical or analytical basis. As previously indicated, standard trade theory indicates that trade agreements such as the TPP generally are expected to generate a number of economic effects, both positive and negative, although the net sum is expected to be positive for all participating countries. This study, however, focuses exclusively on the negative effects, or on the adjustments costs, even though trade models are not capable of precisely estimating these adjustment costs. As noted above, the costs and benefits associated with trade agreements do not accrue to the economy at the same speed: costs to the economy in the form of job losses generally are experienced in the initial stages of the agreement, while the benefits to the economy generally accrue over time.\nThe authors also criticize the typical CGE model assumption of full employment. Given the long-term time horizon of most trade agreements to be fully implemented, assumptions of full employment generally are not thought to be unreasonable, since economic activity is expected to adjust to shocks by returning to its long-run growth pattern of full employment. The adjustment of the economy to shocks is thought to be either automatic through market adjustments, or through deliberate adjustments in macroeconomic policies (either through fiscal policies including adjustments in tax rates or in government spending, or in monetary policies). Also, at an unemployment rate of 4.7%, the United States is effectively nearing its theoretical full-employment limit. Concurrently, measures of capacity utilization, or the amount of slack productive capacity in the economy, indicate that levels in early 2016 are below long-run rates of utilization. With excess productive capacity and with tightening labor markets, benefits going to labor may well rise relative to returns to businesses as firms compete for workers by offering higher wages.\nThe net positive economic effects from trade agreements are expected to arise from lower tariff rates that, in turn, increase the amount of trade among all TPP participants. Lower import costs increase choices for consumers, improve their real purchasing power, and improve long-run productivity in ways that affect the overall efficiency of the economy. In the TPP, businesses are anticipated to improve their performance through the mutual lowering of market-distorting tariffs and non-tariff barriers during the implementation period rather than through a \"race to the bottom,\" as assumed by the authors. The TPP also is expected to yield other long-term productivity gains through mutual reductions in informal market barriers that can stifle competition within national economies, create market inefficiencies, and distort international trade.", "As previously indicated, the negative effects of trade agreements, generally thought to be economic inefficiencies in production, job losses, and downward pressure on wages in import-competing industries, are referred to as \"adjustment costs,\" because economies are expected to shift, or adjust, capital and labor within the economy from declining sectors to growing sectors of the economy in response to market forces. The authors, however, make no assumptions about shifting resources within the economy in response to market signals to more productive activities and base their analyses exclusively on the negative adjustment costs. International trade, both bilaterally and multilaterally, can also be affected by a broad range of economic factors, including economic recessions or financial crises and such new entrants into the global economy as the former Eastern European countries, India, and China, that can affect the global supply of labor and, therefore, the wages of workers in certain import-sensitive industries.\nAccording to the IMF, for instance, the effective global labor market quadrupled over the past two decades through the opening of China, India, and the former Eastern bloc countries. The United States and other developed economies access this global labor market through (1) imports of final goods and services, including intermediate goods; (2) offshoring of production; and (3) immigration. According to the IMF, the internationalization of labor contributed to rising labor compensation in the advanced economies by increasing productivity and output, while emerging market economies benefited from rising wages. Increased exports from labor-intensive developing economies would be expected to push down wages, adjusted for productivity, for unskilled workers in developed economies, thereby reducing labor's share of income. Nevertheless, workers in developed economies could still be better off if the positive effects of increased trade and productivity on the economy are positive, as expected. The IMF also concluded that globalization is only one of several factors that have acted to reduce the share of income accruing to labor in advanced economies and that technological change likely has played a larger role in affecting the distribution of income in the economy, especially for workers in lower-skilled sectors.\nEstimates of losses of jobs and GDP generated by the GPM model are weighted exclusively in favor of the projected adjustment costs of the TPP, since the model is not capable of capturing the full range of economic effects that are expected with the TPP. In addition, the demand-driven GPM macro model does not incorporate important supply side effects that arise from trade agreements and, therefore, assumes large losses in employment, output, and wages in all TPP partners. As a result, the GPM estimates adjustment costs in a way that precludes any positive gains for either consumers or producers in contravention of traditional economic thought and decades of experience.", "In part, the author's estimates of losses in jobs and in GDP arise from the limited amount of trade data and the absence of tariff or industry data in the GPM model. While the authors argue that such limited trade data are not necessary in the context of their macroeconomic model, trade agreements affect the economy as a whole through the accumulated effects at the microeconomic level. As a result, without detailed micro data on tariffs, trade, and industry-specific employment and output, it is not clear how the GPM macro model captures either the trade creation or the trade diversion effects, or the benefits to consumers' choices or real incomes that arise from increased access to a greater variety of goods and services and to lower-priced imports. The GPM model also does not capture the gains in productivity and efficiency that arise in the economy from the adjustment of capital and labor from import-sensitive sectors to other sectors of the economy.\nThe GPM model seems to preclude any shift in capital and labor among sectors within the economy from declining sectors to more productive sectors. Also, the authors focus on wages as a key government policy variable. Among economies that possess differing levels of technological development and productivity, however, trade likely is driven more by the value of wages relative to the level of productivity than a simple comparison of nominal wages across countries. Although the United States is a relatively high wage country, it also is a high productivity country, which makes it possible to export high capital-intensive, high technology-intensive products. Even U.S. agriculture is considered to be a high technology export activity relative to other countries given the vast amount of land available for agriculture in the United States and a high degree of mechanization.", "The authors assume, without providing any evidence from their model in their report, that the TPP will generate only negative adjustment costs. They also assume that businesses and policymakers will undertake to negotiate lower wages for all workers in the economy. This assumption seems to suggest that the government will replace private labor markets by injecting itself into the process of negotiating private labor contracts and setting wage rates throughout the economy. This assumption also seems to arise from the notion that international trade comprises such a commanding role in the economy that the adjustment costs of trade agreements will force wages down throughout the economy and worsen the distribution of income between workers and owners. This assumption seems to be imposed on the model, since the GPM model itself lacks any detailed industry, production, or labor occupational data. As previously indicated, lower tariffs increase opportunities for export-oriented industries. Also, the limited role of trade in the U.S. economy relative to other forces and the relative openness of the economy seem to be at variance with the commanding role that trade plays in the authors' estimates.", "The economic gains for the U.S. economy from the TPP likely will be small relative to the overall size of the economy given the extensive number of trade agreements that currently exist among the TPP participants and the already-low average tariff rates that exist in the United States. Nevertheless, economic theory indicates that cutting tariffs and reducing or eliminating non-tariff barriers among the TPP countries likely will generate positive output, employment, and wage gains for the economy as a whole, according to generally-accepted concepts about the way product and labor markets respond to economic stimuli. In addition, within each industry firms differ in their competitive ability: while some import-sensitive firms likely are fully capable of absorbing small cuts in prices that would be required to remain competitive, firms operating at the margin of the industry likely would have to make additional adjustments to remain competitive. How firms respond to such challenges would determine their long-term viability.", "The authors also assume that national governments and businesses will adopt extreme measures to preserve their market shares in major export markets. This assumption seems to contradict the general proposition that firms, not countries, are the actors that engage in international trade. At times, the policy objectives of national governments can be at odds with those of businesses. For instance, while national governments and central banks are aware that engaging in certain types of monetary policies may move exchange rates in ways that are unfavorable to export-oriented businesses, they rarely surrender the broader macroeconomic objectives of monetary policy to suit the more narrow interests of individual businesses.\nSimilarly, assuming that national governments would adopt policy objectives to preserve the export shares of firms or the income shares of labor seems questionable. There seems to be no compelling reason why governments would prefer using shares as a policy objective over other indicators such as full employment or a stable price level. Firms not only can maintain, but may even increase, the amount and volume of their exports to individual countries or globally and still experience a declining market share if the total value of exports is rising at a faster rate than are exports from a particular country. Likewise, real wages can increase even if labor's share of national income falls as long as the total amount of national income is rising at a faster pace. In addition, the concept of market shares is becoming increasingly less relevant due to the growth of global value chains, or complex cross-border production systems, that may blur the distinction between exports and imports and challenge traditional concepts of domestic versus foreign firms. Increasingly, value chains are characterized by trade in intermediate goods, or goods that are used as inputs to the final production of goods and services. Trade in intermediate goods means that imports are essential inputs in the production of exports. As a result, countries that impose trade measures that restrict imports may negatively affect their own exports.\nThe authors also make a number of assumptions about capital flows and the policies they argue governments will take to preserve capital inflows. In particular, they contend that capital inflows depend on a country's fiscal policy, or the government's budget deficit, in order to attract foreign capital. This assumption, however, seems to contradict the more commonly accepted concept that capital inflows reflect the overall savings-investment balance within the economy as a whole, not simply the balance in the government account. Within this context, capital flows bridge the gap between the total supply and demand of capital in the economy, or the savings-investment balance, which includes the combination of the government's budget deficit or surplus, including the national government and state and local governments, and the surplus or deficit of funds in the accounts of households and firms. The combination of these three accounts determines the overall capital surplus or deficit in the economy as a whole, which, in turn, affects interest rates, exchange rates, and capital inflows or outflows. Capital flows can also be affected by events in the global economy. The U.S. dollar effectively serves as the international reserve currency and demand for the dollar and dollar-denominated assets is affected by a myriad of factors, including actions by investors during times of uncertainty to a flight to quality, or such dollar-denominated assets as Treasury securities and U.S. equities. Such foreign investments affect the internal savings-investment balance in the economy and, in turn, the international exchange value of the dollar and the balance of U.S. exports and imports.", "A number of other studies provide estimates of the impact of the TPP on employment in the United States. Often, they use estimates developed by the International Trade Administration (ITA) on the annual average number of jobs that are supported by exports in the U.S. economy. The ITA methodology is based on three economic relationships: (1) average relationships between the value of goods and services in the economy relative to the average number of jobs that are required to produce that output for each industry; (2) the value of inputs used in their production; and (3) the value of transportation and other marketing services that are required to bring goods and services to buyers. ITA did not develop a similar methodology to estimate the number of jobs related to imports, or any job gains or losses that may be due to imports. In its 2015 update, ITA estimated that U.S. exports of goods and services in 2014 supported 11.7 million jobs—7.1 million in the goods producing sector and 4.6 million jobs in the services sector.\nITA also projected that on average one billion dollars of merchandise goods exports supported 5,210 jobs, and one billion dollars of services exports supported 7,033 jobs, or an average of 5,796 jobs supported by goods and services exports combined. Expressed differently, $191,938 in merchandise goods exports, $142,186 in services exports, or an average of $172,532 in goods and services exports, supported one job in each respective sector.\nBoth opponents and proponents of trade and trade agreements have used the relationship developed by ITA on jobs supported by exports in the economy to estimate the employment effects of FTAs. In some cases, various groups have used these data in reverse to argue that if a certain number of jobs were supported by a billion dollars of exports, then that same number could be used to argue that a certain number of jobs would be \"lost\" by a billion dollars of imports, represented by the trade deficit (the difference between exports of goods and services and imports of goods and services). They argue further that any net increase in imports with countries that are associated with a trade agreement would necessarily result in a loss of employment for the economy. This approach also has been used by some to argue that the U.S. trade deficit implies a net loss of jobs in the economy, because some contend that domestic production could be substituted for imports, which would boost both production and jobs in the U.S. economy.\nAs indicated above, the methodology developed by ITA was unique to estimating a static number of jobs in the U.S. economy that were supported by exports and that ITA did not develop a similar methodology for linking imports or a trade deficit to jobs in the economy. The composition of U.S. imports is fundamentally different from that of U.S. exports. While some imports and exports may represent substitutable items, other imports represent inputs to further processing, or are items that either are not available or are not fully available in the economy. In addition, import-competing industries likely do not have the same mix of capital and labor in their production processes as do export-oriented industries so that demands on capital and labor markets can vary substantially across industrial sectors.\nITA has issued various statements indicating that using the data on jobs supported by exports to estimate any relationship between imports and jobs, as has been done by some, is a misuse of the data. As ITA has stated, the employment estimate is a static relationship, or it reflects a relationship at a point in time; it is not a multiplier and should not be used to estimate changes in jobs associated with changes in exports or imports in a multiplier fashion. This has been done by both opponents and proponents of trade liberalization to estimate the number of U.S. jobs that have been lost or created as a result of trade agreements. In addition, the ITA estimates relate to the average number of jobs that are supported by exports across a broad section of the economy, which is not the same as estimating the number of jobs that would be added or lost as a result of a trade agreement.", "Congress may consider legislation to implement the proposed TPP in the near future. Part of the debate surrounding the agreement likely will focus on the potential impact of the agreement on the U.S. economy, particularly the effect on employment. Although the U.S. rate of unemployment has fallen by more than half since the high rates reached in 2009, many observers remain concerned over the role of international trade and the TPP on the relatively slow growth in wages and the distribution of income. Under such conditions, it is not uncommon for communities or workers to raise concerns over the potential impact of a new trade agreement.\nAn analysis of the available estimates of the potential effects of TPP on U.S. employment, trade, and economic welfare raises a number of questions concerning the usefulness of those estimates. Economic modeling naturally incorporates various assumptions and entails differing methodologies that can have a profound effect on the estimates that are generated, even when the estimates are derived from the same economic model. Standard models are well known and incorporate standard assumptions and approaches that generally are well explained. Many experts agree that the mark of a good economic model is one that uses assumptions and methodologies that seem reasonable and are not geared toward generating any particular result. Even estimates by these studies can vary substantially. In contrast, some models may use non-standard approaches and assumptions that may be difficult to justify and seem to have been chosen in order to generate pre-determined results. Consequently, estimates of the impact of the TPP on the U.S. economy can vary from positive to negative, reflecting the importance of the assumptions that are used to derive the results.\nGiven the current state of economic modeling and data availability, the models that are deemed to offer the most accurate representation of the effects of changes in trade policy likely can provide only rough estimates of the magnitude of the potential changes in employment in certain sectors, but cannot offer estimates of the precise size of the shifts in employment. As this report indicates, the most important assumption involved in generating estimates of the impact of TPP on employment appears to be the expected level of labor utilization in the U.S. economy over the phase-in period. Model simulations based on an assumption of full employment likely track closer to the current situation than would data following the 2008-2009 financial crisis when rates of labor unemployment were above historical levels. It seems reasonable to assume, however, that the U.S. economy will perform at or close to its long-term trend approaching full employment during the period following the adoption of TPP. Another major qualification for the estimates may be that they do not account for changes in exchange rates, which may have a wide-ranging effect on the prices of internationally traded goods and may overwhelm changes in prices of goods that arise from changes in tariff rates.\nEstimates of employment effects of new FTAs can be subjective and misleading because they represent a partial accounting of the total economic effects of new FTAs. U.S. FTAs typically include comprehensive provisions for goods, services, and investment. With few exceptions, estimates of possible employment effects of the TPP focus primarily on employment effects in the goods sectors and neglect the potential effects in the services and investment areas. The study by Petri, et al. attempts to bridge this gap by developing a methodology for making such an assessment. It is not possible to draw any conclusions about the extent to which these estimates reflect the actual costs and benefits of liberalizing trade in services and foreign investment flows without additional information. In addition, the estimates neglect a broad range of impacts for the economy as a whole that potentially can provide consumers with large economic benefits and that can yield broad productivity and efficiency gains for the economy and may enhance employment. As a result, estimates of the employment effects of the TPP may serve poorly as an indicator of the total impact of a new FTA on the economy as a whole.\nAs policymakers consider TPP, they likely will continue to weigh the results of a range of estimates of the employment effects of the agreement to gauge the impact on the economy. In this process, policymakers likely would be aided by estimates that clearly state the assumptions that are used and that inform policymakers about the broad implications of such agreements for the economy as a whole. In addition, policymakers likely would benefit from more reliable data on the potential magnitude of the effects that such agreements might be expected to have on specific sectors, allowing them to craft programs to assist those most directly affected by the agreements. As a result, policymakers may benefit from a number of initiatives to improve information and data on the impact of international trade on the economy. These might include\nIncreased information and data on services in the economy, including the shifting of in-house services from the manufacturing sector to the services sector and the formal and informal barriers to U.S. services posed by major trading partners; Better data on worker dislocations, including the reasons for business closings; and Better understanding of the development of global supply chains and the role they are playing in the U.S. economy." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 2, 1 ], "alignment": [ "h0_title h1_title", "h0_full h1_full", "h1_title", "", "", "", "", "", "", "", "", "h1_full", "", "h0_title h1_title", "h0_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "h0_full h1_full" ] }	{ "question": [ "Why is Congress considered to be a major player in U.S. trade policy?", "What did Congress do in order to have more control over the President's authority in foreign relations?", "How has Congress demonstrated their power over U.S. trade policy?", "What is the U.S. considering regarding foreign trade in the Trans-Pacific region?", "Why are international trade agreements important to Congress?", "What are the potential effects of these trade agreements?", "How will Congress address these mixed effects in regards to the TPP?", "What task does the U.S. International Trade Commision have regarding the TPP?", "What does this report do to demonstrate the mixed effects?" ], "summary": [ "Congress plays a major role in formulating and implementing U.S. trade policy through its legislative and oversight responsibilities. Under the U.S. Constitution, Congress has the authority to regulate foreign commerce, while the President has the authority to conduct foreign relations.", "In 2015, Congress reauthorized Trade Promotion Authority (TPA) that (1) sets trade policy objectives for the President to negotiate in trade agreements; (2) requires the President to engage with and keep Congress informed of negotiations; and (3) provides for Congressional consideration of legislation to implement trade agreements on an expedited basis, based on certain criteria.", "In 2015, Congress reauthorized Trade Promotion Authority (TPA) that (1) sets trade policy objectives for the President to negotiate in trade agreements; (2) requires the President to engage with and keep Congress informed of negotiations; and (3) provides for Congressional consideration of legislation to implement trade agreements on an expedited basis, based on certain criteria.", "The United States is considering the recently concluded Trans-Pacific Partnership (TPP) among the United States and 11 other countries. The 12 TPP countries signed the agreement in February 2016, but the agreement must be ratified by each country before it can enter into force. In the United States this requires implementing legislation by Congress.", "For Members of Congress and others, international trade and trade agreements may offer the prospect of improved national economic welfare.", "Such agreements, however, have mixed effects on U.S. domestic and foreign interests, both economic and political.", "In considering the TPP, Congress likely will examine various economic studies to assess the impact of the agreement on the economy. The results of these studies vary depending on the model and the assumptions that are used to generate the results.", "The U.S. International Trade Commission is tasked with providing the official U.S. government estimate of the economic effects of the agreement.", "This report provides an analysis of various studies and information on the types of economic models that are used to assess the impact of trade agreements and the importance of the assumptions that are used in generating these estimates." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2, 2, 2 ] }
GAO_GAO-19-94	{ "title": [ "Background", "Federal Efforts to Promote Shared Services Resulted in Some Cost Savings and Efficiency Gains, but Challenges Impeded More Widespread Adoption", "Efforts to Promote Shared Services for HR Activities Contributed to Cost Savings and Cost Avoidance", "Outcome Information on Financial Management Shared Services Efforts Is Limited", "Governance and Marketplace Challenges Have Impeded Greater Progress toward Cost Savings and Other Performance Goals", "OMB and GSA Have Taken Actions to Address Governance and Marketplace Challenges, but Could Strengthen Their Implementation Approach", "OMB and GSA Have Taken Actions to Address Persistent Challenges", "OMB and GSA Introduced a New Shared Services Marketplace Model, but Could Strengthen Their Implementation Approach", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "According to OMB, the federal government spends more than $25 billion annually for core mission support services, such as HR and financial management that are common across agencies. These services are generally supported by a wide range of activities. For example, the HR employee life cycle functions represent hiring to retirement and include activities such as payroll and other compensation and benefits management. The financial management function includes core financial activities such as making and receiving payments for goods or services.\nAs shown in figure 1, for more than two decades, the federal government has taken actions aimed at increasing agencies’ use of shared services. Key congressional actions included new laws to create uniform standards for financial reporting, promote agency use of information technology (IT) to deliver core mission support services, and establish funding mechanisms for agencies to modernize IT systems. Presidential administrations have made it a priority to promote the use of shared services for HR and financial management activities for many years. For example, in 2014 and again in 2018, OMB established a cross-agency priority (CAP) goal of improving the use, quality, and availability of administrative shared services. Complementing the goal, the Digital Accountability and Transparency Act of 2014 is intended to standardize and increase the transparency of agencies’ spending data.\nAt present, OMB has responsibility and authority to develop and implement government-wide shared services policy. OMB is working with GSA to develop shared services strategy, policies, and guidance, with OPM and Treasury also having important roles (see table 1). Table 1 also describes the agencies we selected and their roles in the shared services initiatives.", "", "OMB’s efforts to promote HR shared services resulted in cost savings, cost avoidance, and more consistent service delivery. OMB announced the HR Line of Business in 2004 simultaneously with the Financial Management Line of Business. These shared services initiatives shared similar goals: (1) standardize systems, business processes, and data elements to promote consistency across the federal government; and (2) reduce costs by establishing a marketplace or a system of buying and selling products and services. In this context, the marketplace would allow agencies to acquire IT systems for core mission support services through shared services solutions.\nOPM and FIT coordinated with their respective Chief Human Capital Officer and CFO stakeholder communities to develop data elements and business process standards for common HR and financial management activities. Setting consistent standards for data and systems can lead to benefits for shared services customers as well as providers. For example, the ability to meaningfully aggregate or compare data across the federal government increases as more agencies adopt common or standardized data elements or processes. As we have previously reported, the lack of comparable data across agencies can hinder efforts to analyze government-wide trends. Specifically, OPM reported in 2015 that the lack of standardized time and attendance data or required data components limits access to workforce data and hinders efforts to analyze government-wide trends. In addition, once providers know the standards, they can develop a solution applicable to multiple customer agencies and achieve economies of scale.\nOPM oversaw one of the first efforts to create a shared services marketplace in 2001, which focused on payroll. That effort resulted in cost savings, cost avoidance, and greater consistency in the interpretation and application of payroll rules. In the early 2000s, many agencies’ payroll systems were nearing the end of their estimated life cycles. As managing partner of the HR Line of Business, OPM worked with OMB to identify payroll providers. They selected 4 of the then 22 federal payroll providers to serve as FSSPs for the 116 executive branch agencies. We previously reported that, according to OPM officials who had overseen the payroll consolidation effort, OMB authorized only the chosen federal payroll providers—not other agencies—to spend money on modernizing payroll systems, thereby encouraging the shift to the selected FSSPs.\nOPM designated six more public- and private-sector shared services centers to provide additional HR functions to agencies in between 2005- 2008. These functions include core HR services such as personnel action processing and benefits and compensation management, as well as noncore services such as HR strategy and performance management. According to OPM, more than 99 percent of agencies migrated to a payroll provider and more than 88 percent of agencies migrated to an HR shared services center. This resulted in an estimated savings and cost avoidance of more than $1 billion between fiscal years 2002 and 2015. The consolidation of payroll providers from 22 to 4 providers also contributed to greater consistency in the way the federal government interprets and applies payroll rules.", "The federal government made progress toward establishing standards for selected financial management activities and designating providers to engage in a marketplace. However, information on outcomes is limited because data were not tracked amidst changes in the Financial Management Line of Business leadership and strategy. In 2004, OMB designated GSA’s Financial Systems Integration Office (FSIO) as managing partner of the Financial Management Line of Business. OMB also designated four FSSPs to provide financial management services to other agencies. They were: the Department of the Treasury’s Administrative Resource Center (ARC), the Department of the Interior’s Interior Business Center (IBC), the Department of Transportation’s Enterprise Service Center (ESC), and GSA’s Federal Integrated Solutions Center.\nUnder the original Financial Management Line of Business, which was launched in 2004, federal agencies were required to either serve as a shared services provider or leverage a shared services provider when modernizing a financial system. In 2010, OMB changed this strategy. Agencies would no longer be required to adopt shared services for financial systems. In announcing this change in strategy, OMB noted concerns related to the costs and risks—such as projects that did not meet agency needs upon completion—that medium and large agencies had encountered as they pursued shared services for financial management activities. OMB also noted that agency managers were more likely to pursue shared services for less complex operations such as common website hosting, rather than more complex operations, such as financial transactions. Further, OMB announced a change in leadership. FSIO ceased operations and OMB later designated the Department of the Treasury’s Office of Financial Innovation and Transformation (FIT) as the new managing partner of the Financial Management Line of Business.\nFIT took steps to establish a marketplace for customers seeking shared financial management services and to develop standards for financial management activities. As part of this effort, FIT created a process to analyze the existing financial management FSSPs to identify capability gaps. FIT invited the existing FSSPs and other agencies that wanted to receive FSSP designation to apply. In 2014, FIT selected ARC, IBC, ESC, and USDA Financial Management Services (which is separate from NFC) to provide financial management services to other federal agencies. FIT also worked with the CFO community to develop more than 40 business use cases for financial management activities. Business use cases document how a common activity, such as disbursing payments, is executed, including a sequential description of each step in the process. According to a FIT official, these business use cases foster a common understanding of how to execute specific financial management functions among customers and providers, which can make it easier for customers to transition to shared services.\nFurther, FIT identified four initiatives to expand shared services for financial transactions. FIT’s four shared services initiatives included expanding shared services for accounts payable and accounts receivable, debt collection, and payment processing. FIT officials estimated these projects could contribute to cost savings of around $620 million over 5 years, but they did not track cost savings. FIT officials also did not track the percentage of non-CFO Act agencies that migrated financial systems to a shared services provider. FSSP customer lists show that non-CFO Act agencies and commissions more frequently rely on external providers for core financial shared services than do medium and large agencies.\nFIT officials stated that OMB transferred many of FIT’s responsibilities, including collecting performance information, to GSA in 2016. In 2018, GSA officials published customer satisfaction data from 2017 and 2018 for administrative functions, including financial management services through the Customer Satisfaction Survey. GSA also plans to track the percentage of selected financial transactions—such as certain types of payments—completed by a shared services provider starting in 2020. However, tracking of cost data continues to be an issue, which we address later in this report.", "Wider adoption of HR and financial management shared services has been impeded by challenges in two areas. First, shared services efforts have faced persistent governance challenges, such as limited interagency collaboration, difficulty reconciling benefits and trade-offs, and limited oversight and technical support for shared services migrations. Second, the efforts have also experienced marketplace challenges, which involve difficulty obtaining funding to invest in shared services, demand uncertainty among providers, and limited choices for customers. These issues hampered efforts to establish effective and efficient shared services marketplaces. As a result, these marketplaces have not been able to consistently support sufficient competition limiting the potential cost sharing efficiencies and improved performance that could be realized with greater usage. OMB and GSA have taken steps to address these challenges, which we assess later in this report.\nLimited interagency collaboration. The Lines of Business governance structure limited collaboration across different mission support areas. This made it more difficult for those with expertise in acquisitions, IT, HR, and financial management policy to work together on shared services solutions. For example, although a shared payroll solution should ideally consider how to appropriately implement payroll rules, an area in which the Chief Human Capital Officers community has subject-matter expertise, it also needs the expertise of others. Specifically, the solution should also be able to integrate with an agency’s financial reporting systems, an area in which the CFOs and Chief Information Officers have expertise. Additionally, the solution should ideally leverage the government’s purchasing power, an area in which the Chief Acquisition Officers have expertise. The Lines of Business Managing Partners took steps intended to address this issue. For example, the HR Line of Business chartered the Multi-Agency Executive Strategy Committee to facilitate interagency collaboration by bringing together representatives from human capital offices across CFO Act agencies. Later in this report, we describe additional steps OMB and GSA took to promote greater collaboration across the individual Lines of Business.\nDifficulty reconciling benefits and trade-offs. We found that agencies have had difficulty reconciling the trade-offs associated with adopting a standardized service. OMB has issued multiple memorandums over the years directing agency officials to consider shared services solutions when researching options for replacing legacy HR or financial management systems. Despite OMB’s direction, the benefits for customers to migrate to a standardized solution were not always clear. According to ARC officials, prospective customers were invested in their legacy processes, or did not factor long-term cost savings or cost avoidance into their decision-making process, therefore limiting the full realization of standardized shared services.\nThese difficulties are illustrated in a recent experience at Education. Education officials debated whether to migrate the department’s financial management system to a shared services provider, and spent substantial time and money determining whether it was feasible. Education has several systems which are closely integrated and dependent on one another, including financial and grants management. In considering trade- offs, officials were concerned about the costs they would incur and the impact to their grantees if they de-coupled these systems to migrate to a standardized financial system. According to Education officials, they spent about a year meeting with officials from OMB, FIT, and ARC to determine the feasibility of migrating their core accounting system to ARC.\nThey also reported spending more than $750,000 on a feasibility study. The study noted that the cost of an internal migration would be less expensive than migrating to ARC. Ultimately, in 2016, Education officials decided that instead of migrating they would modernize their legacy system internally. GSA and OMB supported Education’s decision to modernize in house and agreed that Education did not need to move to a shared services provider at that time. However, GSA officials working with Education on their financial management modernization efforts noted that Education’s decision to pursue a customized solution that paired financial systems and grants contributed to the higher quoted cost of migrating to ARC. GSA officials also recommended that Education consider the costs and benefits of making changes to its financial management systems that would eventually facilitate the transition to a shared services solution. Education officials said they remain committed to reviewing this effort again in the future.\nLimited oversight and technical support. Customer and provider agencies experienced issues with project management, which contributed to delayed and costly migrations. For example, we previously reported that two recent financial management migrations—involving the Department of Housing and Urban Development (HUD) migrating to ARC and the Department of Homeland Security (DHS) migrating to IBC, the federal shared services provider within the Department of the Interior— were late, over budget, and only addressed a portion of the original project scope. In 2016, we reported that HUD migrated 4 of 14 planned financial management capabilities to shared service solutions, but ended efforts to migrate the remaining 10 planned capabilities to ARC, in part because of weaknesses in implementing key management practices. For example, HUD’s senior leaders did not recognize and fully address challenges as they arose, including those identified with scope, schedule, and program costs. As a result, HUD was unable to follow through with its plans to replace a number of its legacy financial management systems and continues to maintain those systems while seeking other new initiatives to address aspects of the remaining capabilities. HUD spent about $58 million over three years before deciding to end the migration and modernization effort in April 2016. ARC officials reported that as of November 2018, it continues to provide financial management services for the capabilities that HUD migrated.\nSimilarly, in 2017, we reported that to address long-standing deficiencies in DHS’s financial management systems, DHS started to migrate three components to a modernized financial management system solution provided by the IBC. However, we found that significant challenges such as project management and communication problems, among others, disrupted the project, raising concerns about the extent to which objectives would be achieved as planned. In May 2016, DHS and IBC determined that the planned implementation dates were not viable. We reported that plans for DHS’s path forward on this project were delayed for 2 years.\nIn both cases, we found that the customer agencies did not consistently follow leading project management practices, such as properly identifying potential risks and developing mitigation plans. We made four recommendations to HUD and two recommendations to DHS intended to address weaknesses in their department’s financial management systems modernization efforts. However, as of November 2018, they had not yet implemented them.\nOPM took steps to address this issue for the HR Line of Business. OPM officials told us that in 2007 they developed an online guide to assist customer agencies to prepare for and manage a migration of their human resources operations to a shared services center. According to OPM, the guidance contains information regarding different delivery models, the migration process, and roles and responsibilities. Further, OMB and GSA recognized that customers and providers would benefit from additional technical support and oversight. In May 2016 guidance, OMB tasked GSA with assisting agencies during implementation by publishing guidance incorporating best practices and lessons learned in project management. OMB also tasked GSA with monitoring implementations to ensure that agencies are following a disciplined process and properly assessing project risk in partnership with OMB. Later in this report, we describe steps GSA has taken to provide guidance and technical assistance to agencies.\nFunding challenges, demand uncertainty, and limited choices. Funding challenges, demand uncertainty among providers, and limited choices for customers are challenges that have limited the effectiveness of shared services marketplaces for HR and financial management services. We have previously reported that agencies consider obtaining the funding required for consolidation and migration efforts to be a challenge. This can affect their ability to realize cost savings and cost avoidance. GSA officials said funding challenges can be a barrier to entry into the marketplace for potential customers. In part because of funding challenges, agencies continue to rely on legacy IT systems for core mission support services. Many of these systems are increasingly at risk of failure because of aging technology and reliance on applications that are no longer supported by vendors. As a result, agencies are limited in their ability to deploy updates or make adjustments to ensure the systems support mission needs. In our 2017 High-Risk report, we found that agencies needed to establish action plans to modernize or replace obsolete IT investments across the federal government.\nSome FSSPs have also struggled to keep up with the capital investments necessary to modernize. We previously reported that OPM officials involved with the payroll consolidation effort said that funding had not materialized for systems modernization for the four payroll service providers, though it was expected at the outset of the initiative. The officials said this lack of funding was a major problem that put the long- term viability of the effort at risk. According to NFC officials, the HR FSSPs continue to find it difficult to keep up with the capital investments necessary to modernize. GSA officials said that federal investment in HR and financial management systems modernization lags behind the private sector.\nAccording to agency officials and subject-matter experts, federal and commercial shared services providers faced uncertainty related to customer demand, which made it difficult for them to plan and more fully participate in the shared services marketplace. For example, ARC officials said that in determining whether to invest in system improvement, they need to evaluate the impact on current customers as well as the benefits to potential customers. They also pointed out that the costs associated with systems improvements would be borne by the current customer base if potential new customers failed to materialize.\nOn the customer side, both agency officials and subject-matter experts told us that potential customers often found it difficult to identify providers capable of meeting their needs. Some customers wanted a la carte services and others had needs which surpassed the capacity of available providers. For example, Education’s HR officials said it was difficult to find a provider to meet their needs for specific HR services. A lack of up-to- date information about providers’ services and costs complicated their search process. Education officials said they reached out to several FSSPs, but either they did not provide the specific services Education wanted, they were not taking on new customers, or the cost was not feasible for Education. We previously found that as more agencies consider transitioning to shared services providers, making pricing and performance information publically available can help agencies determine the most efficient method for obtaining services.\nSubject-matter experts said that large agencies also had challenges finding an FSSP capable of meeting their needs. For example, one subject-matter expert who works at a large agency with more than 350,000 employees described the challenges his agency faced identifying a provider capable of providing financial management services. He said one potential FSSP was concerned that adding a large customer would negatively impact its ability to serve other customers. In light of the difficulty in finding a provider with sufficient capacity, the agency decided to modernize its financial system internally.\nIn light of these challenges, agency adoption of shared services has been slow and uneven. In 2015, the Association of Government Accountants (AGA) surveyed government managers and staff, and found that difficult migration experiences raised doubts among officials at other agencies contemplating shared services. AGA found that respondents considering migrating to a shared services provider were hearing enough concerns that they were not eager to undergo a substantial migration. Consequently, agencies continue to conduct common business activities in an inconsistent manner and maintain unique systems. Therefore, they may be missing opportunities to achieve cost savings offered by greater use of shared services. For example, according to OPM, there are at least 108 different systems that send time and attendance data to FSSPs. There are also an estimated 86 learning management systems across the government. We have consistently reported that duplicative and incompatible agency business systems and data prevent agencies from sharing data, or force them to depend on expensive, custom-developed systems or programs to do so.", "", "Over the past several years, OMB and GSA have taken actions— including creating a new governance structure and redesigning the marketplace—to address the challenges that impeded more widespread adoption of shared services. To bolster interagency collaboration, OMB issued guidance in 2016, which designated a Shared Services Policy Officer within OMB with responsibility and authority to develop and implement government-wide shared services policy. OMB also tasked the new Unified Shared Services Management (USSM) office within GSA to bring together key stakeholders, including the managing partners of the different lines of business, and representatives from customer and provider agencies.\nGSA also introduced the Federal Integrated Business Framework to build on ongoing efforts by OPM and FIT to develop standards for HR and financial management data elements and business processes, among other things. As part of this effort, cross-agency working groups identified 11 end-to-end processes for mission support services. Similar to the business use cases FIT developed, these business processes document how a common administrative activity is executed, including a sequential description of each step in the process. According to GSA officials, these business processes serve as the basis for a common understanding of what services agencies need, and what shared services providers should offer. These working groups also bring together those with expertise in acquisitions, IT, HR, and financial management policies.\nGSA also developed guidance for selecting and migrating to a shared services provider. The new guidance identified opportunities for GSA to review agency migration materials. GSA developed the Modernization and Migration Management Playbook (M3 Playbook), a compilation of leading project management practices and lessons learned from past systems migrations, and met with agencies contemplating or undertaking migrations. The M3 Playbook divides a typical shared services migration into six phases. For each phase, the M3 Playbook identifies key steps agencies should take before they move on, such as completing a risk mitigation strategy and defining performance and success metrics. At the end of each phase, the M3 Playbook recommends a “tollgate” review to ensure both customer and provider completed the necessary steps and are ready to move to the next phase. GSA is to provide recommendations to OMB on the migrations based on observations of project status and risk from tollgate reviews.\nAgency officials involved with HR and financial management migrations we spoke with said they found both the Playbook and GSA’s reviews helpful. For example, Justice officials said they started to use the Playbook once it was available midway through their HR system migration to NFC. Prior to each tollgate review, Justice officials said they submitted the required deliverables so that GSA had time to review the documents prior to the meetings. Justice officials said that GSA staff reviewing their materials offered concrete suggestions such as developing and documenting success metrics, strengthening their business case, and developing a risk assessment document. According to Justice officials, these suggestions improved the migration process. Education officials also reported they appreciated the project management expertise provided by GSA staff.", "In fiscal year 2018, OMB and GSA introduced a new marketplace model for shared services that seeks to better meet the needs of customers and providers by offering more choices for purchasing shared services. We examined their approach for the new model and found they were following some key change management practices, but there are weaknesses with the implementation. Specifically, we found OMB and GSA do not have a plan to monitor the implementation of an initiative designed to determine how well the new marketplace model works as intended. Nor have they identified and documented some key roles and responsibilities. The action plan also does not explain how OMB and GSA will provide information to customers about provider services, pricing, and performance. Lastly, OMB and GSA have not implemented a process for collecting and tracking cost-savings data.\nOMB and GSA described their plan for the new marketplace in an action plan, released in March 2018, along with the President’s Management Agenda. The management agenda issued a new cross-agency priority (CAP) goal to improve the effectiveness of shared services. According to the management agenda, the shared services goal will support CAP goals related to IT modernization, data accountability and transparency, and the workforce of the future. OMB and GSA are the shared services goal leaders and staff said they are coordinating with other CAP goal leaders to achieve their objectives.\nTo oversee the marketplace and provide greater accountability for migrations, OMB and GSA are implementing a new two–tier governance structure (see figure 2).\nTo ensure that agencies are adhering to the standards developed by the Business Standards Council and to provide greater oversight and accountability for shared services migrations, OMB and GSA are working on plans to create Task Order Review Boards (Review Boards) for different types of services, such as payroll or accounting. According to OMB and GSA’s action plan, the Review Boards will administer standards and will review all task orders for shared services purchases for compliance with the standards. The Review Boards will need to approve any requested customizations. According to GSA officials, the contracts for the various vendors providing shared technology and transaction processing services will be purchased through and managed by Service Management Offices (SMO). The SMO will be responsible for managing the integration of new commercial suppliers into the marketplace and responding to user concerns. The SMO will also be held accountable for provider performance. OMB staff noted that the details of the Review Boards depend on the shared services solutions that are identified.\nFigure 3 describes the different options customers will have for purchasing shared services in the new marketplace. The figure also shows how a Review Board and SMO are intended to interact with customers and providers.\nTo determine whether the marketplace model functions as intended, OMB and GSA introduced an initiative, NewPay. In September 2018, GSA awarded a 10-year, $2.5 billion NewPay agreement to two commercial teams to provide payroll, and work schedule and leave management services using Software-as-a-Service. Software-as-a-Service—a cloud- based computing model—delivers one or more applications and all the resources—operating system, programming tools, and underlying infrastructure to run them—for use on demand. According to OMB and GSA staff, Software-as-a Service should help address some of the challenges with demand uncertainty because providers can more easily increase and decrease capacity depending on changes in demand than FSSPs have been able to do with their current technology.\nOur prior work on organizational transformations shows that incorporating change management practices—such as setting implementation goals and a timeline to show progress—improves the likelihood of successful reforms. Adopting key change management practices can also help managers recognize and address agency cultural factors that can inhibit reform efforts. As OMB and GSA prepared to implement the new marketplace model, they incorporated some key change management practices. For example, they defined their vision for a shared services marketplace and some of the key activities needed to achieve that future state. GSA also issued a draft statement of objectives for NewPay in December 2017. The statement includes a comprehensive list of tasks related to project management and assigns responsibility for those tasks to the prospective customers, providers, or the government agency that will fulfill the SMO role.\nAlthough OMB and GSA have incorporated some key change management practices, we found some weaknesses in OMB and GSA’s implementation of the marketplace.\nMonitoring. OMB and GSA do not have a finalized plan to monitor the implementation of NewPay. We have previously identified key questions for agencies that are planning and implementing transformations. In that work, we found that agencies need to monitor and evaluate their efforts to identify areas for improvement. We have also reported that effective monitoring plans should include performance goals and milestones, transparent reporting tools to help manage stakeholder expectations, and a process for capturing lessons learned to improve the management of subsequent phases.\nOMB and GSA staff said they are working on a plan to help them implement NewPay. However, it is not yet complete and they did not provide us with a draft to review. They said their plans continue to evolve and they anticipate having an implementation plan by spring 2019. The lack of a finalized plan with the elements listed above hinders OMB and GSA’s ability to provide sufficient oversight for this transition. Having such a plan would provide various benefits to the NewPay implementation effort. First, a monitoring plan that includes performance goals and milestones would help OMB and GSA track how many and how well customer agencies are transitioning from one provider to another. Similarly, setting performance goals related to continued delivery of services during the transition could help OMB and GSA more quickly identify gaps and make adjustments as needed. Specifically, OMB and GSA could more effectively monitor how the new approach for purchasing payroll, and work schedule and leave management systems integrates with current HR systems.\nAdditionally, transparent reporting tools, such as web-based reporting on key milestones, could help OMB and GSA demonstrate that they are aware of challenges and are addressing them as they arise. Greater reporting transparency could also help build momentum, show progress, and help justify continuing investments in reforming shared services efforts. Finally, a process for capturing lessons learned based on NewPay could help OMB and GSA improve the process for subsequent initiatives and further minimize disruptions to agency delivery of services during these future transitions.\nWithout a monitoring plan with performance goals and milestones, transparent reporting tools, and a process for capturing lessons learned, it will be more difficult for OMB and GSA to provide oversight of the transition and its effects on providers and customers, including whether there are interruptions to delivery of services. A monitoring plan could help OMB and GSA avoid gaps in service or costly delays as agencies transition to the new model for obtaining payroll and work management services.\nRoles and responsibilities. OMB and GSA have also not identified or documented some key roles and responsibilities related to the implementation of NewPay. Identifying a NewPay SMO is a crucial first step, since the SMO is supposed to play a key role driving standards and holding customers and providers accountable for performance. However, OMB and GSA have not announced which agency will serve as the SMO. Further, they have not identified which agencies or officials will serve on the NewPay Review Board. They also have not documented the authority or the resources the SMO and Review Board will have to enforce agency adoption of standards.\nOMB and GSA have also not yet documented which agency will be responsible for interpreting payroll rules and regulations. This has been an ongoing issue for the payroll FSSPs. According to GSA and NFC officials, the payroll FSSPs have been interpreting business rules differently, and thus have implemented new regulations inconsistently. According to NFC officials, the payroll FSSPs requested the establishment of a governing body to help standardize the process for implementing new regulations. OPM officials told us in September 2018 that they intend to start providing guidance to support payroll standardization to the extent allowed by law and regulation in the future. However, as of October 2018, OMB and GSA had not documented this decision.\nAccording to federal standards on internal control, management should establish an organizational structure, assign responsibility, and delegate authority to achieve an entity’s objectives. When the organizational structure describes overall responsibilities, and when those responsibilities are assigned to discrete units, then organizations can operate more efficiently and effectively. Moreover, in our previous body of work on enhancing interagency collaboration, we identified key practices that can help agencies mitigate challenges when they attempt to work collaboratively. For example, clarifying roles and responsibilities can enhance interagency collaboration.\nOMB staff and GSA officials said they are still identifying which agencies or entities will fill key roles and assume key responsibilities. They anticipate that some of this information will be finalized by spring 2019. Identifying and documenting roles and responsibilities would help ensure that key stakeholders are involved in planning and implementation activities. Until OMB and GSA clearly identify, communicate, and document key roles and responsibilities, they run the risk of not achieving their objectives. They also risk repeating past problems, such as the inconsistent implementation and interpretation of standards and migrations that encounter costly delays because agencies do not follow available guidance.\nInformation on services, pricing, and performance. Although the action plan aims to help additional providers enter the marketplace, it does not explain how OMB and GSA will provide information to customers about provider services, pricing, and performance. According to the Association of Government Accountants, effective marketplaces require market transparency with information on services, pricing, and performance. Also, according to federal standards on internal control, managers should externally communicate the necessary quality information to achieve an entity’s objectives.\nAs we have previously reported, reliable information on the costs of federal programs and activities is crucial for effective management of government operations. OMB staff and GSA officials said that data collection efforts are on hold as they continue to try to determine what performance metrics they will use and share with potential customers. Without up-to-date information on providers—such as the services they offer, their level of performance, and their costs—it will be time consuming and difficult for potential customers to compare providers. This lack of information could slow the rate of shared services adoption.\nCost-savings data. In the CAP goal action plan for shared services, OMB and GSA established a cost savings goal of an estimated $2 billion over 10 years based on reforms to the shared services governance structure and marketplace. However, their action plan does not include steps they intend to take to collect and track cost-savings data. Such data would allow them to assess their progress toward their goal. In their action plan, OMB and GSA included performance measures for goals such as customer satisfaction. They also have output measures related to HR and financial management activities. However, they did not include a measure to gauge their progress in achieving cost savings. In our previous work on key questions for agencies that are planning and implementing transformations, we found that agencies need to have processes in place to collect the needed data and evidence to effectively measure goals of reform efforts.\nOMB and GSA said they are still finalizing their implementation plan. Including a process to collect and track cost savings data in the final plan would position them to assess how well their reform efforts are contributing to their cost savings goal. Cost savings data would also support oversight efforts, as OMB and GSA could better communicate to Congress and other relevant stakeholders the extent to which their reforms are contributing to cost savings goals. Earlier in this report, we described how difficult it was to determine the progress of the financial management line of business because the managing partners of that effort did not track data on cost savings. Until OMB and GSA finalize a plan for collecting the needed data and evidence to effectively measure cost-savings goals, they risk experiencing a similar challenge.\nOMB and GSA’s action plan to support the shared services CAP goal does not directly address funding challenges. However, new legislation intended to promote IT modernization efforts may address these challenges. In 2017, Congress enacted the Modernizing Government Technology (MGT) Act as part of the 2018 National Defense Authorization Act. The MGT Act allows agencies to create working capital funds for modernizing IT systems. Working capital funds are primarily used for business-like activities, such as purchasing consolidated or shared services within and between federal agencies. The MGT Act allows CFO Act agencies to transition legacy systems to cloud computing platforms or other innovative platforms and technologies, among other things. We have previously reported that working capital funds provide agencies with an opportunity to operate more efficiently by consolidating services and creating incentives for customers and managers to exercise cost control and economic restraint.\nThe MGT Act also established the Technology Modernization Fund and Technology Modernization Board. Agencies can apply to the board for loans for IT modernization projects, including replacing legacy systems with shared services. In February 2018, OMB issued guidance on the initial process agencies should follow to submit proposals to the board. As of February 2019, OMB announced plans to award close to $90 million to various agencies for modernization projects. Two of these awards were for shared services: one award was to GSA for more than $20 million to help fund NewPay and one award was to USDA for $5 million to migrate 10 IT applications to a shared services cloud platform model.", "When properly implemented, a shared services model for HR and financial management activities has the potential to help the federal government cut costs and modernize aging IT systems. Over the past 15 years there have been some notable shared services successes: for example, consolidating payroll services resulted in more than $1 billion in cost savings and cost avoidance over 10 years, according to OPM estimates. However, there have also been persistent governance and marketplace challenges that have impeded more widespread adoption of shared services.\nOMB and GSA have been involved in shared services reform efforts for decades. Their plan for a new shared services governance structure and marketplace has the potential to address some of the challenges that have previously hindered more widespread adoption of shared services. For example, their proposed marketplace model has the potential to make the marketplace more effective by reducing demand uncertainty among shared services providers and providing more choices for customers. However, several weaknesses in their implementation of NewPay could limit the initiative’s success. OMB and GSA do not have a plan to monitor NewPay’s implementation. They also have not documented key decision- making roles and responsibilities related to the implementation of NewPay. Until they develop a monitoring plan which includes performance goals and milestones, transparent reporting tools, and a process for capturing lessons learned, and documenting key roles, they risk implementation challenges that could cause gaps in service or costly delays.\nOMB and GSA also do not have a process to provide information to customers about provider services, pricing, and performance. Developing such a process would help minimize the challenges of transitioning to shared services on key stakeholders. Finally, OMB and GSA do not have a process for collecting and tracking cost-savings data. Until OMB and GSA finalize their plan for collecting the related data and evidence to measure their cost savings goal of an estimated $2 billion over 10 years, they will not be able to determine and report progress made.", "We are making four recommendations to OMB to work with GSA, which is the co-goal leader for the shared services CAP goal.\nOMB’s Shared Services Policy Officer should work with GSA to finalize a plan for monitoring the implementation of NewPay. The plan should include: implementation goals, a timeline, and milestones for agencies to transition from one provider to another; transparent reporting mechanisms on key milestones; and a process for capturing and communicating lessons learned. (Recommendation 1)\nOMB’s Shared Services Policy Officer should work with GSA to document key roles and responsibilities, including which agency will be the NewPay SMO, who will be assigned to the NewPay Task Order Review Board, how the SMO, the Review Board, and other key stakeholders will work together, and which agency will be responsible for interpreting payroll rules and regulations. (Recommendation 2)\nOMB’s Shared Services Policy Officer should work with GSA to update provider information on services offered, pricing, and performance and share that information with prospective customers. (Recommendation 3)\nOMB’s Shared Services Policy Officer should work with GSA to implement a process for collecting and tracking cost-savings data that would allow them to assess progress toward the shared services cost- savings goal of an estimated $2 billion over 10 years. (Recommendation 4)", "We provided a draft of this report to the Director of OMB, the Administrator of GSA, the Acting Director of OPM, the Secretary of the Treasury, the Deputy Assistant Inspector General for Audit of the USDA, the Secretary of Education, and the Assistant Attorney General for Administration of Justice for review and comment. OMB staff did not agree or disagree with our recommendations. In comments provided by email, OMB staff stated OMB has been re-evaluating its shared services policies and may provide an updated policy in the future. OMB, GSA, Treasury, OPM, USDA, and the Department of Education provided technical comments on this report which were incorporated as appropriate. The Department of Justice did not have comments.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Director of the Office of Management and Budget, the Administrator of General Services Administration, the Acting Director of the U.S. Office of Personnel Management, the Secretary of the Treasury, the Deputy Assistant Inspector General for Audit of the U.S. Department of Agriculture, the Secretary of the Department of Education, and the Assistant Attorney General for Administration of the Department of Justice, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff has any questions about this report, please contact Tranchau (Kris) T. Nguyen at (202) 512-2660 or Nguyentt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of our report. Key contributors to this report are listed in appendix II.", "This report: (1) identifies the progress and challenges associated with federal shared services initiatives for selected human resources (HR) and financial management activities, and (2) assesses the Office of Management and Budget’s (OMB) and the General Service Administration’s (GSA) actions to address those challenges.\nTo address both of our objectives, we conducted a literature review of GAO work and other relevant publications on HR and financial management shared services. In addition to GAO reports, we selected reports by think tanks and professional associations from the past 15 years, such as reports by the Partnership for Public Service and the Association of Government Accountants (AGA). We reviewed reports that described past HR and financial management federal shared services initiatives or specific shared services migrations involving HR or financial management services. These reports assessed the outcomes, challenges, or summarized lessons learned associated with those initiatives or migrations.\nWe reviewed planning and performance documents and we interviewed officials from (1) OMB and GSA, the agencies that oversee shared services policy and guidance, and (2) the Office of Personnel Management (OPM) and the Office of Financial Innovation and Transformation (FIT) within the Department of the Treasury (Treasury), agencies that oversaw past shared services initiatives and continue to play a key role developing government-wide policy for HR and financial management shared services. Key documents we reviewed included: OMB memorandums announcing federal shared services initiatives; the Modernization and Migration Management (M3) Playbook, guidance that GSA developed and provides to agencies considering or implementing shared services migrations; strategic or operational plans for earlier shared services initiatives, such as the Human Resources and Financial Management Lines of Business; and strategic or operational plans for ongoing shared services initiatives such as the Federal Integrated Business Framework, a model GSA developed with the lines of business managing partners for moving agencies toward common, cloud-based solutions for management functions.\nTo illustrate examples of outcomes and challenges, we selected two federal shared services providers (FSSPs), federal agencies that provide shared services to other agencies: the National Finance Center (NFC) within the U.S. Department of Agriculture (USDA) and the Administrative Resource Center (ARC) within Treasury. We also selected two customer agencies: the Departments of Justice (Justice) and Education (Education), which are experiencing different phases of shared services migrations.\nWe made our selection based on a number of factors. To capture a range of experience and perspectives, we selected a mix of customer and provider agencies. We selected one HR and one financial management systems migration to review, as well as one migration in an earlier phase and one in a later phase. To capture an in-depth perspective of a migration, we selected one customer and provider working together on a migration. To capture perspectives on OMB and GSA’s efforts to address shared services challenges and improve outcomes, we selected provider and customer agencies that were meeting regularly with GSA in 2016 or 2017 on their shared services migration. Our selection of agencies is non- generalizable and their experiences and outcomes may not be reflective of all migrations.\nWe reviewed guidance, planning, and performance documents at the four selected agencies. Specifically, we reviewed planning documents that describe shared services migration purpose and goals, the composition and responsibilities of the project management team, and estimated costs and savings; documented results of market research and analyses of alternatives; risk management strategies; service level agreements and performance metrics; communication plans for stakeholders; and reports that capture lessons learned.\nFor each of the illustrative example agencies, we interviewed agency officials involved with shared services migrations. At Justice, we interviewed the project management team overseeing the HR migration to the NFC. At Education, we interviewed the officials who reviewed the Department’s HR and financial management shared services options. At the two FSSPs, we interviewed officials knowledgeable about the outcomes and challenges associated with past and ongoing federal shared services initiatives.\nWe also interviewed subject-matter experts who were involved in public and private shared services migrations as customers, providers, or consultants. We met with members of the Shared Services Leadership Coalition, an interest group promoting shared services solutions involving commercial vendors. The members who participated in the group interview discussed shared services benefits, challenges, and lessons learned. We also met with members of the nonprofit Partnership for Public Service Shared Services Roundtable. The roundtable members who participated in the group interview are federal employees involved with shared services operations. They represented a mix of small and large agencies.\nTo further address the second objective, we reviewed OMB and GSA’s efforts to identify and address challenges and lessons learned from past migrations, including the new shared services action plan OMB released in March 2018. We assessed the extent to which OMB and GSA’s plan and guidance are designed to facilitate better shared services outcomes using criteria such as standards for internal control in the federal government, principles identified in our previous work related to addressing major management challenges, and the Association of Government Accountants criteria for effective marketplaces. During our interviews with customer and provider agency officials and subject-matter experts, we asked for their perspectives on these efforts and the likely effect they will have on ongoing and future shared services migrations.\nWe conducted this performance audit from June 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "Key contributors to this report include Sonya Phillips (Assistant Director), Jessica Nierenberg (Analyst-in-Charge), Rose Almoguera, and Monique Nasrallah. Faisal Amin, Ann Czapiewski, Timothy J. DiNapoli, Jared Dmello, Robert Gebhart, Amanda Gill, Dave Hinchman, Gina Hoover, Valerie Hopkins, John Hussey, Heather Krause, Michael LaForge, Laura Pacheco, Paula M. Rascona, and Kevin Walsh also contributed to this report." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_title", "h0_full", "", "h0_full", "h0_title h1_title", "", "h0_full h1_full", "h0_full", "", "", "h2_full", "", "", "" ] }	{ "question": [ "What were the effects of the attempt to centralize services for HR and financial management?", "Why are there positive outcomes as well as negative outcomes of this sharing?", "What has the government done in order to address the negative outcomes of the shared services?", "What are the OMB and GSA doing in regards to management?", "What did GAO find when they investigated OMB and GSA's New Shared Services Plan?", "Why is implementing these changes of the plan so crucial to the effectiveness of sharing services?", "How have the OMB and GSA demonstrated implementation weakness?", "How could these agencies avoid weakness in implementing the plan in the future?", "What did GAO do to address the outcomes of the implementation of the Shared Services plan?", "How did GAO gather the data for this report?", "What did GAO examine about OMB and GSA's implementation of the plan?", "How does GAO's report confront OMB and GSA's actions?" ], "summary": [ "Efforts to promote greater use of shared services for human resources (HR) and financial management activities resulted in some cost savings and efficiency gains, but challenges impeded more widespread adoption.", "For example, the Office of Personnel Management estimates that shared services for HR, including payroll resulted in more than $1 billion in government-wide cost-savings and cost avoidance between fiscal years 2002 and 2015. However, challenges include limited oversight, demand uncertainty among providers, and limited choices for customers.", "To address these challenges, the Office of Management and Budget (OMB) and the General Services Administration (GSA), as the shared services initiative leaders, introduced a new marketplace model in 2018 meant to better meet the needs of customers and service providers by offering more choices for purchasing shared services (see figure).", "They are also working on plans to create Service Management Offices and Task Order Review Boards to work with agencies to adopt standards for common management activities.", "GAO found that OMB and GSA were following some key change management practices such as improving interagency collaboration in their design of the marketplace model. However, implementation weaknesses may limit their success.", "GAO found that OMB and GSA were following some key change management practices such as improving interagency collaboration in their design of the marketplace model. However, implementation weaknesses may limit their success.", "For example, OMB and GSA do not have a plan to monitor the implementation of NewPay, a 2018 payroll shared services initiative designed to determine how well the new model works.", "A monitoring plan which includes performance goals and milestones could help OMB and GSA avoid gaps in service or costly delays as agencies transition to the new model for obtaining shared services.", "GAO was asked to review previous shared services initiatives. This report: (1) identifies the progress and challenges associated with federal shared services initiatives for selected HR and financial management activities and (2) assesses OMB and GSA's actions to address those challenges.", "GAO analyzed planning and performance documents and interviewed officials from selected customer and provider agencies and from agencies involved with shared services policy and guidance. GAO also interviewed subject-matter experts familiar with shared services.", "GAO reviewed steps OMB and GSA are taking to identify and address challenges from past migrations to improve shared services performance.", "This report: (1) identifies the progress and challenges associated with federal shared services initiatives for selected HR and financial management activities and (2) assesses OMB and GSA's actions to address those challenges." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 1, 1, 1, 1 ] }
CRS_RL33069	{ "title": [ "", "Trends in Poverty1", "The U.S. \"Official\" Definition of Poverty5", "Poverty among Selected Groups", "Racial and Ethnic Minorities10", "Nativity and Citizenship Status", "Children", "Adults with Low Education, Unemployment, or Disability", "The Aged", "Receipt of Need-Tested Assistance Among the Poor", "The Geography of Poverty", "Poverty in Metropolitan and Nonmetropolitan Areas, Center Cities, and Suburbs", "Poverty by Region", "State Poverty Rates", "Change in State Poverty Rates: 2002-2013", "Poverty Rates by Metropolitan Area", "Congressional District Poverty Estimates", "\"Neighborhood\" Poverty—Poverty Areas and Areas of Concentrated and Extreme Poverty", "The Research Supplemental Poverty Measure", "Poverty Thresholds", "SPM Poverty Thresholds", "Resources and Expenses Included in the SPM", "Poverty Estimates Under the Research SPM Compared to the \"Official\" Measure", "Poverty by Age", "Poverty by Type of Economic Unit", "Poverty by Region", "Poverty by Residence", "Poverty by State", "Marginal Effects of Counting Specified Resources and Expenses on Poverty under the SPM", "Distribution of the Population by Ratio of Income/Resources Relative to Poverty", "Discussion" ], "paragraphs": [ "", "In 2013, the official U.S. poverty rate was 14.5%, compared to 15.0% in 2012, and marked the first statistically significant drop in the rate since 2006. In 2013, 45.3 million persons were estimated as having income below the official poverty line, a number statistically unchanged from the estimated 46.5 million poor in 2012. (See Figure 1 .)\nFigure 1 shows a clear relationship between poverty and the economy. The level of poverty tends to follow the economic cycle quite closely, tending to rise when the economy is faltering and fall when the economy is in sustained growth.\nThe poverty rate increased markedly over the past decade, in part a response to two economic recessions (periods marked in red). A strong economy during most of the 1990s is generally credited with the declines in poverty that occurred over the latter half of that decade, resulting in a record-tying, historic low poverty rate of 11.3% in 2000 (a rate statistically tied with the previous lowest recorded rate of 11.1% in 1973). The poverty rate increased each year from 2001 through 2004, a trend generally attributed to economic recession (March 2001 to November 2001), and failed to recede appreciably before the onset of the December 2007 recession. This most recent recession, which officially ended in June 2009, was the longest recorded (18 months) in the post-World War II period. Over the course of the most recent recession, the unemployment rate increased from 4.9% (January 2008) to 7.2% (December 2008), and continued to rise over most of 2009, peaking at 10.0% in October of that year. Even as the economy has been recovering, poverty has remained well above pre-recessionary levels. Although the unemployment rate has generally been falling since late 2009, it has not been until this past year that we have seen a marked (statistically significant) decline in the official poverty rate. That the unemployment rate has continued to fall over 2014 suggests that poverty levels are likely to fall in 2014. Poverty statistics for 2014 poverty will be issued in the late summer of 2015. The recession especially affected non-aged adults (persons age 18 to 64) and children. (See Figure 2 .) The poverty rate of non-aged adults reached 13.8% in 2010, the highest it has been since the early 1960s. In 2013 the non-aged poverty rate of 13.6% remained statistically unchanged from rates seen in the prior three years. The poverty rate for non-aged adults will need to fall to 10.8% to reach its 2006 pre-recession level.\nThe 2013 poverty data provide one encouraging sign with respect to children. Both the estimated number of poor children and their poverty rate fell from 2012 to 2013. In 2013, the number of poor children fell by an estimated 1.3 million (15.4 million in 2012 to 14.1 million in 2013), and their poverty rate fell from 21.3% in 2012 to 19.5% in 2013. The 2013 child poverty rate is still well above its pre-recession low of 16.9% (2006). Child poverty appears to be especially sensitive to economic cycles, as it often takes two working parents to support a family, and a loss of work by one may put the family at risk of falling into poverty. Moreover, roughly one-third of all children in the country live with only one parent, making them even more prone to falling into poverty when the economy falters.\nIn 2013, the aged poverty rate (9.5%) was statistically unchanged from 2012, although the number of poor rose by an estimated 305,000 (from 3.9 million in 2012 to 4.2 million in 2013). In spite of the recession, the aged poverty rate remains near an historic low level. The longer-term secular trend in poverty has been affected by changes in household and family composition and by government income security and transfer programs. In 1959, over one-third (35.2%) of persons age 65 and over were poor, a rate well above that of children (26.9%). Social Security, in combination with a maturing pension system, has helped greatly to reduce the incidence of poverty among the aged over the years, and as recent evidence seems to show, it has helped protect them during the economic downturn.", "The Census Bureau's poverty thresholds form the basis for statistical estimates of poverty in the United States. The thresholds reflect crude estimates of the amount of money individuals or families, of various size and composition, need per year to purchase a basket of goods and services deemed as \"minimally adequate,\" according to the living standards of the early 1960s. The thresholds are updated each year for changes in consumer prices. In 2013, for example, the average poverty threshold for an individual living alone was $11,888; for a two-person family, $15,142; and for a family of four, $23,834.\nThe current official U.S. poverty measure was developed in the early 1960s using data available at the time. It was based on the concept of a minimal standard of food consumption, derived from research that used data from the U.S. Department of Agriculture's (USDA's) 1955 Food Consumption Survey. That research showed that the average U.S. family spent one-third of its pre-tax income on food. A standard of food adequacy was set by pricing out the USDA's Economy Food Plan—a bare-bones plan designed to provide a healthy diet for a temporary period when funds are low. An overall poverty income level was then set by multiplying the food plan by three, to correspond to the findings from the 1955 USDA Survey that an average family spent one-third of its pre-tax income on food and two-thirds on everything else.\nThe \"official\" U.S. poverty measure has changed little since it was originally adopted in 1969, with the exception of annual adjustments for overall price changes in the economy, as measured by the Consumer Price Index for all Urban Consumers (CPI-U). Thus, the poverty line reflects a measure of economic need based on living standards that prevailed in the mid-1950s. It is often characterized as an \"absolute\" poverty measure, in that it is not adjusted to reflect changes in needs associated with improved standards of living that have occurred over the decades since the measure was first developed. If the same basic methodology developed in the early 1960s was applied today, the poverty thresholds would be over three times higher than the current thresholds.\nPersons are considered poor, for statistical purposes, if their family's countable money income is below its corresponding poverty threshold. Annual poverty estimates are based on a Census Bureau household survey (Annual Social and Economic Supplement to the Current Population Survey, CPS/ASEC, conducted February through April). The official definition of poverty counts most sources of money income received by families during the prior year (e.g., earnings, social security, pensions, cash public assistance, interest and dividends, alimony, and child support, among others). For purposes of officially counting the poor, noncash benefits (such as the value of Medicare and Medicaid, public housing, or employer provided health care) and \"near cash\" benefits (e.g., food stamps, renamed Supplemental Assistance Nutrition (SNAP) benefits beginning in FY2009) are not counted as income, nor are tax payments subtracted from income, nor are tax credits added (e.g., Earned Income Tax Credit (EITC)). Many believe that these and other benefits should be included in a poverty measure so as to better reflect the effects of government programs on poverty.\nThe Census Bureau, in partnership with the Bureau of Labor Statistics (BLS), has recently released a Supplemental Poverty Measure (SPM), designed to address many of the perceived flaws of the \"official\" measure. The SPM is discussed in a separate section at the end this report (see \" The Research Supplemental Poverty Measure \").", "Even during periods of general prosperity, poverty is concentrated among certain groups and in certain areas. Minorities; women and children; the very old; the unemployed; and those with low levels of educational attainment, low skills, or disability, among others, are especially prone to poverty.", "The incidence of poverty among African Americans and Hispanics exceeds that of whites by several times. In 2013, 27.2% of blacks (11.0 million) and 23.5% of Hispanics (12.7 million) had incomes below poverty, compared to 9.6% of non-Hispanic whites (18.8 million) and 10.5% of Asians (1.8 million). Although blacks represent only 13.0% of the total population, they make up 24.4% of the poor population; Hispanics, who represent 17.3% of the population, account for 28.1% of the poor. Poverty rates for Hispanics fell from 25.6% in 2012 to 23.5% in 2013, as did the number of poor Hispanics, from 13.6 million in 2012, to 12.7 million in 2013. Poverty rates and the numbers estimated as poor were statistically unchanged from 2012 to 2013 for white non-Hispanics, blacks, and Asians.", "In 2013, among the native-born population, 13.9% (37.9 million) were poor—a rate and number statistically unchanged from 2012 (14.3%, 38.8 million). Among the foreign-born population, 18.0% (7.4 million) were poor in 2013—a statistically significant drop in the poverty rate (from 19.7%), but not in the number estimated as poor. The poverty rate among foreign-born naturalized citizens (12.7%, in 2013) was lower than that of the native-born U.S. population (13.9%). In 2013, the poverty rate of non-citizens (22.8%) dropped significantly from 2012 (24.9%), as did the estimated number who were poor (about one-half million, dropping from 5.4 million in 2012, to 4.0 million in 2013).", "Poverty among children dropped significantly from 2012 to 2013. Their estimated poverty rate fell from 21.3% in 2012, to 19.5% in 2013. In 2013, an estimated 1.3 million fewer children were poor than in 2012 (14.1 million versus 15.4 million, respectively). However, the 2013 child poverty rate (19.5%) is still well above its pre-recession low of 16.9% (2006). The lowest recorded rate of child poverty was in 1969, when 13.8% of children were counted as poor.\nChildren living in single female-headed families are especially prone to poverty. In 2013 a child living in a single female-headed family was nearly five times more likely to be poor than a child living in a married-couple family. In 2013, among all children living in single female-headed families, 45.8% were poor. In contrast, among children living in married-couple families, 9.5% were poor. The increased share of children who live in single female-headed families has contributed to the high overall child poverty rate. In 2013, one quarter (25.0%) of children were living in single female-headed families, more than double the share who lived in such families when the overall child poverty rate was at a historical low (1969). Among all poor children, nearly 6 in 10 (58.7%) were living in single female-headed families in 2013.\nIn 2013, 38.0% of black children were poor (4.2 million), compared to 30.0% of Hispanic children (5.3 million) and 10.1% of non-Hispanic white children (3.8 million). (See Figure 3 .) Among children living in single female-headed families, more than half of black children (54.0%) and Hispanic children (52.3%) were poor; in contrast, one-third of non-Hispanic white children (33.6%) were poor. The poverty rate among Hispanic children who live in married-couple families (19.9%) was above that of black children (16.8%), and four times that of non-Hispanic white children (4.9%) who live in such families. Contributing to the high rate of overall black child poverty is the large share of black children who live in single female-headed families (54.0%) compared to Hispanic children (30.1%) or non-Hispanic white children (15.7%). (See Figure 4 .)", "Adults with low education, those who are unemployed, or those who have a work-related disability are especially prone to poverty. Among 25- to 34-year-olds without a high school diploma, between one-third and two-fifths (36.8%) were poor in 2013. In 2013, 1 in 10 25- to 34-year-olds lacked a high school diploma. Within the same age group whose highest level of educational attainment was a high school diploma, about one in five (20.7%) were poor. In contrast, only about 1 in 16 (6.5%) of 25- to 34-year-olds with at least a bachelor's degree were found to be living below the poverty line.\nAmong persons between the ages of 16 and 64 who were unemployed in March 2014, nearly 3 out of 10 (29.8%) were poor based on their families' incomes in 2013; among those who were employed, 6.9% were poor.\nIn 2013, persons who had a work disability represented 11.3% of the 16- to 64-year-old population, and about one-quarter (26.0%) of the poor population within this age range. Among those with a severe work disability, 35.6% were poor, compared to 17.0% of those with a less severe disability and 11.4% who reported having no work-related disability.", "In 2013, the 9.5% poverty rate among persons age 65 and older was statistically unchanged from the 2012 rate (9.1%), but statistically higher than the all-time low-poverty rate among the aged of 8.7% attained in 2011. The number of aged poor grew by 305,000 from 2012 to 2013, from 3.9 million to 4.2 million,. Among persons age 75 and over, 11.2% were poor in 2013, compared to 8.3% of those ages 65 to 74. Measured by a slightly raised poverty standard (125% of the poverty threshold), 15.1% of the aged could be considered poor or \" near poor \" in 2013; 12.6% who are ages 65 to 74, and 18.4% who are 75 years of age and over, could be considered poor or \"near poor.\"", "In 2013, nearly three of every four poor persons (73.8%) lived in households that received any means-tested assistance during the year. Such assistance could include cash aid, such as Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI) payments, SNAP benefits (Food Stamps), Medicaid, subsidized housing, free or reduced price school lunches, and other programs. In 2013, somewhat over one in five (17.4%) poor persons lived in households that received cash aid ; half (49.5%) received SNAP benefits (formerly named Food Stamps); 6 in 10 (61.3%) lived in households where one or more household members were covered by Medicaid; and about 1 in 7 (14.8%) lived in subsidized housing. Poor single-parent families with children are among those families most likely to receive cash aid. Among poor children who were living in single female-headed families, about one-fifth (21.9%) were in households that received government cash aid in 2013, down from 24.0% in 2012. The share of poor children in single female-headed families receiving cash aid is well below historical levels. In 1993, 70.2% of these children's families received cash aid. In 1995, the year prior to passage of sweeping welfare changes under PRWORA, 65% of such children were in families receiving cash aid.", "Poverty is more highly concentrated in some areas than in others; it is about twice as high in center cities as it is in suburban areas and nearly three times as high in the poorest states as it is in the least poor states. Some neighborhoods may be characterized as having high concentrations of poverty. Among the poor, the likelihood of living in an area of concentrated or extreme poverty varies by race and ethnicity.", "Within metropolitan areas, the incidence of poverty in central city areas is considerably higher than in suburban areas—19.1% versus 11.1%, respectively, in 2013. Nonmetropolitan areas had a poverty rate of 16.1%. A typical pattern is for poverty rates to be highest in center city areas, with poverty rates dropping off in suburban areas, and then rising with increasing distance from an urban core. In 2013, only nonmetropolitan areas experienced a statistically significant decline in poverty (both rate and numbers poor) from 2012, with the poverty rate decreasing from the 17.7% in 2012 to 16.1% in 2013, and the number of poor declining by an estimated 891,000 persons. Poverty rates and estimated numbers of poor people remained statistically unchanged in metropolitan areas, center cities, and suburbs from 2012 to 2013.", "In 2013, poverty rates were lowest in the Northeast (12.7%) and Midwest (12.9%), followed by the West (14.7%), with the South (16.1%) having the highest poverty rate. Poverty remained statistically unchanged (measured both in terms of numbers poor and rates) in each of the four regions from 2012 to 2013.", "Based on 2012 American Community Survey (ACS) data, poverty rates were highest in the South (with the exception of Virginia), extending across to Southwestern states bordering Mexico (Texas, New Mexico, and Arizona). (See Figure 5 .) Poverty rates in several states bordering the Ohio River (Ohio, West Virginia, Kentucky) also exceeded the national rate, as did those of Michigan and New York, and the District of Columbia, in the eastern half of the nation, and California, Oregon, and Montana in the western half.\nStates along the Atlantic Seaboard from Virginia northward tended to have poverty rates well below the national rate, as did three contiguous states in the upper Midwest/plains (Iowa, Minnesota, and North Dakota), as well as Utah, Wyoming, Alaska, and Hawaii.\nFigure 6 shows estimated poverty rates for the United States and for each of the 50 states and the District of Columbia on the basis of the 2013 American Community Survey (ACS), the most recent ACS data currently available. In addition to the point estimates, the figure displays a 90% statistical confidence interval around each state's estimate, indicating the degree to which these estimates might be expected to vary based on sample size. Although the states are sorted from lowest to highest by their respective poverty rate point estimates, the precise ranking of each state is not possible because of the depicted margin of error around each state's estimate. All states with non-overlapping statistical confidence intervals have statistically significant different poverty rates from one another. Some states with overlapping confidence intervals may also have significantly different poverty rates from one another, measured at the 90% confidence interval. For example, New Hampshire, shown as having the lowest poverty rate (8.7%) in 2013, is statistically tied with Alaska (9.3%). Mississippi clearly stands out as the state with the highest poverty rate (24.0%) and New Mexico, with a poverty rate of 21.8%, has the second-highest poverty rate. Louisiana, a state ranked as having the third-highest poverty rate (19.7%), is statistically tied with Arkansas (19.7%) and the District of Columbia (18.9%), but not with Georgia (19.0%), even though Louisiana and Georgia's statistical confidence intervals overlap.", "Table 1 provides estimates of state and national poverty rates from 2002 through 2013 from the ACS. Statistically significant changes from one year to the next are indicated by an upward-pointing arrow (▲) if a state's poverty rate was statistically higher, and by a downward-pointing arrow (▼) if statistically lower, than in the immediately preceding year or for other selected periods (i.e., 2005 vs. 2002, 2013 vs. 2007). It should be noted that ACS poverty estimates for 2006 and later are not strictly comparable to those of earlier years, due to a change in ACS methodology that began in 2006 to include some persons living in non-institutionalized group quarters who were not included in earlier years.\nTable 1 shows that three states (New Jersey, New Mexico, and Washington) experienced statistically significant increases in their poverty rates from the 2012 to 2013 ACS. New Jersey's estimated poverty rate increased from 10.8% in 2012 to 11.4% in 2013, New Mexico's rate increased from 20.8% to 21.9%, and Washington's rate increased from 13.5% to 14.1%. Four states (Colorado, New Hampshire, Texas, and Wyoming) experienced statistically significant decreases in their poverty rates from 2012 to 2013.\nThe table shows that poverty among states generally increased over the 2002 to 2005 period, as measured by the ACS, consequent to the 2001 (March to November) economic recession. From the 2002 to 2003 ACS, five states (including the District of Columbia) experienced statistically significant increases in their poverty rates, whereas none experienced a statistically significant decrease. From 2003 to 2004, eight states saw their poverty rates increase, whereas two saw decreases. From 2004 to 2005, 13 states saw their poverty rates increase, whereas only 1 saw its poverty rate decrease. Comparing poverty rates from the 2005 ACS to those from the 2002 ACS, poverty was statistically higher in 22 states, and lower in only one.\nBy 2007, poverty rates among states were beginning to improve, with 13 states (including the District of Columbia) experiencing statistically significant declines in their poverty rates from 2006; only Michigan experienced a statistically significant increase in its poverty rate in 2007 compared to a year earlier.\nSince 2007, state poverty rates have generally increased consequent to the 18-month recession (December 2007 to June 2009). From 2007 to 2008, the ACS data showed eight states (California, Connecticut, Florida, Hawaii, Indiana, Michigan, Oregon, and Pennsylvania) as experiencing statistically significant increases in their poverty rates, whereas three states (Alabama, Louisiana, and Texas) experienced statistically significant decreases. From 2008 to 2009, 32 states saw their poverty rates increase, and no state experienced a statistically significant decrease, and from 2009 to 2010, 34 states experienced statistically significant increases in poverty, and again, no state experienced a decrease. As noted above, from 2012 to 2013, three states saw their poverty rates rise, and four saw a decline. Comparing 2013 to 2007, poverty rates were statistically higher in 48 states (including the District of Columbia), and no state had a poverty rate statistically below its prerecession rate.", "The four tables that follow provide poverty estimates for large metropolitan areas having a population of 500,000 and over, and for smaller metropolitan areas having a population of 50,000 or more but less than 500,000. Among large metropolitan areas, 10 areas with some of the lowest poverty rates are shown in Table 2 , and the 10 areas with some of the highest poverty rates are shown in Table 3 . Among smaller metropolitan areas, 10 areas with some of the lowest poverty rates are shown in Table 4 , and 10 among those with the highest poverty rates in Table 5 . It should be noted that metropolitan areas shown in these tables may not be statistically different from one another, or from others not shown in the tables. Poverty estimates for all metropolitan areas in 2013 are shown in Appendix B . Table B-1 .", "Poverty estimates for congressional districts are shown in Appendix C . Table C-1 includes poverty rate estimates for 2012. Congressional districts in 2012 are not directly comparable to earlier years, due to re-districting.", "Neighborhoods can be delineated from U.S. Census Bureau census tracts. Census tracts usually have between 2,500 and 8,000 persons and, when first delineated, are designed to be homogeneous with respect to population characteristics, economic status, and living conditions. The Census Bureau defines \"poverty areas\" as census tracts having poverty rates of 20% or more.\nFigure 7 groups census tracts according to their level of poverty. The first two groupings are based on poor persons living in census tracts with poverty rates below the national average (15.4% based on the five-year ACS data), and from 15.4% to less than 20.0%. Poor persons living in census tracts with poverty rates of 20% or more meet the Census Bureau definition of living in \"poverty areas.\" Poverty areas are further demarcated in terms of poor persons living in areas of \"concentrated\" poverty (i.e., census tracts with poverty rates of 30% to 39.9%), and areas of \"extreme\" poverty (i.e., census tracts with poverty rates of 40% or more). The figure is based on five years of data (2009-2013) from the U.S. Census Bureau's American Community Survey (ACS). Five years of data are required in order to get reasonably reliable statistical data at the census tract level while at the same time preserving the confidentiality of survey respondents.\nFigure 7 shows that over the five-year period 2009-2013, over half of all poor persons (55.0%) lived in \"poverty areas\" (i.e., census tracts with poverty rates of 20% or more). Among the poor, about three out of ten (30.7%) lived in areas with poverty of 30% or more, and about one in seven (14.5%) lived in areas of \"extreme\" poverty, having poverty rates of 40% or more. Among the poor, African Americans, American Indian and Alaska Natives, and Hispanics are more likely to live in poverty areas than either Asians or white non-Hispanics. Among poor blacks, nearly half (48.0%) live in neighborhoods with poverty rates of 30% or more, and one-quarter (25.2%) live in \"extreme\" poverty areas, with poverty rates of 40% or more. Among poor Hispanics, about two-fifths (39.6%) live in areas with poverty rates of 30% or more, and about one in six (17.5%) live in areas of \"extreme\" poverty. Among poor white non-Hispanics, over half (53.2%) live outside poverty areas, while nearly one-quarter (23.2%) live in areas with poverty rates of 30% or more.", "On October 16, 2014, the Census Bureau released its fourth annual report using a new Supplemental Poverty Measure (SPM). As its name implies, the SPM is intended to \"supplement,\" rather than replace, the \"official\" poverty measure. The \"official\" Census Bureau statistical measure of poverty will continue to be used by programs that allocate funds to states or other jurisdictions on the basis of poverty, and the Department of Health and Human Services (HHS) will continue to derive Poverty Income Guidelines from the \"official\" Census Bureau measure.\nMany experts consider the \"official\" poverty measure to be flawed and outmoded. In 1990, Congress commissioned a study on how poverty is measured in the United States, resulting in the National Academy of Sciences (NAS) convening a 12-member expert panel to study the issue. The NAS panel issued a wide range of specific recommendations to develop an improved statistical measure of poverty in its 1995 report M easuring Poverty: A New Approach .\nIn late 2009, the Office of Management and Budget (OMB) formed an Interagency Technical Working Group (ITWG) to suggest how the Census Bureau, in cooperation with the Bureau of Labor Statistics (BLS), should develop a new Supplemental Poverty Measure, using the NAS expert panel's recommendations as a starting point. Referencing the work of the ITWG, the Department of Commerce announced in March 2010 that the Census Bureau was developing a new Supplemental Poverty Measure, as \"an alternative lens to understand poverty and measure the effects of anti-poverty policies,\" with the intention that the new measure \"will be dynamic and will benefit from improvements over time based on new data and new methodologies.\"\nThe SPM is intended to address a number of weaknesses of the \"official\" measure. Criticisms of the \"official\" poverty measure raised by the NAS expert panel include the following:\nThe \"official\" poverty measure, by counting only families' total cash, pre-tax income as a resource in determining poverty status, ignores a host of government programs and policies that affect the disposable income families may actually have available. For example, the official measure ignores the effects of payroll taxes paid by families, and tax benefits they may receive such as the EITC and the Child Tax Credit. It ignores a variety of in-kind benefits, such as SNAP benefits and free or reduced-price lunches under the National School Lunch Program, that free up resources to meet other needs. Similarly, it ignores housing subsidies that help make housing more affordable. The \"official\" poverty income thresholds used in determining families' and individu als' poverty status, devised in the early 1960s, have changed little since . Except for minor technical changes and adjustments for price inflation, poverty income thresholds have essentially been frozen in time, reflecting living standards of a half-century ago. The \"official\" poverty measure does not take into account necessary work-related expenses, such as child care and transportation costs that are associated with getting to work. Child care expenses are much more common today than when the \"official\" poverty measure was originally developed, as mothers' labor force participation has since increased. The \"official\" poverty measure does not take into account medical expenses that individuals and families may incur , affecting their ability to meet other basic needs. These costs, which tend to vary by age, health status, and insurance coverage of individuals, may differentially affect families' abilities to meet other basic needs, especially given rising health care costs. The \"official\" poverty measure does not take into account changing family situations, such as cohabitation among unmarried couples, or child support payments. The \"official\" poverty measure does not adjust for differences in prices across geographic areas, which may affect the cost of living from one area to another.\nThe ITWG, using the NAS-panel recommendations as a starting point, suggested an approach to developing the SPM that addressed how income thresholds should be set and resources counted in measuring poverty. Conceptual differences between the \"official\" and supplemental poverty measures are summarized in Table 6 .\nThe SPM incorporates a more comprehensive income/resource definition than that used by the \"official\" poverty measure, including in-kind benefits (e.g., SNAP) and refundable tax credits (e.g., EITC). It also expands upon the traditional family definition based on blood, marriage, and adoption to include cohabiting partners and their family relatives as part of a broader economic unit for assessing poverty status. The SPM subtracts necessary expenses (i.e., taxes, work-related expenses including child-care, child support paid, medical out-of-pocket [MOOP] expenses) from resources to arrive at a measure of an economic unit's disposable income/resources that may be applied to a standard of need based on food, clothing, shelter, and utilities (FCSU), plus \"a little bit more\" for everything else. The SPM income/resource thresholds are initially set at a range in the distribution (30 th to 36 th percentile) of what reference families (families with exactly two children) actually spend on FCSU. Separate thresholds are derived for homeowners with a mortgage and those without a mortgage, and for renters. Thresholds are adjusted for price differences in housing costs by geographic area (metropolitan and nonmetropolitan areas in a state). Thresholds for economic units other than initial reference units (i.e., those with exactly two children) are adjusted upwards or downwards for the number of adults and number of children in the unit.", "As described earlier, the \"official\" U.S. poverty measure measures cash—pre-tax—income against income thresholds that vary by family size and composition. The thresholds were derived from research that showed that the average U.S. family spent one-third of its pre-tax income on food, based on a USDA 1955 Food Consumption Survey. After pricing minimally adequate food plans for families of varying sizes and compositions, poverty thresholds were derived by multiplying the cost of those food plans by a factor of three (i.e., one-third of the thresholds were assumed to address families' food needs, and two-thirds addressed everything else). The thresholds, established in 1963, are adjusted each year for price inflation.", "The SPM poverty thresholds are based on the NAS panel recommendation that thresholds be based on a point in the empirical distribution that \"reference\" families spend on food, clothing, shelter, and utilities (FCSU). Based on ITWG's suggestions, the Census Bureau derives FCSU thresholds for \"reference\" units with exactly two children, between the 30 th and 36 th percentile of what such units spend on FCSU, averaged over five years of survey data from the BLS Consumer Expenditure (CE) Survey. Whereas \"official\" poverty thresholds are based on initial thresholds adjusted for price changes over time, the SPM thresholds are based on changes in reference consumer units' actual spending on FCSU over time.\nFollowing the ITWG's suggestion, three separate sets of thresholds are established: one set for homeowners with a mortgage, another set for homeowners without a mortgage, and a third set for renters. Following NAS panel recommendations, the ITWG suggested that initial poverty thresholds based on FCSU be multiplied by a factor of 1.2, to account for all other needs (e.g., household supplies, personal care, non-work-related transportation). Additionally, thresholds are adjusted upward and downward based on SPM reference unit size using a three parameter equivalence scale based on the number of adults and children in the unit.\nLastly, the thresholds are adjusted to account for variation in geographic price differences across metropolitan and nonmetropolitan areas, by state, based on differences in median housing costs across areas relative to the nation. The geographic housing cost adjustment is applied to the shelter portion of the FCSU-based thresholds.\nFigure 8 depicts poverty threshold levels under the \"official\" poverty measure and under the Research SPM for a resource unit consisting of two adults and two children. The figure shows that in 2013, the official poverty threshold for a family with two adults and two children was $23,624. In comparison, for a similar family, the SPM poverty threshold for homeowners with a mortgage was $25,639, $2,015 (8.5%) above the official poverty threshold, and for homeowners without a mortgage, $21,397, or $2,227 (9.4%) below the official threshold. The SPM poverty threshold for renters was $25,144 or $1,520 (6.4%), above the official measure.", "As discussed earlier, the \"official\" poverty measure is based on counting families' and unrelated individuals' pre-tax cash income against poverty thresholds that vary by family size and composition. The SPM expands upon the pre-tax cash income resource definition used by the \"official\" measure to develop a more comprehensive measure of \"disposable\" income that SPM units might use to help meet basic needs (i.e., poverty thresholds based on FCSU, plus \"a little more\"). The SPM resource measure includes the value of a number of federal in-kind benefits, such as Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamp) benefits; free and reduced-price school lunches; nutrition assistance for women, infants, and children (WIC); federal housing assistance; and energy assistance under the Low Income Home Energy Assistance Program (LIHEAP). It also includes federal tax benefits administered by the Internal Revenue Service, such as the Earned Income Tax Credit (EITC) and the partially refundable portion of the Child Tax Credit (CTC), known as the Additional Child Tax Credit (ACTC).\nThe SPM subtracts a number of necessary expenses from SPM units' resources to arrive at a measure of \"disposable\" income that units might have available to meet basic needs. Necessary expenses subtracted from resources on the SPM include child support paid; estimated federal, state, and local income taxes; estimated social security payroll (FICA) taxes; estimated work-related expenses other than child care (e.g., work-related commuting costs, purchase of uniforms or tools required for work); reported work-related child care expenses; and reported medical out of pocket (MOOP) expenses, including the employee share of health insurance premiums plus other medically necessary items such as prescription drugs and doctor copayments.\nThe effects of counting each of these resources and expenses in the SPM are assessed later in this report (see \" Marginal Effects of Counting Specified Resources and Expenses on Poverty under the SPM \").", "In 2013, the overall poverty rate was somewhat higher under the SPM (15.5%) than under an \" adjusted official\" poverty measure (14.6%)— \"adjusted\" to include unrelated children typically excluded from the \"official\" measure. In 2013, an estimated 48.671 million people were poor under the SPM, 2.9 million people more than the 45.748 million estimated under the \"official\" (adjusted) poverty measure. The remainder of this report focuses on differences in poverty rates among and between various groups under the two measures.", "The SPM yields a very different impression of the incidence of poverty with respect to age than that portrayed by the \"official\" measure. Figure 9 compares poverty rates by age group under the SPM and the \"official\" measure in 2013. The poverty rate for adults ages 18 to 64 is somewhat higher under the SPM than under the \"official\" measure (15.4% compared to 13.6%). The figure shows that the poverty rate for children (under age 18) is lower under the SPM than under the \"official\" measure (16.4% compared to 20.4%). In contrast, the poverty rate among persons age 65 and over is much higher under the SPM than under the \"official\" measure (14.6% compared to 9.5%). Although the child poverty rate is lower under the SPM than under the \"official\" measure, and the aged poverty rate is considerably higher, the incidence of poverty among children still exceeds that of the aged under the SPM, as it did under the \"official\" measure. The SPM paints a much different picture of poverty among the aged than that conveyed by the \"official\" measure. As will be shown later, much of the difference between the aged poverty rate measured under the SPM compared to the \"official\" measure is attributable to the effect of medical expenses on the disposable income among aged units to meet basic needs represented by the SPM resource thresholds.", "As noted above, the SPM expands the definition of the economic unit considered for poverty measurement purposes over that used under the \"official\" poverty measure. The \"official\" poverty measure groups all co-residing household members related by marriage, birth, or adoption as sharing resources for purposes of poverty determination. Unrelated individuals, whether living alone as a single person household or with other unrelated members, are treated as separate economic units under the \"official\" poverty measure. The \"official\" measure also excludes unrelated children under age 15 from the universe for poverty determination. As noted earlier, the \"adjusted official\" poverty measure presented in this section of the report includes unrelated children, resulting in a 14.6% poverty rate as opposed to the published rate of 14.5% in 2013.\nThe SPM expands the economic unit used for poverty determination beyond that used by the \"official\" measure. The SPM assesses the relationship of unrelated household members to others in the household to determine whether they will be joined with others to construct expanded economic units. For example, the SPM combines unrelated co-residing household members age 14 and older who are not married and who identify each other as boyfriend, girlfriend, or partner as cohabiting partners. Cohabiting partners, as well as any of their co-resident family members, are combined as an economic unit under the SPM. The SPM also combines unmarried co-residing parents of a child living in the household as an economic unit, even if the parents do not identify as a cohabiting couple. Any unrelated children who are under age 15 and are not foster children are assigned to the householder's economic unit, as are foster children under the age of 22. Additionally, the SPM combines children over age 18 living in a household with a parent, and any younger children of the parent, as an economic unit. Under the \"official\" poverty measure, a child age 18 and over is treated as an unrelated individual, and the child's parent is also treated as an unrelated individual if no other family members are present, or as an unrelated subfamily head if a spouse or other children (under age 18) are also residing in the household.\nIn 2013, an estimated 27.953 million persons, 8.9% of the 313.395 million persons represented in the CPS/ASEC, were classified as either joining an economic unit or having members added to their economic unit under the SPM measure, compared to how they would have been classified under the \"official\" measure's economic unit definition. Combining the resources of these additional household members had the effect of reducing poverty under the SPM measure, compared to the \"official\" measure, in 2013.\nFigure 10 shows poverty rates in 2013 by type of economic unit. Persons identified as being in a married-couple unit, or in female- or male-householder units, are persons in those economic units whose members remained unchanged under the SPM compared to the \"official\" poverty measure. Persons who were added to an economic unit, or were part of an economic unit that had members added to it under the SPM definition, are labeled as being in a \"new SPM unit.\" The figure shows that poverty rates for persons in married-couple units, and in male-householder units, are higher under the SPM than under the \"official\" poverty measure (9.5% versus 6.7% for persons in married-couple units, and 23.1% versus 18.7% for persons in male-householder units). Poverty rates for persons living in female-householder units did not statistically differ from one another, with about three out of ten persons in such units considered poor under either measure. In contrast, poverty among persons who were members of \"new SPM units\" fell by about two-fifths, from 31.4% under the \"official\" measure to 17.9% under the SPM.", "Figure 11 compares poverty rates in 2013 under the SPM with the \"official\" measure by Census region. The figure shows that poverty rates in the West are considerably higher (26% higher) under the SPM (18.7%) than under the \"official\" measure (14.8%). Poverty rates are about 11% higher in the Northeast under the SPM (14.3%) compared to the \"official\" measure (12.8%). Poverty rates in the Midwest are lower under the SPM than under the \"official\" measure, and in the South, essentially equal. The differences in poverty rates within and between regions based on the SPM compared to the \"official\" measure are most directly due to the SPM's geographic price adjustments to poverty thresholds for differences in the cost of housing in metropolitan and nonmetropolitan areas across states. The cost of housing tends to be higher in the West and Northeast, causing their poverty rates to rise under the SPM relative to the \"official\" measure and relative to the South and Midwest, where housing tends to be less expensive.", "Figure 12 depicts poverty rates by residence in metropolitan (principal city, and outside principal city [i.e., \"suburban\"]) and nonmetropolitan areas in 2013. The figure shows that under the SPM, the poverty rate for persons living in Metropolitan Statistical Areas (MSAs) (15.9%) is somewhat higher than under the \"official\" measure (14.3%), whereas for persons living outside MSAs, the poverty rate is lower under the SPM (13.2%) than under the \"official\" measure (16.2%). Again, this most likely reflects differences in the cost of housing between MSAs and non-MSAs. Within MSAs, poverty rates are higher for persons living within principal cities under both measures than for people living outside them in \"suburban\" or \"ex-urban\" areas.", "Figure 13 depicts states according to whether the state's SPM poverty rate statistically differs from its \"official\" poverty rate. Estimates are based on three-year (2011 to 2013) averages of CPS/ASEC data. Three years of data are combined in order to improve the statistical reliability of CPS/ASEC estimates at the state level. The figure shows that 13 states (Alaska, California, Connecticut, Florida, Hawaii, Illinois, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, and Virginia) and the District of Columbia had higher poverty rates under the SPM than under the \"official\" measure. Among the 13 states with higher SPM poverty rates than their respective \"official\" poverty rate, only Illinois and Nevada were inland, and with the exception of Florida and Virginia, none were in the South. The figure shows that the SPM poverty rate was not statistically different than the \"official\" poverty rate in 11 states (Arizona, Colorado, Delaware, Georgia, Minnesota, Oregon, Pennsylvania, Rhode Island, Utah, Vermont, and Washington). Among the 26 remaining states in which their SPM poverty rates were lower than their respective \"official\" poverty rates, nearly all (with Maine being the exception) were either in the South, or inland.\nFigure 14 and Figure 15 depict poverty rates by state under the official poverty measure and the SPM based on three years of CPS/ASEC data. Estimates are based on three-year (2011 to 2013) averages to improve the statistical reliability of estimates attainable from CPS/ASEC data at the state level. The two figures differ only in terms of the order in which states are sorted. In Figure 14 , states are sorted from lowest to highest based on their respective \"official\" poverty rate point estimates, whereas in Figure 15 states are sorted from lowest to highest based on their respective SPM poverty rate point estimates. In neither figure are precise rankings of states possible because of the depicted margin of error around each state's estimate. Within a state, a statistically significant difference between a state's official poverty rate and its SPM poverty rate is signified by solid-filled markers, indicating the point estimate under each measure, and a line connecting them, indicating the estimated difference (which is also shown in parentheses after each state name). The figures show the magnitude of the difference among the 13 states and the District of Columbia that had statistically significant higher poverty rates under the SPM than under the \"official\" measure, as well as for the 26 states in which the state's SPM rate was lower than its \"official\" poverty rate and the 11 states in which the incidence of poverty under the two measures did not differ statistically.\nDifferences in state poverty rates based on the SPM compared to the \"official\" measure may be due to a variety of factors. Geographic adjustments to SPM poverty income thresholds to account for differences in housing costs tend to result in higher poverty rates in areas with higher-priced housing than in areas with lower-priced housing. The mix of housing tenure (e.g., owner occupied, with or without a mortgage, renter occupied) may account for some of the difference between \"official\" and SPM poverty rates, within and between areas. Similarly, taxes may differ among areas. Also, populations may differ across areas in terms of household composition (e.g., share of households with cohabiting partners). The composition of the population based on age, or health insurance status, may also affect the incidence of SPM poverty relative to \"official\" poverty within and between geographic areas, by affecting medical out of pocket spending (MOOP), which is considered by SPM in estimating poverty.\nAmong the states with a statistically significant increase in poverty under the SPM, California's poverty rate increased by more than any other state's, increasing from 16.0% under the \"official\" measure to 23.4% under the SPM, or 7.4 percentage points. Under the \"official\" measure, California's poverty rate was substantially above the U.S. rate (14.6%), but under the SPM, California's poverty rate is estimated as the highest in the nation.\nOther states with comparatively large increases in their poverty rates (in the four to five percentage point range) under the SPM compared to the \"official\" measure include Florida (a 15.1% to 19.1% increase), Hawaii (an increase from 12.4% to 18.4%), and New Jersey (a 10.7% to 15.9% increase).\nFour states had decreases in their SPM poverty rate compared to their \"official\" rate in the four to five percentage point range. Among the states with the highest \"official\" poverty rates, New Mexico and Mississippi, (21.5% and 20.7%, respectively) both have estimated SPM poverty rates (16.0% and 15.3%, respectively) statistically tied with U.S. SPM rate (15.9%). Kentucky and West Virginia's \"official\" poverty rates (18.1% and 17.4%, respectively) are well above the \"official\" U.S. rate (14.9%), but their SPM poverty rates (13.8% and 13.2%) fall well below the U.S. SPM rate (15.9%).", "Figure 16 focuses strictly on the SPM, examining the marginal effects on poverty rates attributable to the inclusion of each selected income/resource or expenditure element on the measure. The marginal effects of each element on the SPM are displayed by age group. Elements that marginally contribute resources, and thereby have a poverty reducing effect when included in the SPM, are ranked from left to right in terms of their effect on poverty reduction among all persons. Similarly, expenditure elements, which are subtracted from resources and thereby marginally increase poverty as measured by the SPM, are ranked from left to right by their marginal poverty increasing effects on all persons.\nThe figure shows, for example, that the EITC has a greater poverty reducing effect than any of the other depicted resource elements. Overall, the EITC lowers the SPM poverty rate for all persons by 2.9 percentage points. The EITC is followed by SNAP benefits (1.6 percentage point reduction), housing subsidies (1.3 percentage point reduction), school lunch (0.5 percentage point reduction), and WIC (0.2 percentage point reduction) and LIHEAP (0.1 percentage point reduction).\nIn contrast, on the expenditure side, child support paid to members outside the household has a relatively small effect on increasing the overall poverty rate. Federal income taxes before considering refundable credits, such as the EITC (counted on the resource side), result in an increase in overall poverty of 0.4 percentage points. FICA payroll taxes have a larger effect on marginal poverty (1.5 percentage point increase) than federal income taxes, as do work expenses (1.9 percentage points). Among all of the expense elements presented, medical out of pocket expenses (MOOP) contribute to the largest increase in poverty (3.5 percentage point increase for all persons).\nAmong the three age groups, the additional resources included in the SPM have a greater effect on reducing poverty among children (persons under age 18) and poverty among working age adults (ages 18 to 64) than on the aged (age 65 and older), with the exception of housing subsidies, which reduce the aged poverty rate by about the same amount as that of children. The EITC has a greater effect of reducing poverty among children (6.4 percentage point reduction) than any of the other added SPM resources.\nOn the expenditure side, FICA payroll taxes and work expenses have a greater effect on increasing poverty among children (due to a working parent) and non-aged adults than on the aged, who are less likely to be in the labor force and incur work-related taxes and expenses. Notably, under the SPM, MOOP expenses contribute to a substantial increase in poverty among the aged, contributing to a 6.3 percentage point increase in their poverty rate.\nThe relative distribution of additional resources and expenses in the SPM by age group helps to explain why poverty among children is lower under the SPM than it is under the \"official\" measure, whereas it is considerably higher for the aged.", "Figure 17 shows the distribution of the population by age group according to the degree to which their income and resources fall below or above poverty under the \"official\" and SPM definitions. The figure breaks out the poor population, depicted by brackets, into the share whose income and resources fall below half of their respective poverty lines (a classification sometimes referred to as \"deep poverty\") and the remainder. Others are categorized by the extent to which their income/resources exceed poverty under the two definitions, with those who fall below twice the poverty line also demarcated by brackets.\nThe figure shows, for example, that the share of children in \"deep poverty\" under the SPM is considerably lower than under the \"official\" measure (4.4% compared to 9.3%). As shown earlier, the SPM child poverty rate (16.4%) is lower than the \"official\" rate (20.3%). However, under the SPM, a much greater share of children live in \"families\" with income/resources between one and two times the poverty line than under the \"official\" measure (38.2% compared to 22.5%, respectively). Altogether, well over half of the children live in \"families\" having income/resources below twice the poverty line under the SPM (54.6%) compared to about two-fifths (42.8%) under the \"official\" measure. Thus, while the SPM appears to result in fewer children being counted as poor than under the \"official\" measure, under the SPM a greater share than under the \"official\" measure are concentrated at income levels just above poverty.\nAmong persons age 65 and over, a greater share are poor under the SPM than under the \"official\" measure, as shown earlier (14.6% compared to 9.5%), and a greater share are in \"deep poverty\" under the SPM (4.8%) than under the \"official\" measure (2.7%). In contrast to the \"official\" measure, under which one-third (33.1%) of the aged have income below 200% of poverty, somewhat under half (45.1%) have income/resources below that level under the SPM.", "As a research measure, the SPM offers potential for improved insight leading to better understanding of the nature and circumstances of those deemed to be among the nation's most economically and socially vulnerable. The SPM offers the means to better assess the performance of the economy, government policies, and programs with regard to the population's ability to secure sufficient income/resources to be able to meet basic expenditures for food, clothing, shelter, and utilities (plus \"a little bit more\").\nThe SPM counts considerably more elderly as poor than does the \"official\" measure. Medical expenses appear to be the driving factor in increasing poverty among the elderly under the SPM (see Figure 16 ). While not negating the improvement in the poverty status of the aged over the years, based on the \"official\" measure (see Figure 2 ), the SPM points more directly to the economic vulnerability of the aged, based not on income/resources alone, but rather, medical expenses competing for income that might otherwise be used to meet basic needs (i.e., FCSU plus \"a little bit more\"). Rising medical costs in society overall and individuals' personal health and insurance statuses pose potential economic risk to the aged being able to meet basic needs, as captured by FCSU-based poverty thresholds. The SPM provides additional insight that poverty reduction among the elderly depends not only on improving income, but also on their ability to reduce exposure to high medical expenses through \"affordable\" insurance. Rising medical costs in society also place the aged at increased risk of poverty under the SPM. It is worth noting that the SPM does not consider financial assets, other than interest, dividends, and annuity income from those assets, nor non-liquid assets (e.g., home equity) in determining poverty status. The SPM therefore does not address the means or extent to which the aged might tap those assets to meet medical or other needs.\nThe SPM results in fewer children being counted as poor than under the \"official\" measure. Still, the incidence of child poverty under the SPM, as under the \"official\" measure, exceeds that of the aged, but by a much slimmer margin (see Figure 9 ). Work-based supports, which both encourage work and help to offset the costs of going to work, appear be especially important to families with children, as captured by the SPM. The EITC, not counted under the \"official\" measure, significantly reduces child poverty as measured by the SPM, helping to offset taxes and work-related expenses working families with children incur (also captured by the SPM, but not under the \"official\" measure) (see Figure 16 ). The lack of safe, reliable, and affordable child care may limit parents' attachment to the labor force, contributing to poverty by reducing earnings that parents might otherwise secure. The SPM recognizes child care as a necessary expense many families face in their decisions relating to work by subtracting work-related child care expenses from income/resources that might otherwise go to meeting basic needs (i.e., FCSU plus \"a little bit more\"). As a consequence, the SPM should be sensitive to measuring the effects of child care programs and policies on child care affordability and poverty. The SPM captures the policy effects of assisting the poor through the provision of in-kind benefits, as opposed to just cash, whereas the \"official\" measure does not. For example, SNAP benefits, not captured under the \"official\" poverty measure, appear to have a sizeable effect in reducing child poverty under the SPM. Additionally, the expansion of the economic unit under the SPM to include cohabiting partners and their relatives may also contribute to lower child poverty rates under the SPM than under the \"official\" poverty measure, which is based on family ties defined by blood, marriage, and adoption.\nAppendix A. U.S. Poverty Statistics: 1959-2013\nAppendix B. Metropolitan Area Poverty Estimates\nAppendix C. Poverty Estimates by Congressional District" ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 2, 2, 2, 1, 2, 3, 2, 2, 3, 3, 3, 3, 3, 3, 3, 2 ], "alignment": [ "h0_title h1_title", "", "h0_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_full h1_full", "", "", "h0_full h1_full", "h1_title", "", "h1_full", "", "", "", "", "", "" ] }	{ "question": [ "How is poverty currently measured by the government?", "What is not accounted for in the \"official\" poverty definition?", "Why is the current \"official\" definition of poverty inadequate?", "What was recommended in the NAS’s study regarding the U.S. and poverty?", "How has the Census Bureau implemented NAS panel recommendations?", "What is the Supplemental Poverty Measure?", "How will the official poverty measure continue to be used?", "How are HHS poverty guidelines used?" ], "summary": [ "Moreover, poverty as it is currently measured only counts families' and individuals' pre-tax money income against the poverty line in determining whether or not they are poor.", "In-kind benefits, such as benefits under the Supplemental Nutrition Assistance Program (SNAP, formerly named the Food Stamp program) and housing assistance, are not accounted for under the \"official\" poverty definition, nor are the effects of taxes or tax credits, such as the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC).", "In this sense, the \"official\" measure fails to capture the effects of a variety of programs and policies specifically designed to address income poverty.", "A congressionally commissioned study conducted by a National Academy of Sciences (NAS) panel of experts recommended, some 20 years ago, that a new U.S. poverty measure be developed, offering a number of specific recommendations.", "The Census Bureau, in partnership with the Bureau of Labor Statistics (BLS), has developed a Supplemental Poverty Measure (SPM) designed to implement many of the NAS panel recommendations.", "The SPM is to be considered a \"research\" measure, to supplement the \"official\" poverty measure.", "The \"official\" statistical poverty measure will continue to be used by programs that use it as the basis for allocating funds under formula and matching grant programs. The Department of Health and Human Services (HHS) will continue to issue poverty income guidelines derived from \"official\" Census Bureau poverty thresholds.", "HHS poverty guidelines are used in determining individual and family income eligibility under a number of federal and state programs." ], "parent_pair_index": [ -1, 0, 0, -1, 0, -1, -1, 3 ], "summary_paragraph_index": [ 3, 3, 3, 4, 4, 4, 4, 4 ] }
CRS_RL33023	{ "title": [ "", "Introduction", "Definitions of Open Access Publishing and Database Models", "Selected Illustrations of Nongovernmental Open Access Activities", "Illustrations of Open Access Systems", "Public Library of Science (PLoS)", "BioMedCentral (BMC)", "Faculty of 1000", "patientINFORM", "Illustrations of Academic-Related Systems", "EScholarship Program", "DSpace", "Highwire Press", "Illustrations of Dedicated Subject or Disciplinary Archives", "arXIV.org22", "CogPrints", "Major Issues Relating to Open Access Publishing", "Journal Publishing Costs and Sources of Revenue", "Who Pays?: Traditional, Subscriber-Pays Journals", "Who Pays?: Open Access Journals", "Policies For Paying Publication Costs in Relation to the Future of Open Access Publishing", "Rising Subscription Costs", "The Role of Foundation Support for Open Access Journals", "Publishing Revenues Support Scientific Societies", "Commercial and Open Access Publisher Practices", "Journal Enhancements", "Timing of Free Access to Journal Articles", "Self-Archiving", "Commercial and Open Access Search Engines", "Copyright Issues", "Economic Development", "Peer Review and Quality of Articles In Open Access Journals", "\"Enhanced Public Access Policy\": National Institutes of Health (NIH) and Other Agencies", "Legislative Origins of NIH Policy", "NIH's Public Access Policy and NIH's PubMed Central (PMC) Database System", "Legislative Action in the 109th Congress", "Criticisms of \"NIH's Enhanced Public Access Policy\"", "Legislative Proposal to Extend Open Access Policies to Other Agencies: The Federal Research Public Access Act (FPRAA)", "Government Purpose and Copyright Issues", "Issues Relating to Federal Open Access Archives and Publishing", "Federal Scientific and Technical Archival Databases", "Objections to Government-Operated Databases: Censorship and Competition in the Free Market", "Allegations of Governmental Censorship", "Curbs on Department of Energy Information Systems", "The Federal Database: PubChem", "Speculation About Differences in Federal Agency Policies", "Interagency Activities", "International Activities", "Summary of Policy Issues and Questions", "Copyright", "Quality Control", "Monitoring of NIH Public Access Activities and Other Federal Initiatives, Including PubChem", "Who Pays?", "Economic Implications", "Appendix. Open Access Publishing: Selected Questions in Academia" ], "paragraphs": [ "", "This report begins with an inventory of basic information: definitions and guides to histories of the growth of open access publishing and citation archives and descriptions of selected major open access activities. It moves on to summarize major points of difference between proponents and opponents of nongovernmental open access publishing and databases, and then highlights federal, including National Institutes of Health (NIH), open access activities and contentious issues surrounding these developments. The report also briefly describes open access developments in the United Kingdom (where a number of governmental and nongovernmental initiatives have occurred) and in the international arena. Finally, controversial issues which could receive attention the 110 th Congress are summarized.", "The \"open access movement\" is said to have begun in 1966. The term describes a variety of activities that includes access to archives of indexed citations of articles, access to separate journal articles that were published in traditional, subscriber-pays journals, and access to free, online journals. According to a May 23, 2005 Wall Street Journal article,\"[c]urrently, the open-access movement makes up between 1% and 2% of the market, experts say. While that number seems small, the concept is assuming an important role channeling academic discontent\" about the rising costs of journals.\nIn traditional, subscriber-pays publishing , the publisher, who holds the copyright to an article, pays most printing and distribution costs and, in order to read an article, the journal subscriber pays fees, whether for hard-copy or online versions. Sometimes an author is required to pay printing page charges for complex graphics or color presentations.\n\" Open access \" publishing generally means that the author or publisher, who holds the copyright to an article, grants all users unlimited, free access to, and license to copy and distribute, a work published in an open access journal (which may be published initially electronically or in hard-copy). Users can also make copies for their personal use, if authorship is properly attributed. Open access publishing often requires an author to pay for publishing or posting of a paper. Estimates of fees charged vary, but generally range from about $500 to $4,000. These charges may be paid by individual authors, or by institutions, pursuant to institutional subscription contracts with open access journals that cover publication charges for all authors affiliated with that institution. Typically, open access publishers require that a complete version of the work and related materials be deposited electronically in an online database that permits open access, distribution, interoperability (allowing users to extract and use the data in other research), and long-term archiving.\nIn \" free access \" publishing neither an author nor a reader pays for articles to be published or posted on the Internet, but other open access features may not be mandatory.\nA few commercial publishers have adopted some open access features in their business models. However, the fundamental difference is that traditional publishers generally require readers to pay to read or print an article, or to search indexes of abstracts or citations. Open access publishers generally do not require readers to pay for these services. Some traditional publishers say they already provide open access in that they may make papers freely available online—but this is usually a year or two after publication. The publishers still hold copyright, and they may or may not allow the author to post his or her published articles in an open access repository or database, or on the author's own website.\nThe scope of open access repositories or archives varies. Some contain published journal articles or nonpublished \"grey literature\" in all fields of science or in specific scientific disciplines. Some archive a specific researchers' preprints, articles, or research reports; or, as in the case of the National Institutes of Health model, articles, data, or other materials funded by an agency, but prepared for publication by traditional publishers. Some open access repositories archive only citations for articles or other materials; some archive both citations and full text materials; some allow free downloading and some do not.", "A variety of nongovernmental open access publishing activities is illustrated next with summaries of some current major open access information systems or publishers. These are categorized by general type, including commercial open access systems, academic-sponsored systems, and subject or disciplinary systems. NIH's PubMed Central (PMC) system is described in detail in the section of this report that focuses on NIH.", "", "PLoS is a nonprofit group, spearheaded in large part by Dr. Harold Varmus, former NIH director. It provides readers with free access to peer reviewed articles published in PLoS's electronic journals. The activity is supported by author payments starting at $1,500 per article and multi-million dollar philanthropic foundation contributions. PLoS's journals include PLoS Biology, PLoS Medicine, PLoS Computational Biology, PLoS Genetics, and PLoS Pathogens. PLoS seeks to launch journals in other disciplines. It has the goal of publishing highly selective, top-quality articles competitive with the quality of articles in traditional, subscriber-pays journals like Science and Nature. Different from traditional, subscriber-pays publishing, which requires authors to cede copyright to the publisher, authors who publish in PLoS retain copyright to an article, but are required to deposit a copy of the article in an open access, online repository that allows long-term archiving. Reportedly, one of the group's major goals is to make research more accessible by eliminating publishers as copyright holders and by ending the \"balkanization\" of scientific information in separate databases. Under PLoS's editorial policy, \"any data can be integrated into new work as long as the original author is credited appropriately. The model is inspired by GenBank, the central repository of DNA sequence whose open access policy has driven much of the progress in genomics and biotechnology of the last decade.\" PLoS has announced that it will assist scientists in developing countries by providing Internet access for readers of limited bandwidth, and will waive or defray author charges for those who cannot afford to pay.", "This is a British-founded, independent, commercial publishing system, which provides free access to peer reviewed biomedical research published online. It publishes its own approximately 120 biomedical journals and says articles are rapidly peer reviewed; peer review policies are determined by each journal's board. Authors retain copyright of their work. BioMedCentral charges authors or their institutions for the costs of peer review and publication. \"Other sources of revenue include subscription access to commissioned articles, sales of paper copies of our journals to libraries, sales of reprints, advertising and sponsorship, and ... a range of subscription-based value added services such as literature reviews and evaluation, personalized information services delivered electronically, provision of editorially enhanced databases, tools that help scientists collaborate, and other software research aids.\" It archives materials in PubMed Central, NIH's free archive of biomedical literature.", "BioMedCentral has created a fee-based subscription service called Faculty of 1000. It originated because the publication of so many articles in online journals (sometimes free to readers) with varying degrees of peer review has spawned a new industry: peer reviewers or experts who evaluate articles after publication and provide a selected list of articles recommended for reading to their paid subscribers.", "In spring 2005 patientINFORM was launched by the American Cancer Society, the American Heart Association, and the American Diabetes Association, in partnership with more than 20 publishing firms, to provide immediate access to free, selected full-text research articles and materials from the three organizations' websites, which provide links to different types of published materials. \"According to the group, the initiative 'is being driven by recent trends indicating that public awareness of clinical research, heightened by media coverage and fueled by the spread of broadband Internet, has led more and more patients to go online to find the latest information about treatment options.'\" NIH's decision to launch its system, reportedly, accelerated the formation of patientINFORM . After a period of evaluation, \"... the group will determine whether to expand its focus past the three initial diseases into rarer conditions.\" This system may not permit permanent access to materials on it, since the organizations maintaining the website may, overtime, replace or remove materials posted.", "Some universities ensure that their scholars' publications are available online in a free open access repository by creating their own archives or participating in networked open access archives. Several examples are outlined next.", "The EScholarship Program of the University of California system was launched in the fall of 2003. It is an electronic, searchable repository that makes freely available an archive of the publications (and other media) and some research databases of University of California researchers. The vehicle is also used to disseminate the university's own open access, peer reviewed published journals. Supporters of systems like this say that indexing materials improves access to them and, if full text is available, widens reader access, and improves utilization of federally financed research and development.", "A number of research universities are participating in DSpace , a networked multi-member electronic repository that indexes and shares some research data, articles, and other media. It was developed by the Massachusetts Institute of Technology (MIT) in collaboration with Hewlett-Packard. Some universities, such as Cornell, reportedly, are using it to provide free access to peer reviewed publications.", "This is an archive run by Stanford University that provides online, full-text articles for biomedical and other scientific journals. It adheres to the post-publication timing policies of each journal, with most articles archived and made accessible between 6 and 24 months after publication in the original traditional, subscriber-pays published journal. Some of these articles, but not all, may be viewed for free.", "Some repositories permit free searching for citations, abstracts, articles, or other materials in specific disciplinary fields or areas of application, or by researchers affiliated with specific academic systems, or by other researchers. A few illustrations are given next.", "Initiated in 1991, this is a free, online archive which allows physical science researchers to make preprints of their papers available before formal publication. Maintained by the Cornell University Library (in cooperation with the National Science Foundation and the Department of Energy), it includes articles in the following subjects: physics, mathematics, nonlinear sciences, computer science, and quantitative biology. According to PLoS , \"This server expanded from its initial role as a vehicle for sharing preprints in theoretical high-energy physics to its current role as the principal 'library' for a large fraction of research literature in physics, computer sciences, astronomy, and many mathematical specialities. Today, more than half of all research articles in physics are posted to this server prior to their publication in conventional journals. In many fields, these 'eprints' are the de facto publications of record.", "Some types of foreign open access publishing include access to U.S.-generated research findings. CogPrints is a free, British-run, self-archive of full-text, electronically available, published, peer reviewed journal articles as well as preprints of unrefereed articles in the \"cognitive sciences, including any area of psychology, neuroscience, and linguistics; many areas of computer science (e.g., artificial intelligence, robotics, vison, learning, speech, neural networks); philosophy (e.g., mind, language, knowledge, science, logic); biology (e.g., ethology, behavioral ecology, sociobiology, behavior genetics, evolutionary theory); medicine (e.g., psychiatry, neurology, human genetics, imaging); anthropology (e.g., primatology, cognitive ethnology, archeology, paleontology), as well as any other portions of the physical, social and mathematical sciences that are pertinent to the study of cognition.\"", "Controversies arise because developments in open access systems and policies seem to have outpaced society's ability to design equitable and efficient mechanisms and economic reward structures to manage transitions between traditional and open access publishing and archiving. There is evidence that greater acceptance of online and open access publishing is \"forcing traditional journals to address fundamental financial and philosophical challenges,\" which has generated heated discussions in the scientific publishing community.\nMajor arguments made by supporters of open access publishing (largely scientists, librarians, and some non-profit publishers) are that it rides the new wave of inevitable changes in publishing and electronic dissemination of information due to development of the Internet, hastens scientific progress, gives access to more readers, promotes economic development, and, in the case of federally funded research, provides citizens with ready access to the results of research and development that their taxes funded.\nOpponents of open access publishing (primarily traditional publishers and major scientific associations) cite such issues as the doubtful permanence of electronic archives, questions of copyright ownership and reductions to traditional publishers' profits, costs to researchers who have to pay to have their manuscripts published in open access journals, the possibly dubious quality of articles published, questions about peer review processing and quality, perceptions of the academic community and the academic reward system which appear to give more status to articles published in traditional, subscriber-pays journals, and so forth. See the Appendix for a list of additional issues raised about the impact of open access publishing on the academic community, scholarship, and teaching.\nThe following sections elaborate on some of these issues.", "The costs of publishing a journal article include preparing the manuscript for publication (initial sorting and selection of manuscripts to be refereed, peer review, selection, editing, layout, table of contents, overhead, letters to the editor, etc.) and distribution. According to a Wall Street Journal story, costs for publishing an article typically range from $3,000 to $4,000. However, these costs can average more than $10,000 for some journals, such as Science magazine, which publishes only a small fraction of the articles submitted (about 7%), but has high value-added costs, which include reviewing all articles submitted and selecting those that will be published, layout, graphics, distribution, and so forth. Another author has estimated costs for publishing an article in other journals: BioScience , about $7,000 per article; Nature and New England Journal of Medicine, in excess of $1,500.\nThe comparative costs of publishing online only versus traditional journals that print hard-copy are uncertain. While some observers say that article processing costs are similar for print and electronic publications, other research shows that electronic publishing and distribution are cheaper than hard-copy publishing. A private British funding group reported that research it commissioned showed that author pays, open access publishing models are a viable alternative to subscription journals and \"have the potential to serve the scientific community successfully.\" Specifically, \"Open access publishing should be able to deliver high-quality, peer-reviewed research at a cost that is significantly less than the traditional model while bringing with it a number of additional benefits.\"", "Traditional publishers usually incur most of the costs of publishing an article. Revenue comes from subscriptions, advertising, reprints, and, in some cases, from authors who are asked to subsidize the costs of color printing or printing of complex graphics, or page charges for publishing articles in traditional hard-copy journals. Data for 2004 from a study by the Kaufman-Willis Group, which surveyed sources of revenue for traditional and open access publishers, indicates that the three largest sources of revenue for traditional journal publishers were subscriptions, which provided, on average, about 70% of total revenue; industry support (advertising and sponsorship) at about 15% for some journals and membership dues at about 8% for others; and author fees and charges.", "Reportedly, most, but not all, open access journals require authors to pay from about $500 to $4,000 for publishing costs. Open access journals also receive funds from advertising, corporate sponsorships, government grants, the use of volunteers, and foundation grants. The study by the Kaufman-Willis Group, cited above, identified the three largest sources of revenue in 2004 for open access journal publishers as industry support (advertising and sponsorship) at 37%; author fees and charges at 30%; and grants at 13%.\nThis same study showed that, contrary to expectations, author fees were charged by a larger fraction of traditional, subscriber-pays journals than open-access journals. Author fees include charges for color printing, page layout, page publication charges, and so forth. This finding, in combination with the data on percentage sources of revenue, appears to mean that in relation to the total number of publishers, traditional publishers more than open access publishers charged fees to authors, but the payments (as a percentage of publishers' total revenue) were less to traditional publishers than to open access publishers. The fees traditional, subscriber-pays publishers charged to authors were primarily for small changes, color views, and related items, rather than the larger fees open access journals charge authors to publish in the open access journal.", "Among the issues related to \"author pays,\" and possibly to the future of open access journals, is whether the federal government will continue to allow some research grant funding to be used to pay charges levied on authors or institutions for the costs of publishing articles resulting from federally funded research. This may become a more prominent issue if open access publishing becomes a larger part of the market.\nNow, pursuant to OMB's guidelines, federal agencies that award funds for scientific research permit investigators at universities, colleges, and nonprofit institutions to charge the costs of publishing a scientific article as an allowable direct cost (usually paid in full) if the funding agency agrees that they are an appropriate part of the project. If the costs of publishing are disallowed as direct costs, the federal governments likely will pay for these costs as part of \"facilities and administrative\" (F&A) indirect costs, if the research was federally sponsored and if the journal levies similar charges on all research papers published by the journal. If the cost is covered as an F&A indirect cost, full reimbursement may not occur due to limitations on recoveries of some indirect costs.\nSome federal agencies have issued policy guidance about allowing as a direct cost of project support, fees for publication and page charges in order to disseminate reports of the agency's federally funded research results. The National Science Foundation (NSF), for instance, says,\nThe proposal budget may request funds for the costs of documenting, preparing, publishing or otherwise making available to others the findings and products of the work conducted under the grant. This generally includes the following types of activities: reports, reprints, page charges or other journal costs (except costs for prior or early publication); necessary illustrations; clean up, documentation, storage and indexing of data and databases; development, documentation and debugging of software; and storage, preservation, documentation, indexing, etc., of physical specimens, collections or fabricated items.\nAccording to NIH, the following publication costs are allowed:\nPage charges for publication in professional journals are allowable if the published paper reports work supported by the grant and the charges are levied impartially on all papers published by the journal, whether or not by government-sponsored authors. The cost of reprints and publishing in another media, such as books, monographs and pamphlets, also are allowable. Publications and journal articles produced under an NIH grant-supported project must bear an acknowledgment and disclaimer as appropriate, as provided in Administrative Requirements—Availability of Research Results: Publications, Intellectual Property Rights, and Sharing Research Resources. \"\nPublication costs, library fees, and journal subscription costs related to a specific research project may be allowed as costs of a federally supported research project. It is not known if the federal government will extend these allowances to include the costs of institutional subscriptions that open access publishers or journals may sell to colleges or universities to cover publication fees for all authors affiliated with a specific institution. At least one report cautions that some federal agencies may not allow publication costs to be covered. Harold Varmus, a co-founder of PLoS, considers \"publishing fees as the final, relatively cheap step of a research project\" and contends that the federal government should pay for these costs.\nIn 2003, the UK Wellcome Trust, a large research charity that supports biomedical research in the United Kingdom, announced its support of online open access journals and said it would allow scientists it funds to use a portion of their grant to pay author charges required by the journals. The U.S.-based Howard Hughes Medical Institute allows grantees to use up to an additional $3,000 to spend for publishing in open access journals.\nSome professional groups have developed, or widened, policies for \"author pays\" publishing allowing free access to readers. For example, in 2006 the American Chemical Society and Elsevier, both of which publish large numbers of scholarly scientific journals, announced that they would establish mechanisms permitting authors to pay a few thousand dollars to allow their articles to be viewed online for free after publication of the journal. Similarly, anticipating a the release of many important papers after the 2007 start-up of the Large Hadron Collider (LHC), particle physicists are seeking free access to all articles published in their field. In a report released in June 2006 a task force, led by CERN, a physics laboratory in Switzerland, proposed \"that a consortium of labs and funding agencies pay publication costs for particle physics papers. It would cost $6 million or more a year to include all the journals willing to offer an open-access option, the group estimated. That would cover up to half of the 6,000 or so original theory and experimental papers published each year.\"\nSupporters of open access sometimes contend that now most publishing costs are borne by research sponsors, such as the federal government, and that allowing these sponsors to shift support to pay for open access publishing will not cost more and will provide more benefits to society. For instance,\nAsking research sponsors to pay for publication of the research they support may seem to impose new financial burdens on the government agencies, foundations, universities and companies that sponsor research. But these organizations already pay most of the costs of scientific publishing—a huge fraction of the US $9 billion annual revenue of scientific, medical, and technology journals comes from subscriptions, site licenses, and publication fees ultimately billed to grants or employers. Much of the rest is borne by society in the form of increments to university tuitions; healthcare costs, including drug prices; and state and federal taxes that subsidize healthcare, libraries, and education. Surely the cost of open-access digital publishing cannot, in total, be more than we are already paying under the subscription and licensing model. By simply changing the way we support the scientific publishing enterprise, the scientific community and public would preserve everything we value in scientific publishing and gain all of the benefits of open access.\nIn opposition, some say if the government paid such costs, money would be diverted inappropriately from research to publishing. Some universities say their costs will increase if they need to reimburse researchers to pay author fees for open access journals and if they still have to pay high costs for subscriptions to traditional journals. In addition, some young scientists/investigators say that business models that force authors to pay for publication in open access journals could hurt them since they often have smaller grants and \"... an author-pays model could amount to a 'tax for productivity.' \" Another issue is that in some applications-oriented fields, such as medicine, engineering, computer science, management, and pharmacy, users of journals, including open access materials, are often private sector parties who read the journals, but likely would not be authors who would contribute to journal publication costs. As a result, researchers who produce knowledge would bear disproportionate costs for journal publication.", "It has been reported that traditional, subscriber-pays academic publishing has a $5 billion global market, and that one of the leading publishers, Reed Elsevier journals, \"bring[s] in about $1.6 billion in annual revenue with an operating-profit margin of about 30%.\" This profit, according to the same source, could be cut to between 10% to 15% if open access publishing were expanded. (The total scientific and technical journal market has been estimated at $9 billion.)\nSubscription costs vary depending upon the journal and how many journals an institution subscribes to. Prices also vary for individual versus institutional subscriptions. According to one article, in October 2003 two scientists at the University of California at San Francisco were charged $91,000 \"from Elsevier's Cell Press unit for one-year's access to six biology journals.\" The University of California in 2003 was reportedly charged $7.7 million a year for subscriptions to 1,200 Elsevier periodicals, which was a 25% price reduction from the original bill, negotiated after faculty moves to boycott Elsevier journals if the original bill price were not reduced. Reportedly, sometimes sales are increased by publishers forcing libraries to subscribe to more than they want because publishers often \"... bundl[e] ... journal subscriptions into large contracts often not well matched with institutional research interests.\" This includes bundling together journals that are made available electronically in database systems that access current and archived journals. Bundling of this sort can force libraries to pay for access to the same journal several times if it is included in more than one database to which the library subscribes.\nRising journal subscription costs, it is argued, are too expensive, making it difficult for libraries, especially university libraries and the public to afford many journals, and forcing them to sacrifice spending on other media. Reportedly, Rick Johnson, former Director of the Scholarly Publishing and Academic Resources Coalition (SPARC), said that because of rising costs, library spending on print media is shifting from monograph and other materials to support largely journal subscriptions, with price per journal reportedly having doubled within 15 years. He illustrated this by saying that while the Consumer Price Index increased 64 percent, libraries are paying 227 percent more for journal subscriptions. According to a National Library of Medicine (NLM) report, Access to Biomedical Research Information, prepared for Congress in June 2004, \"prices of commercial biomedical titles increased 224% from 1988 to 1998, while the prices of nonprofit titles increased 129%.\" The NLM report was quoted as saying that \"'These trends have adversely affected the ability (from a cost standpoint) of academic and health science libraries to continue to support the needs of the research and health care provider communities for access to biomedical literature....'\"\nThe current open access movement has been fueled by actions of academics and librarians located at the University of California campuses, as well as at other academic sites, who, in late 2003 and 2004, mounted strenuous objections to increases in costs for subscriptions to scientific journals. Some demanded a 25% reduction in subscription fees from major scientific publishers, with Reed Elsevier often cited as a major target, and said if fees were not reduced, they would relinquish journal editorial board memberships or stop providing free peer reviews for major scientific publishers.", "The question as to whether open access journals can exist without subsidies may still be unanswered. Some observers wonder whether open access journals and archives can be sustained without philanthropic contributions and what will happen if foundation contributions are ever reduced. It has been reported that several journals which attempted to provide free access to readers reversed policies due to falling subscription rates and revenues for print journals. These journals reportedly included the Journal of High Energy Physics, which published online for free for six years; it originally did not charge authors a fee, but ultimately decided \"to impose a subscription fee of about $1000 a year\" for readers. There is also a question of whether, if publishing patterns and revenue sources change, publishers will obtain enough revenue to be able to risk starting up niche journals in narrow fields of science and which have a small readership, which many traditional publishers have been able to do given their revenue margins.", "The point is often made that scientific societies, which may publish on their own or may use commercial publishers to publish their journals, reap considerable profits from their share of journal revenues. They then use these profits to support societies' activities, which can include advocacy and assistance to new researchers in the field. Critics of this practice say that these professional associations need to find different business models, or alternative ways to raise money, to support their activities instead of using publishing profits, which are based on payments from subscribers, university libraries, and, in many cases, indirect costs of federally funded R&D.\nOn the other hand, revenues to scientific societies may not decrease since, at least according to one professional association, the rise of online publishing does not reduce subscriptions to print journals. For instance, according to the American Physical Society (APS), which receives journal publishing profits, preprints of articles in physics, computer science, and mathematics are published on arXIV.org , an open and publicly accessible archive. The editor-in chief of the American Physical Society, reportedly said that\nthere has been no decline in the subscriber base of journals in those disciplines. In fact the 'contrary is true,' he said. He explained APS journals have a very liberal copyright policy that gives back to the author the right to post articles on e-print servers even before journal publication. They also allow authors to update articles on the servers, using the corrected journal form, after publication....", "Proponents of open access have alleged that some traditional publishers' practices limit equitable access to scientific information. These practices include \"restrictive licensing terms overriding copyright and fair use practices, [controls on] long-term archival access to electronic content, and ... selective deletions of published articles from database and e-publications.\" Traditional, subscriber-pays publishers often disagree and say that they are beginning to adopt some features of open access publishing, including, but not limited to, developing multimedia enhancements, allowing authors to self-archive their articles, and improved content search capabilities.", "Some traditional publishers (like many open access publishers) have taken steps to enhance the content of journal articles they post online by permitting digital access, permitting access to ancillary databases and related materials, or allowing posting of preprints in author's websites or institutional repositories. However, often traditional, subscriber-pays publishers charge a fee to view the journal article or enhancements, \"... with fees ranging from a few dollars to a few tens of dollars.\" Open access proponents say that fees should not be charged for access to these kinds of information.", "Subscriber-pays, traditional publishers have a wide variety of policies regarding free access to the articles they publish. The British Medical Journal (BMJ) , for instance, allows free access to all readers for all materials in its journal for one week after publication. After that, non-subscribers have free online access only to original research articles that were published in the hard-copy journal. Only paying subscribers can access editorials and news articles published in the journals and articles that are published only in an online version. After a year access is free to all BMJ materials. Generally, traditional publishers may permit free access to journal articles anywhere from a few months to two years after publication. Proponents of open access have argued that the public or other researchers should not have to wait a year or more to have access to research findings, especially for biomedical research findings, that could be used to improve a patient's health outcome. Another view is that \"... limited access to the full text of research articles is bad for science. Such restrictions make it difficult for researchers to build on the entirety of what has gone before and for readers to check whether they have done so. The practice might contribute to citation bias since authors will only reference journals they can access.\" Still others may find that traditional publishers do not allow electronic access to data in a form that other researchers can easily use to verify findings or to compare in other research projects.", "Open access publishers require or allow authors to self-archive their articles immediately and to make them accessible for free. Some traditional, subscriber-pays publishers now allow authors to self-archive on the author's own website an electronic version of the preprint of their article, or, after a delay, the published journal article. There are a variety of models for this, sometimes with fees charged. Some traditional publishers allow authors to self-archive the preprint and then link to the printed version after publication (American Meteorological Association); some do not allow posting of the article until a year or more after publication in the journal (American Association for the Advancement of Science); some allow posting of an author's article only on an institutional or educational server, not the author's personal self-archive, (American Anthropological Association); and so forth. The policies of hundreds of U.S. and foreign journals, associations, and publishers are summarized in an inventory, published by SHERPA, a British open access project.\nCritics say that archiving only on the author's website makes it hard to find sets of related articles in particular subjects because articles are more accessible when placed in freely searchable repositories that archive articles in many fields by many authors and which can be searched by index or keyword terms.", "Some commercial publishers make available free search engines that allow readers to search for citations or abstracts in specific fields or types of information. Some of these repositories link to a text version which can be viewed for free. However, most full text articles found through these searches are not accessible for free; costs to read or download an article average $30 per article, which users or libraries are required to pay. An example is Scirus, a search engine limited to science literature managed by Elsevier , which provides access to short abstracts or excerpts. Open access bibliographic or citation archives have a wide range of policies regarding access to scientific articles. Open access bibliographic archives generally provide free access to abstracts or citations in multiple fields, and often to full-text manuscripts or articles.\nNIH's PubMed/MEDLINE is a free bibliographic database that the public can use to search for journal articles. It gives access to references from millions of articles published in almost 5,000 biomedical journals dating back to the 1950s. It gives a citation and abstract and links to full-text articles that are available for free (via publishers' websites or on PubMed Central ) as well as to full-text articles on the publishers' websites that users may have to pay to view. NIH's PubMed Central (PMC) includes the full-text version of almost all articles cited in its database (usually from open access publishers) and in limited cases has links to the full-text versions on publishers' websites. Many journals routinely deposit material in PMC and generally all their published articles are made available for free. PMC also is the repository for articles resulting from NIH-funded research that are submitted under the agency's Public Access Policy. These articles comprise only a small part of the PMC database and many NIH-funded researchers publish the results of their research in journals that do not contribute article to PMC . ( PMC is discussed in greater detail below in the section on NIH's Public Access Policy.)\nOpen access proponents say that there are multiple benefits to providing free access to articles in online repositories of collections of articles since a reader could identify many related papers on one topic and would bypass the need to search individual authors' websites or to use commercial indexing databases that typically charge a fee to read an article.", "Supporters of traditional, subscriber-pays publishing argue that publishers, as copyright holders, need copyright protection in order to market journals and sell reprints which support the costs of publishing and archiving both hard-copy and electronic materials. Some also say that copyright ownership is required to guarantee a researcher's accuracy and the authenticity of authorship of an article. In open access publishing, the author of the article retains copyright ownership, but access to the article normally remains free to readers. As will be discussed below, a mixed model is used in the case of NIH's Public Access Policy , which asks authors to voluntarily submit to PubMed Central (PMC) the peer reviewed version of a manuscript accepted for publication in a journal. This should be done as soon as possible, but within 12 months of acceptance of the article by the publisher. Free access to the manuscript is prohibited until after journal publication or for the embargo period specified by the publisher. Publishers, who hold the copyright to articles that are not published using the open access model, retain the exclusive right to disseminate the work for the time before free access is permitted on PMC, but authors are encouraged to conclude agreements with publishers that allow them to place the manuscript in the database. According to NIH, regardless of the publisher's decision, the agency has the right to utilize the journal article under the government purpose license doctrine (even though NIH says it is not exercising this authority). In the future, other agencies may seek to implement public access policies similar to NIH's, but may modify it to use government purpose licensing provisions, which may be controversial. (See the section on NIH, below, for more details.)", "Open access publishing, according to many proponents, helps promote economic, social, and technical development and equitable access to scientific knowledge by researchers in countries unable to afford the costs of scientific journals by hard-copy or subscription web access. Many open access systems also say that they will waive publication charges for authors from developing counties who cannot afford to pay to have their articles published.\nBut some traditional publishers say that scientists in developing countries already have free and ready access to most scientific journals. For example, many traditional publishers \"... participate in projects sponsored by the World Health Organization and the Food and Agriculture Organization of the United Nations to provide medical and agricultural journals to readers in developing countries at low or no cost.\" In addition, more than 2,000 biomedical journals are accessible online to researchers and health workers in developing countries via a philanthropic project called Health InterNework Access to Research Initiative ( HINARI) supported in collaboration with the World Health Organization.", "There is a diversity of views about whether the articles that appear in open access journals have been subject to the same kind of rigorous peer review as those published in traditional, subscriber-pays journals and about whether they are of comparable quality. The peer review process traditionally involves review of quality of the article and selection of articles to be published in a journal. Usually journal editors or editorial boards make an initial selection of articles to be peer reviewed from among those submitted; use a panel of expert scientists who may volunteer their time to review submissions; select articles to be published from among the articles peer reviewers ranked as high quality; and sometimes do some editing.\nA long-held principle is that the accumulation of high-quality scientific knowledge rests on a foundation of publication, typically in traditional commercially distributed scientific journals, with the findings and results vetted and validated through a process involving peer review and fee-based journal subscriptions. Critics allege that the open access \"author pays\" model of paying for publishing costs, including peer review, prevents quality control mechanisms from working correctly and that, in the long run, scientific articles published in open access sources may be less credible than those published in journals which charge subscription fees. A survey published in 2005, funded by traditional, subscriber-pays journal publishers, is reported to have found that the quality of peer review was lower in open access than in traditionally published journals:\nOpen-access journals ... received fewer submissions and were less selective in choosing among submissions. [It continued] essentially all of the journals reported using editorial review to select and edit submissions. But nearly all of the traditional journals used external peer review, while only editorial staff members reviewed submissions of about 30 percent of the open-access journals.\nAccording to another study, the most rigorous peer review, \"as measured by their [journals'] reliance on external reviewers,\" was largely by traditional publishers, and that, in contrast, \"full open access journals tended to depend heavily on editorial staff only for peer review,\" except for two subsets of open access journals—BioMed Central (BMC) and Internet Scientific Publications (ISP) journals, which had practices more like traditional journals. On the other hand, a study published in 2005 by a publishing analysis firm showed that the quality of nearly 200 open access journals was almost as high in specific medical disciplines as the quality of articles in traditionally published journals.\nSome analysts say that peer review in open access journals suffers from the difficulty of finding enough scientist peer reviewers for both the growing number of open access journals and traditional journals. There is also the view that editorial boards of open access journals, may not filter out unacceptable manuscripts as much as traditional, subscriber-pays journal boards do. Thus peer reviewers for open access journals, who interact and report primarily electronically, may be overwhelmed by the number of articles they are given to review, and, ultimately, there may be delay in the system. Publication in peer reviewed journals figures prominently in promotion and tenure processes in academia. Some observers contend that members of the academic and scientific communities may not view publication on the Internet or in an open access journal to be as prestigious as publication in a traditional, subscriber-pays peer reviewed journal.\nOthers use citation data as a surrogate measure for quality. Some analysts cite data showing that articles posted in open access journals or freely available on the Internet are used and cited more frequently than those published in traditional journals and are, therefore, a better model to ensure the speedy utilization of scientific research. For instance,\nExperience in physics where researchers publish in traditional journals and then self-archive their papers in a free database is conducive to scientific communication and favorable to authors because \"papers listed in free archives often get more citations....\" A recent study showed that in four disciplines, philosophy, political science, electrical and electronic engineering, and mathematics, articles that are freely available via open access publishing have a greater research impact than those not available via open access. Impact is measured by citations made by other researchers to the literature in the ISI Web of Science database. In computer sciences, \"a 2001 study in Nature, showed that, at least in one set of disciplines, papers that appear free online are more likely to be cited by other researchers than those that do not. A scientist at NEC Research Institute analyzed nearly 120,000 papers in computer science and related titles. Those that were freely available online had been cited more often in other papers than were those not online, he found. The average number of citations of offline papers was 2.74, compared with 7.03 for those freely available online.\" A study published in an open access journal, suggested that articles published online in open access journal got cited more often than those cited in subscriber or pay for view journals. The articles examined were published in the Proceedings of the National Academy of Science s in 2004; authors paid $1000 to allow their papers to be read immediately and without cost.\nOne implication of these data should be noted. Ease of access to articles readily available online, as opposed to those that may be accessible only in hard-copy journals, may increase the propensity to cite them. Thus citation data may not so much measure quality as accessibility.", "On June 26, 2003, Representative Martin O. Sabo introduced the \"Public Access to Science Act\" ( H.R. 2613 , 108 th Congress), which would have denied copyright protection to publications resulting from federally funded basic scientific research in order to encourage free dissemination of research results to the public. No action was taken on this bill.", "Subsequently, the House Appropriations Committee's report on the FY2005 Labor/HHS bill, H.R. 5006 , July 14, 2004, contained language that led to the NIH's \"Enhanced Public Access Policy\" ( H.Rept. 108-636 , p. 104). The language, reported to have been authored by Representative Ernest J. Istook, Jr., \"recommended\" that NIH permit open access to NIH-funded research by \"requiring\" researchers to deposit peer reviewed articles accepted for publication and associated supplemental materials in NIH's PubMed Central , an free access repository information system, within six months after publication of the article in a scientific journal. If NIH awarded funds for publishing, the research would be made available immediately upon publication. It also instructed NIH to draft a report by December 1, 2004 on how it would implement this policy. Reportedly \"librarians and the Scholarly Publishing and Academic Resources Coalition, or SPARC,\" lobbied \"the Appropriations Committee behind the scenes to include the open-access language in the committee's report....\"\nThe conference report on the FY2005 Consolidated Appropriations Act, P.L. 108-447 ( H.Rept. 108-792 , p. 1177), which included funds for Labor/HHS, directed NIH to consider input from publishers as it developed its public access policy, directed NIH to continue to work with publishers to insure the integrity of the peer review system, and requested that NIH \"... provide the estimated costs of implementing this policy each year in its annual budget justification ...\" in response to concerns from publishers that NIH's database cannot easily handle the new articles it will be required to archive.", "NIH maintains a database, called PubMed Central (PMC) . This is an electronic system that was launched in 2000 and which contains bibliographic citations and the full text of some several thousand peer-reviewed articles that were published in journals in the fields of biomedical, behavioral, and clinical research. The goal of the database system is to develop a publicly accessible, permanent, and searchable electronic archive of life science literature, that is separate from publishers' individual databases Some of the journals participating in PMC (typically open access publishing journals) make full text articles available to users immediately upon publication; some require waiting periods of up to three years to obtain free access to full text of an article. Some journals which participate allow the publication of bibliographic information about an article, but require the reader to link to the journal's website to view the abstract or full article, which may be accessible only to subscribers or for a fee. Many major biomedical journals do not participate in submitting materials to PMC , including such journals as the Journal of the American Medical Association , the American Psychologist , the Journal of Abnormal Psychology , and the New England Journal of Medicine . Electronic access to articles in these journals is usually available for a fee—sometimes over $25 per article—at the journal's website. Publishers may make the text of articles published in some of these journals available to readers for free, but usually only on a delayed basis averaging about 12 months after publication in the journal.\nIn response to congressional mandate, NIH's policy to archive published articles that resulted from its funding was released for public review and comment in September 2004. After holding several meetings with stakeholders and considering numerous comments from traditional publishers and others submitted during the public comment period, Washington Fax, November 22, 2004; Jocelyn Kaiser, \"NIH Unveils Public Access Policy,\" Science, February 3, 2005; Andrew J. Hawkins, \"NIH Says Public Access Policy will Change How Science Is Understood,\" Washington Fax, May 2, 2005. NIH issued the final policy, which was published in the Federal Register on February 3, 2005. Implementation of the policy started on May 2, 2005.\nIt asks authors funded by NIH to voluntarily submit as soon as possible to NIH for inclusion in the NIH PMC system, manuscripts that have been edited through the peer review process and accepted for journal publication. Such manuscripts are to be submitted as soon as possible, but within 12 months after acceptance of the article by a scientific journal (instead of six months as originally proposed). They are supposed to be posted and made available for public viewing after the embargo period, or sooner if the publisher agrees, but within 12 months. According to NIH, the requirement is not mandatory and no penalties would be imposed if an author did not submit a manuscript to the free archive. Thus, NIH-funded scientists are asked to\n...submit an electronic version of the author's final manuscript, upon acceptance for publication, resulting from research supported in whole or in part by NIH. The author's final manuscript is defined as the final version accepted for journal publication, and includes all modifications from the publishing peer review process. The policy gives authors the flexibility to designate a specific time frame for public release—ranging from immediate public access after final publication to a 12 month delay—when they submit their manuscripts to NIH. Authors are strongly encouraged to exercise their right to specify that their articles will be publicly available through PubMed Central (PMC) as soon as possible.\nThe version required to be submitted voluntarily is not the final version of the article as copyedited and printed in the journal. Since publishers use different formats for publishing materials electronically, NIH is using a standardized format to archive and make accessible the submitted manuscript in PMC . NIH's policy says that it would accommodate any changes made to the manuscript by the publisher if submitted to PMC and that manuscripts would not be made available from PMC until after the article was published in a journal. PMC will provide a link to the publisher's website (which could possibly charge a fee for viewing) to enable the public to read the article as published in a journal. Specifically,\n... under the Policy, the final manuscript will not be made available to the public through PMC until after the copyedited version is published by the journal. Corrections and other necessary revisions of author's final manuscripts will be accommodated. Furthermore, when publicly available, the published article on the journal-sponsored website and the author's final manuscript in PMC will be appropriately linked through PubMed. Corrections and post-publication comments referring to a publication are currently identified and linked in PubMed, and this capability will be linked to the corresponding manuscript in PMC. If publishers wish to provide PMC with the publisher's final version, this version will supersede the author's final manuscript in PMC.\nNIH allows researcher/authors to use the submission of the manuscript to meet certain NIH grant reporting requirements. According to NIH, its policy is compatible with existing publishing models. The agency said it,\nexamined the access policies of the top 20 journals based on citation impact for medicine and medical research and of the 50 journals published by members of FASEB [Federation of American Societies for Experimental Biology]. As of October 2004, 80% of the 20 high impact journals allow public access of some sort through HighWire press within 12 months of publication; of the 50 FASEB journals, 78% offer public access within 12 months.\"\nNIH Director Zerhouni justified the new policy by explaining that it provides electronic access to NIH-funded research, permits formation of a central archive of NIH-funded research publications, advances science by creating an information resource that scientists can mine, and helps NIH \"better manage its entire research investment.\"\nNIH has also created a Public Access Advisory Working Group of the National Library of Medicine (NLM) Board of Regents, composed of stakeholders to advise NIH and NLM on policy implementation and evaluation. Modifications are to be made to the system as it becomes operational and is studied by the group. The NIH Public Access Advisory Group met on November 15, 2005. Among its recommendations was that the NIH policy, which is now voluntary, be made mandatory; that manuscripts be posted within six months, instead of the current 12 months; and that the final copyedited version be posted, instead of the author's final manuscript.\nIn November 2005, in response to several publishers' concerns, NIH revised the existing public access policy to allow publishers, in addition to authors, to request that articles which infringe copyright be removed from PubMed Central , even though the author has the copyright agreement with a publisher, and the public access policy agreement is between an author and NIH. Such infringement might occur if a publisher has not granted permission for an article to be displayed in PMC before 12 months has elapsed or if the author provided NIH with a final copyedited version of the article, which a publisher might oppose.\nAccording to minutes of the Public Access Advisory Working Group's April 10, 2006 meeting,\nthe majority of members confirmed the opinions expressed at the previous (November 15, 2005) meeting of the working group: (1) the policy should be mandatory; (2) submission should occur within six months (with flexibility to 12 months in the case of journals that publish quarterly or less frequently); and (3) the final manuscripts as published should be the favored form. A minority favors a 12 month submission deadline and submission of the author's final manuscript rather than the final published form.\nAs announced on September 1, 2006, NIH released a press release describing a modification to the existing implementation process for its open access policy. The policy says essentially that an author does not have to directly submit a manuscript to PMC if he or she publishes in a journal which automatically deposits all of its content on PMC and makes its contents available to the public (which is most of the journals that partner with PMC ). \"All but a handful\" of Public Med Central journals permit free access usually immediately to the final version of an article and authors who publish with them do not have to take further steps to satisfy NIH public access policy. Seven of the almost 300 journals accessible via PMC require the author to submit manuscripts.\nAt this time, NIH also initiated a new system called the PubMed Central (NIH Portfolio) project—only for NIH-funded research—which is apparently designed to satisfy NIH needs and the demands of some nonprofit publishers. Although a signed agreement is not necessary, some publishers have signed an agreement for participation with NIH. According to one publisher, it stipulates that published journal articles resulting from NIH-funded research be made available only for internal use in an NIH-funded archive during the embargo period, that the embargo period last no longer than 12 months, and that following the embargo period NIH could provide links to the journal and could also distribute the article directly through PMC . If a journal does submit articles via the bulk system, authors have to confirm the version that is posted on PMC. So far only one journal, Blood , has agreed to participate, but negotiations are underway with other publishers. Authors that publish in any other journal not considered a regular PMC journal or NIH portfolio journal (identified by NIH, for example, as Elsevier journals) need to continue to submit manuscripts to comply with NIH's policy to submit final manuscripts to PMC . These changes occurred after several months of discussions intended in part to allay criticisms (dealing primarily with abridging a publisher's embargo periods before submitting a final journal article, increasing compliance by NIH-funded researchers, and averting additional action to mandate compliance).", "On June 21, 2005, the House Appropriations Committee approved H.Rept. 109-143 on the FY2006 appropriations bill that included appropriations for NIH ( H.R. 3010 ). The House bill was passed on June 24, 2005. The report endorsed NIH's objectives in establishing the \"Public Access Policy\" and included language requiring NIH to develop an \"aggressive\" outreach program to ensure full participation by grantees in volunteering to submit their journal manuscripts to the NIH archive. It also requested the NIH Director to report to Congress by March 1, 2006 on the number of \"articles\" deposited and the length of the embargo by publishers—that is, the delay between submission of each peer reviewed \"article\" to NIH and its subsequent posting on the PubMed Central website—and to estimate the total number of articles available for deposit. S.Rept. 109-103 on this bill endorsed the objectives of the policy but also emphasized the need for interaction between NIH and stakeholders. It urged NIH to work with stakeholders as it implements the new policy; and asked NIH to report by February 1, 2006 on the number of peer reviewed \"articles\" deposited in the database, on \"the extent to which the implemented policy has led to improved public access,\" on the impact on the peer review system, and on the cost of operating the database. The bill enacted after conference committee action was sent to the President for signature on December 28, 2005 (signed as P.L. 109-149 ). The NIH report to the committees was released in January 2006. It reported that for the first eight months of the system, the rate of submission was low, less than 4% of the total number of articles estimated to be eligible for submission, that is 1,636 out of about 43,000 that could be deposited. Lack of awareness, it reported, does not appear to be the primary reason for the low submission rate. The report did not describe the reasons for the low rate of participation, but publisher resistance seems apparent. The NIH said it will continue to work with participants and stakeholders to improve public access. It also identified three issues the working group was continuing to examine, which undoubtedly contribute the low participation rates:\nShould investigators' participation in the Policy be mandatory or voluntary? Which version of an article should be deposited in PMC: the author's final peer reviewed manuscript, or the final, edited article as it is published in the journal? What should be the length of the embargo period before public access to an article is permitted through PMC?\nIn 2006, the House Appropriations Subcommittee on Labor, Health and Human Services, and Education again addressed the issue of NIH's public access policy. Testimony on the issue was delivered at an April 6, 2006 subcommittee hearing. The full Appropriations Committee reported an original bill, H.R. 5647 on June 20, 2006. Sec. 220 would change NIH's policy to make it mandatory that all NIH-funded researchers submit electronic versions of final, peer-reviewed manuscripts to PubMed Central within one year of acceptance for publication in a journal. No further action has occurred. The Senate bill, S. 3708 , does not contain this language. Both committee reports on the bills contain language which commends the PMC repository and observe that NIH is continuing to work with researchers, publishers, societies and other stakeholder to improve public access.\nThe American Center for Cures Act, S. 2104 , was introduced on December 14, 2005, by principal sponsors, Senators Joe Lieberman and Thad Cochran; it contains a provision on translational research, including a section requiring NIH grantees to provide NIH with a final version of all peer-reviewed manuscripts accepted for publication within six months from date of publication. According to the American Psychological Association, a Member of Congress had planned to, but did not finally, introduce an amendment during committee consideration of H.R. 6164 , the NIH Reauthorization Act, \"that would have required all journal articles about federally funded research to be deposited in a free, open archive (NIH's Pub Med) no later than six months after they were accepted for publication.\" The bill was reported out of the authorizing committee, the House Committee on Energy and Commerce, and approved in the House on September 26, 2006. According to the report, \"The Committee has listened to stakeholder concerns about NIH's current open access policy with respect to making published literature available online. The Committee will continue to monitor the open access policies adopted by the NIH, including the management of the program and the participation levels of scientific journals\" ( H.Rept. 109-687 , pp. 22-23). The Senate passed H.R. 6164 , amended, without written report on December 8, 2006; the House agreed to the amended bill on December 9; and the bill was sent to the President on December 9.\nReportedly, some Members of Congress have supported the position of major opponents of the NIH public access policy. Senators Larry Craig, Mike Crapo, and Kit Bond, according to a news article, sent a letter to NIH Director Zerhouni on November 18, 2005, which supported the FASEB group position of having NIH post abstracts which are linked to publishers' websites to read the full text of articles. The Senators also questioned NIH's ability to fund the public access system due to limited resources and requested that NIH meet with representatives of the group to consider their proposal. Dr. Zerhouni reportedly said he would welcome a meeting.", "Criticisms of the NIH policy have come from traditional, subscriber-pays publishers as well as proponents of open access.\nFor instance, PLoS 's supporters have criticized the NIH policy for its voluntary compliance requirement and said \"... the agency's language should have been to 'require' or 'expect' rather than 'request' the deposition of NIH-funded articles in the National Library of Medicine's free-to-use Internet repository, PubMed Central.\" In addition, according to PLoS \"... the maximum allowable delay before articles' public release should have been at most 6, rather than 12 months—particularly since no publisher has presented evidence that the free availability of a fraction of its journals' articles half a year after publication would adversely affect subscription revenues.\" Others say that the 12-month delay for public access falls short of achieving goals of congressional intent and is too lengthy \"in a field as dynamic as biomedicine,\" where patients need immediate access.\nNIH policy has also been criticized by some who say that NIH should utilize free access policies that exist in the not-for-profit publishing community, which, they say, are more cost-effective. They suggest that instead of putting articles in PMC , NIH should create a search engine that has the capability to crawl the full texts of existing journals, including nonprofit journals, to allow access to articles on the original journal's website and to provide access to other articles on the topic. Publishers often charge a fee to access articles this way. Among the groups who have commented on this position is the Washington DC Principles for Free Access to Science and the American Physiological Society.\nBy way of example, Google Scholar , which was launched in 2004, is a free Internet search engine that allows readers to search for peer reviewed articles, preprints, abstracts, grey unpublished literature and other scholarly analyses. If it links to a full-text article, the article is likely to have been published at least a year before the date of the search. There is no assurance that the search engine captures all current or archived materials available in a field. Full text of publisher-controlled, copyrighted materials may be indexed with a citation, but a reader may be linked to the publisher's website to obtain full text of the published version for a fee. In addition, there may be a direct link to the full text of a preprint or a version posted by an author or university archive website.\nSome focus on the notion that NIH policy may promote the forfeiture of patent rights. A legal analysis contends that pre-publication \"manuscripts placed on the PMC database 'likely' can be considered 'printed publications' for patent purposes, thus 'triggering the one-year time period for filing a U.S. patent application covering research disclosed in the manuscript....' \" \"Current practice,\" it is charged, \"relies on the date of journal publication to start the clock.\"\nA report prepared for the American Physiological Society criticized the NIH policy as limiting technology development and commercial competition, specifically that \"the open access plan 'undermines the principle of [Bayh-Dole] that the private sector is the preferable vehicle to move federally-funded research results to the public and the marketplace.' \" It should be noted that the Bayh-Dole law applies to technology transfer, not to publishing of research results.\nAccording to NIH officials, voluntary participation in the public access system has been very limited: only about 4% to 5% of articles by NIH grantees have been submitted, and a survey (by a publisher group) contends that only about 18% of NIH grantees understand how to submit a manuscript for posting in the public access archive. In response, the Federation of American Societies for Experimental Biology (FASEB), which opposes the NIH policy as configured, proposed that the public access policy be modified so that NIH links readers from abstracts of articles to publishers' websites to read an article, rather than to the article itself, and that NIH create an archive of full text of articles for internal NIH use only. NIH officials are reported to have objected to this proposal, saying it would prevent achieving the policy's three core goals: a stable and permanent archive, an archive available to awardees to help communicate research findings, and an archive accessible to the public.", "S. 2695 , the Federal Research Public Access Act of 2006, was introduced on May 2, 2006, co-sponsored by Senator John Cornyn and Senator Lieberman. It requires all federal departments and agencies that invest $100 million or more annually in research to develop a public access policy that requires all final manuscripts or articles that result from federal funding to be posted in a free publicly accessible archive as soon as possible but no later than six months after publication. The bill also would require agencies to \"make effective use of any law or guidance relating to the creation and reservation of a Government license that provides for the reproduction, publication, release, or other uses of a final manuscript for Federal purposes\" (Sec. 4 (c)). The following could be among the agencies affected, the National Science Foundation, the Department of Energy, the Department of Transportation, the Department of Defense, and the National Aeronautics and Space Administration. This proposal, like the NIH public access policy, has generated considerable reaction. In July, 2006, the provosts of 25 universities, including Harvard, the University of Chicago, and the University of California, jointly released \"An Open Letter to the Higher Education Community,\" supporting the bill as \"good for education and good for research.\" Subsequently the presidents of 53 liberal arts colleges, organized by the president of Oberlin College, issued a joint letter supporting the legislation. Several library groups have also supported this proposal. Additional support has come from major New England university provosts. Some scholarly associations, academics, and publishers objected on the same grounds as objections to the NIH policy—for instance, that the costs of a broader policy would detract from research spending, the government might not maintain databases, some journals would be forced to close for lack of income, and the government should not interfere in private activities by creating such publication databases.\nOn October 20, 2006 a forum was held on \"Improving Access to Publicly Funded Research,\" cosponsored by leaders of higher education and library organizations, including the Association of American Universities (AAU), the Association of Research Libraries (ARL), the Coalition for Networked Information (CNI), the National Association of State Universities and Land-Grant College (NASULGC), and the Scholarly Publishing and Academic Resources Coalition (SPARC). Many of the speakers supported S. 2695 and open access publishing of federally funded research.", "NIH documents indicate that its Public Access policy upholds the principles of copyright since submission of manuscripts is voluntary and the statutory fair use privilege still applies to public use of the archived articles. The agency issued guidelines for authors on how to include, in a copyright agreement with a publisher, language that acknowledges the author's obligation to provide a copy of the article to PMC .\nNIH relies on obtaining permission from authors as the basis for its policy even though \"NIH does not need to seek permission from journals who may acquire copyrights from authors or institutions because any copyright transfer or assignment is currently subject to the government purpose license pursuant to 45 C.F.R. 74.36.\" The term \"government purpose license\" is not used per se in the cited regulation, but is implied. NIH says it is not relying on use of government purpose license to implement its policy. The regulation reads,\nThe recipient may copyright any work that is subject to copyright and was developed, or for which ownership was purchased, under an award. The HHS awarding agency reserves a royalty-free, nonexclusive and irrevocable right to reproduce, publish, or otherwise use the work for Federal purposes, and to authorize others to do so (45 CFR 74.36(a)).\nThe concept of nonexclusive right to use the work is similar to the concept of \"government purpose license\" that is used in the Federal Acquisition Regulation , which governs federally funded contracts. Government purpose licensing permits agencies to disseminate to the public scientific and technical articles based on, or containing data produced from, research funded by the agency. The government may subsequently use and distribute the scientific and technical articles as submitted to a publisher or as published in a journal if the publisher has not added any original materials, such as publisher-prepared abstracts or peer review comments. However, generally an agency should obtain a publisher's written permission to reuse or republish the article as published in the journal. Use of \"government purpose authority\" per se to disseminate published journal articles to the public may be limited to contracts funded by those agencies whose originating or authorizing legislation mandates them to preserve and/or disseminate information to the general public about the agencies' activities and research results. Agencies may attach separate and different interpretations to this function and purpose.\nOther agencies that support scientific grants are governed by OMB Circular A110-section 36, which allows copyrighting by the owner of the work produced from the award of federal funds, but gives the government a nonexclusive right to use it. Specifically,\nThe recipient may copyright any work that is subject to copyright and was developed, or for which ownership was purchased, under an award. The Federal awarding agency(ies) reserve a royalty-free, nonexclusive and irrevocable right to reproduce, publish, or otherwise use the work for Federal purposes, and to authorize others to do so.\nThe Circular A-110 language does not appear to require agencies' enabling legislation to mandate dissemination of research findings, although agency regulations generally require grantees to publish or disseminate the findings of their research and to share data generated by such research. See, for instance, the NSF Grant Policy Manual which specifies that \"Investigators are expected to promptly prepare and submit for publication with authorship that accurately reflects the contributions of all those involved, all significant findings from work conducted under NSF grants.\" However agencies may have different rules relating to the dissemination of research findings and definitions of \"Federal purpose.\"\nIf other agencies were to develop Public Access policies like NIH's, they might use a policy of voluntarily submitted manuscripts like NIH. But research funding agencies might also chose to invoke government purpose license or nonexclusive right to use policies to archive articles.", "In addition to NIH's Public Access policy and PMC , other federal agencies have engaged in open access activities. Several federal agencies publish free, open access, peer reviewed, Internet accessible journals. These journals include Emerging Infectious Diseases, by the Centers for Disease Control and Prevention; and Agricultural Research and the Journal of Agricultural Research , maintained by the U.S. Department of Agriculture and the National Agricultural Library. Others have free, searchable, electronically available repositories that include abstracts, links to full-text articles, and other research reports, some of which may be read online. However, some agencies have confronted serious obstacles to maintaining such systems and have been forced to terminate them. Below is an overview of agency activities and a review of some of the general issues raised about federal involvement in open access publishing and databases.", "Some agencies maintain databases or repositories containing citations, articles or reports that resulted from government-funded research or research funded by other sources, and some include preprints of scientific and technical materials. For instance, the DOE Information Bridge allows readers to access for free all available Department of Energy (DOE) preprint report literature (preprint reports prepared for the government via grant or contract that are usually longer than articles published in journals). DOE also has a tool called E-print that allows the user to search major preprint systems and university sites where articles are posted. E-print is a gateway to over 17,208 websites and databases worldwide that hold \"... e-prints in basic and applied sciences, primarily in physics but also including subject areas such as chemistry, biology and life sciences, materials science, nuclear sciences and engineering, energy research, computer and information technologies, and other disciplines of interest to DOE.\" The system permits documents to be \"... circulated electronically to facilitate peer exchange and scientific advancement. Included are pre-publication drafts of journal articles (preprints), scholarly papers, technical communications, or similar documents relaying research results among peer groups.\"\nOther federal agency open access systems include:\nThe GrayLIT Network , which includes the searchable full text of gray literature from the Defense Technical Information Center, the DOE, the NASA Jet Propulsion Lab, NASA Langley, and the Environmental Protection Agency. The Federal Research and Development Project Summaries system contains information about research projects from the DOE, the National Institutes of Health and the National Science Foundation.\" The U.S. Department of Agriculture's (USDA) AGRICOLA ( AGRIC ultural O n L ine A ccess) system, an online bibliographic data base which provides citations, abstracts, and links, when they are available, to published and non-published agricultural literature in the National Agricultural Library. The Astrophysics Data System (ADS) is a National Aeronautics and Space Administration (NASA)-funded project which maintains four bibliographic databases containing more than 4.2 million records, including links to external resources dealing with: Astronomy and Astrophysics, Instrumentation, Physics and Geophysics, and preprints in Astronomy. The system also contains full-text scans of much of the astronomical literature (almost 50 astrophysics journals).", "Allegations of censorship and governmental competition with free market mechanisms are often cited in opposition to government-maintained databases of scientific and technical information.", "Some critics focus on dissemination issues and contend that governmental operation of archives and databases of abstracts and journal articles resulting from federally funded research or research funded by other sources implies government \"censorship and encroachment upon scholarly discourse.\" Federal officials, rather than private publishers, some allege could end up determining what research gets archived or disseminated and what does not.", "Some publishers have objected to government-run scientific and technical databases containing abstracts or articles, saying these threaten their publishing activities and employees' jobs. This controversy is illustrated by the experiences of at least two DOE systems.\nThe DOE E-print system, described above, has been controversial, and, according to a DOE official, a few years ago several publishers threatened to prohibit publication of articles that authors posted on it. But eventually the publishers relented and now each publisher has different rules regarding the posting of preprints.\nPubScience , was a U.S. Department of Energy effort to provide a free multidisciplinary database for physical sciences literature. It contained indexed abstracts or citations for federally funded and other literature published in commercial journals. Readers could access indexed abstracts for free, but were directed to the commercial website link to obtain the full text article, usually for a fee. The system was initiated on October 1, 1999 and closed on November 4, 2002. According to one article:\n... the effort quickly became the target of intense lobbying, spearheaded by the Washington-based Software & Information Industry Association (SIIA), a coalition of for-profit and nonprofit members including Reed Elsevier, ISI, Chemical Abstracts Services, and Cambridge Scientific Abstracts. The SIIA claimed that such a service competed with its members' services and argued that government initiative should confine themselves to government information only.\nDOE's Office of Scientific and Technical Information (OSTI) operated PubScience . According to one DOE official, intense lobbying by publishers and their associations threatened OSTI's budget. The House Appropriations committee report on the DOE FY2002 appropriation bill, H.R. 2311 ( H.Rept. 107-112 , pp. 108-109), cautioned DOE about duplication with commercial information services and asked DOE to keep its efforts focused appropriately. The existence of the commercial database Scirus and another called Infotrieve were cited as competing commercial vendors.", "Efforts were made in 2005 to curtail or close an NIH database initiated to advance science by assisting basic researchers to identify chemicals related to genetics and cellular research. According several articles, the American Chemical Society (ACS) initially sought closure, and then modified its position to seek limitations, on PubChem , which, it says, duplicates ACS's commercial, fee-based Chemical Abstract Service (CAS) .\nReportedly, NIH launched PubChem in fall 2004 to provide data and to index hyperlinks to articles on the chemical structures of small organic molecules and information on their biological activities to support the \"molecular libraries and imaging component of the NIH Roadmap Initiative,\" which is a strategic planning process initiated by the NIH Director. PubChem contains data organized into three databases: PubChem Substance , PubChem Compound , and PubChem BioAssay . According to NIH,\nLinks from PubChem 's chemical structure records to other Entrez databases provide information on biological properties. These include links to PubMed scientific literature and NCBI's protein 3D structure resource. Links to PubChem's bioassay database present the results of biological screening. Links to depositor web sites provide further information.\nThe system, reportedly, will expand as it includes more data from the Molecular Libraries centers and data from other online open access chemical database repositories.\nPubChem , operated by the National Center for Biotechnology Information (NCBI), also provides readers with free access to links to other NCBI databases. It is operated by 13 staff members with a budget of about $3 million.\nAccording to the ACS, PubChem jeopardizes its own CAS service, which is reported to \"... employ ... more than 1,200 people in Columbus, Ohio, and makes a significant contribution to the society's $317 million in annual revenue from publications.\" CAS subscribers receive summary data on chemicals and links to about 24 million abstracts from about 9,000 journals, as well as patent abstracts on more than 25 million chemical substances. NIH is reported to have said that its database provides indexes and links only to biological journals that overlap only slightly with the journals linked by CAS and focuses on \"biological information such as protein structures and toxicology,\" which CAS does not deal with, not broader chemical reactions which CAS covers. An NIH official, Christopher Austin, senior advisor at the NIH Chemical Genomics Center at the National Human Genome Research Institute, was reported to have said that limitation of PubChem would have profoundly negative effects on medical discoveries. One report said \"The overlap between the two databases occurs in the indexes of chemical names. NIH maintains the overlap is 'quite modest' and for the most part is 'complementary' to CAS. ACS disagrees, saying PubChem duplicates CAS' platform and replicates its search features and information.\" Several articles noted that the ACS lobbied Members of Congress, especially Appropriations Committee members, to have PubChem terminated or limited to include only compounds derived from federally funded R&D and to avoid overlap with a commercial enterprise.\nBoth the House Appropriations Committee and the Senate Appropriations Committee addressed this issue in their reports on the FY2006 appropriations bill that includes appropriations for NIH ( H.R. 3010 ). They did not reduce funding for the database. Both reports said essentially the same thing—that they understood that the database will include chemical compound information from the NIH-funded molecular libraries screening center network and from other sources. But they both expressed concern about duplication of effort with the private sector and urged NIH to work with private sector publishers to avoid unnecessary duplication. After conference committee action, the bill was cleared on December 21, 2005 for the President's signature and signed as P.L. 109-149 .\nReportedly, \"Supporters of PubChem see the House language as a victory for NIH.\" An ACS official is reported to have said that the language is a \"'tremendous step in the right direction.' \" In late August 2005 NIH rejected an offer from ACS to create and manage for free \"a database for NIH to deposit bioassay data from its molecular screening project.\" Instead, on September 1, 2005, NIH announced in the Federal Register that it was inviting participation from private sector providers and users of chemical information to participate in a new working group \"to advise on interactions with private sector information providers in the development of PubChem.\" Subsequently, it was reported in October 2005 that the American Chemical Society objected to what it characterized as the retrospective process that the group was to use to assess biomedical relevance of compounds in the data base, and sought that prospective analysis be used instead. Reportedly, NIH database managers said that NIH cannot know \"...'a priori which compounds should and shouldn't go into the collection.'\" The private-sector panel and NIH officials met on December 19, 2005, and, reportedly, \"No definitive conclusions were reached at the end of the meeting, although industry representatives said they left with a better understanding of PubChem and of NIH's intentions. Agency officials said it was unclear whether the working group would meet again.\"\nAccording to NIH, many new private sector depositors have contributed to NIH's PubChem system. A \"live\" list of depositors is available at http://pubchem.ncbi.nlm.nih.gov/sources/sources.cgi . This site report that\nMDL/Elsevier deposited over 2 million structures under the \"DiscoveryGate\" and \"xPharm\", names, for example, and Prous Science deposited several thousand structures from their \"Drugs of the Future\" review journal. This shows that some of the major providers in the chemical information industry have found PubChem useful and complementary to their commercial services.", "There are no unequivocal answers as to why some agencies can maintain open access systems more easily than others. It may be that publishers, despite their misgivings, moderated their opposition to congressional action to put manuscripts on NIH's PubMed Central since the posted items are limited to those that resulted from NIH funding. However, NIH may be in a different position from other federal agencies since it has a mandate to preserve and provide health information to the public; other agencies may not have such clear mandates to distribute information and the results of their research funding to the public. Furthermore, support for NIH's open access activities seems based not only on the need to allow taxpayers access to results of research their taxes funded, but also on the emotional argument about need for rapid access to information to improve health and save lives, a compelling rationale to many Members of Congress.\nReportedly, DOE's Scientific and Technical Information Advisory Board is discussing, at the highest levels, the question of whether it should establish an open access policy like NIH's to make DOE-funded articles available in its own database and is preparing a report on this subject. According to several federal agency staff, it seems that in the absence of guidance from the congressional appropriations committees, agencies, other than NIH, would likely find it difficult to mount a system like NIH's because of publisher opposition.", "Scientific publishing and communications methods are slowly changing as Internet publishing becomes more prevalent. Some observers say that government-supported researchers and sponsoring agency staff should participate in shaping these new methods of delivering scientific information. CENDI (the Commerce, Energy, NASA, Defense Information Managers Group), an interagency committee composed of senior Scientific and Technical Information (STI) managers from 12 U.S. federal agencies, has working groups that are studying open access publishing, indexing, and archiving and has issued reports on it to help develop uniform standards and methods of international cooperation.", "Several international organizations and other countries are examining wider implementation of open access publishing. Following the release in 2003 of the \"Berlin Declaration\" which called for open access to knowledge and its signing by representatives of selected European universities, research groups, and government sectors, the European Union began a study on changes in markets for scientific and technical publishing in Europe. Among its topics of inquiry is the subject of \"open access to research findings for all and the need to reconcile authors' rights and the economic interests of publishers.\" The report, Study on the Economic and Technical Evolution of the Scientific Publication Markets in Europe , January 2006, endorsed but did not require open access to publicly funded research.\nIn 2004, the Organization for Economic Cooperation and Development's (OECD) science ministers declared their commitment to a \"... principle that research data from public funding should be openly available\" on the rationale that providing such access promotes long-term economic benefits, more informed governmental decisionmaking, and hastens the advancement of scientific research. The ministers asked OECD to develop guidelines to \"facilitate optimal cost-effective access to digital research data from public funding ...\" that would be balanced in terms of opening access while recognizing \"the need for restriction of access in some instances to protect social, scientific, and economic interests.\" The guidelines will be released after approval by the OECD Council. The 2004 OECD work was based, in part, on a report that was funded by the U.S. National Science Foundation. According to the report's authors, \"The ultimate goal ... is to make data sharing and the principle of open access the rule rather than the exception.\"\nAnother OECD report published on September 2, 2005, as Digital Broadband Content: Scientific Publishing. It reiterated the view that governments should increase access to findings from publicly funded research to maximize social returns on public investments and presented examples and comprehensive pro and con analyses of currently used business models of open access publishing and open access archives. It also summarized the pros and cons of \"hybrid\" business models which distribute publishing costs among authors and users. One example is a\n... two-part tariff for author fees ... with fees levied for submission and publication serving to reduce the tendency for multiple and speculative submission of papers for publication, and enabling journals to cover the costs of quality through support for higher rejection rates. Such as model might also serve to increase revenue certainty for publishers of open access author pays variant journals and, by reducing the cost of publication in them, enable them better to compete for authors with subscription-based journals. However, user resistance would be a strong possibility compared with simpler author pays models.\nThe report also proposed variations of another hybrid model involving \"... segmentation of a journal into subscription and open access on an article-by-article basis, according to the author's preference and willingness/ability to pay.\" Apparently a number of publishers have already adopted such practices, and the OECD report concluded \"Such a model may be a useful way for a journal title to migrate from a subscription model to an open access model over time, with the pace and direction of change dictated by author preferences.\"\nAs noted above, there has been considerable governmental and nongovernmental activity to promote open access publishing in the United Kingdom. Some scientific and medical researchers in Britain took steps to make research results freely available via the British open access publisher, BioMedCentral . Subsequently, in 2004, the Science and Technology Committee of Britain's House of Commons issued a report endorsing open access to research results by proposing to require authors to deposit their published papers in online archives and journals using an author pays model and eliminating subscription fees. It also recommended that government agencies mandate that government-funded researchers put their articles into the archives and that the government pay some publishing fees. In November 2004 the U.K. government (the Department of Trade and Industry) rejected the proposal, maintaining there is no indication that access to scientific journals is impeded under current publishing methods, and that according to the government, \"the true costs of open-access publishing are still not clear ...\" and \"it is 'not obvious ... that the 'author pays' business model would give better value for money than the current one....\" In June 2005, the United Kingdom Research Councils (RCUK), the main British supporter of publicly funded research, \"which distribute[s] most government science funding,\" issued for comment a draft policy which mandates researchers it funds to archive their journal articles and conference papers \"in a free public archive 'at the earliest opportunity, wherever possible at or around the time of publication.'\" But the rules may allow publishers to continue to embargo archiving articles until many months after publication, since the council says \"its mandate is 'subject to copyright and licensing arrangements' that can restrict what authors do.\" Costs of publishing in \"author pays\" journals would be covered by the Research Councils' funding grant \"subject to justification of cost-effectiveness.\" The British government said it would review its policy options on this issue taking into consideration the draft RCUK policy and any changes to it, as well as other information. The executive board of the RCUK issued a policy statement in the summer of 2006, saying that \"...all peer-reviewed journal papers produced by publicly funded research must be made available for free soon after they're completed.\" But \"exactly what that means was not specified, and RCUK left each research council to set its own rules.\" RCUK also said it would assess the results of a two-year analysis of the impact of mandating open access and review the policies in 2008. The Wellcome Trust, a large British medical foundation, recently announced that it requires all papers produced with its support \"... to be submitted to the NIH archive or to the British equivalent that is being developed.\"\nThe British Royal Society, an advisory body to the government, which also publishes seven peer-reviewed journals, whose papers can be accessed without charge a year after publication, issued a position paper opposing the RCUK policy. It cited, in particular, the lack of assessment about cost effectiveness of institutional archives, subject-based repositories, and self-archiving; the potential for the proposed policy to threaten survival of some existing journals; and the problems observed with quality control of articles appearing in some open access publications. Apparently some learned societies fear that libraries will cancel subscriptions to their professional societies' publications.\nOther foreign and international organization open access activities are summarized in Julie M. Esanau and Paul F. Uhlir, eds., Open Access and the Public Domain in Digital Data an Information for Science, Proceedings of an International Symposium, Published by U.S. National Committee for CODATA, National Academies Press, Washington, D.C., 2004.", "Policies for open access journals and citation repositories are evolving and contentious issues may be raised during the 109 th Congress. Those that have implications for academic institutions are discussed in the Appendix . Other policy issues and questions are emerging, including the following.", "Assessment of which federal agencies, in addition to NIH, would seek to archive and provide free public access to manuscripts or articles reporting the results of research that they supported. Analysis of which agencies might seek to provide access to manuscripts or articles, using government purpose license or nonexclusive right to use published articles, regardless of copyright ownership.", "Comparison of the quality of peer review processes and of peer reviewed articles that are published in traditional, subscriber-pays and open access journals. Monitoring of whether academic reward systems react differently to articles published by traditional publishers or open access publishers and assessing the implications for professional advancement of researchers and teachers in academic promotion and tenure systems. Assessing the positive and negative impacts on the speed and quality of scientific research, knowledge synthesis, and knowledge accumulation flowing from open access publishing and open access citation/abstract archives in comparison with traditional publishing and archival methods. Analysis of publisher actions to identify whether or not authors who seek copyright agreement terms allowing them to post manuscripts in PMC are penalized.", "Assessment of rates of voluntary participation by NIH-funded authors in the Public Access policy and determination of whether there are any negative impacts—from research sponsors or the scientific community—on NIH-funded authors who may not submit articles for dissemination in PMC . Determination if federal open access databases and archival repositories should be limited to providing access only to publications that result from federally funded R&D. Assessment of proposals for governmental citation archives to link to publisher's websites to read published articles, as opposed to posting articles on a free access government system. Follow-up to congressional mandates that NIH monitor the implementation of its Public Access policy, that it work with traditional, subscriber-pays publishers to monitor the impacts and costs of open access archiving of text on PMC, as it posts what is estimated to be thousands (possibly 60,000) of additional articles on the system, and that it work with publishers to monitor impacts on the integrity of peer review processes. (The NIH Director estimated that the added costs for posting all NIH-funded research studies on PubMed Central ' s digital library at around $2 to $4 million annually. According to NIH, agency-supported research resulted in 60,000 to 65,000 published papers in 2003.) With respect to PubChem , assessing cooperation between NIH and private groups on clarifying the possible overlap between NIH's archive and that of private activities, including the American Chemical Society's Chemical Abstracts Service . Analysis of the impacts on biomedical research in general and on NIH's research and its strategically planned genomic research initiatives if the scope of PubChem were to be limited.", "Determining whether federal regulations for support of contracts and grants will continue to allow agencies to pay individual authors or academic institutions for the costs of publishing articles in open access journals as part of the research process, especially if open access publishing becomes more widespread and a substantial portion of the scientific and technical publishing market. A related issue is determining the possible effects on research support funding. Given that federal research sponsors allow some journal publishing and subscription costs to be counted as part of the costs to conduct federally sponsored research, comparing the actual total costs to the government for publishing and reading of scientific articles published traditionally as opposed to those published using open access models.", "Analysis of the role that the federal government should play in funding the start-up of nongovernmental citation archives and repositories for scientific and technical articles, if the government also initiates governmental activities with similar purposes. Economic analysis of the impacts on the commercial publishing industry (revenues, employment, sustainability, etc.) if open access publishing and archiving activities continue to expand. Examination of the extent to which professional scientific societies utilize the profits from publishing to support their activities and of alternative sources of funding for these activities.", "Continuing questions relating to controversial issues about open access publishing were raised by Andy Gass and Helen Doyle, \"The Reality of Open-Access Journal Articles,\" Chronicle of Higher Education, February 18, 2005. They conclude that although there are problems, support is growing in academia for open access journals. Remaining questions include:\nWhat will become of the market for secondary filters of primary research articles, services like BioMed Central's Faculty of 1000, which highlight important papers published in a wide swath of journals? Will fee-for-access ventures that collect open-access articles become a new cash cow for publishers? At present, faculty members offer their recommendations to the filtering services free, and publishers sell their aggregated opinions to institutions—will established professors go on contributing their free labor to such entrepreneurial enterprises? How will the role of the research library change, as open-access scholarly communication becomes more widely practiced? To what extent will librarians be freed from the burdens of subscription management? Many university libraries now encourage open access by subsidizing a portion of the publication charges in open-access venues for authors affiliated with the university, through channels like our employer's institutional membership program. Will those subsidies continue? If so, will they continue to be paid from libraries' budgets, or will they come from research budgets—a source that would be more consistent with the view of open-access proponents that costs of publication should be part of the costs of conducting research? Or will external granting agencies, many of which already pay scientists' page charges and color-illustration fees, assume the full costs of their investigators' open-access publications? Will libraries continue to serve as intermediaries through which researchers find open-access information, as well as that available only through subscription, and how? Those questions relate not just to academic libraries, but to the mission of colleges and universities. The time has come for a comprehensive review of how best to pay for the dissemination of professors' work. How will reduced legal barriers to reusing articles—a stipulation of most formal definitions of open access—affect teaching, research, and other scholarly activities? There are, of course, good precedents for having few or no legal restrictions on the reuse of scholarly work: Every article published by an employee of the NIH is in the public domain. Some more-restrictive open-access licenses now available, like the Creative Commons attribution license in use for articles from our employer and from BioMed Central, permit users to reproduce scholarly work in any medium, for any purpose, as long as the author receives proper credit. What kinds of educational tools will such licenses make possible? For example, will we see a proliferation of online articles enhanced with explanatory links and informational sidebars, which make scientific discoveries more comprehensible to a wide audience? Will such resources be produced by commercial enterprises? By nonprofit organizations? Or by networks of volunteers, as is the case with open-source computer software? Will open-access articles enable more researchers from less-developed countries to work on the frontiers of science? Given that all credible open-access journals waive publication fees for authors who can't afford to pay them, increased availability—and therefore knowledge—of the literature might well allow scientists in the developing world to increase their output of cutting-edge work. Would that change, in turn, help resolve the \"10/90 gap\"—the unfortunate reality that less than 10 percent of the global expenditure on medical research goes to study the predominant health needs of 90 percent of the world's population? Most important, what kinds of discoveries might result from searchable, open archives of peer-reviewed, full-text scientific literature? The aggregation of gene sequences in a single, freely accessible information space (GenBank) has spawned entire fields of research; will open access to journal articles have a similar effect on areas of work that could benefit from \"mining\" full texts and figures? Clearly, comprehensive collections of open-access literature would make it much easier to systematically review published medical studies. Will open-access literature lead to frequent discoveries of correlations between phenomena previously thought to be unrelated? Will it spark more open access to data sets and databases of laboriously compiled and annotated information? The potential for open access to lead to new discoveries is its single most compelling asset, though one that is frequently overlooked." ], "depth": [ 0, 1, 1, 1, 2, 3, 3, 4, 3, 2, 3, 3, 3, 2, 3, 3, 1, 2, 3, 3, 3, 2, 3, 2, 2, 3, 3, 3, 3, 3, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 3, 3, 2, 1, 1, 2, 2, 2, 2, 2, 3 ], "alignment": [ "h0_title h2_title h1_title", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_full h1_title", "", "", "", "", "h0_full", "", "", "h1_title", "", "", "", "", "h1_full", "", "", "h2_title h1_title", "", "h1_full", "h2_full", "h1_full", "h2_full", "", "", "", "", "", "", "", "", "", "", "h0_title", "", "", "", "h0_full", "", "" ] }	{ "question": [ "How are traditional publishers and the open access system different?", "Why do some people support the open access movement?", "Why do some people oppose the open access movement?", "How do critics oppose the open access movement?", "How did NIH react to congressional action in 2004 and 2005?", "What does the NIH policy allow?", "How do most publishers feel about the NIH policy?", "How did the NIH policy change in 2006?", "What is the purpose of NIH's policy?", "What would be the results of implementing H.R 5647 and S. 2104?", "What would be the result of implementing S. 2695?" ], "summary": [ "Traditional publishers typically charge readers subscriber fees to fund the costs of publishing and distributing hard-copy and/or online journals. In contrast, most open access systems charge authors publication fees and give readers free online access to the full text of articles.", "Supporters of the open access \"movement\" object to the rising costs of journal subscriptions; share peer reviewers' reluctance to do free reviews for journals rapidly escalating in price; and believe that scientific collaboration, advancement, and utilization will be hastened by free access to information.", "Traditional subscriber-pays commercial publishers and some scholarly associations object to most open access publishing because it may weaken the publishing industry and erode profits.", "Critics seek to limit free government-run repositories only to articles and citations from federally sponsored research; others oppose fees in the thousands of dollars charged to authors to pay the costs of publishing articles or view as unreliable foundation donations that sustain some open access activities.", "In response to congressional action in 2004 and 2005, the National Institutes of Health (NIH) implemented a policy that requires authors it funds to voluntarily submit copies of their manuscripts to NIH's free access electronic database, PubMed Central (PMC), as soon as possible after a journal accepts the article for publication, but within 12 months.", "The policy allows a publisher-imposed embargo, or delay, before allowing free public access to the manuscript.", "Many publishers oppose this policy and there is only about a 4% compliance rate by grantees.", "In September 2006, NIH publicized procedures to permit publishers to post manuscripts or articles directly to PMC and to give NIH free access to some articles for the embargo period.", "In the 109th Congress, report language on H.R. 3010, signed as P.L. 109-149, endorsed NIH's policy to post peer-reviewed manuscripts and mandated NIH to develop its open access repository, PubChem, and to avoid duplication with private efforts.", "H.R. 5647 would have mandated NIH-funded researchers to submit final manuscripts to PMC; S. 2104 would have required submission within six months.", "S. 2695, the Federal Research Public Access Act (FRPAA), would have required federal agencies with research funding exceeding $100 million annually to require all their federally funded researchers to deposit final manuscripts in a publicly accessible archive within six months of acceptance by a publisher." ], "parent_pair_index": [ -1, -1, 1, 2, -1, 0, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2 ] }
GAO_GAO-14-442	{ "title": [ "Background", "Federal Roles and Responsibilities Related to Medical Countermeasures", "The Medical Countermeasure Development Process and DOD’s Funding", "DOD Received about $6 Billion since 2001 in Total Funding for Medical Countermeasures, of Which $4.3 Billion Was Targeted Against Biological Threat Agents", "DOD Has Made Progress in Researching, Developing, and Making Available Medical Countermeasures Against Biological Threat Agents, but Has Not Updated Its List of Threat Priorities as Required", "DOD Researched, Developed, and Made Available Medical Countermeasures against Traditional, Emerging, and Genetically Modified Biological Threat Agents", "Medical Countermeasures Against Biological Threat Agents", "DOD Has Not Used Its Established Process to Annually Update Its Validated List of Biological Threat Priorities", "DOD Has Taken Steps to Enhance Internal Coordination on Resource Allocation for Medical Countermeasures Against Biological Threat Agents", "CBDP Has Taken Steps to Enhance Coordination and Address Military Service Concerns", "CBDP Coordinates the Activities of DOD Components Involved in the Research and Development of Medical Countermeasures against Biological Threat Agents", "DOD’s Efforts to Coordinate across Agency Boundaries Align with Best Practices", "DOD, HHS, and DHS Share a Joint Biological Research Campus", "DOD and HHS Have Established Interagency Agreements and Collaboration Tools to Promote Coordination", "Interagency Agreements", "Collaboration Tools", "DOD and DHS Have a Shared Process for Identifying Domestic Biological Threat Agents and Risks", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Department of Defense (DOD) Funding for Chemical and Biological Defense Program and Medical Countermeasures, in Nominal Dollars", "Dollars in thousands", "Fiscal year 2001", "Appendix III: Comments from the Department of Defense", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "Several federal departments and agencies have responsibilities as part of their mission for assessing the threat of biological agents and determining requirements and priorities for developing and obtaining countermeasures for these agents.\nDepartment of Defense. DOD has exclusive responsibility for research, development, and acquisition of medical countermeasures to prevent or mitigate the health effects of biological agents and naturally occurring diseases on armed forces personnel. DOD contributes to DHS’s terrorism risk assessments, including the identification of biological global threats, and also coordinates with HHS on efforts to identify common medical countermeasure priorities and jointly stockpile countermeasures, as appropriate. The Defense Intelligence Agency also performs its own threat analysis for Chemical, Biological, and Radiological Defense, called a Capstone Threat Assessment, at least every 2 years. CBDP leads DOD’s efforts to anticipate, respond to, mitigate, and manage the health effects of biological threat agents that could affect the warfighter. According to DOD Directive 5160.05E, which assigns roles and responsibilities associated with CBDP, the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs, through the Deputy Assistant Secretary of Defense for Chemical and Biological Defense, is responsible for overseeing CBDP activities, policy guidance, and interagency coordination.have key roles in medical countermeasure efforts: Within CBDP, the following organizations\nChairman of the Joint Chiefs of Staff, in consultation with the commanders of the combatant commands; the Secretaries of the military departments; and the Director, Defense Intelligence Agency, validates and prioritizes CBRN threats to DOD personnel, equipment, and weapon systems.\nJoint Requirements Office, which is part of the Joint Staff, sets requirements for medical countermeasures—including performance parameters and quantity—and develops DOD’s biological threat lists and Joint Priorities List to ensure that countermeasures will be feasible for DOD use.\nJoint Science and Technology Office performs applied research and engages in early development of medical countermeasures against biological threat agents.\nJoint Program Executive Office supports advanced development of potential medical countermeasures.\nThe Army, as CBDP Executive Agent, supports the views of the military services and combatant commands during the Program Objective Memorandum process, and is responsible for reviewing CBDP’s funding requirements.\nDepartment of Homeland Security. DHS leads federal interagency coordination and planning for emergency response to CBRN incidents in the United States and is responsible for assessing the risks to the civilian population posed by various CBRN agents, as directed by the Project BioShield Act of 2004,10 (Biodefense for the 21st Century), HSPD 18 (Medical Countermeasures against Weapons of Mass Destruction), and HSPD 22 (National Domestic Chemical Defense). DHS’s Science and Technology Homeland Security Presidential Directive (HSPD)\nApplied, or translational, research builds on basic research by validating and testing concepts in practical settings to identify potential products. Successful concepts move from the applied research stage into the early development stage to demonstrate basic safety, reproducibility, and ability to be used in humans. “Life-cycle management” includes the maintenance of medical countermeasures that have been acquired and the removal of expired products from stockpiles.\nDirectorate develops CBRN Terrorism Risk Assessments (TRA) and Material Threat Assessments, which include assessments of the relative risks posed by CBRN agents based on variable threats, vulnerabilities, and consequences. Since 2004, DHS has developed TRA reports every other year.\nDepartment of Health and Human Services. HHS leads all federal public health and medical response to public health and medical emergencies covered by the National Response Framework. Additionally, HHS is responsible for the protection of the civilian population against biological threat incidents, as stipulated by the Project BioShield Act. Within HHS, the following organizations play key roles in leading the federal response:\nPublic Health Emergency Medical Countermeasures Enterprise is an interagency decision-making body that makes recommendations to the Secretary of Health and Human Services regarding CBRN and emerging infectious-disease medical countermeasure development and acquisition. PHEMCE is led by the HHS Office of the Assistant Secretary for Preparedness and Response and includes three primary HHS internal agency partners: the Centers for Disease Control and Prevention, the Food and Drug Administration (FDA), and the National Institutes of Health, as well as several interagency partners: DOD, DHS, the Department of Veterans Affairs, and the Department of Agriculture.\nOffice of the Assistant Secretary for Preparedness and Response leads PHEMCE and the federal medical and public health response to public health emergencies, including strategic planning, medical countermeasure prioritization, medical requirements development, and support for developing and procuring medical countermeasures.\nBiomedical Advanced Research and Development Authority, within the Office of the Assistant Secretary for Preparedness and Response, coordinates and supports advanced research and development, manufacturing, and initial procurement of medical countermeasures for CBRN threats, pandemic influenza, and emerging infectious diseases. The Biomedical Advanced Research and Development Authority also oversees HHS’s efforts to develop and utilize flexible manufacturing capabilities for medical countermeasure development and medical emergency response.\nNational Institutes of Health conducts and funds basic and applied research to develop new or enhanced medical countermeasures and related medical tools to protect the nation against threats posed by CBRN agents and emerging infectious diseases.\nCenters for Disease Control and Prevention maintains the Strategic National Stockpile—the national repository for medical countermeasures for use in a public health emergency—and provides guidance and recommendations for the mass distribution and use of medical countermeasures for public health emergencies.\nFood and Drug Administration assesses the safety and efficacy of medical countermeasures and regulates their development, approval, licensure, emergency use, and postmarket surveillance. The FDA makes the primary determination of the safety and efficacy of medical countermeasures for DOD, and is involved throughout the research and development process to help facilitate the approval of new medical countermeasures.", "DOD’s medical countermeasure research and development process for the warfighter is similar to the process used by DHS and HHS for the civilian population. In consultation with DHS, DOD leads the first step in the process to assess, on an ongoing basis, the threat of biological agents and determine which of these agents pose a threat to the warfighter. Step two of the process is applied research and early development of medical countermeasures, which can take from 4.5 to 11 years. DOD may have multiple candidates at a particular stage of the development process in support of a single medical countermeasure. Successful concepts are moved into the early development stage to be tested for product modes, such as vaccines, therapeutics, or diagnostics. Step three is advanced development, which includes further evaluation of potential medical countermeasures in animal studies to demonstrate safety and effectiveness for use in humans. DOD officials told us that human clinical trials must also be performed at this stage of development to further assess the safety of the product. In addition, in this stage, manufacturing of the vaccine, drug, or diagnostic is increased from the level used for early development to the proposed commercial scale and the product is further evaluated for approval and licensure. This stage could take from 4 to 12 years. The licensing and acquisition of medical countermeasures is the final stage of the development process. In figure 2, we show DOD’s, DHS’s, and HHS’s role in the process to develop medical countermeasures.\nThe federal government faces a variety of challenges in its medical countermeasure efforts, including lengthy, complex, and expensive research and development processes and the risk of technical failure. It can take about 12 years for a medical countermeasure to progress from research and early development to the point at which the vaccine, drug, or diagnostic has been approved by the FDA and is available for use. DOD officials told us the costs to research and develop a new medical countermeasure average $1.2 billion. Additionally, DOD officials told us the lack of a commercial market for most medical countermeasures for biological threat agents hindered large pharmaceutical companies from entering the market, although HHS officials told us this has changed over the last 2 years.\nAs noted above, from fiscal year 2001 through fiscal year 2013, DOD received about $20 billion in funding for CBDP to protect the warfighter against a wide range of threats using approaches such as medical countermeasures, personal protective equipment, and threat-detection sensors. Figure 3 shows the amount of this funding CBDP received by fiscal year in constant fiscal year 2013 dollars. Appendix II presents the original, noninflation adjusted figures (in nominal dollars).", "Of the $20 billion in total funding that DOD received for CBDP in fiscal year 2001 through fiscal year 2013 to protect military personnel against a wide range of threats, DOD budgeted about one-third, or about $6 billion over that same period for medical countermeasures against chemical, biological, and radiological threats. According to our analysis of data in the Joint Service Chemical and Biological Information System, of the $6 billion in funding for these medical countermeasures, nearly 70 percent, or about $4.3 billion, was for medical countermeasures against biological threat agents. CBDP officials told us they are concentrating research and development on biological medical countermeasures because they have already fielded a number of effective medical countermeasures against While total medical countermeasure funding generally chemical threats.increased between fiscal years 2001 and 2013, the percentage budgeted for medical countermeasures against biological threat agents remained above 50 percent, but has fluctuated from year to year, as shown in figure 4.\nAccording to CBDP officials, these fluctuations are due to varying needs each year, such as funding for specific initiatives or the need to support specific countermeasures as they move into more-expensive stages of development. During the fiscal year 2001 through 2013 period, the percentage of funding for research and early development averaged about 55 percent of the $4.3 billion in funding for medical countermeasures against biological threat agents, while the funding for advanced development—including procurement—averaged about 45 percent. Figure 5 shows how the funding for research and early development and the funding for advanced development varied by fiscal year.\nOur analysis of DOD data showed that most of the funding for medical countermeasures against biological threat agents in fiscal years 2001 through 2013 was targeted to research and development efforts, with research and development funding totaling approximately $3.75 billion, or nearly 90 percent of the $4.3 billion in funding; the remaining amount was for procurement. According to CBDP officials, this emphasis is due in part to the lengthy time frames for researching and developing new medical countermeasures.\nAccording to DOD’s directive for chemical and biological defense roles and responsibilities, CBDP oversees the allocation of funds for medical countermeasures. The various organizations within CBDP oversee funds within the stage of research and development for which they are responsible. For example, the Joint Science and Technology Office manages funding for research and early development, while the Joint Program Executive Office manages funding for advanced development. CBDP officials told us that they track budget and obligation data using the Joint Service Chemical and Biological Information System. According to CBDP officials, they began using this tool in 1996, and all organizations within CBDP can access the funding data using the tool. CBDP officials indicated that the tool is intended to track funding by different categories, such as stage of development or specific countermeasure program, and could also be used to help track specific countermeasure costs at the per- dose level.", "DOD is researching and developing over 40 candidates for medical countermeasures for use against traditional, emerging, and genetically modified biological threat agents, and is researching, developing, or has obtained FDA approval for countermeasures that address 10 of the 19 biological threat agents it has identified as threats to the warfighter. Over the past 15 years, the biological threat list that DOD’s CBDP uses to prioritize its investments in medical countermeasures has been updated, in various ways, to respond to policy changes, but DOD does not follow its established process for annually updating the biological threat list.", "", "DOD’s CBDP is researching, developing, or has obtained FDA approval for medical countermeasures that address 10 of the 19 biological threat agents it has identified as threats to the warfighter. CBDP is researching, developing, or has available 47 medical countermeasures or candidates for medical countermeasures for use by the warfighter to respond to biological agents on its threat list; 4 of these medical countermeasures are FDA-approved and they respond to 2 of DOD’s 19 identified threats. Nine candidates for medical countermeasures are in advanced development, and 34 are in research or early development. Of the medical countermeasure candidates, 13 are being developed using broad-spectrum technologies that show promise for use against a variety of threats, including emerging or genetically modified threats. According to DOD officials, medical countermeasures are used as part of a layered defense strategy meant to protect the warfighter from the effects of CBRN threats. Figure 6 shows the status of DOD’s medical countermeasures against biological threat agents.\nDOD is using a number of strategies to research, develop, and make available medical countermeasures for use against emerging and genetically modified (i.e., “novel”) threats. CBDP’s 2012 Strategic Plan indicates that to protect the warfighter against novel threats, CBDP will leverage cutting-edge and broad-spectrum capabilities that address current threat agents as a model for rapid response to novel threats that may arise in the future. DOD is investing in threat-specific medical countermeasures for certain threats, but is also researching and developing broad-spectrum medical countermeasures, which have the possibility of addressing more than one threat on its biological threat list as well as providing capability against emerging and genetically modified threats. For example, of the 47 medical countermeasures or candidates for medical countermeasures that CBDP is researching, developing, or has made available, 13 are designed to be used against multiple threats. Furthermore, DOD has also developed and continues to invest in diagnostic capabilities that allow for the identification and characterization of biological threat agents. Specifically, CBDP is researching additional capabilities to add to the Joint Biological Agent Identification and Diagnostic System, which currently can diagnose five biological threat agents. DOD officials believe that CBDP’s efforts to develop medical countermeasures more quickly are aided by DOD’s investment in enabling technologies and platform technologies. Officials told us that one key enabling technology is represented by the Defense Advanced Research Projects Agency’s research to produce a pandemic flu vaccine using tobacco plant-based manufacturing, as opposed to the traditional egg-based production techniques that require much more lead time and more-controlled environments. Furthermore, CBDP officials told us that DOD is investing in platform-based vaccines for filoviruses and various strains of encephalitis in order to reduce the time and costs associated with developing medical countermeasures. Officials told us that platform technologies might be adapted to other various emerging or genetically modified threats (similar to the process used to develop the annual influenza vaccine, which is altered to be effective against different strains of that virus every year).\nAnother component of DOD’s strategy to address emerging and genetically modified biological threats is a new facility for advanced development and manufacturing of medical countermeasures to be located near Gainesville, Florida. CBDP officials said that this facility, which is currently under construction and is projected to be operational in April 2015, will be designed with a focus on disposable or rapidly adaptable equipment so that it can produce small batches of numerous medical countermeasures with a relatively short lead time, while also providing the capability to increase production, when needed. DOD officials believe that this facility represents an opportunity for DOD to efficiently maintain fresh stockpiles of countermeasures that are rarely used, quickly produce new medical countermeasures in small amounts as may be needed for DOD’s purposes, and to provide a capability to scale up production in the event of a national emergency.", "According to DOD Directive 6205.3, DOD Immunization Program for Biological Warfare Defense, the Chairman of the Joint Chiefs of Staff shall, annually and as required, validate and prioritize the biological warfare threats to DOD personnel in consultation with the combatant commands, military service chiefs, and the Director of the Defense Intelligence Agency, and forward that list to the CBDP Executive Agent (the Army) through the Assistant Secretary of Defense for Health Affairs.\nSince April 2000, the list that DOD uses to prioritize the validated biological threat agents that pose a risk to the warfighter has only been updated occasionally, usually in response to broader policy or strategy changes made within the department. For example, officials told us the 2012 update assessed CBRN threats; however, it did not include input from key stakeholders and it was not updated as part of an annual process as required by DOD Directive 6205.3. Examples of DOD’s biological threat lists include:\nChairman of the Joint Chiefs of Staff Threat List (April 2000) serves as the basis for each of the ensuing lists. DOD officials told us this list was developed in response to DOD Directive 6205.3, issued in November 1993, which establishes policy for DOD’s immunization program for biological warfare defense and requires that the Chairman of the Joint Chiefs of Staff annually validate and prioritize biological warfare threats to DOD personnel.\nMedical Risk Management Matrix (May 2001). DOD officials told us this list was developed in response to the 2001 Quadrennial Defense Review, which was under development at the same time, and advocated for a capabilities-based approach to defense, focusing more on how an adversary might fight than who an adversary might be. Officials said this analysis was carried out by a contracting service that applied a risk analysis to the 2000 Chairman of the Joint Chiefs of Staff Threat List to develop the new list, which maintained many similar threats, but categorized them into risk categories based on the likelihood and effect of such an attack.\nMedical Operational Consequence Assessment (September 2012) is an assessment of all CBRN threats. The assessment used a similar methodology to the Medical Risk Management Matrix, but also included chemical and radiological inputs. A CBDP official told us the Medical Operational Consequence Assessment was used indirectly to inform DOD’s budget for fiscal year 2015, since the fiscal year 2015 budget was based on previous budgets, which directly relied on the same assessment to help prioritize investments for specific medical countermeasures.\nWe found that DOD’s May 2001 and September 2012 biological threat list updates were not performed in accordance with DOD Directives 6205.3 and 5160.05E. For example, key stakeholders, such as officials from the CBDP Executive Agent and military service officials from the chemical and biological countermeasure community, were unaware of an updated biological threat list because the list was not sent to them for review or input, as required by the directives. Officials from the Joint Requirements Office—which is part of the Joint Staff—expressed uncertainty about the applicability of DOD Directive 6205.3, which they believe was made obsolete when the 2001 Quadrennial Defense Review established DOD’s emphasis on capability-based planning over threat-specific planning, an emphasis that was continued through the more recent 2010 Quadrennial Defense Review. However, DOD Directive 6205.3 remains in effect and has not been formally superseded or cancelled. In commenting on a draft of this report, officials from DOD said the 2001 and 2012 analyses were assessments based on the 2000 list rather than updates to the official threat list. However, we continue to believe that the process described in DOD Directive 6205.3 should have been applied to these assessments because the biological threats listed changed as a result of these analyses, reflecting changes in CBDP priorities.\nThe requirement that the Chairman of the Joint Chiefs of Staff validate and prioritize CBRN threats also is contained in a more-recent directive, which addresses roles and responsibilities within CBDP. While DOD has moved toward capability-based planning and risk-informed analysis, DOD officials told us that they continue to seek information about current threats to assist their planning efforts. In addition, as shown in figure 7, the changes to the methodology—which did not always include input from key stakeholders—resulted in changes to the threats included in the lists. Specifically, some threats included in the 2000 list were removed in the 2001 list, and then reinstated as part of the 2012 list.\nBy not following its directives and regularly updating its biological threat list and priorities, DOD cannot be fully assured that its investments and allocation of resources—and those of its partners—are being applied toward developing medical countermeasures to respond to the most- serious and likely biological threat agents.", "CBDP has taken steps to increase transparency and improve coordination practices within DOD as it allocates resources to address biological threat agents. Military service officials with whom we met indicated that prior to the most-recent budget development cycle, there was a lack of transparency in how CBDP prioritized requirements and made resourcing decisions for medical countermeasures. To address these concerns and better incorporate service priorities and perspectives, CBDP issued a business plan in 2012, which updated its coordination methods. Military service officials agreed with CBDP’s actions and stressed the need for continuing dialogue and collaboration. In addition, CBDP also has established processes for internal DOD coordination throughout the stages of research and development of specific medical countermeasures against biological threat agents.", "CBDP is responsible for establishing both medical and nonmedical defense capabilities, and is also responsible for overseeing its budget processes and allocating funds. However, military service officials indicated that, in the past, CBDP did not have transparent processes for prioritizing requirements and allocating funding among these capabilities during the preparation of the budget. Specifically, officials expressed concern that while the Army, as CBDP Executive Agent, works to build consensus among the military services as it coordinates and integrates requirements, CBDP has made key prioritization decisions without communicating its justification to key stakeholders, including the Army. For instance, CBDP and military service officials told us that CBDP officials decided to prioritize medical countermeasure research and development, while transferring funds from military service requirements, such as personal protective equipment and threat-detection sensors. Specifically:\nAccording to Army officials, during preparation of future budget plans in 2010, CBDP leadership transferred funding from programs that would have provided personal protective equipment in order to increase funding for a medical countermeasures initiative. According to Army officials, this occurred after the Army had integrated and coordinated priorities with the other military services and combatant commands, and CBDP leadership did not coordinate this change with key stakeholders. CBDP’s actions affected 24 different programs and totaled about $1.2 billion over the course of the 4-year budget, according to Army officials. Though the Army, in its role as Executive Agent, ultimately concurred with the final CBDP budget plan, it expressed its concern about CBDP’s decisions when doing so.\nDuring the same time frame, CBDP transferred funding from an Air Force threat-detection sensor program, according to Air Force officials. The officials indicated that the program was a high priority for their service and had, until that point, received sufficient funding. However, according to the officials, CBDP removed nearly all of the funding, approximately $50 million, in order to support other priorities, including medical countermeasures.\nNavy officials indicated that in fiscal year 2013, CBDP removed $90 million in funding for upgrades to a ship-based threat-detection sensor program. This program would have addressed issues with the current version of the system, such as false alarms and high rates of repair. According to Navy officials, though they met frequently with the Joint Requirements Office to advocate for the program, CBDP leadership removed the funding during its review of the proposed budget.\nCBDP officials acknowledged that they did not effectively communicate with the military services regarding some of these actions, but stated that their decisions were driven by the need to balance resources among all priorities, including medical countermeasures. Also, CBDP officials noted that the services had equipment available to respond to short-term requirements. Additionally, CBDP officials told us that some of the increased investments in medical countermeasures would not continue, but were necessary to initiate specific programs, such as the creation of a DOD facility for advanced development and manufacturing of medical countermeasures. According to CBDP officials, they are now strategically planning how they fund medical countermeasures for the future, so that they do not have to transfer funding from other programs, though they recognize that they will not always be able to meet all military service resource-allocation requests. In addition, Army and Navy officials stated that the Office of Cost Assessment and Program Evaluation within the Office of the Secretary of Defense is conducting a study of DOD’s biological defense capabilities and, among other things, the most- effective balance between capabilities, such as medical countermeasures and personal protective equipment and threat-detection sensors. Army officials told us that this study, which is slated for completion in mid-2014, will help inform CBDP prioritization and resourcing decisions in the future.\nSince CBDP made some of these funding decisions, it has updated its practices for collaboration by issuing a business plan that details how it will coordinate with stakeholders in the future, and military service officials have agreed that these changes have resulted in improvements in coordination among CBDP components. CBDP intends for its business plan, issued in October 2012, to help it manage the program and develop capabilities in a focused and collaborative manner by laying out a framework through which CBDP stakeholders can align strategies. CBDP established a yearly cycle to develop strategic guidance and establish priorities, which ultimately inform CBDP’s budget planning and resource decisions. In order to implement this cycle, CBDP created multiple teams, at varying levels of authority, to provide input and recommendations. For example, the Integrated Product Team includes representatives from all of the military services and other members of CBDP. Members of this team assess the composition of the CBDP portfolio, coordinate and align CBDP efforts across the program, provide input on portfolio priorities, and support budget development. Similar teams and boards at higher organizational levels then review this input and make decisions. Additionally, CBDP can charter teams to address specific issues as needed. For example, CBDP officials said that a Medical Working Integrated Product Team began holding meetings in January 2014 to examine specific threats and determine which medical countermeasures against biological threat agents DOD needs, and how to prioritize among them.\nAccording to the business plan, these processes support decision making and incorporate perspectives from key stakeholders, including the military services. According to CBDP officials, these efforts have resulted in increased predictability, transparency, and representation of stakeholder perspectives, including agreement on budget plans. Military service officials complimented CBDP’s work to improve coordination, especially the ability to provide early input into the strategic priorities, and said that this change has resulted in a more-transparent budget process. These officials told us that it will be important for CBDP to continue to improve coordination and collaboration in the future. In particular, Army officials expressed concern that potential revisions to the DOD directive on CBDP roles and responsibilities could weaken their role and authorities as Executive Agent. Under the current directive, the Army reviews the CBDP funding plan, and provides senior-level input to CBDP leadership. Army officials indicated that the Army nonconcurred on a draft revision to this directive in October 2012, and CBDP officials told us that they informally provided the Army an updated draft in March 2014.", "In addition to the internal DOD coordination processes that CBDP has established for resource-allocation priorities and plans, CBDP has also created groups to coordinate the stages of development of medical countermeasures against biological threat agents. As previously discussed, multiple DOD components are involved in researching and developing medical countermeasures against biological threat agents, and some countermeasure programs can shift back and forth between components. According to CBDP officials, consistent coordination among the components is needed to ensure that DOD provides mature capabilities to the warfighter. To help improve coordination, CBDP established the following teams.\nTranslational Teams. Members from multiple components within CBDP participate in these teams to help transition medical countermeasures against biological threat agents among the various stages of development, such as moving from a research prototype into advanced development. The teams provide visibility into the status of each program, enabling each organization to better prepare to support the programs, and also assist with CBDP resource allocation, as they enable the shifting of funds among the organizations depending upon the pace of development. Additionally, the teams can serve as technical support, and help identify solutions for DOD requirements.\nIntegrated Product Teams. These multidisciplinary teams integrate all activities that DOD would need to perform to plan for and ultimately acquire a medical countermeasure against biological threat agents. According to officials, one team exists for each specific program, such as filoviruses, and assesses the cost, schedule, and performance of each program.", "DOD’s efforts to coordinate with HHS and DHS align with best practices we have identified for collaborating across agency boundaries— specifically, to leverage available resources; establish mutually reinforcing joint strategies; and develop compatible policies, procedures, and other tools to operate across agency boundaries. DOD, HHS, and DHS share a joint research campus—the National Interagency Biodefense Campus at Fort Detrick, Maryland—to study biological threat agents. The campus has its own governance structure, which allows the agencies to leverage available resources and facilitate scientific exchange. Senior leaders at DOD and HHS have also developed interagency agreements and other tools that facilitate communication on the various stages of medical countermeasure development. Finally, DOD and DHS have established processes for identifying biological agents that pose domestic threats and risks.", "DOD, HHS, and DHS share a joint biological research campus, known as the National Interagency Biodefense Campus, at Fort Detrick, Maryland, which has its own governance structure. The campus is intended to maximize resource sharing and facilitate scientific exchange on the study of dangerous biological pathogens.campus and governance structure, which leverages available resources and establishes joint strategies, aligns with our best practices for collaborating across agency boundaries to help ensure that the departments reach desired outcomes. DOD’s, HHS’s, and DHS’s respective biological facilities at the shared campus include the following: The creation of the research\nDOD’s U.S. Army Medical Research Institute for Infectious Diseases (USAMRIID) engages in scientific research of dangerous biological threat agents. Its work after the terrorist attacks of September 11, 2001, expanded to include biological threat characterization, enhanced studies of disease, and the development of medical countermeasures.\nHHS’s National Institute of Allergy and Infectious Diseases, of the National Institutes of Health, built the Integrated Research Facility (IRF) that includes biocontainment laboratories, which are shared with other federal departments at the joint campus. The IRF allows HHS to support its mission to study disease and develop improved methods of treatment.\nDHS’s National Biodefense Analysis and Countermeasures Center, also located at the shared campus, allows DHS to share its repository of pathogens and specimens to identify biological threat agents, and characterize the potential threats to the civilian population through studies to determine the cause of diseases.\nIn 2003, officials developed a governance structure for the Fort Detrick research campus—the National Interagency Confederation for Biological Research (NICBR)—that includes DOD, HHS, and DHS scientists who engage in interagency scientific research of dangerous biological pathogens. The primary goal of the NICBR is to respond to the need for a “whole of government” effort by the federal government to address bioterrorism. Most, if not all, aspects of medical countermeasure research and development activities and associated finances fall under the auspices of many federal departments that have different requirements, funding sources, metrics, and areas of expertise and responsibility. No one agency within the departments is involved in the end-to-end development of medical countermeasures, nor does any one agency have a complete overview of the medical countermeasure landscape across the federal government. In an effort to link agency activities, NICBR partners engage in shared efforts related to biological threat characterization, studies to determine the cause of disease, and the development of medical countermeasures to treat diseases resulting from exposure to the pathogens. DOD, HHS, and DHS have ratified a strategic plan to enhance coordination among the members of the NICBR. These efforts align with our best practices for collaborating across agency boundaries to help ensure that the departments reach desired outcomes, specifically by leveraging available resources and establishing joint strategies.\nThe NICBR governance structure includes the Fort Detrick Interagency Coordinating Committee, made up of all NICBR partner representatives, leading multiple subcommittees and working groups. NICBR officials, the various members that make up NICBR meet weekly, at a minimum, and subcommittee and working group members meet routinely to share scientific expertise, information, and technical services, in accordance with their interagency agreements. NICBR partners share responsibility for the governance structure and ongoing collaborative research efforts. Along with regular meetings, DOD officials said that NICBR partners also meet on an ad hoc basis due to the professional relationships that have formed since the establishment of the governance structure. In an example of this interagency collaboration and coordination, according to DOD officials, the NICBR members facilitated joint research efforts on the emerging infectious disease known as the Middle East respiratory syndrome coronavirus. To advance the study of the disease, Navy scientists collected specimens of the pathogen from a foreign site and shared it with other DOD, DHS, and HHS scientists at Fort Detrick, who conducted studies to understand the cause of the disease. DOD scientists also collaborated with DHS and HHS scientists at the campus to conduct other research towards a potential medical countermeasure for the disease. DOD and IRF officials described the interagency coordination to research the Middle East respiratory syndrome coronavirus as mutually reinforcing research by leveraging available expertise and facilitating scientific exchange. These efforts correspond with best practices for enhancing collaborative efforts by facilitating information sharing and communication and leveraging available resources.\nThe Fort Detrick Interagency Coordinating Committee reports to an Executive Steering Committee comprising of equivalent leadership officials from all partner agencies. The Executive Steering Committee reports to a Board of Directors consisting of senior leaders from all the partner agencies. improved their understanding of emerging diseases. DOD officials said that shared biocontainment laboratories also facilitate scientific exchange, data sharing, and collaboration on research. For example, IRF officials told us that working with DOD scientists on biological defense helps HHS understand how medical requirements to treat diseases can be defined to support both the military and civilian population. DOD officials added that because the field of senior-level scientists and officials involved in research on biological threat agents at the shared campus is relatively small, and scientists often move from one department to another within the NICBR organization, valuable insights have been shared and collaborative relationships have improved significantly.", "", "DOD and HHS have signed various interagency agreements to support joint activities for the various stages of the medical countermeasure process. For example, the departments share interagency agreements and memorandums of understanding that support interagency coordination for medical countermeasure activities, such as coordinating on early research and development, sharing certain resources at advanced development facilities, and stockpiling medical countermeasures, such as anthrax and smallpox vaccines. Together, the agreements, which stipulate the roles and responsibilities for coordination, are consistent with best practices for collaboration and generally serve to promote agency collaboration by defining common outcomes and providing interagency agreement on roles and responsibilities, as called for in our previous work.\nTo support early research and development, DOD and HHS developed various interagency agreements intended to promote coordination. The agreements generally describe the basis for joint activities to mitigate the threat of CBRN agents and global public health challenges, including emerging infectious diseases. For example, one memorandum of understanding supports the transfer of information and shared intellectual property between DOD and HHS. DOD officials told us that sharing medical countermeasure research has facilitated the ability to understand the causes of disease. Another memorandum of understanding supports information sharing between DOD and HHS regarding cutting-edge, broad-spectrum capabilities that address current threat agents for both military and civilian use. DOD officials said that collaborating on broad- spectrum countermeasures is important to support efforts to address novel threats that may arise in the future. HHS officials said that these broad-spectrum countermeasures, which provide the capability of addressing more than one threat, also offer opportunities for financial savings, commercial investment, and scientific efficiencies.\nHHS officials said that the centers’ efforts also are intended to augment domestic manufacturing surge capacity against pandemic influenza. of disposable equipment and alternative technologies for product development and rapid manufacturing—to aid in the development and production of medical countermeasures. DOD and HHS plan to collaborate at their respective centers by sharing access to a network of biodefense medical countermeasure innovators (including those from the private sector) that can use emerging platform technologies to enhance the production of biological medical countermeasures. The two departments also plan to use their separate centers to reduce scientific research and development expenses, risks of scientific failure, and to provide more-reliable and sustainable medical countermeasure manufacturing during times of need. According to DOD and HHS officials, the centers are expected to advance scientific discovery through the use of flexible technologies that support large-scale surge capacity for biological medical countermeasures in quantities that will be sufficient during emergencies and available for shared purposes.\nTo make medical countermeasures available for the warfighter, DOD and HHS also have developed interagency agreements that allow DOD to purchase, and HHS to rotate, certain products from HHS’s Strategic National Stockpile for use by DOD’s military personnel. For example, DOD and HHS have agreements that establish a framework allowing DOD to purchase smallpox and anthrax vaccines from the Strategic National Stockpile. According to DOD officials, DOD’s ability to purchase the vaccines from the Strategic National Stockpile benefits both departments financially and minimizes duplicative efforts. A similar agreement facilitates coordination in the event of a shortfall in critical medical countermeasures needed by either department in the event of a public health incident related to a domestic catastrophic incident. Under this agreement, HHS and DOD agree to share medical countermeasures, including pharmaceuticals, biologics, medical and surgical supplies and equipment that are needed by HHS or DOD to prepare for, respond to, or recover from a public health incident of national significance. The agreement is intended to create a standardized approach to coordinate mutual support in the event of a medical countermeasures shortfall during an emergency. DOD officials said that the agreement includes materials and products from the Strategic National Stockpile as well as DOD contingency materiel stockpiles. DOD officials said that the shared stockpile benefits DOD both financially and in terms of logistics. For example, DOD is able to access products it needs through the Strategic National Stockpile, which provides efficiencies for the federal government because the Centers for Disease Control and Prevention is able to rotate medical countermeasures out of its stockpile. HHS officials agreed that the ability to share stockpiles of medical countermeasures contributes significantly during federal emergencies.", "DOD and HHS, through the PHEMCE’s Integrated Portfolio, collaborate on the status of medical countermeasure activities using tools intended to promote communication on product development timelines and milestones, clinical progress achieved, and other metrics for tracking and monitoring. DOD and HHS have initiated actions consistent with practices identified in our past work as well as federal internal control standards to enhance information sharing and coordination. Specifically, DOD and HHS have established the Integrated Portfolio Charter and other tools to channel information across and within the departments to help ensure that agency officials at all levels are informed of each department’s medical countermeasures efforts. Both DOD and HHS officials said that they often talk and meet more often than the monthly meetings that the Integrated Portfolio Charter specifies. The Integrated Portfolio, made up of senior-level HHS and DOD officials with responsibility for portfolio analysis of CBRN medical countermeasures, has developed tools such as a portfolio tracking system and knowledge-based standard terms to help agencies communicate about the stages of research and development. According to DOD and HHS officials, the tools have enabled DOD and HHS to leverage investments and resources by sharing information and metrics to understand each department’s requirements, scope, schedule, and budget for developing countermeasures. For example, the medical countermeasure Portfolio Tracking Tool currently is being updated to support real-time viewing of the status of all medical countermeasure products, allowing users to analyze the status of countermeasures; develop estimates of key planning parameters, including investments needed to meet requirements; and minimize duplication of effort by anticipating transition points. According to DOD officials, the ability to have an overview of all existing medical countermeasure activities in one location has helped to inform recommendations related to portfolio planning, including for funding transitions and to improve gaps in each agency’s medical countermeasure stockpiles. The Integrated Portfolio also aligned Technology Readiness Levels, which is a shared language for medical countermeasure research and development terms that are intended to provide a common method to understand, at a general level, the maturity of medical countermeasure development products over the development life cycles. According to HHS officials, the aligned definitions facilitate interagency communication during all stages of the medical countermeasure process.", "DOD and DHS officials coordinate on the identification of biological threat agents that pose risk to the nation through DOD’s participation in DHS’s senior-level, quarterly terrorism risk-assessment working group meetings. These efforts align with practices we have identified for collaborating across agency boundaries—specifically, implementing practices that enhance and sustain collaboration, including frequent communication among and within the agencies. DOD provides input at the meetings where information is gathered that is used to produce DHS’s biennial Biological Terrorism Risk Assessments, which are distributed to national organizations for the prioritization of medical countermeasures. While DHS is responsible for assessing and prioritizing biological threat agents that pose a risk to the civilian population, as directed by the Project BioShield Act of 2004 and various HSPDs, DHS officials told us they provide informal feedback to DOD on DOD’s prioritized biological threat lists or risk assessments. DOD officials told us that DOD makes limited use of information from DHS to prioritize its own threat list because DHS focuses on domestic threats to civilians, while DOD focuses its threat and risk assessments on global scenarios that pose a risk to the warfighter. DOD and DHS also have agreements to operate across agency boundaries, which aligns with our best practices. For example, DOD and DHS have developed a memorandum of understanding to foster information sharing and collaboration in areas of chemical and biological defense, including science and technology research. Areas of cooperation that are considered include use of facilities, exchange of information and personnel, jointly produced documentation, and joint project ventures. DHS officials told us the interagency cooperation would generally occur at the Fort Detrick campus where the National Biodefense Analysis and Countermeasures Center performs biological research using its biocontainment laboratories with forensic capabilities. Although DHS has agreements to share its facilities and resources with DOD, DHS officials told us that to-date they have not performed extensive work for DOD at the biological research facilities, though the departments have had initial conversations for such efforts.", "DOD’s efforts within the department and with interagency partners have resulted in progress in DOD’s ability to plan for and develop medical countermeasures to respond to biological threat agents. However, some elements need attention to capitalize on this progress. To ensure that DOD officials are able to better prepare for and respond to potentially catastrophic attacks with a biological threat agent, DOD guidance requires annual updates and revalidation of its biological threat list. Yet, DOD does not follow its established process for updating its biological threat priorities, which has, in the past, led to conditions in which the list has been updated without including input and review from key stakeholders and in which the list has not been updated for long periods of time—years in some cases. By following DOD guidance for updating its biological threat list or by revising the list development process to reflect its emphasis on capabilities- and risk-based planning, DOD could help ensure that the list remains current and is validated regularly using input from all key stakeholders. This, in turn, would help DOD sustain the progress it has made in planning for medical countermeasures against biological threat agents.", "To help ensure that DOD’s investments are being applied toward developing medical countermeasures to respond to the most serious and likely biological threat agents, we recommend that the Secretary of Defense direct the appropriate DOD officials to develop and implement a process to update and validate DOD’s list of biological threats, as required by DOD Directives 5160.05E and 6205.3, or implement a process that aligns with the department’s current policies, practices, and priorities as reflected in the 2001 and 2010 Quadrennial Defense Reviews.", "In written comments on a draft of this report, DOD concurred with our recommendation to develop and implement a process for updating and validating the department’s list of biological threats to ensure that they align with current policies, practices, and priorities. DOD officials indicated that they will review the relevant directives addressing biological warfare threats to ensure that they align with DOD’s capabilities-based planning processes and reflect a threat-informed, risk-based assessment. We believe this effort, and any related specific actions, will address the intent of our recommendation. The full text of DOD’s comments is reprinted in appendix III. DOD also provided us with technical comments, which we incorporated, as appropriate.\nHHS did not provide formal agency comments on a draft of this report, but provided technical comments, which we incorporated, as appropriate. DHS also did not provide formal agency comments and had no technical comments.\nWe are sending copies of this report to interested congressional committees; the Secretaries of Defense, Health and Human Services, and Homeland Security; the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs; the Acting Deputy Assistant Secretary of Defense for Chemical and Biological Defense; the Chairman of the Joint Chiefs of Staff; the Secretaries of the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; the Director, Centers for Disease Control and Prevention; the Commissioner, Food and Drug Administration; the Director, National Institutes of Health; and the Director, Office of Management and Budget. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions concerning this report, please contact Joseph Kirschbaum at (202) 512-9971 or KirschbaumJ@gao.gov or Marcia Crosse at (202) 512-7114 or CrosseM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "For the purposes of our review, we defined “medical countermeasures” as the vaccines, drugs, and diagnostics that respond to chemical, biological, and radiological threats. We defined “medical countermeasures against biological threat agents” as the pretreatments, prophylaxes, therapeutics, and diagnostics that respond specifically to biological threats. We did not include personal protective equipment, such as gas masks, gloves, and boots, or biosurveillance and detection equipment in our analysis. We included in our definition of “biological threat agents” traditional, emerging, and genetically modified agents. We defined “traditional” biological agents as those naturally occurring microorganisms or toxin products with the potential to be disseminated to cause mass casualties. We defined “emerging” biological agents as previously unrecognized pathogens that might be naturally occurring and present a serious risk to human populations, and “genetically modified” agents as organisms that have either been modified or developed to bypass traditional countermeasures or produce a more-severe or enhanced disease. We included budget data from fiscal year 2001 through fiscal year 2013, since that period would be sufficient to allow us to analyze funding since the 2001 anthrax attacks.\nTo describe the Department of Defense’s (DOD) funding for medical countermeasures from fiscal year 2001 through fiscal year 2013, we obtained and analyzed data from the Chemical and Biological Defense Program (CBDP) budget office and identified the total funding related specifically to medical countermeasures against biological threat agents. For the purposes of this objective, we defined medical countermeasures against biological threat agents in alignment with the data DOD provided, which did not include diagnostics. Specifically, we reviewed results from CBDP’s Joint Service Chemical and Biological Information System, which is used by CBDP for tracking this information. CBDP officials confirmed that the data reflected obligations for fiscal year 2001 through 2012, and budget allocations for fiscal year 2013. Using DOD’s National Defense Budget Estimates for Fiscal Year 2014, we adjusted all figures for inflation. Specifically, we used the research, development, test, and evaluation deflation index for fiscal year 2013 from the Total Obligational Authority by Appropriation Title table. After adjusting figures to fiscal year constant 2013 dollars, we converted figures from thousands to millions when appropriate for presentation purposes, and conducted analysis to determine totals and percentages. Further, we interviewed agency officials about how they use the Joint Service Chemical and Biological Information System and how they ensured the accuracy of the data provided, but we did not independently verify or validate the data provided by DOD. Through these steps, we determined that the funding data provided by DOD were sufficiently reliable to provide an overview of total funding levels for medical countermeasures against biological threat agents.\nTo evaluate DOD’s progress in researching, developing, and making available medical countermeasures for use against prioritized biological threat agents, including DOD’s process to prioritize biological medical countermeasure development, we compared the requirements of DOD Directive 6205.3, DOD Immunization Program for Biological Warfare Defense and DOD Directive 5160.05E, Roles and Responsibilities Associated with the Chemical and Biological Defense Program, to the practices CBDP uses to prioritize investments in medical countermeasures against biological threat agents. Further, we compared the threats listed on DOD’s Chairman of the Joint Chiefs of Staff Threat List, the Medical Risk Management Matrix, and the Medical Operational Consequence Assessment, which were all developed by CBDP’s Joint Requirements Office to identify significant biological threats to the warfighter, and compared them to the medical countermeasures DOD is researching, developing, and has made available for use. Finally, we examined DOD’s efforts to research and develop medical countermeasures against emerging and genetically modified biological threat agents by reviewing DOD’s efforts to facilitate development of broad-spectrum medical countermeasures and other unique production and diagnosis capabilities that would be effective against a wide variety of pathogens, including genetically modified threat agents. To corroborate our understanding of the documents we reviewed, we interviewed officials from CBDP and its component offices, and obtained these officials’ perspectives on their methodology and practices for updating lists of prioritized threat agents.\nTo describe the status of DOD’s efforts to internally coordinate the allocation of resources to medical countermeasures against biological threat agents, we compared the coordination requirements established in DOD’s policies, priorities, and strategies for its medical countermeasure efforts to the way DOD agencies actually coordinate with each other to prioritize, research, develop, and budget for medical countermeasures. Specifically, we reviewed DOD Directive 5160.05E, Roles and Responsibilities Associated with the Chemical and Biological Defense Program, and CBDP’s 2012 business plan. To corroborate our understanding of these policies and processes, and to understand how DOD has applied its practices, we interviewed officials from within DOD organizations responsible for researching and developing medical countermeasures regarding each office’s responsibilities to coordinate medical countermeasure efforts, including CBDP, Joint Requirements Office, Joint Science and Technology Office, Joint Program Executive Office, and Office of the Assistant Secretary of Defense for Health Affairs. To understand service perspectives on DOD’s current practices, we interviewed officials from the Army, the Navy, and the Air Force, and reviewed documentation for the examples they cited. We also reviewed guidelines established by DOD that are relevant to the organization and structure of DOD’s medical countermeasure coordination efforts, including the CBDP Strategic Plan and the Chairman of the Joint Chiefs of Staff’s National Military Strategy to Counter Weapons of Mass Destruction.\nTo evaluate the extent to which DOD’s efforts to coordinate with the Department of Health and Human Services (HHS) and the Department of Homeland Security (DHS) to research and develop medical countermeasures against prioritized biological threat agents align with best practices for collaboration, we reviewed DOD, HHS, and DHS policies and procedures, strategies, memorandums of understanding, and other documents on medical countermeasure efforts to understand how the departments coordinate and communicate. We interviewed DOD, HHS, and DHS officials responsible for medical countermeasure efforts against prioritized biological threat agents. Specifically, we compared the coordination efforts of DOD, HHS, and DHS with the 2008 National Defense Strategy, which advocates for a “whole of government” approach to national security issues that requires that federal partners improve efficiencies by working together on roles and missions, as well as prior GAO reports on federal practices to enhance and sustain agency collaboration that require, in particular, that agencies leverage available resources, establish mutually reinforcing joint strategies, and develop compatible policies, procedures, and other tools to operate across agency boundaries.Internal Control in the Federal Government, which call for (1) management to ensure that there are adequate means of communicating with, and obtaining information from, external stakeholders, and (2)\nWe also compared the efforts against the Standards for effective communication flowing down, across, and up the organization to enable managers to carry out their internal control responsibilities. Finally, we interviewed selected subject-matter experts from academia to obtain their perspectives on DOD’s interagency coordination efforts with HHS and DHS for the research and development of medical countermeasures against biological threat agents.\nWe obtained relevant data and documentation and interviewed officials from the following organizations:\nOffice of the Under Secretary of Defense for Acquisition, Technology\nOffice of the Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs\nOffice of the Deputy Assistant Secretary of Defense for\nOffice of the Assistant Secretary of Defense for Health Affairs Joint Staff Directorate for Force Structure, Resources and Assessment (J-8)\nDefense Threat Reduction Agency Joint Science and Technology Office\nDefense Advanced Research Projects Agency\nOffice of the Assistant Secretary of the Army for Acquisitions, Logistics, and Technology Joint Program Executive Office for Chemical and Biological Defense\nOffice of the Deputy Chief of Staff for Programming (G-8)\nOffice of The Surgeon General and U.S. Army Medical\nU.S. Army Medical Research and Materiel Command\nU.S. Army Medical Materiel Development Activity\nU.S. Army Medical Research Institute of Infectious\nChief of Naval Operations, Surface Warfare (N96), Chemical, Biological, Radiological, and Nuclear Defense Branch\nOperations, Plans and Requirements\nLogistics, Installations and Mission Support Department of Health and Human Services\nAssistant Secretary for Preparedness and Response\nBiomedical Advanced Research and Development Authority\nPublic Health Emergency Medical Countermeasures Enterprise\nNational Institutes of Heath\nNational Institute of Allergy and Infectious Diseases\nCenters for Disease Control and Prevention\nFood and Drug Administration\nScience and Technology Directorate\nOffice of Health Affairs\nNational Biodefense Analysis and Countermeasures Center\nUniversity of Pittsburgh Medical Center for Health Security\nNational Interagency Confederation for Biological Research We conducted this performance audit from August 2013 to May 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "", "", "In addition to the contact named above, GAO staff who made key contributions to this report include Mark A. Pross, Assistant Director; Karen Doran, Assistant Director; Natalya Barden; Richard Burkard; Mae Jones; Amie Lesser; Carolina Morgan; Randy Neice; Carol Petersen; Terry Richardson; Jennifer Spence; and Elaine Vaurio.", "National Preparedness: HHS Has Funded Flexible Manufacturing Activities for Medical Countermeasures, but It Is Too Soon to Assess Their Effect. GAO-14-329. Washington, D.C.: March 31, 2014.\nNational Preparedness: HHS Is Monitoring the Progress of Its Medical Countermeasure Efforts but Has Not Provided Previously Recommended Spending Estimates. GAO-14-90. Washington, D.C.: December 27, 2013.\nNational Preparedness: Efforts to Address the Medical Needs of Children in a Chemical, Biological, Radiological, or Nuclear Incident. GAO-13-438. Washington, D.C.: April 30, 2013.\nHigh-Containment Laboratories: Assessment of the Nation’s Need Is Missing. GAO-13-466R. Washington, D.C.: February 25, 2013.\nNational Preparedness: Countermeasures for Thermal Burns. GAO-12-304R. Washington, D.C.: February 22, 2012.\nNational Preparedness: Improvements Needed for Acquiring Medical Countermeasures to Threats from Terrorism and Other Sources. GAO-12-121. Washington, D.C.: October 26, 2011.\nInfluenza Pandemic: Lessons from the H1N1 Pandemic Should Be Incorporated into Future Planning. GAO-11-632. Washington, D.C.: June 27, 2011.\nInfluenza Vaccine: Federal Investments in Alternative Technologies and Challenges to Development and Licensure. GAO-11-435. Washington, D.C.: June 27, 2011.\nNational Preparedness: DHS and HHS Can Further Strengthen Coordination for Chemical, Biological, Radiological, and Nuclear Risk Assessments. GAO-11-606. Washington, D.C.: June 21, 2011.\nPublic Health Preparedness: Developing and Acquiring Medical Countermeasures Against Chemical, Biological, Radiological, and Nuclear Agents. GAO-11-567T. Washington, D.C.: April 13, 2011.\nHigh-Containment Laboratories: National Strategy for Oversight Is Needed. GAO-09-1045T. Washington, D.C.: September 22, 2009.\nHigh-Containment Laboratories: National Strategy for Oversight Is Needed. GAO-09-1036T. Washington, D.C.: September 22, 2009.\nHigh-Containment Laboratories: National Strategy for Oversight Is Needed. GAO-09-574. Washington, D.C.: September 21, 2009.\nHigh-Containment Biosafety Laboratories: Preliminary Observations on the Oversight of the Proliferation of BSL-3 and BSL-4 Laboratories in the United States. GAO-08-108T. Washington, D.C.: October 4, 2007." ], "depth": [ 1, 2, 2, 1, 1, 2, 3, 2, 1, 2, 2, 1, 2, 2, 3, 3, 2, 1, 1, 1, 1, 1, 2, 3, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "", "h0_full", "h0_title", "h0_full", "h0_full", "h1_full", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What has DOD made progress in?", "Despite DOD's progress, what is one problem with DOD?", "How can DOD respond to biological threat agents?", "Why is it a problem that DOD doesn't update its biological threat list?", "What directive establishes the process for updating said list?", "Even when the list was updated, what concern remained?", "How is CBDP allowing DOD to allocate resources to address biological threats?", "How did CBDP respond to concerns raised by military service officials?", "How did military service officials respond to CBDP's actions?", "What efforts has DOD made that align with GAO's best practices for collaboration?", "What is the purpose of the joint research campus in Maryland?", "What does the campus have which facilitates scientific exchange?", "How have DOD and HHS interacted?", "How have DOD and DHS interacted?" ], "summary": [ "DOD has made progress in researching, developing, and making available medical countermeasures against biological threat agents, but does not use its established process for annually updating its list of threat priorities.", "However, DOD does not use its established process to annually update its list of biological threat priorities.", "DOD's Chemical and Biological Defense Program (CBDP) is researching, is developing, or has obtained Food and Drug Administration approval for countermeasures that address 10 of the 19 biological threat agents DOD has identified as threats to the warfighter. Of DOD's 43 candidates for medical countermeasures, 13 use technologies that may allow them to respond to various emerging or genetically modified biological threat agents.", "By not following its established process for annually updating its biological threat list, DOD cannot ensure that its investments—and those of its partners—are applied toward responding to the most-serious and likely biological threats.", "DOD Directive 6205.3, DOD Immunization Program for Biological Warfare Defense , establishes roles and responsibilities and an annual process for updating DOD's biological threat list.", "GAO found that the list has not been updated annually and, when it was updated in 2001 and 2012, DOD did not receive input from key stakeholders.", "CBDP has taken steps to increase transparency and improve coordination practices within DOD to allocate resources to address biological threats.", "In response to concerns raised by military service officials that CBDP was not completely transparent in how it prioritized requirements and made resourcing decisions, CBDP issued a business plan in 2012 to update its coordination methods.", "While military service officials were supportive of CBDP's actions, they stressed the need for continuing dialogue and collaboration in the future.", "DOD's efforts to coordinate with the Department of Health and Human Services (HHS) and the Department of Homeland Security (DHS) align with best practices GAO has identified for collaborating across agency boundaries—specifically, to leverage available resources; establish mutually reinforcing joint strategies; and develop compatible policies, procedures, and other tools to operate across agency boundaries.", "DOD, HHS, and DHS share a joint research campus—the National Interagency Biodefense Campus at Fort Detrick, Maryland—to study biological threat agents.", "The campus has its own governance structure, which allows the agencies to leverage available resources and facilitate scientific exchange.", "Senior leaders at DOD and HHS also have developed interagency agreements and other tools that facilitate communication on the various stages of medical countermeasure development.", "Finally, DOD and DHS have established processes for identifying biological agents that pose domestic threats and risks." ], "parent_pair_index": [ -1, 0, -1, -1, 3, 3, -1, -1, 1, -1, -1, 1, -1, 3 ], "summary_paragraph_index": [ 4, 4, 4, 4, 4, 4, 5, 5, 5, 6, 6, 6, 6, 6 ] }
CRS_R42553	{ "title": [ "", "Introduction: Counterterrorism Context", "From Radicalization to Terrorism", "Countering Radicalization in the United States", "Administration Strategy and Current Activities", "Community Engagement", "Role of U.S. Attorneys", "Other Federal Activities", "Department of Homeland Security", "Department of Justice", "Federal Bureau of Investigation", "Risks and Challenges", "The Tension Between Enforcement and Engagement Activities", "U.S. Attorneys as Brokers", "Legitimacy and Litmus Tests", "Fusion Centers and Community Engagement—Potentially Alleviating Tensions", "Building Government and Law Enforcement Expertise", "Risks and Challenges", "The Issue of Openness", "Talking about Ideology", "Countering Violent Extremist Propaganda", "Risks and Challenges", "Administration Plan and Future Activities", "Is DHS the De Facto U.S. CVE Lead Agency?", "", "Possible Policy Considerations for Congress", "Implementing the CVE Strategy", "Picking Partners and Establishing \"Rules of the Road\"", "Intervention with At-Risk Individuals", "Identifying Programs and Federal Contacts to Assist Grassroots CVE Efforts", "Countering Extremist Ideas: Choosing Good vs. Bad", "The Lack of a Lead Agency", "Measuring Input and Results", "Secretiveness vs. Transparency" ], "paragraphs": [ "", "In August 2011, the Obama Administration released its domestic counter-radicalization strategy. The Administration dubbed this effort \"countering violent extremism\" (CVE). Implementation of the CVE strategy revolves around impeding the radicalization of violent jihadists in the United States. As this may suggest, for this report, a couple of concepts are key. Namely, \"radicalization\" describes the process of acquiring and holding radical or extremist beliefs; and \"terrorism\" describes violent or illegal action taken on the basis of these radical or extremist beliefs.\nThis report examines the implementation of the Administration's counter-radicalization strategy and provides possible policy considerations for Congress relating to this relatively new area of coordinated federal activity. Implementation of the CVE strategy involves many elements within the executive branch and brushes against a number of key issues involving constitutionally protected activity versus effective counterterrorism policing efforts.\nGovernment-related efforts to stave off terrorist activity in the United States exist within two broad contexts. First, the operational aspects of violent terrorist plots largely involve clandestine illegal activity. Since the terrorist attacks of September 11, 2001 (9/11), hundreds of individuals have been implicated in more than 70 homegrown violent jihadist plots or attacks. In this secretive realm, law enforcement pursues terrorists in a real-world version of hide-and-seek. Domestic law enforcement strategies devised in the decade since 9/11 to prevent terrorism largely focus their efforts in this area. Federal law enforcement activity in this arena is geared toward rooting out terrorists and stopping them from successfully executing their plots.\nThe second context is the open marketplace of ideas. Here, private citizens are free to weigh competing ideologies and engage in constitutionally protected speech and expression. In this arena, a relative few ordinary law-abiding persons move from the mainstream and adopt radical ideologies that embrace terrorism. As they radicalize, they do not necessarily commit crimes . Much like the policing that occurs in the secretive realm, the federal government's CVE strategy is a preventative approach to terrorism, but it is not wholly focused on policing . Rather, federal activity in this arena is geared toward helping local communities and individuals boost their resilience to terrorist radicalization efforts.\nThe divergent nature of these two contexts may imply clear distinction between the marketplace of ideas and the secretive operational realm. In reality, they are far from distinct. What happens operationally has significant impacts in the marketplace of ideas ( Figure 1 ). This interrelationship is highlighted by any number of issues. For example,\nthe success of terrorist plots in the secretive realm may spur radicalization and generate public fear in the marketplace of ideas; conversely, successful investigations in the secretive realm may discourage radicalizing individuals within the marketplace of ideas from eventually embracing violent acts of terrorism as an ultimate goal; effective policing within the secretive realm may depend on a trusting community acting supportively in the marketplace of ideas; perceived policing excesses in the secretive realm may impede community engagement with law enforcement; and high levels of radicalization occurring in the marketplace of ideas may expand the potential pool of terrorist recruits, while an effective government strategy to counter radicalization may staunch terrorist recruitment.\nIn fact, some of the key challenges involved in implementing a national strategy to deal with terrorist radicalization spring from the interplay between the marketplace of ideas and the secretive realm.", "A key way to fight the threat of homegrown terrorists is to develop an understanding of how radicalization works and formulate ways to prevent radicalization from morphing into terrorist plotting. In 2007, the New York City Police Department's (NYPD's) Intelligence Division released a study of domestic jihadist radicalization that has been widely circulated within the law enforcement community.\nThe NYPD study describes a general four-step process of radicalization leading to terrorist plotting. First, individuals exist in a pre-radicalization phase in which they lead lives unaware of or uninterested in either violent jihad or fundamentalist Salafi Islam. Next, they go through self-identification in which some sort of crisis or trigger (job loss, social alienation, death of a family member, international conflict) urges them to explore Salafism. Third, individuals undergo indoctrination or adoption of jihadist ideals combined with Salafi views. The study indicates that, typically, a \"spiritual sanctioner\" or charismatic figure plays a central role in the indoctrination process. Finally, radicalizing individuals go through \"jihadization,\" where they identify themselves as violent jihadists, and are drawn into the planning of a terrorist attack. At this point, according to the NYPD, they can be considered violent extremists (terrorists). The Federal Bureau of Investigation's (FBI's) own four-stage model of radicalization closely follows that of the NYPD.\nThis model and the process it describes—though useful—should, however, be read with caution, according to some observers. The radicalization process is best depicted in broad brush strokes. Brian Michael Jenkins has suggested that\nThere is no easily identifiable terrorist-prone personality, no single path to radicalization and terrorism. Many people may share the same views, and only a handful of the radicals will go further to become terrorists. The transition from radical to terrorist is often a matter of happenstance. It depends on whom one meets and probably on when that meeting occurs in the arc of one's life.\nSome experts have warned against viewing the radicalization process as a \"conveyer belt,\" somehow starting with grievances and inevitably ending in violence. The NYPD report itself acknowledges that individuals who begin this process do not necessarily pass through all the stages nor do they necessarily follow all the steps in order, and not all individuals or groups who begin this progression become terrorists. Studies by the Department of Homeland Security's (DHS's) Office of Intelligence and Analysis indicate that the radicalization dynamic varies across ideological and ethno-religious spectrums, different geographic regions, and socioeconomic conditions. Moreover, there are many diverse \"pathways\" to radicalization and individuals and groups can radicalize or \"de-radicalize\" because of a variety of factors.\nIn a more fundamental conceptualization, radicalization expert Peter Neumann has noted that three core elements exist in the radicalization process. These are grievance, ideology/narrative, and mobilization. Grievances can stem from narrow issues unique to an individual's personal life or arise from broader perceptions of the surrounding world. A radicalizing individual seizes upon extremist ideologies or narratives to help explain his or her grievance. Mobilization consists of an individual acting on his or her grievances based on precepts culled from a particular ideology or narrative. These actions can involve criminality.", "Because so much of the radicalization process occurs within the marketplace of ideas, counter-radicalization efforts involve activity in the same realm. American counter-radicalization approaches favor government engagement with communities affected by terrorism. Scholars who have studied the circumstances that are associated with voluntary cooperation by Muslim-Americans in anti-terror policing efforts have identified strong evidence that when authorities are viewed as more legitimate, their rules and decisions are more likely to be accepted. Community engagement is—in part—an effort to make law enforcement authority more accepted within localities.", "The Administration's CVE strategy revolves around countering the radicalization of all types of potential terrorists. As such, the radicalization of violent jihadists falls under its purview and is the key focus. The initial August 2011 strategy was supported by the Administration's release in December 2011 of its \"Strategic Implementation Plan for Empowering Local Partners to Prevent Violent Extremism in the United States\" (SIP). The SIP is a large-scale planning document with three major objectives and numerous future activities and efforts. There is no single lead agency for any of the three objectives. Likewise, there is no single agency managing all of the individual future activities and efforts of the plan. The SIP's three objectives or \"core areas of activity\" are \"(1) enhancing engagement with and support to local communities that may be targeted by violent extremists; (2) building government and law enforcement expertise for preventing violent extremism; and (3) countering violent extremist propaganda while promoting our [U.S.] ideals.\"\nThe following sections provide examples of Administration CVE activity and discussion of the risks and challenges evident in the SIP's three core areas of activity. The \"future activities and efforts\" outlined for each of the three core areas of activity in the SIP are also diagramed and briefly discussed below.", "The concept of building trust through engagement and partnership is rooted in the community policing model developed by law enforcement professionals in the 1990s, and community policing is mentioned in the Administration's CVE strategy. Following the 9/11 attacks, law enforcement agencies came to realize the prevention of terrorist attacks would require the cooperation and assistance of American Muslim, Arab, and Sikh communities. \"Embedded within these communities,\" notes Professor Deborah Ramirez, \"are the linguistic skills, information, and cultural insights necessary to assist law enforcement in its efforts to identify suspicious behavior. In order to have access to these critical tools and information, law enforcement recognized the need to build bridges required for effective communication with these groups.\" At the same time, Muslim, Arab, and Sikh Americans recognized the need to define themselves as distinctly American communities who, like all Americans, desire to help prevent another terrorist attack.\nA study by the Homeland Security Institute found that \"[c]ommunity policing has been applied with notable success in places such as New York City, Chicago, Boston, and San Diego, and has been widely adopted (at least in name) throughout the United States.\" A Homeland Security Advisory Council (HSAC) working group chaired by Maryland Governor Martin O'Malley commented on Community-Oriented Policing, stating that\nEffective public-private partnerships, designed to enable civic engagement, problem-solving, and violent crime mitigation provide the foundation for efforts to prevent, protect against and respond to violent criminal activity—including that which may be motivated by ideological objectives.\nThe Administration's CVE strategy depends on federal agencies cooperating with local groups to expand engagement efforts and to foster preventative programming \"to build resilience against violent extremist radicalization.\" In fact, it highlights a \"community-based approach\" for the federal government, and much of the activity it describes will take place in the \"marketplace of ideas\" described in Figure 1 . To this end, the federal government most effectively acts as a \"facilitator, convener, and source of information.\" Since November 2010, a national task force led by DOJ and DHS has helped coordinate CVE-related community engagement from the national perspective. It works with U.S. Attorneys, DHS's Office for Civil Rights and Civil Liberties (CRCL), the Department of State, and DOJ, among others.", "Under the Administration's CVE strategy, U.S. Attorneys play a key role in community engagement within their jurisdictions. U.S. Attorneys are \"the nation's principal litigators under the direction of the Attorney General.\" Attorney General Eric Holder has pushed the U.S. Attorneys to enhance their outreach efforts to Muslim, Sikh, and Arab American communities. Within their districts across the country, U.S. Attorneys have met with Muslim communities regarding specific situations and trends. In December 2010, DOJ began a pilot program involving U.S. Attorneys in community outreach efforts. This program did not specifically focus on CVE efforts but has included radicalization-related outreach. For example, in September 2011, the U.S. Attorney for the District of Oregon and Attorney General Holder met with Arab and Muslim community representatives in Portland, OR.\nComparable outreach has been pursued by other U.S. Attorneys. The District of Minnesota has established the Young Somali-American Advisory Council. This responded to al-Shabaab's recruitment of young men within the greater Minneapolis-St. Paul, MN, Somali community. The council includes more than a dozen people between the ages of 18 and 30. Among the outreach activities tied to the council, the U.S. Attorney's office instructed council members on civics issues. In a similar vein, the U.S. Attorney for the Southern District of Florida and Assistant Attorney General Thomas E. Perez met with Muslim and Arab leaders in Miami in February 2011. Likewise, in November 2010, an alleged jihadist terrorist plotter was arrested for purportedly attempting to bomb a Christmas tree lighting ceremony in Portland, OR. In the plot's wake, the state's U.S. Attorney repeatedly met with local Muslim leaders.", "Aside from the special role given to U.S. Attorneys, other elements of DOJ and additional U.S. government agencies engage and partner with Muslim American communities. Some of these efforts by DHS, DOJ, and FBI are detailed below.", "DHS has stated that public outreach to local communities plays a major role in the department's mission. Engagement activities are centered in the Office for Civil Rights and Civil Liberties (CRCL), which began its outreach in 2003. Its work involves counterterrorism and CVE-related matters, but its overall mission is broader. The office is also responsible for\nadvising DHS leadership, personnel, and partners about civil rights and civil liberties issues; communicating with individuals and communities whose civil rights and civil liberties may be affected by DHS activities, informing them about policies and avenues of redress, and promoting appropriate attention within DHS to their experiences and concerns; and investigating and resolving civil rights and civil liberties complaints filed by the public.\nCRCL has a Community Engagement Section. Recent domestic CVE-related outreach events have been coordinated by CRCL and its Community Engagement Section.", "In addition to the CVE role played by U.S. Attorneys, DOJ's engagement activities largely appear to come from the Civil Rights Division and the Community Relations Service. According to its website, since the terrorist attacks of September 11, 2001 (9/11), the Civil Rights Division of DOJ has prioritized prosecution of bias crimes and discrimination against Muslims, Sikhs, and persons of Arab and South-Asian descent, as well as individuals perceived to be members of these groups. These types of incidents are commonly referred to as \"backlash.\" The division has also educated people in these communities about their rights and available government services. Senior Civil Rights Division officials have met with Muslim, Sikh, Arab, and South Asian community leaders regarding backlash discrimination issues. Like the Civil Rights Division, DOJ's Community Relations Service is involved in outreach. Since 9/11, the service has held meetings around the country to address backlash-related issues.", "The FBI has publicly suggested that since 9/11, it has been formulating an \"extensive program\" to bolster its relationship with Arab, Muslim, Sikh, and South Asian communities in the United States. In March 2010, the Chief of the Community Relations Unit of the FBI's Office of Public Affairs testified to Congress that the primary purpose of the agency's outreach program was \"to enhance public trust and confidence in the FBI.\" This involves fostering a positive image of law enforcement among U.S. organizations that have condemned terrorism and violent radicalization. The FBI relies on programs at the field office level to foster interaction with a wide variety of local groups. Also, some FBI field offices have formally interacted with local Muslim communities regarding specific cases. At the national level, FBI headquarters representatives have engaged in liaison with Arab and Muslim American advocacy groups and have regular issue-focused conference calls with community leaders. The FBI is also a member of the Incident Coordination Communications Team managed by DHS CRCL.", "Although there is considerable support among public officials for community engagement, some experts warn of significant challenges in the development of programs that foster substantive relationships rather than token discussions or community relations events. A study of policing in Arab American communities sponsored by the National Institute of Justice, for example, highlighted four key obstacles hindering outreach between U.S. Arabs (Christian and Muslim) and law enforcement: \"Distrust between Arab communities and law enforcement, lack of cultural awareness among law enforcement officers, language barriers, and concerns about immigration status and fears of deportation.\"\nTerrorism expert Marc Sageman cautions that engagement can be a sign of government focus on Muslim communities when instead it should be stressed that Muslims are Americans just like everyone else. He sees another challenge arise when engagement on the government side is led by federal agencies with law enforcement and intelligence responsibilities. \"It can send the message that we are only interested in Muslims because they are potential law breakers. No other foreign or religious communities in the United States get this type of scrutiny.\"\nOutreach may be most effective when U.S. Muslim communities initiate it and community-government contact revolves around countering the extremist messages popular among violent jihadists. Marc Sageman also suggests it would be more appropriate for local authorities, such as a mayor's office, to perform the engagement role because they know these communities better than federal officials.", "An inherent challenge to building trust and partnership involves law enforcement investigative activities and tactics that can be perceived to unfairly target law-abiding citizens or infringe on speech, religion, assembly, or due process rights. This challenge highlights how government counterterrorism work in the secretive operational realm depicted in Figure 1 can influence engagement conducted in the open marketplace of ideas. If a community views government counterterrorism investigative activity as overly aggressive, it may not willingly cooperate in engagement programs. One expert has noted that \"counter-radicalization is not about intelligence-gathering nor is it primarily about policing.\" The HSAC Countering Violent Extremism Working Group found that\nThere can be tension between those involved in law enforcement investigations and those collaborating to establish local partnerships to stop violent crime. Community policing can be impeded if other enforcement tactics are perceived as conflicting with community partnership efforts.\nThis challenge is evident in some public discussions of law enforcement surveillance activities and efforts to recruit and manage informants. Revelations that the NYPD engaged in surveillance of mosques, Muslim businesses, and Muslim college students in New Jersey and elsewhere in 2006 and 2007 have prompted concern among a number of community groups and civil libertarians. The FBI's top official in New Jersey suggested that such activities undermined the bureau's efforts at community engagement. While New York City Mayor Michael Bloomberg and others defended the legality of such activities, some New Jersey officials have complained that the NYPD had not effectively coordinated efforts with them. Other former law enforcement officials in New Jersey believed that appropriate cooperation occurred. Also, as announced in May 2012, a fact-finding review conducted by New Jersey's Office of the Attorney General \"revealed no evidence ... that NYPD's activities in the state violated New Jersey civil or criminal laws.\"\nIn pursuing a community engagement strategy, the use of informants can be a controversial issue, especially when law enforcement officials rely on informants with criminal records who may be working on behalf of authorities in exchange for reduced jail time. One Muslim community leader who has published widely on domestic terrorism states that \"many Muslim Americans fear that paid FBI informants specifically target impressionable youth and that law enforcement agents coerce community members to become informants themselves to avoid complications with immigration procedures.\" Confidential informants have been used in post-9/11 violent jihadist cases occurring in the United States. In some of those cases, the informants had criminal histories. The use of informants poses the following risks:\nInformants do not merely observe and collect data. They make things happen.... Informants can cause confusion and dissatisfaction among members of groups and communities they infiltrate, discrediting leaders, and fostering factionalism as people wonder if any of their colleagues are spies. Their handlers' structure of incentives—raises, promotions, transfers, financial rewards, waived jail time—creates a system where informants consciously or subconsciously create and then destroy terrorist threats that would not otherwise exist. These pressures can push them from passive observer to aggressive actor, with serious consequences for constitutionally protected free speech. Another unplanned result: government loses legitimacy and support in the eyes of targeted communities, if they feel they have been manipulated.\nAcknowledging the challenge, then FBI Director Robert Mueller said in 2009, \"Oftentimes, the communities from which we need the most help are those who trust us the least. But it is in these communities that we ... must redouble our efforts.\" Also in 2009, then-FBI spokesman John Miller said the agency values its relationships with Muslims and has worked hard on outreach efforts that range from town hall meetings to diversity training for FBI agents. Miller said there is no factual basis for claims the FBI infiltrates mosques or conducts blanket surveillance of Muslim leaders. \"Based on information of a threat of violence or a crime, we investigate individuals, and those investigations may take us to the places those individuals go.\"\nFormer FBI agents and federal prosecutors note that informants are \"still one of the government's best weapons to thwart terrorists and that the benefit to national security is likely to far outweigh any embarrassment to the agency.\" They claim that \"although the law places almost no constraints on the use of informants, the agency takes sending an informant into a mosque very seriously and imposes a higher threshold for such requests.\" Former FBI counterterrorism Chief Robert Blitzer states that \"what matters to the FBI is preventing a massive attack that might be planned by some people ... using the mosque or church as a shield because they believe they're safe there. That is what the American people want the FBI to do. They don't want some type of attack happening on U.S. soil because the FBI didn't act on information.\"\nMaher Hathout from the Muslim Public Affairs Council counters by saying that \"people cannot be suspects and partners at the same time. Unless the FBI's style changes, the partnership with the Muslim community will not be fruitful.\" The HSAC's CVE Working Group also cautions that \"Law enforcement should be sensitive to the fact that perceptions regarding enforcement actions and intelligence gathering can impact community-oriented policing goals.\" In considering the tradeoff between security and liberty, policy makers face a choice in those cases where an investigative tactic might inflame members of a particular community: Is the impact of that tactic counterproductive in the long run, or is it necessary, short-term collateral damage?", "As mentioned elsewhere in this report, DOJ has pushed the U.S. Attorneys to become larger players in community outreach. This suggests a critical question: is it appropriate to have the nation's principal litigators be key players in the federal government's CVE outreach efforts? Can the same people responsible for prosecuting terrorism cases effectively broker trust among community members who may be wary of federal law enforcement? Maintaining the integrity of this dualistic U.S. Attorney role—chief terrorism litigators v. federal outreach coordinators—may be challenging in the implementation of the strategy.", "Given their role in federal CVE engagement, U.S. Attorneys have to selectively cooperate with groups at the local level. Identifying specific groups for outreach may be challenging. There is little consensus among American Muslims regarding national advocacy groups: \"many Muslims do not feel there is a national Muslim-American organization that represents them. When asked which of a list of national Muslim-American organizations represents their interests, 55% of Muslim men and 42% of Muslim women say that none do.\"\nThe U.S. government can affect the legitimacy of community actors simply by choosing them as outreach partners. It is unclear how U.S. Attorneys will select the groups with which they will work. To this end, will the U.S. government establish litmus tests regarding federal interaction with community groups? What role will law enforcement considerations—potentially choosing only groups that have cooperated with FBI investigations by offering leads or providing informants, for example—play in the selection of community partners? Will federal investigators scour the backgrounds of groups prior to engaging with them?\nWhen selecting engagement partners, DOJ has made at least one very public choice that was driven by law enforcement or prosecutorial considerations. The FBI and DOJ have limited their ties to the Council on American-Islamic Relations (CAIR), because DOJ listed the group as an unindicted co-conspirator in a federal terrorism case. This is an example of the dynamics described in Figure 1 —the secretive (operational) realm driving community engagement activity in the marketplace of ideas. In November 2008, the Holy Land Foundation for Relief and Development and five of its leaders were convicted of providing material support to Hamas, a designated foreign terrorist organization. CAIR has opposed its listing as an unindicted co-conspirator. The listing is not a formal criminal charge, and subsequent terrorism charges have not been brought against CAIR. In spite of all of this, CAIR, a well-known Muslim advocacy group, maintains working relationships with local law enforcement officials.", "The CVE strategy mentions the role of the national network of fusion centers in alleviating tension between the government's investigative and engagement activities. Fusion centers play a part in reporting suspicious, terrorism-related activity nationwide, perhaps potentially causing some tension between communities and law enforcement. The strategy and the SIP mention the Building Communities of Trust Initiative (BCOT) as a project fostering relationships among three sets of actors—fusion centers, law enforcement, and the communities in which they operate. This type of outreach potentially informs local communities about how suspicious activity suggestive of terrorism is reported to law enforcement and how police protect civil rights and liberties as they look for such activity. The initiative's recommendations included items such as\ntraining of fusion center analysts in cultural sensitivity so that they can distinguish behavior that is constitutionally protected from criminal or terrorist activity; encouraging law enforcement to \"embrace\" community policing by \"emphasizing partnerships and problem solving\"; and encouraging communities to view information sharing with fusion centers and law enforcement as key to crime prevention and counterterrorism.", "The SIP emphasizes three key items in this area. First, the plan notes that the U.S. government has to improve its understanding of radicalization via research, analysis, and partnerships. Second, greater sharing of information among state, local, and federal agencies regarding terrorist recruitment and radicalization is necessary. Third, the SIP notes that the federal government has to improve the radicalization-related training offered to federal, state, and local agencies.\nParamount among the federal government's efforts to improve its understanding of CVE are efforts to study the radicalization process and identify radicalizing individuals. To this end, the National Institute of Justice included research on domestic radicalization in its list of funding opportunities. The Science and Technology Directorate (S&T) within DHS has also pursued the topic. To help identify radicalizing individuals, DHS, the FBI, and the National Counterterrorism Center (NCTC) produced a study of homegrown terrorists, which reportedly teased out warning signs of radicalization. The study was discussed by senior federal, state, and local law enforcement officials at the White House in January 2012. Along these same lines, in July 2011, NCTC released findings resulting from an interagency study of homegrown terrorists. This study was not made public officially, but a summary of its findings is available online. It describes four \"mobilizing patterns\" among extremists. These include \"links to known extremists, ideological commitment to extremism, international travel, and pursuit of weapons and associated training.\" It also emphasized an approach to understanding and assessing radicalization via analysis of behavioral indicators.\nThe SIP also calls for enhanced information sharing between federal, state, and local law enforcement. Prior to late 2011, these efforts largely revolved around disseminating information to and briefing state and local officials. Such activity included the development of case studies examining the experiences of known and suspected terrorists. This was recommended in 2010 by the HSAC. In February 2011 congressional testimony, then DHS Secretary Janet Napolitano remarked that DHS develops these unclassified case studies so\nthat state and local law enforcement, state and local governments, and community members can understand the warning signs that could indicate a developing terrorist attack. These case studies focus on common behaviors and indicators regarding violent extremism to increase overall situational awareness and provide law enforcement with information on tactics, techniques, and plans of international and domestic terrorists.\nNapolitano went on to note that DHS conducted what she dubbed \"deep dive sessions\" regarding CVE issues with local police intelligence experts—providing them with information they could pass to subordinates.\nAdditionally, the SIP notes that the federal government will enhance the radicalization-related training offered to federal, state, and local agencies. It argues that this is necessary because of \"a small number of instances of federally sponsored or funded CVE-related and counterterrorism training that used offensive and inaccurate information.\" In March 2011, news reports and a study suggested that state and local law enforcement officials were receiving poor counterterrorism training from unqualified instructors, often from the private sector. Furthermore, news reports indicated that offensive material produced by an FBI employee was delivered in a variety of official training sessions up until August 2011. These revelations led to concerns from public officials and advocacy groups regarding training standards used by the bureau. In addition, reportedly biased material had seeped into the training made available to Joint Terrorism Task Force officers via a secure computer network.\nIn the midst of these revelations, in September 2011 the bureau announced a review\nof all training and reference materials that relate in any way to religion or culture. Additionally, the FBI will consult with outside experts on the development and use of training materials to best ensure the highest level of quality for new agent training, continuing education for all employees, and any FBI-affiliated training. All training will be consistent with FBI core values, the highest professional standards, and adherence to the Constitution.\nDOJ announced a similar review in September 2011 as well. Less than 1% of the material inspected was found to be inaccurate or inappropriate. In October 2011, the White House ordered a broader examination of CVE instructional efforts within the federal government. In the same month, DHS released guidance and best practices for CVE training. These highlighted five commonsense goals:\n1. Trainers and training should be expert and well-regarded. 2. Training should be sensitive to constitutional values. 3. Training should facilitate further dialog and learning. 4. Training should adhere to government standards and efforts. 5. Training and objectives should be appropriately tailored, focused, and supported.\nThe same document notes that CVE education programs differ from strictly counterterrorism training (the latter presumably centered on topics such as terrorist threats, vulnerabilities, and trends in terrorism). CVE training focuses \"on developing trust, enhancing community resiliency, prevention, intervention, and protecting civil rights and civil liberties.\" In March 2012, DOJ and FBI released their own sets of training principles that parallel DHS's goals.", "Development of better training and improved information sharing are laudable law enforcement goals. However, because such efforts feature so prominently in the second SIP objective, its overall thrust may be perceived to be more about classic preventative policing than about countering radicalization at the grass-roots level. It is unclear how much of the activity described under this objective directly fits into the Administration's emphasis on \"a community based\" CVE approach.\nThere is space in the CVE strategy for training law enforcement about constitutionally protected aspects of the radicalization process—in other words, efforts to train police to understand when suspects go from being law-abiding radicals to being terrorists. However, the SIP itself does not offer any formal means for federal, state, or local law enforcement to cope with radicalizing individuals outside of their traditional areas of expertise—investigation, arrest, and prosecution. The SIP does not outline mechanisms for law enforcement to refer radicalizing individuals for community intervention (whatever that might mean within a local context). Without such a process, police can become very adept at identifying radicalization and yet be only able to cope with a radicalized individual when he or she mobilizes and becomes a terrorism suspect. One of the risks implicit in this SIP objective is that it may sharpen police ability to investigate terrorists, without improving their ability to intervene with radicalizing individuals.\nIf the SIP's efforts to improve law enforcement training mostly enhance the ability of police to detain suspects and provide no other means for coping with radicalization, then these elements of the strategy might be better described as counterterrorism in nature, not part of the nation's counter-radicalization strategy.", "Should the federal government be concerned about the over-classification of radicalization-related research and training material by the security agencies involved in its development? The SIP's second objective is an area in which a great deal of activity can occur behind closed doors (within the secretive realm described in Figure 1 ), especially if the objective largely involves security, intelligence, and law enforcement agencies that typically avoid public disclosure of much of their other work. However , the steps involved in the radicalization process involve largely constitutionally-protected activity that occurs in the public sphere. Excessive secretiveness regarding government efforts to understand the legally protected activities of Americans might actually fuel radicalization. For example, one study by a British think tank has suggested that conspiracy theories \"are a reaction to the lack of transparency and openness in many of our [U.K.] institutions.\" This same study sees conspiracies as a \"radicalizing multiplier.\" Could this be possible in the United States?\nA project developed as part of the second SIP objective was not widely released. The study of radicalization among homegrown violent extremists performed by DHS, NCTC, and the FBI—mentioned above—was revealed to state and local law enforcement behind closed doors at the White House. This example poses the question: can the federal government build trust within local communities if it holds back from the general public its own study of how people in the United States radicalized and became terrorists? Will secretiveness in this area actually feed radical narratives?\nAdditionally, will excessively secret government efforts to understand radicalization shake community trust in law enforcement? Federal attempts to develop classified theories about legally-protected activities may make community groups less willing to \"share\" information regarding those very activities— especially if that information is treated strictly as intelligence by the government and the results of such \"sharing\" are never seen . Transparency in this arena potentially opens government conceptualizations of radicalization and federal training materials to the scrutiny of outside experts. It is unclear what sway partnerships with non-government experts will have in the SIP's second objective.", "Ideology is a key ingredient in the radicalization experience. It is unclear how the CVE Training Guidance issued by DHS accommodates discussion of ideology within an instructional environment. In fact, under one of its goals: \"Training should be sensitive to constitutional values,\" the guidance indicates that \"Training should focus on behavior, not appearance or membership in particular ethnic or religious communities,\" yet it is silent regarding radical ideologies. Should instructors focus on ideology? How should instructors discuss radical beliefs in the classroom?", "The SIP notes that countering violent extremist propaganda is \"the most challenging area of work, requiring careful consideration of a number of legal issues, especially those related to the First Amendment.\" In this area the document highlights NCTC's efforts to develop a \"Community Awareness Briefing.\" In 2010, NCTC's Director described the briefing in testimony to the Senate Homeland Security and Governmental Affairs Committee:\nIt has become clear that government can play a significant role by acting as a convener and facilitator that informs and supports—but does not direct—community-led initiatives. Based on this, NCTC led the development of a Community Awareness Briefing that conveys unclassified information about the realities of terrorist recruitment in the Homeland and on the Internet. The briefing, which can be used by departments and agencies and has garnered very positive reactions, aims to educate and empower parents and community leaders to combat violent extremist narratives and recruitment.\nNCTC has also connected community activists with technology experts in a seminar to \"maximize the use of technology to counter violent extremism online\" and the Department of State has developed exchanges between foreign CVE experts and U.S. communities. The SIP did not indicate any additional \"current activity\" in late 2011 to counter violent extremist propaganda other than working to inform the media, policy makers, and U.S. communities on the issue. It did mention the development of a separate approach for the digital environment. This was released in February 2013. In an online posting titled \"Working to Counter Online Radicalization to Violence in the United States,\" the White House emphasized the creation of a new Interagency Working Group to Counter Online Radicalization to Violence. It is\nchaired by the National Security Staff at the White House and involving specialists in countering violent extremism, Internet safety experts, and civil liberties and privacy practitioners from across the United States Government. This Working Group will be responsible for developing plans to implement an Internet safety approach to address online violent extremism, coordinating the Federal Government's activities and assessing our progress against these plans, and identifying additional activities to pursue for countering online radicalization to violence.\nThe White House has charged the group with using existing federal programs to \"raise awareness and disseminate tools for staying safe from online violent extremism.\"", "The SIP notes that government efforts to counter narratives that foster radicalization should affirm American unity and bolster community capacities to \"contest violent extremist ideas.\" The document stresses the importance of First Amendment concerns in this area.\nAside from First Amendment issues, a challenge in this area might revolve around the perceived legitimacy of the main agencies the Administration selects for its implementation efforts. If security agencies trawling the internet for potential suspects lead the charge in fostering a counter-narrative, will American Muslims see these efforts as legitimate? How willing will they be to partner with FBI, DOJ, NCTC, and DHS to further this SIP goal?", "The SIP lists \"future activities and efforts\" under its three objectives. Figure 2 , Figure 3 , and Figure 4 each cover a single SIP objective. They depict the lead federal agencies responsible for the future activities and efforts subsumed by the relevant objective, and more than one agency can serve as a lead for a particular effort. For the sake of clarity, the figures do not depict partner agencies playing secondary roles and assisting the lead agencies in particular activities. The language used for each of the future activities and efforts in the three figures extensively paraphrases or directly quotes the language used in the SIP. Additionally, the three figures do not include all of the component agencies of specific executive departments. Only the component agencies responsible for future activities and efforts under each SIP objective are included.", "It appears that DHS is cited as a lead agency in 43 of the 62 future activities and efforts discussed in the SIP. Because it is a key player and decision maker in more than two-thirds of the SIP's impending plans, it seems that DHS may be the de facto lead agency in charge of U.S. CVE activity in the near future. This suggests a critical issue: while granted a large amount of responsibility for implementation of the CVE strategy, will DHS have a matching level of say in its further evolution?", "", "\"The United States has made great strides,\" says one federal counterterrorism official, \"in what might be called tactical counterterrorism—taking individual terrorists off the streets, and disrupting cells and their operations ... an effective counterterrorism strategy must go beyond this ... (to address) the threat of violent extremism.\" With the announcement of the CVE strategy, the Obama Administration has begun to address this concern. These Administration efforts may attract greater oversight from Congress, especially because the strategy involves the interplay between the public marketplace of ideas involving constitutionally protected activity and the secretive operational realm where terrorists plot and law enforcement pursues.", "As mentioned elsewhere in this report, federal CVE activity emphasizes engagement with Muslim communities across the country. It broadly recognizes this, training, and counter messaging as key components of CVE. However, aside from embracing robust outreach and training for government agencies, the strategy lacks specific initiatives to combat radicalization at the grass-roots level. This suggests a number of other issues.", "Who speaks for diverse Muslim communities in America? As mentioned above, \"[w]hen asked which of a list of national Muslim-American organizations represents their interests, 55% of Muslim men and 42% of Muslim women say that none do.\" Perhaps sentiments are clearer at the local level, however these figures suggest the difficulty of selecting partners who accurately represent community needs. It is difficult to speak of one Muslim \"constituency\" in the United States. The 2.75 million Muslims in the United States have divergent sectarian points of view, come from many ethnic or national backgrounds, and live in a variety of areas. Muslim Americans support many secular and religious organizations.\nWhat criteria will the Administration employ in its selection efforts, and how transparent will the process be? Once approved as partners, what \"rules of the road\" will govern continued cooperation? In essence, what would have to happen for a Muslim community group to fall out of favor with the government? Ad hoc decision making might cause the whole CVE outreach process to appear arbitrary to some community participants. Congress may consider requiring the Administration to release public guidelines in this area. Public guidelines may be especially important, because engagement directly involves engaging people and issues in the open marketplace of ideas and protected constitutional activity.", "There appears to be little federally driven guidance to community groups on how to intervene with people vulnerable to radicalization. Such an intervention effort, the Channel Program, has been a key element of the United Kingdom's counter radicalization strategy since 2007. The British government describes Channel as a \"multi-agency programme to identify and provide support to people at risk of radicalisation\" and involvement in \"all forms of terrorism.\" Channel \"relies on close collaboration between police, partners and other key stakeholders ... and where necessary, provides an appropriate support package tailored to an individual's needs.\" Copying the Channel program in its entirety may not be appropriate for the U.S. context. However, it is unclear whether the Obama Administration considers some variant of Channel workable or even necessary in the United States.\nThe U.S. CVE strategy does cite the Office of Juvenile Justice and Delinquency Prevention (OJJDP) Comprehensive Gang Model as an example of \"locally-based initiatives that connect communities and government to address community challenges through collaboration and the development of stakeholder networks.\" OJJDP—a component of DOJ's Office of Justice Programs—describes the model as \"one of the few approaches to gangs that encompasses a multidisciplinary response to gangs on multiple levels.\" The preventative model is intended as a blueprint for organizing local counter-gang efforts that do not necessarily result in law enforcement-driven outcomes, such as investigations, arrests, and prosecutions. For intervention, it targets young adult and teen gang members, not entities such as hate groups, prison gangs, or ideologically driven gangs consisting of adults. The model involves five strategies:\nCommunity Mobilization: Involvement of local citizens, including former gang members and community groups and agencies, and the coordination of programs and staff functions within and across agencies.\nOpportunities Provision: The development of a variety of specific education, training, and employment programs targeting gang-involved youth.\nSocial Intervention: Youth-serving agencies, schools, street outreach workers, grassroots groups, faith-based organizations, law enforcement agencies, and other criminal justice organizations reaching out and acting as links between gang-involved youth and their families, the conventional world, and needed services.\nSuppression: Formal and informal social control procedures, including close supervision or monitoring of gang youth by agencies of the criminal justice system and also by community-based agencies, schools, and grassroots groups.\nOrganizational Change and Development: Development and implementation of policies and procedures that result in the most effective use of available and potential resources to better address the gang problem.\nThe model is designed to focus on youth active in gangs or those who exhibit factors indicating potential gang involvement. It also advocates engagement with the families of such youth. Among its many suggestions, the model discusses interventions such as job training, employment, family counseling, academic tutoring, and anger management classes for young people at-risk. It also calls on law enforcement agencies and courts to move beyond traditional roles in the suppression of gangs—urging them to consider more intervention-oriented activities such as referring youth to social service programs.\nThe CVE strategy provides little detail about how the Comprehensive Gang Model may be applied to keep vulnerable people from radicalizing and becoming terrorists. Congress may consider examining the utility and feasibility of developing a CVE intervention model for the United States. While elaborating the specific details of such a program may be best left to the federal agencies potentially involved, broadly and publicly exploring what shape it would take might be of value to Congress. Key questions may involve issues such as (1) which agencies would take the lead in creating a program based on the Comprehensive Gang Model? (2) how would the FBI have to adapt its counterterrorism mission—strictly focused on investigating and disrupting terrorist activity—to handle the notion of \"social intervention\" as suggested by the Comprehensive Gang Model?", "The Administration's CVE strategy stresses that \"the best defenses against violent extremist ideologies are well-informed and equipped families, local communities, and local institutions.\" Determining and explaining how local entities—whether public or private—should interact with federal partners may pose quite a challenge. For example, are there existing federal grant programs that can be harnessed by local actors to develop a CVE intervention program? A publicly available comprehensive list of grant programs that can be harnessed for CVE activities does not exist. Congress may opt to consider the feasibility or the value of such a list or a clearinghouse available to local entities to identify such programs. By possibly pursuing this, Congress may help to ensure that local constituents have better information about and more direct access to federal CVE programs. On the other hand, such a list may be perceived as an additional layer of bureaucracy between constituents and grant programs.", "As the United Kingdom has clearly stated in its counter-radicalization program, extremist ideologies play a role in radicalization. Furthermore, Quintan Wiktorowicz (at the time on the National Security Council) commented that \"we [the United States] will push back against the full scope of different violent ideologies with an inclusive, positive narrative.\" However, in the United States, mere belief in radical notions, no matter how reprehensible they are, is not necessarily illegal. The American Civil Liberties Union's (ACLU's) Michael German has stated that the ACLU is \"deeply concerned about the potential for government censorship of Internet content based on the [CVE] strategy's proposal for countering violent extremist propaganda.\"\nEven more fundamentally, the task of countering extremist ideas raises key issues regarding the implementation of the CVE strategy. In the SIP, the Administration notes that when countering violent extremist propaganda, \"In many instances, it will be more effective to empower communities to develop credible alternatives that challenge violent extremist narratives rather than having the federal government attempt to do so.\" This begs the question: do the strategy and the SIP place the federal government in the business of determining which ideologies are dangerous and which are safe—essentially determining which beliefs are good and which are bad? This can be viewed from two angles. One involves establishing parameters for engagement with local communities, the other involves evaluating the end product of engagement, the counter-narrative.\nFirst, while the SIP may suggest that the government should not be involved in creating alternatives to violent extremist propaganda, it appears to assume that the government will be involved in sifting between dangerous and safe ideas—establishing parameters for engagement on this issue. Without picking and choosing between good and bad ideologies, \"empowering\" local activists to counter specific concepts may prove difficult. Empowering individuals and groups to counter un-named, un-described concepts may prove challenging. Second, if the framing of a counter-narrative challenging terrorist ideologies is necessary, how precisely should the federal government partner with state and local government and civilian counterparts in the development of this counter-narrative? How do government entities keep a counter-narrative from being publicly viewed as propaganda or fueling terrorist conspiracy theories about the United States?\nOversight in this area may be vital. As a start, Congress may wish to ask the Administration to better define what it means when referring to \"violent extremist narratives.\"", "There is no designated single lead agency for any of the three objectives laid out in the SIP. Likewise, there is no single agency managing all of the individual activities and efforts of the plan. At the national level, it arguably may be of value to have a single federal agency in charge of the government's CVE efforts. One expert has stated as much:\nThe White House should designate a single agency that serves as the principal hub for collecting, disseminating, and evaluating information on counter-radicalization. Its main function would be to collect, analyze, and share best practices with a wide range of governmental and non-governmental actors, including community leaders and non-profits.\nWithout a lead agency it may be difficult to monitor the levels of federal funding devoted to CVE efforts. How many personnel are devoted to CVE in the federal government? For how many of these employees is counter radicalization a full-time job? Are there mechanisms to track federal CVE expenditure? Which federal body is responsible for this? Very specifically, the lack of a lead agency is reflected in the fact that DOJ, DHS, and FBI have each issued training guidelines for CVE. They are very similar, but the issuance of three almost identical but separate guidelines raises the question: why not just have one set created by one body overseeing the CVE program? Congress may pursue with the Administration the feasibility or value of designating a lead agency, or the possibility of naming a lead via legislation. However, it is unclear what types of authority—especially in the budgetary realm—such a lead may be able to wield over well-established agencies playing central roles in the CVE strategy.", "On the other side of these budgetary questions, without a lead agency, how will the Administration evaluate the effectiveness of federal CVE efforts? The SIP underscores that individual departments and agencies involved in CVE \"will be responsible for assessing their specific activities in pursuit of SIP objectives, in coordination with an Assessment Working Group.\" While this may seem straight-forward, the British government has struggled with measurement issues related to its counter-radicalization strategy. U.K. officials have made \"progress ... in measuring outputs but not always in measuring outcomes.\" In other words, counting the number of engagement events is one thing. It is quite another thing to evaluate their impact. The SIP mentions this problem as well. However, the SIP does not discuss (1) specific metrics, (2) what real authority the Assessment Working Group will have to independently evaluate and impact CVE activity within federal departments and agencies, and (3) whether the Assessment Working Group will have the power to standardize measures of success across federal agencies and departments. In the end, the lack of a lead agency with budgetary control over CVE efforts and clear responsibility for implementation of the strategy makes it difficult to conceptualize exactly how spending in this area will be prioritized, evaluated, and then re-prioritized based on results.", "Without a high degree of transparency, an engagement strategy driven by federal agencies charged with intelligence gathering and law enforcement responsibilities may run the risk of being perceived as an effort to co-opt communities into the security process—providing tips, leads, sources, and informants. This threatens to \"securitize\" a relationship intended as outreach within the marketplace of ideas. It has been noted that \"unlike counterterrorism, which targets terrorists, counter-radicalization is focused on the communities that are targeted by terrorists for recruitment. The aim is to protect, strengthen, and empower these communities so that they become resilient to violent extremism.\" As such, some suggest that it might not be particularly effective to have the same federal agencies responsible for counterterrorism also be the main players in the CVE strategy. The SIP rejects this notion stressing that \"traditional national security or law enforcement agencies such as DHS, DOJ, and the FBI will execute many of the programs and activities outlined in the SIP.\" The strategy relies on agencies whose enforcement and intelligence missions are undergirded by secretiveness. As it stands, 19 of the 20 \"future activities and efforts\" for SIP objective 1, which focuses on community engagement, have DOJ, DHS, or a national task force headed by DOJ and DHS as lead agencies. The lone remaining future activity/effort is headed by the Department of Treasury and is focused on terrorism financing, an area of enforcement for the department.\nThe fact that DOJ, DHS, and Treasury are key counterterrorism agencies may make it difficult for community groups to view them as full partners, especially if community confidence in them is shaky to start. According to a 2011 study, American Muslims have less confidence than other faith groups in the FBI—\"60% of Muslim Americans saying they have confidence in the FBI, versus 75% or more of Americans of other faiths who say this.\" Because of this reality, Congress may decide to assess whether there is a need for greater transparency from the Administration in its CVE efforts." ], "depth": [ 0, 1, 2, 1, 2, 3, 4, 4, 4, 4, 4, 3, 4, 4, 4, 4, 3, 3, 4, 4, 3, 3, 2, 3, 1, 2, 2, 3, 3, 3, 3, 3, 4, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_title h2_title", "h0_full", "h0_title h2_title", "", "", "", "h0_full", "h2_full", "", "h2_full" ] }	{ "question": [ "What is the purpose of the counter-radicalization strategy?", "Why is this strategy important?", "How is the CVE strategy different?", "What are some challenges associated with implementing the CVE strategy?", "What does the strategy address?", "How has the strategy been elaborated?", "What is the SIP?", "What are the SIP's main objectives?", "What are problems associated with an engagement strategy that isn't very transparent?", "What do some people believe this strategy threatens to do?", "What issue might critics have with the CVE strategy?", "Why might Congress consider whether there is a need for greater transparency?" ], "summary": [ "It is devised to address the forces that influence some people living in the United States to acquire and hold radical or extremist beliefs that may eventually compel them to commit terrorism.", "This is the first such strategy for the federal government, which calls this effort \"combating violent extremism\" (CVE).", "Unlike the necessarily secretive law enforcement and intelligence efforts driving these investigations, the CVE strategy includes sizeable government activity within the open marketplace of ideas, where private citizens are free to weigh competing ideologies and engage in constitutionally protected speech and expression.", "Some of the key challenges in the implementation of the CVE strategy likely spring from the interplay between the marketplace of ideas and the secretive realm encompassing law enforcement investigations and terrorist plotting.", "The strategy addresses the radicalization of all types of potential terrorists in the United States but focuses on those inspired by Al Qaeda.", "To further elaborate this strategy, in December 2011 the Administration released its \"Strategic Implementation Plan for Empowering Local Partners to Prevent Violent Extremism in the United States\" (SIP).", "The SIP is a large-scale planning document with three major objectives and numerous future activities and efforts.", "The SIP's three objectives involve (1) enhancing federal community engagement efforts related to CVE, (2) developing greater government and law enforcement expertise for preventing violent extremism, and (3) countering violent extremist propaganda.", "Without a high degree of transparency, an engagement strategy driven by federal agencies charged with intelligence gathering and law enforcement responsibilities may run the risk of being perceived as an effort to co-opt communities into the security process—providing tips, leads, sources, and informants.", "Some may maintain that this threatens to \"securitize\" a relationship intended as outreach within the marketplace of ideas.", "As such, critics may argue that it might not be particularly effective to have the same federal agencies responsible for classified counterterrorism investigations grounded in secrecy also be the main players in the CVE strategy.", "However, the Department of Homeland Security, the Department of Justice, and the Federal Bureau of Investigation have responsibilities for much of the CVE program. Because of this reality, Congress may opt to consider whether there is a need for greater transparency from the Administration in its CVE efforts." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, -1, 2, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 14, 14, 14, 14 ] }
CRS_R44151	{ "title": [ "", "Nuclear Waste Policy Act Framework", "Interim Storage Facility Requirements", "Establishing a Permanent Geologic Repository for High-Level Nuclear Waste and Spent Nuclear Fuel", "Yucca Mountain and the Obama Administration", "Yucca Mountain Funding", "Blue Ribbon Commission on America's Nuclear Future", "DOE's Attempted Withdrawal of Its Construction Authorization License Application", "Legal Challenges to Attempted Termination or Suspension of License Application Review Process", "NRC Administrative Adjudications and Suspension of Licensing Proceedings", "D.C. Circuit Challenges to DOE Withdrawal and NRC Suspension: In re Aiken County", "After Aiken County: NRC Safety Evaluation Report and Other Licensing Activities", "NRC Order on Resumption of Licensing Process", "Safety Evaluation Report Conclusions", "Supplement to Environmental Impact Statement", "Yucca Mountain Water Rights Legal Status", "Background on State Water Law Framework and Permitting Procedures", "History and Current Status of DOE Applications for Water Rights", "Other Related Litigation", "Challenges to EPA's and NRC's Health and Safety Regulations and DOE's Environmental Review for the Proposed Yucca Mountain Repository", "Challenges to NRC's Waste Confidence Determination and Continued Storage Rule", "Challenge to Nuclear Waste Fund Fee", "Nuclear Power Utility Standard Contract Claims", "Congressional Action on Yucca Mountain Facility and Nuclear Waste Storage and Disposal", "Energy and Water Development and Related Agencies Appropriations", "Blue Ribbon Commission Recommendations", "Yucca Mountain Licensing", "Nuclear Waste Reduction and Storage Safety" ], "paragraphs": [ "", "More than 30 years ago, Congress addressed increasing concerns regarding the management of the nation's grow ing stockpile of nuclear waste by calling for the federal collection of spent nuclear fuel (SNF) and high-level nuclear waste (HLW) for safe, permanent disposal. Passed in 1982, the Nuclear Waste Policy Act (NWPA) was intended to establish an explicit statutory basis for the Department of Energy (DOE) to dispose of the nation's most highly radioactive nuclear waste. The NWPA requires DOE to take title to commercial nuclear power plants' SNF and, in exchange for a fee, remove and transport it to a permanent geologic repository or an interim storage facility before permanent disposal. Defense-related HLW was to go into the same repository, unless the President determined separate storage was required.\nIn an effort to mitigate the political difficulties of imposing a federal nuclear waste facility on a single community, Congress attempted to establish an objective, scientifically based, multi-stage statutory process for selecting the eventual site of the nation's new permanent geologic repository. Although DOE would be responsible for developing the eventual repository and carrying out the disposal program, individual nuclear power providers would fund a large portion of the program through significant annual contributions, or fees, to the Nuclear Waste Fund (NWF) established by the NWPA.", "Under the NWPA, \"the persons owning and operating civilian nuclear power reactors have the primary responsibility for providing interim storage of spent nuclear fuel from such reactors.\" Authority and responsibility for the federal government to provide \"not more than 1,900 metric tons of capacity for interim storage\" via a federally owned and operated system expired in 1990. Separately, the government's authority to license a monitored retrievable storage facility is conditioned on the NRC having issued a license for a permanent geologic repository. This requirement was intended in part to reduce concern that any consolidated storage facility could become a de facto repository.\nWith interim storage generally not authorized under the NWPA, the amount of SNF stored at civilian nuclear power reactors continues to grow. Currently, spent fuel discharged from U.S. commercial nuclear reactors is stored at 60 operating nuclear plant sites, 14 shutdown plant sites, and the Idaho National Laboratory.", "The NWPA created a multi-stage statutory framework—requiring the participation of the President, Congress, DOE, and the NRC—that governs the establishment of a permanent geologic nuclear waste repository. The various phases of the process include site recommendation, site characterization and study, site approval, and construction authorization. At the site recommendation stage, the Secretary of Energy (Secretary) was directed to nominate at least five potentially \"suitable\" sites for an eventual repository. After identifying and conducting an initial study of these sites, the Secretary was to recommend three sites to the President for characterization as \"candidate sites.\" Pursuant to these obligations, the Secretary recommended Deaf Smith County, Texas; Hanford, Washington; and Yucca Mountain, Nevada, to the President in 1986. The Secretary's recommendations were met with significant opposition from the affected states; however, and as a result, Congress amended the NWPA's site selection process in 1987 and designated Yucca Mountain as the sole candidate site for the repository by terminating \"all site specific activities (other than reclamation activities) at all candidate sites, other than the Yucca Mountain site.\" The 1987 amendments, did not, however, end the site characterization, approval, and construction authorization phases, which continued as outlined under the original terms of the NWPA.\nIn accordance with the characterization stage of the NWPA framework, Yucca Mountain was extensively inspected and studied in an effort to determine if the site was in compliance with suitability guidelines established by DOE, and public health, safety, and environmental guidelines established by the Environmental Protection Agency. DOE obtained temporary (10-year) water permits from the State of Nevada for use in site characterization in 1992. In 1997, pursuant to state law and to NRC regulations requiring DOE to \"have obtained such water rights as may be needed to accomplish the purpose of the geologic repository operations area\" before proceeding with licensing, DOE filed five applications to the Nevada State Engineer for permanent water rights at the Yucca Mountain site for performance confirmation studies and eventual construction. The Nevada State Engineer denied DOE's applications for permanent water rights in 2000, finding that granting the water rights would not be in the public interest. That denial was challenged in litigation, which is still ongoing fifteen years later. Meanwhile, the federal government did not meet its contractual obligation to begin accepting SNF by 1998, leading to litigation by some utilities for contract damages to cover the costs of on-site storage.\nFollowing other significant litigation over the proper safety standards to be applied to the Yucca Mountain facility, and notwithstanding charges by the State of Nevada that the site was unsafe, Secretary of Energy Spencer Abraham recommended that the President approve the Yucca Mountain site for the development of a repository in 2002. President George W. Bush approved the Yucca Mountain site the next day, and, pursuant to the terms of the NWPA, recommended the site to Congress.\nThe NWPA, however, provided the state in which the proposed repository would be located with the opportunity to object to the President's site recommendation by submitting a notice of disapproval to Congress. If a notice of disapproval were submitted, the NWPA stated that the site would be \"disapproved\" unless both houses of Congress overrode the state's objection by passing a \"resolution of siting approval.\" Although Nevada opposed the selection of Yucca Mountain and quickly submitted its notice of disapproval, Congress passed, and the President signed, the necessary approval resolution to override Nevada's objection. Thus, the site approval stage of the NWPA process ended.\nThe fourth stage of the NWPA process commenced in June 2008, when DOE submitted an application for authorization to construct the Yucca Mountain nuclear waste repository (license application) to the NRC. Under the NWPA, \"if the President recommends to the Congress the Yucca Mountain site … and the site designation is permitted to take effect … the Secretary shall submit to the [NRC] an application for a construction authorization for a repository at such site.\" The statute further directed that following submission of the license application, the NRC \"shall issue a final decision approving or disapproving the issuance of a construction authorization not later than the expiration of 3 years after the date of the submission of such application.\" NRC's final decision to grant or deny a construction authorization is to be made after completion of the NRC staff's independent technical review of the license application, an adjudicatory hearing before NRC's Atomic Safety and Licensing Board, and subsequent review by the Commissioners. The NRC was considering the 8,600-page license application when the Obama Administration took office and ushered in a change in policy with respect to Yucca Mountain as the future site of the nation's permanent nuclear waste repository.", "President Obama, former Secretary of Energy Steven Chu, and current Secretary of Energy Ernest Moniz have stated that Yucca Mountain does not represent a viable option for the permanent storage of nuclear waste. In accordance with this view, the Administration has taken several important steps directed toward terminating the Yucca Mountain facility. First, with Congress's approval, the Administration has sought to defund the Yucca Mountain project. Second, the President and former Secretary Chu established a commission to consider alternative solutions to the nation's nuclear waste challenge. Third, and perhaps most controversial, DOE attempted to terminate the NRC's Yucca Mountain licensing proceeding by seeking withdrawal of its application for a construction authorization (license application) for the Yucca Mountain facility.", "DOE's recent budget proposals have not requested funding for the Yucca Mountain facility. Moreover, the Administration utilized its FY2011 budget request to recommend the closure of the Office of Civilian Radioactive Waste Management (OCRWM), which had previously been charged with administering the Yucca Mountain project and many of DOE's obligations under the NWPA. After steady reductions in staff, the OCRWM officially closed on September 30, 2010. The recent budget proposals follow years of steady decreases in funding for the repository: from $572 million in FY2005, to $288 million in FY2009, to only enough funds, approximately $197 million, to finance the ongoing NRC licensing process in FY2010. Consistent with the Administration's budget requests, Congress, though debating several funding proposals, has not appropriated funds for the Yucca Mountain project since the limited funding included in FY2010.", "Shortly before releasing the FY2011 budget proposal, the President asked DOE to establish the Blue Ribbon Commission on America's Nuclear Future (Commission) to explore, study, and evaluate alternatives to the Yucca Mountain facility for the permanent storage of SNF and HLW. The 15-member Commission, appointed by the Secretary of Energy, consisted of scientists, academics, industry representatives, labor representatives, and former elected officials. The commission's goal was to \"provide recommendations for developing a safe, long-term solution to managing the nation's used nuclear fuel and nuclear waste.\" The commission would not, however, consider specific sites for a future repository.\nThe commission issued its final report on January 26, 2012. As expected, the report did not make any specific recommendations as to the \"suitability\" of Yucca Mountain, other than to make clear that the process of selecting and establishing the Yucca Mountain facility has suffered from several flaws and should be replaced by a new \"consent-based approach\" that provides \"incentives\" and encourages interested communities to \"volunteer\" as a potential host site for an eventual repository. While acknowledging that \"the future of the Yucca Mountain project remains uncertain,\" the commission did make specific findings that may have significant influence over the future of nuclear waste disposal. Importantly, the commission concluded that deep geologic disposal \"is the most promising and accepted method [of disposal] currently available,\" and therefore recommended that the United States \"should undertake an integrated nuclear waste management program that leads to the timely development of one or more permanent deep geological facilities for the safe disposal of spent fuel and high-level nuclear waste.\" Additionally, the commission concluded that \"new institutional leadership for the nation's nuclear waste program is clearly needed.\" The final report therefore recommended that control over nuclear waste disposal be removed from DOE, and instead vested in a newly established \"single-purpose organization\" that could \"provide the stability, focus, and credibility that are essential to get the waste program back on track.\" The commission found a sufficiently independent \"federal corporation chartered by Congress\" to be the most promising structure for this new entity. Finally, the commission reiterated the severe consequences of continued delays and urged Congress and the President to take action to institute the Commission's recommendations \"without further delay.\"\nRecognizing the delays in a permanent disposal solution, the commission also urged \"[p]rompt efforts to develop one or more consolidated storage facilities\" to contain SNF temporarily before final disposal. Such interim storage facilities could enable removal of SNF from shutdown reactors and could also allow the federal government to begin meeting its waste acceptance obligations sooner, reducing its liability. However, legal authority for the federal government to provide or arrange for centralized, consolidated storage is lacking under the NWPA; provisions of the NWPA addressing such storage either have expired or are tied to repository-related milestones that have not been met. Currently, nuclear reactors store spent fuel in pools or (after several years of \"cooling\") dry casks on- or off-site.\nDOE responded to the commission's recommendations in January 2013 with a new waste strategy that calls for a \"consent-based\" process to select nuclear waste storage and disposal sites. The strategy calls for geologic repository siting to occur by 2026, after development by the Environmental Protection Agency (EPA) of generic, non-site-specific, repository safety standards; the goal under the strategy is for repository licensing to be completed by 2042, and operations to begin by 2048. The strategy also calls for a pilot interim surface storage facility to open by 2021, and a larger consolidated interim storage facility by 2025, which would require new authority from Congress. In March 2015, President Obama reiterated support for the 2013 strategy and authorized DOE to move forward with planning for a separate repository for high-level radioactive waste resulting from atomic energy defense activities. This authorization reverses the conclusion made under President Reagan in 1985 that separate disposal of defense nuclear waste was not required and that defense and civilian waste could be disposed of together in a dual-purpose repository. DOE issued an invitation for public comments on the consent-based siting components of the strategy in late December 2015, held a series of public meetings in spring and summer 2016, and plans to release a draft report on the comments and meetings later in 2016.", "One of the more controversial actions taken by DOE was the agency's effort to terminate the NRC licensing proceeding by attempting to withdraw the Yucca Mountain license application. The 8,600-page license application had been submitted in June 2008. At the time of DOE's decision to withdraw its license application, NRC's review of the application was proceeding on two tracks: technical review by NRC staff, to be documented in a safety evaluation report, and preliminary phases of adjudication before the NRC's Atomic Safety and Licensing Board (Board), to resolve challenges by a number of parties to technical and legal aspects of the DOE application. The Board had admitted nearly 300 contentions, or contested issues, for adjudication.\nDOE formally filed its motion seeking to withdraw the Yucca Mountain license on March 3, 2010. The agency made clear that the decision to withdraw the license application was based on \"policy\" considerations. Specifically, DOE asserted that scientific and technological advancements since the enactment of the NWPA, such as dry cask storage and advanced recycling, \"provide an opportunity to develop better alternatives to Yucca Mountain.\" The agency further asserted that it did not \"intend ever to refile an application to construct a permanent geologic repository for spent nuclear fuel and high-level radioactive waste at Yucca Mountain.\" As discussed in the following section, DOE's withdrawal motion triggered strong opposition from a number of concerned parties.", "Several petitioners filed similar legal claims in two different venues immediately following DOE's withdrawal motion. These petitioners—Washington; South Carolina; Aiken County, South Carolina; the Prairie Island Indian Community; and the National Association of Regulatory and Utility Commissioners (NARUC)—petitioned to intervene in the NRC licensing proceeding in order to stop the withdrawal. Washington, South Carolina, and Aiken County, along with a group of private plaintiffs from Washington State, also filed statutory claims in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) challenging DOE's authority to withdraw the license application. Most of the aforementioned parties later joined claims in the D.C. Circuit challenging NRC's authority to terminate its review of DOE's license application.\nThe legal battle over the Secretary's authority to withdraw the license application—and the NRC's obligation to review the license application—hinged on specific statutory language within the NWPA. Section 114 outlines the process for obtaining the necessary site approval and construction authorization for a permanent repository and provides the statutory foundation for the ongoing litigation. The provision states that once the site approval procedures are completed and the site is designated, as was the case with Yucca Mountain, \"the Secretary shall submit to the [NRC] an application for a construction authorization for a repository.\" Upon submission of the application, the NRC \" shall consider\" the application \"in accordance with the laws applicable to such applications, except that the [NRC] shall issue a final decision approving or disapproving the issuance of a construction authorization not later than the expiration of 3 years after the date of the submission of such application.\"", "At the administrative level, the Board issued a sweeping opinion in June 2010, ruling that Secretary Chu did not have the authority to withdraw the Yucca Mountain license application. In rejecting DOE's arguments, the Board concluded that the statutory language of the NWPA \"mandates progress towards a merits decision,\" which DOE could not \"single handedly derail\" by withdrawing the license application. Beginning with the plain language of Section 114, the Board held that Congress had established a \"detailed, specific procedure\" that removed control of the license application process from the Secretary by creating a mandatory statutory scheme. In the Board's view, to allow DOE to withdraw the application as a matter of policy at this stage would be contrary to Congress's intent that the licensing process be \"removed from the political process.\"\nOne day after the Board's decision, and before DOE filed a formal appeal, the NRC released an order inviting the parties to file briefs on whether the commission should review the Board's decision. However, before the NRC took further action, the NRC Chairman at the time, Gregory Jaczko, directed NRC staff to use funds appropriated under the FY2011 Continuing Appropriations Act (CR) to close down the agency's review of the Yucca Mountain license application. In an October 4, 2010, memorandum, NRC staff were instructed to continue their Yucca Mountain activities \"in accordance with\" the commission's FY2011 budget request that had sought only $10 million to \"support work related to the orderly closure of the agency's Yucca Mountain licensing support activities.\" The Chairman's guidance was opposed by two fellow NRC commissioners as inconsistent with principles of appropriations law.\nNotwithstanding the ongoing budget dispute, the NRC released an order on September 9, 2011, stating that the \"Commission finds itself evenly divided on whether to take the affirmative action of overturning or upholding the Board's decision.\" Although not reaching a decision on the license withdrawal, the order, citing \"budgetary limitations,\" directed the Board to \"complete all necessary and appropriate case management activities, including disposal of all matters currently pending before it and comprehensively documenting the full history of the adjudicatory proceeding,\" by the end of the fiscal year. On September 30, 2011, the Board officially announced that \"because both future appropriated [Nuclear Waste Fund] dollars and [Full-Time Equivalent positions] for this proceeding are uncertain, and consistent with the Commission's Memorandum and Order of September 9, 2011, this proceeding is suspended.\" However, the Board made clear that because the commission remained evenly divided, \"the Board's decision to deny DOE's motion to withdraw [the license], therefore stands.\"", "In conjunction with opposing DOE's motion for withdrawal at the administrative level, a number of parties also filed cases in federal court in an attempt to stop the termination of the Yucca Mountain licensing proceeding. Statutory claims filed by South Carolina, Washington, and private plaintiffs were consolidated in the D.C. Circuit. The complaints alleged violations of the NWPA, the National Environmental Policy Act, and the Administrative Procedure Act—claims similar to those made before the NRC.\nIn a July 2011 decision entitled In re Aiken County I , the D.C. Circuit dismissed the challenges to the DOE license withdrawal as unripe. However, the court made clear that the plaintiffs may have found greater success had they challenged NRC's obligation to review the license application, as opposed to DOE's obligation to submit the application. The parties quickly re-filed, arguing that the NRC had no authority to terminate the licensing process. In In re Aiken County II , issued in August 2012, the court ruled that it would hold the case in abeyance until December 14, 2012, at which point the parties were directed to update the court on the status of FY2013 appropriations, giving Congress the opportunity to provide more clarity regarding the funding issue.\nOn August 13, 2013, in the final In re Aiken County decision, the D.C. Circuit issued a writ of mandamus ordering the NRC to resume processing DOE's license application. The order stated that since the court's 2012 order, \"Congress has taken no further action on this matter. At this point, the Commission is simply defying a law enacted by Congress, and the Commission is doing so without any legal basis.\" The court rejected NRC's arguments that it lacked funding to complete the Yucca Mountain licensing process, noting that \"Congress often appropriates money on a step-by-step basis\" and that the NRC \"ha[d] at least $11.1 million in appropriated funds—a significant amount of money—to [continue the licensing process].\" The court also noted that despite several years of appropriations for the Yucca Mountain licensing at or near zero, \"Congress speaks through the laws it enacts. No law states that the Commission should decline to spend previously appropriated funds on the licensing process…. [C]ourts generally should not infer that Congress has implicitly repealed or suspended statutory mandates based simply on the amount of money Congress has appropriated.\" The court concluded:\n[O]ur decision here does not prejudge the merits of the Commission's consideration or decision on the Department of Energy's license application, or the Commission's consideration or decision on any Department of Energy attempt to withdraw the license application. But unless and until Congress authoritatively says otherwise or there are no appropriated funds remaining, the Nuclear Regulatory Commission must promptly continue with the legally mandated licensing process.\nThe dissent in the case argued that the court should have used its discretion \"'not to order the doing of a useless act.'\"\nFollowing the decision granting the writ of mandamus, the State of Nevada sought rehearing en banc , but its petition was denied. Thereafter, certain petitioners moved to recover their attorneys' fees pursuant to the Equal Access to Justice Act; one such claim was settled and the court denied the remaining petitioners' claims on October 23, 2014.", "", "Days after the D.C. Circuit's 2013 decision in In re Aiken County , Nye County, a plaintiff in that litigation, submitted motions to the NRC and Atomic Safety and Licensing Board to lift the suspension of the licensing proceeding and to schedule a case management conference. The NRC sought input on how to restart the Yucca Mountain licensing process and directed its staff to gather pertinent budgeting information. The NRC thereafter issued an order and memorandum directing its staff to complete the remaining volumes of the Safety Evaluation Report (SER) for the Yucca Mountain construction authorization application, the first volume of which had been published in August 2010. The SER functions to explain the NRC staff's determination as to whether the Yucca Mountain application meets NRC regulations. The NRC also directed its staff to undertake certain records management activities. The NRC declined to resume the contested adjudication before the Board.\nIn addition, because NRC staff had previously determined in 2008 that the Environmental Impact Statement (EIS) submitted by DOE as part of its application was deficient in certain respects, particularly with respect to its discussion of groundwater impacts, the NRC requested that DOE prepare an EIS supplement. While recognizing (as it had in 2008) that either DOE or the NRC could prepare the EIS supplement, the NRC found that \"in promulgating the NWPA, Congress intended that the primary responsibility for evaluating environmental impacts rest with DOE,\" and that DOE had already performed significant analyses in support of the EIS supplement. However, on March 12, 2015, the NRC published a Federal Register notice explaining that the NRC, not DOE, would be preparing the EIS supplement.\nIn its November 2013 order, the NRC anticipated that completion of the SER (including necessary records management activities) and adoption of the EIS supplement would expend nearly all of the approximately $11 million in previously appropriated funds. The NRC therefore issued another order to its staff at that time regarding efficient use of available funds and preparation of plans and status reports. The NRC interpreted appropriations law as prohibiting it from expending general appropriations for Yucca Mountain-specific activities such as restoration of facilities, offices, and equipment involved in restarting the licensing proceedings. On March 4, 2015, NRC Chairman Stephen Burns testified before the Senate Appropriations Subcommittee on Energy and Water Development that $330 million in additional appropriations would be needed to complete the licensing process, including adjudicatory hearings.", "In its five-volume \"Safety Evaluation Report Related to Disposal of High-Level Radioactive Wastes in a Geologic Repository at Yucca Mountain, Nevada\" (SER), NRC staff found key deficiencies relating to the legal status of DOE's land and water rights at the site, described in more detail below. Even if NRC were to receive sufficient appropriations to complete the licensing proceedings, DOE's lack of ownership of required land and water would have to be resolved—most likely with the involvement of Congress—before NRC could grant a license for the Yucca Mountain nuclear repository.\nHowever, except for the issues with land ownership and water rights, the NRC staff generally approved the safety and regulatory compliance of DOE's application. These conclusions would support the NRC in eventually granting a license if the land and water rights were obtained, and if NRC and DOE were otherwise able to go forward with the overall licensing process. Volume 1 of the NRC staff's SER, published in August 2010, concludes that DOE provided information satisfying NRC's regulations regarding \"General Information\" in the license application. The remaining SER Volumes 2-5 present the NRC staff's evaluation of the \"Safety Analysis Report\" portion of DOE's license application. These volumes were published from October 2014 through January 2015. The second volume finds with \"reasonable assurance\" that with certain conditions, the repository design complies with NRC's regulations regarding performance objectives and preclosure safety requirements. The third likewise finds with \"reasonable expectation\" that the application complies with NRC regulatory requirements for postclosure safety, including multiple barriers and the performance assessments for individual protection, separate groundwater protection, and human intrusion.\nVolume 4 of the SER, on \"Administrative and Programmatic Requirements,\" describes two ways in which DOE's license application failed to meet applicable regulatory requirements. First, the NRC staff found that \"regulatory requirements … regarding ownership of the land where the [geologic repository operations area, or GROA] is located are not satisfied, because the lands where the GROA would be located have not been acquired by DOE, are not under the control and jurisdiction of DOE, and are not free of significant encumbrances.\" Specifically, the GROA and surrounding land within the proposed preclosure controlled area are under the control of several different federal agencies, including DOE, the U.S. Department of the Interior, and the U.S. Department of Defense. Volume 4 also noted that DOE had submitted a land withdrawal bill to Congress in 2007, but this was not enacted, and DOE has not completed any other land acquisition process.\nSecond, Volume 4 of the SER recognizes that NRC regulations require DOE to have obtained such water rights as may be needed to accomplish the purpose of the repository. DOE had filed a water appropriation request with the Nevada State Engineer on July 22, 1997, for permanent rights to 430 acre-feet annually from five wells, the maximum amount estimated to be required for construction. However, as described in more detail below and as summarized in the SER, \"DOE's actions to obtain water rights for this purpose have not been successful.\" Therefore, the NRC staff found that this regulatory requirement, too, had not been satisfied.\nBecause the land ownership and water rights regulatory requirements were not satisfied, and also because the environmental impact statement supplement had not yet been prepared, NRC staff did not recommend that the NRC issue a construction authorization at this time. Nevertheless, Volume 5 of the SER includes proposed conditions of construction authorization which \"could be included in a Construction Authorization if there is a Commission decision to authorize construction.\"", "NRC staff released a supplement to DOE's 2002 EIS in May 2016 to address the potential environmental impacts on groundwater, and impacts associated with the discharge of any contaminated groundwater to the ground surface, due to potential releases from a geologic repository at Yucca Mountain over a one-million-year period. The NRC uses a three-level standard of significance for assessing environmental impacts—small, medium, and large, where \"small\" impacts are found when \"[t]he environmental effects are not detectable or are so minor that they will neither destabilize nor noticeably alter any important attribute of the resource.\" The supplement \"finds that each of the potential direct, indirect, and cumulative impacts on the resources evaluated in this supplement would be SMALL.\"", "", "As noted in the Yucca Mountain SER, NRC regulations require DOE to have obtained such water rights as may be needed to accomplish the purpose of the repository. DOE's current lack of water rights for a repository at Yucca Mountain underlies one of the two regulatory deficiencies highlighted by NRC's Safety Evaluation Report, so background on the legal framework for such water rights may be helpful in assessing any potential congressional actions specifically relating to Yucca Mountain.\nSubject to certain exceptions, the allocation and use of water resources is primarily governed by state law, even on federally owned land. Allocation of water rights under state law often requires that users put the water to beneficial use. Under Nevada water law, beneficial use is \"the basis, the measure and the limit of the right to the use of water.\" As summarized by the state agency with authority over water resources:\nExamples of beneficial uses include irrigation, mining, stock watering, recreation, commercial, industrial, and municipal uses. Beneficial use also includes the underlying principle of the appropriative rights system of water allocation, known as 'use it or lose it.' In the West, where water resources are scarce, water users must demonstrate an actual beneficial use of water. They cannot speculate in water rights or hold on to water rights they do not actually intend to place to a beneficial use in a timely manner.\nThe Nevada State Engineer, whose office is housed within the Nevada Department of Conservation and Natural Resources, has authority over appropriations of surface water and groundwater in the state. Any person who wishes to appropriate waters in Nevada for a beneficial use, or to change an existing water right, must apply to the State Engineer for a permit prior to any work in connection with such appropriation. A \"person\" for purposes of this requirement includes the United States and federal agencies such as DOE. The permit application must include, among other information, the amount of water sought, the purpose, a description of the proposed works, and the estimated time to construct the works and apply the water to beneficial use. Pursuant to the \"use it or lose it\" principle, the applicant also must provide proof satisfactory to the State Engineer of the applicant's good faith intention, financial ability, and reasonable expectation to construct any work necessary to apply the water to the intended beneficial use with reasonable diligence. Any person interested may file a written protest against the granting of the application, and each protest must be considered.\nThe State Engineer must reject a water permit application where there is no unappropriated water in the proposed source of supply, where the proposed use conflicts with existing rights or with protectable interests in existing domestic wells, or where it threatens to prove detrimental to the public interest. The State Engineer also cannot approve an appropriation beyond the extent to which it is reasonably required for the beneficial use to be served. There is no provision in Nevada water law for the governor or any other person or entity, besides a court, to overrule a decision of the State Engineer. If an application is granted, a certificate of appropriation can be granted only after the applicant has filed proof of the application of the water to beneficial use, that is, the completion of the water works or project. Issuance of a certificate of appropriation \"perfects\" the water right.", "DOE submitted five water permit applications to the Nevada State Engineer on July 22, 1997. The applications sought to appropriate a cumulative 430 acre-feet annually from the groundwater of the Fortymile Canyon – Jackass Flat Hydrographic Basin for \"industrial purposes,\" including for road and facility construction, drilling, dust suppression, tunnel and pad construction, testing, and general site uses for the proposed Yucca Mountain repository. DOE sought the water appropriation to implement its responsibilities under the NWPA.\nThe applications were protested by several Nevada officials. After a hearing, the State Engineer denied the applications, based largely on the enactment of a Nevada statute banning storage of radioactive waste in the state. DOE appealed the State Engineer's ruling to the federal district court (with a protective notice of appeal in the appropriate county court). In a 2003 order, the district court revoked the State Engineer's ruling and remanded the matter back for a decision that did not consider the Nevada radioactive waste storage ban. After another hearing, the State Engineer again denied the applications later that year on the grounds that the proposed water appropriations would not constitute beneficial uses and would threaten to prove detrimental to the interests of the Nevada public.\nThe district court's 2003 order also granted a stay of the water rights proceedings while \"more encompassing\" issues involving the Yucca Mountain project were being litigated elsewhere. While the 2003 stay order was based primarily on deference to certain litigation in the D.C. Circuit, in 2005 the district court held that the decision in that litigation, Nuclear Energy Institute, Inc. v. EPA , left the status of the project still undetermined. The court recognized that \"whether the proposed repository is, in fact, licensable\" is an important consideration in determining, for the water rights appeal, \"[whether] the State Engineer was arbitrary and capricious in determining that the water permit applications are not in the public interest.\" The district court therefore maintained the stay, save for a limited allowance for DOE to file an amended complaint adding the State Engineer's updated ruling.\nThe litigation remains stayed as the licensing question remains uncertain, particularly given DOE's current opposition to the repository. However, the NRC's publication of the SER, described above, may have resolved some questions relating to \"whether the proposed repository is, in fact, licensable\" by determining that the application met regulatory requirements except for those relating to land ownership and water rights. If the district court does at some point lift the stay, the court could ultimately either affirm the State Engineer's 2003 ruling; overturn it and direct DOE's water permit applications be approved; or remand it to the State Engineer with guidelines for a new ruling.", "", "While the administrative adjudication and court litigation described above were brought with the aim of furthering progress toward a repository at Yucca Mountain, other parties have initiated other litigation aiming to stop any such progress and prevent a repository at Yucca Mountain, or to restrict nuclear power and nuclear waste generation more generally. The State of Nevada, in particular, has challenged aspects of Yucca Mountain-related decisions for many years. Some of Nevada's claims remain ongoing.\nThe Energy Policy Act of 1992 required EPA to issue public health and safety standards for radioactive material potentially disposed of at Yucca Mountain, and also directed the National Academy of Sciences (NAS) to conduct a study to provide recommendations on what such standards would be reasonable. The statute also required the NRC to modify, to be consistent with EPA's standards, its technical requirements and criteria that DOE's Yucca Mountain construction license application must meet under the NWPA to be granted by the NRC.\nNAS released its report in 1995 and EPA issued the standards for Yucca Mountain in 2001. The State of Nevada joined with various environmental groups to challenge EPA's radiation-protection regulation as insufficiently protective of public health and safety. The State of Nevada also joined with several jurisdictions within Nevada to challenge the NRC's licensing-criteria rule and DOE's site-suitability criteria as arbitrary and capricious under the Administrative Procedure Act; DOE's 2002 Final Environmental Impact Statement (FEIS) as unlawful under the National Environmental Policy Act (NEPA); and Congress's 2002 site approval resolution as unconstitutional. The Nuclear Energy Institute challenged EPA's groundwater standard as unnecessary and unlawful. These cases were consolidated and decided in 2004 in Nuclear Energy Institute, Inc. v. EPA , in which the D.C. Circuit held:\n(1) The 10,000-year compliance period selected by EPA violates section 801 of the Energy Policy Act (EnPA) because it is not, as EnPA requires, \"based upon and consistent with\" the findings and recommendations of the National Academy of Sciences [which had recommended a standard pegged to the time when radiation doses reach their peak, and had disapproved a 10,000-year period]. The remaining challenges to the EPA regulation are without merit. (2) The Nuclear Regulatory Commission's licensing requirements are neither unlawful nor arbitrary and capricious except to the extent that they incorporate EPA's 10,000-year compliance period. (3) The congressional resolution selecting the Yucca site for development represents an appropriate exercise of Congress's Article IV, section 3 authority over federal property. (4) The Department of Energy's and the President's actions leading to the selection of the Yucca Mountain site are unreviewable. All but one of Nevada's challenges to these actions are moot, and the remaining challenge [to the FEIS under NEPA] is unripe. Accordingly, we vacate the EPA and NRC regulations insofar as they include a 10,000-year compliance period. We deny or dismiss the remaining petitions for review.\nBecause the court dismissed Nevada's challenge to the FEIS on ripeness grounds, subsequent lawsuits bringing the same or a similar challenge to the FEIS were not foreclosed. Thus, Nevada challenged DOE's FEIS again in 2004, after DOE issued a Record of Decision based on the FEIS governing the transportation of nuclear waste from the production sources to Yucca Mountain. Nevada's petition was denied as still unripe, because DOE's implementation of the transportation plan was contingent on various conditions—such as approval of a construction license for Yucca Mountain, or a \"concrete decision\" in that direction. In June 2008, DOE issued a Supplemental Environmental Impact Statement for the Yucca Mountain repository, as well as Environmental Impact Statements for the related Nevada Rail Corridor and Rail Alignment. The State of Nevada filed comments in 2008 before the U.S. Surface Transportation Board opposing DOE's application to construct the rail corridor, arguing in part that the NEPA analyses were flawed. There appears to have been little further court activity challenging the Yucca Mountain NEPA analyses in light of the developments beginning with DOE's attempted withdrawal of its license application. As noted above, NRC completed a supplement to DOE's 2008 Environmental Impact Statement in May 2016.\nAfter the Nuclear Energy Institute court struck down that portion of EPA's rule relating to the 10,000-year compliance period, EPA released a new proposal in 2005 and reissued the public health and safety standards for Yucca Mountain in 2008, this time establishing dose standards applicable for a period up to 1 million years after disposal. NRC reissued its regulations consistent with EPA's standards in 2009. The State of Nevada, and others, again brought lawsuits in the D.C. Circuit challenging the EPA and NRC rules as insufficiently protective and otherwise legally deficient. However, the trajectory of this litigation was changed with the Obama Administration's opposition to a nuclear waste repository at Yucca Mountain and DOE's attempted withdrawal of the license application. Given the continued suspension of the Yucca Mountain license application adjudicatory proceedings before the Board, as well as other uncertainty surrounding the Yucca Mountain project, Nevada's lawsuits against EPA and NRC regarding their Yucca Mountain standards have been held in abeyance, subject to periodic status reports.\nNotably, the legal validity of the EPA and NRC standards for Yucca Mountain were assumed by NRC in its Safety Evaluation Report. However, if any aspect of the standards were to be struck down in the future, then the conclusions of the SER—which, as noted above, generally found DOE's license application to meet the NRC standards —could be thrown into jeopardy.", "The NRC's \"Waste Confidence\" proceedings have also provided a basis for ongoing litigation that continues to be shaped by the Yucca Mountain saga. Litigation on the topic reaches back to the late 1970s, when environmental groups and states asked the NRC to condition its individual reactor operating license decisions on determinations that the reactors' radioactive wastes could be disposed of safely. In the 1979 decision in Minnesota v. NRC , the D.C. Circuit agreed with the environmental groups and states. It ordered the NRC to determine, by rulemaking or other generic (as opposed to license-by-license) determination, whether offsite storage or disposal would be available for SNF when reactors' licenses expired, and if not, whether the SNF could be safety stored at decommissioned reactors until an offsite solution became available.\nIn response to Minnesota v. NRC , the NRC issued its first waste confidence rule in 1984, supported by an environmental assessment and finding of no significant impact pursuant to NEPA. The NRC found \"reasonable assurance\" that, among other things, safe disposal of SNF and HLW in a geologic repository was technically feasible; one or more geologic repositories with sufficient capacity would be available by 2009; SNF and HLW would be managed safely until sufficient repository capacity became available; and if necessary, SNF could be stored safely and without significant environmental impacts for at least 30 years beyond the expiration of a reactor's operating license at that reactor or at an offsite storage installation.\nThe NRC amended its waste confidence rule several times, including in 2010 to extend the timeframes, due in part to the Yucca Mountain delays and uncertainties. In the 2010 waste confidence rule, the NRC found that SNF could be stored safely for at least 60 years beyond the expiration of a reactor's operating license and that sufficient mined geologic repository capacity would be available when necessary. The 2010 rule amendment was struck down in 2012, when the D.C. Circuit held that it violated NRC's NEPA obligations. In particular, the court held that the NRC had to examine the environmental effects of failing to establish a permanent repository, \"a possibility that cannot be ignored;\" and the court also ordered the NRC to examine certain potential risks relating to interim storage of SNF. The NRC largely suspended issuing reactor or storage installation licenses until its assessments and rulemaking responding to the decision were completed.\nThe NRC finalized a revised rule entitled \"Continued Storage of Spent Nuclear Fuel\" in September 2014, codifying the environmental impact determinations reflected in the generic environmental impact statement (GEIS) issued at the same time. \"Because the timing of repository availability is uncertain,\" the GEIS analyzes potential environmental impacts over a short-term timeframe of 60 years of continued storage after the end of a reactor's licensed life for operation; a 160-year timeframe to address the potential for delay in repository availability; and an indefinite timeframe \"to address the possibility that a repository never becomes available.\" The rule provides that the impact determinations in the GEIS shall be deemed incorporated into the environmental assessments and environmental impact statements required by other regulatory provisions for licensing actions. The NRC also lifted the suspension on licensing decisions at that time.\nThe States of New York, Connecticut, and Vermont, along with the Prairie Island Indian Community and a number of interest groups, filed suit in the D.C. Circuit to challenge the 2014 Continued Storage rule, the underlying GEIS, and the NRC's order lifting the suspension on licensing decisions. The State of Massachusetts and the California State Energy Resources Conservation and Development Commission intervened on behalf of the petitioners, while several power companies and the Nuclear Energy Institute intervened on behalf of the respondent agencies. Administrative petitions to suspend nuclear reactor licensing decisions and motions to admit new contentions to nuclear reactor licensing dockets were also filed before the NRC in September 2014 on similar grounds; briefing in the litigation was deferred until after the NRC denied the administrative petitions and motions in February 2015.\nOn June 3, 2016, a three-judge panel of the D.C. Circuit upheld the NRC's Continued Storage rule. In its decision in New York v. NRC , the court held, among other things, that \"none of [the challenged] assumptions is so unreasonable as to render the NRC's decision-making arbitrary or capricious,\" and that the GEIS sufficiently analyzed the impacts of continued storage of SNF. The court stated:\nWe acknowledge the political discord surrounding our nation's evolving nuclear energy policy. But the role of Article III courts in this debate is circumscribed. \"The scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency.\" To the extent that the petitioners disagree with the NRC's current policy for the continued storage of spent nuclear fuel, their concerns should be directed to Congress.\nThe D.C. Circuit denied petitioners' request for rehearing en banc .", "A series of decisions in the D.C. Circuit have also affected the statutory mechanism by which the construction and operation of the Yucca Mountain repository was to be funded. As required by the NWPA, the DOE entered into contracts with nuclear power utilities in which the agency agreed to collect and dispose of SNF and high-level nuclear waste in exchange for ongoing payments by the utilities into the statutorily established Nuclear Waste Fund (NWF). The law further requires the Secretary of Energy to annually \"review\" the fees to determine if the NWF will provide sufficient revenue to fund the waste disposal program and propose an adjustment to the fee if he determines that either excessive or inadequate revenue is being collected. Despite the fact that DOE had neither begun collecting nuclear waste nor constructed a disposal facility—and indeed determined that the Yucca Mountain facility is \"unworkable\"—the agency continued to collect the NWF fees (amounting to approximately $750 million per year). Nor had the Secretary proposed a fee adjustment—instead concluding that continued collection of the fee at established levels was warranted.\nIn 2010, the National Association of Regulatory Utility Commissioners (NARUC) challenged the Secretary's continued collection of the NWF fee, arguing that the Secretary had not adequately considered costs and revenues, and had failed to take into consideration the Obama Administration's decision to terminate the Yucca Mountain waste facility.\nIn June 2012, the D.C. Circuit agreed with NARUC and ruled that the Secretary's fee determination was inadequate, holding that it was \"unreasonable\" for the agency to use Yucca Mountain as a \"proxy\" for calculating future costs when the DOE itself deemed the facility \"unworkable.\" The court added that the Secretary's failure to engage in \"sophisticated evaluations of the potential costs of a hypothetical repository\" was arbitrary and capricious. At the time, however, the court found it \"premature\" to order the Secretary to suspend the fee, instead directing the Secretary to respond with a new fee assessment within six months.\nThe Secretary responded to the court's order by asserting that he could not determine whether the fees were inadequate or excessive because the agency had concluded that the NWF's capacity to cover the future costs of nuclear waste disposal could span anywhere from a $2 trillion deficit to a $4.9 trillion surplus—a range the D.C. Circuit characterized as \"so large as to be absolutely useless as an analytical technique to be employed to determine—as the Secretary is obligated to do—the adequacy of the annual fees paid by petitioners.\"\nThe court rejected the Secretary's position, holding that \"[t]he Secretary may not comply with his statutory obligation by 'concluding' that a conclusion is impossible\" and that many of the agency's assumptions in reaching its estimate were in conflict with the NWPA. Given the Secretary's failure to produce an adequate fee assessment, the court ordered the Secretary to propose an alteration of the NWF fee to zero \"until such a time as either the Secretary chooses to comply with the Act as it is currently written, or until Congress enacts an alternative waste management plan.\"\nThe DOE officially ceased collection of the NWF fee on May 16, 2014.", "As previously mentioned, the NWPA directed the DOE to enter into contracts with nuclear power utilities, the terms of which obligated the federal government to collect and dispose of the operator's SNF and high-level waste in exchange for the payment of fees to the NWF. The NWPA expressly stated that these contracts (known as the Standard Contract) require the federal government to begin disposal of the covered nuclear waste no later than January 31, 1998. With no available repository, DOE breached the Standard Contract by failing to begin the acceptance and disposal of SNF by the statutory deadline established in the NWPA. As a result, nuclear utilities have spent billions of dollars on temporary storage for toxic SNF that DOE is contractually and statutorily required to collect for disposal. The breach has triggered a prolonged series of suits by nuclear power providers seeking to recover damages for DOE's failure to perform its statutory and contractual obligations. DOE estimates total liability stemming from these cases will reach $29 billion.\nAlthough DOE has acknowledged its partial breach of the Standard Contract in most cases, significant litigation has been required to determine the level of damages individual nuclear utilities may legally recover. The nuclear utilities have pursued their breach of contract claims under a partial breach theory. Generally speaking, when one party to a contract materially breaches the contract, the non-breaching party has the option to sue for damages under either a \"full breach\" or \"partial breach\" theory. A successful claim for full breach discharges the contractual obligations of both parties and allows the non-breaching party to sue for all past, present, and future damages. A claim for partial breach, on the other hand, preserves the ongoing contractual relationship between the parties—meaning both parties are still obligated to perform under the terms of the contract. Additionally, a party suing for partial breach may only recover the costs of mitigating the other party's breach that were incurred between the time the party became aware of a potential breach and the date of trial, and may not, therefore, recover future damages.\nNuclear utilities have generally been successful in recovering all reasonable and foreseeable expenses incurred in mitigation of DOE's breach. These damages typically consist of costs associated with developing, implementing, and maintaining on-site interim SNF storage. Damages are limited, however, to the costs incurred from the date at which the utility became aware of DOE's potential breach, a realization often occurring well before the January 31, 1998, deadline, to the date of trial. Nuclear utilities are free, however, to re-file future claims as new damages are incurred. The Judgment Fund of the U.S. Treasury, not the NWF, has been the source of federal funds for the payment of eligible claims; as of the end of FY2015, a total of $5.3 billion had been paid for settlements and final judgments.", "", "The Obama Administration's FY2017 budget request included an increase in funding for disposal of SNF, including funding to expand DOE's efforts to develop a \"consent-based\" nuclear waste disposal system in lieu of a repository at Yucca Mountain. Similar to previous years, the House Appropriations Committee rejected the Administration's program funding request and instead voted to provide $170 million to continue the Yucca Mountain licensing process. (As noted above, NRC is currently winding down the licensing process using what remains of previously appropriated funds; the NRC Chairman has testified that completion of the licensing process for Yucca Mountain, including the adjudication, would cost $330 million, not including any costs that would be incurred by DOE as the license applicant. ) Likewise similar to previous years, the Senate has not included any funding to continue the Yucca Mountain licensing process, but did include provisions granting DOE authority to move forward with a pilot consolidated interim nuclear waste storage facility with consent-based siting, notwithstanding any other provisions of the NWPA. The Senate approved its version of the FY2017 Energy and Water Development appropriations bill on May 12, 2016, but the House version of the bill did not pass a roll call vote on the House floor on May 26, 2016.", "Several bills have been introduced to implement a number of the recommendations made in 2012 by the Blue Ribbon Commission on America's Nuclear Future. S. 854 , the Nuclear Waste Administration Act of 2015, would establish a new Nuclear Waste Administration (NWA) as an independent agency in the executive branch, to which all current DOE functions under the NWPA and all current nuclear waste disposal contracts would be transferred. Repository siting would no longer be set by statute at Yucca Mountain; rather, all repository and storage siting would be required to follow a consent-based procedure. A new Nuclear Waste Oversight Board would oversee various funding, fee, and contract-related matters. S. 854 would remove a number of limitations on the nuclear agency's authority currently imposed by the NWPA. It would require the NWA to establish a program for at least one federal or private nuclear waste storage facility to provide interim storage, starting with a pilot program for high-priority waste such as waste from decommissioned nuclear reactors. It would also expressly allow for reevaluation of the determination, made in 1985, that a separate facility for defense nuclear waste was not \"necessary,\" and would more broadly allow separate facilities \"if necessary or appropriate.\" NWPA's current repository volume limitations would also be revoked. The bill also contains various provisions on nuclear waste transportation, technical assistance, and funding and cost recovery.\nS. 854 expressly provides that ongoing litigation against DOE regarding nuclear waste disposal contracts shall \"not abate by reason of the enactment of this Act,\" and would continue with the Administrator of the NWA substituted for the Secretary of Energy. However, the bill directs the Administrator, together with the Attorney General, to settle the claims \"as a condition precedent of an agreement of the Administrator to take title to and store the nuclear waste of the contract holder at a storage facility,\" and to modify contracts in accordance with such settlements.\nAnother pair of bills introduced in the 114th Congress in both houses, the Nuclear Waste Informed Consent Act, H.R. 1364 and S. 691 , would relate more narrowly to the Blue Ribbon Commission's recommendation for a new \"consent-based approach\" to nuclear waste facility siting. These bills would prohibit the NRC from granting a nuclear waste repository construction license unless DOE has entered into a written agreement to host the repository with the governor of the state in which the repository is proposed to be located; each affected unit of local government as well as any unit of general local government contiguous to the affected unit of local government through which SNF or HLW would be transported; and each affected Indian tribe. The bills also clarify that the consent requirements apply to DOE's pending 2008 application for a construction license Yucca Mountain, as well as to any application submitted thereafter. Notably, comparable provisions of S. 854 would extend to nuclear waste storage facilities as well as permanent repositories, but S. 854 does not include contiguous local governments through which waste would be transported.\nThe Interim Consolidated Storage Act, H.R. 3643 and H.R. 4745 , would amend the NWPA to expressly authorize DOE to enter or modify contracts for the storage of HLW or SNF with any licensed interim consolidated storage facility, and to specify that DOE's transfer of HLW or SNF to such a facility would satisfy Standard Contract obligations. H.R. 3643 also would enable DOE to use \"necessary amounts\" from the Nuclear Waste Fund for certain costs in connection with an interim consolidated storage facility, without further appropriation; this provision is removed in H.R. 4745 . Waste Control Specialists LLC (WCS), a private company, in collaboration with Andrews County, Texas, has proposed to develop an interim consolidated storage facility in Texas, and has filed a license application with the NRC; an application for a second centralized interim storage facility in New Mexico is expected to be filed by another company, Holtec International, later in 2016.", "Taking a contrasting approach to the bills above, in the 113th Congress, H.R. 3895 , the Energy Exploration and Production to Achieve National Demand Act, or EXPAND Act, would have directed the NRC to continue to review DOE's pending license application to construct the repository at Yucca Mountain and to approve such application within 180 days after enactment, apparently notwithstanding any lack of appropriations or any determinations by the NRC finding deficiencies in the application. H.R. 3895 also would have removed statutory limitations on the amount of radiological material that can be placed in Yucca Mountain and required the NRC to replace such limitations with new limits based on scientific and technical analysis. In addition, H.R. 3895 would have mandated the NRC to take certain measures to accelerate nuclear energy development.", "Several other bills have been introduced in the 114th Congress relating to nuclear waste reduction and storage safety, and they have taken diverging approaches to dealing with the current lack of disposal options stemming from the hurdles that have faced the Yucca Mountain repository. With respect to nuclear waste reduction, H.R. 1806 , the America COMPETES Reauthorization Act of 2015, contains various provisions for DOE nuclear energy research, including \"[r]educing used nuclear fuel and nuclear waste products generated by civilian nuclear energy,\" as well as \"[r]educing the environmental impact of nuclear energy-related activities.\" More specifically, the bill replaces DOE's Nuclear Reactor 2010 program with a program for reactor concepts that, among other attributes, \"substantially reduce production of high-level waste per unit of output.\" Fuel cycle research and development under the bill would also encompass a variety of potential strategies to minimize nuclear waste creation (including by nuclear fuel recycling), improve safety, and improve waste management and storage. H.R. 1806 passed the House on May 20, 2015, on a 217-205 vote and was referred to the Senate Committee on Commerce, Science, and Transportation.\nA series of bills in the Senate target SNF storage management for active and decommissioned nuclear power plants, with an emphasis on moving SNF out of pools. S. 944 , the Safe and Secure Decommissioning Act of 2015, would prohibit NRC from granting any regulatory waiver or exemption for a nuclear power reactor that has permanently shut down, thereby requiring NRC to impose full safety and security requirements, unless and until all of that reactor's SNF has been transferred from pools to dry casks. S. 945 , the Dry Cask Storage Act of 2015, would require nuclear power plants to develop, and NRC to review and approve or disapprove, plans for removing SNF from storage pools and transfer it to dry cask storage facilities. S. 964 , the Nuclear Plant Decommissioning Act of 2015, would expand requirements for post-shutdown decommissioning activities reports to increase state, local, and public involvement and NRC oversight. Similar bills were introduced in the 113 th Congress." ], "depth": [ 0, 1, 2, 2, 1, 2, 2, 2, 2, 3, 3, 2, 3, 3, 3, 1, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full", "", "h0_full", "h0_title h2_title h3_title h1_full", "h1_full", "h0_full h3_full h1_full", "h1_full", "h1_title", "", "h1_full", "h2_title", "h2_full", "h2_full", "h2_full", "h2_title", "", "h2_full", "h3_title", "", "h3_full", "", "", "h3_title", "", "h3_full", "", "" ] }	{ "question": [ "What was the purpose of NWPA?", "What does NWPA require?", "How did Congress attempt to mitigate the difficulties of imposing a federal nuclear waste facility on one community?", "What actions did Congress take in 1987?", "What have the Obama administration and DOE done since 2009?", "What steps have the Obama administration and DOE taken?", "Why did the NRC suspend the Yucca Mountain Licensing proceeding in 2011?", "What action did the US Court of Appeals for D.C circuit take in 2013?", "What did NRC staff complete in 2015?", "What did the report conclude?", "Why has litigation challenging the Nevada State Engineer's denial of DOE's application for permanent water rights been stayed?", "What did NRC staff complete in 2016?", "What nuclear waste issues have been litigated?", "What did the US Court of Appeals for the District of Columbia Circuit reject in 2016?", "What are private companies seeking in the absence of a permanent repository?" ], "summary": [ "The Nuclear Waste Policy Act of 1982 (NWPA) was an effort to establish an explicit statutory basis for the Department of Energy (DOE) to dispose of the nation's most highly radioactive nuclear waste.", "The NWPA requires DOE to remove spent nuclear fuel from commercial nuclear power plants, in exchange for a fee, and transport it to a permanent geologic repository or an interim storage facility before permanent disposal.", "In an effort to mitigate the political difficulties of imposing a federal nuclear waste facility on a single community, Congress attempted to establish a scientifically based, multi-stage statutory process for selecting the eventual site of the nation's new permanent geologic repository.", "Congress amended the NWPA's site selection process in 1987, however, and designated Yucca Mountain, Nevada, as the sole candidate site for the repository by terminating site-specific activities at all other sites.", "Since 2009, the Obama Administration and DOE have taken a number of steps directed toward terminating the Yucca Mountain project.", "First, the Administration's budget proposals have eliminated all funding for the project. Second, the President established a Blue Ribbon Commission to consider alternative solutions to the nation's nuclear waste challenges; in response to its recommendations, DOE is designing a consent-based siting process. Third, DOE attempted to terminate the Nuclear Regulatory Commission's (NRC's) Yucca Mountain licensing proceeding by seeking to withdraw its 2008 license application.", "Although DOE's motion to withdraw the application was denied by the NRC's Atomic Safety and Licensing Board, the NRC suspended the Yucca Mountain licensing proceeding in 2011, claiming budgetary limitations.", "In 2013, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) directed the NRC to resume its review of DOE's license application using what remained of previously appropriated funds, although it acknowledged that such funds were insufficient for the NRC to complete the review.", "Following the D.C. Circuit's decision, NRC staff completed work on a Yucca Mountain Safety Evaluation Report (SER) in 2015.", "The SER concluded that DOE's license application met regulatory requirements, except for requirements related to ownership of land and certain water rights.", "Litigation challenging the Nevada State Engineer's denials of DOE's applications for permanent water rights has been stayed for more than a decade pending resolution of other issues relating to the future of Yucca Mountain.", "In May 2016, NRC staff also completed work on a supplement to DOE's environmental impact statement to address groundwater impacts.", "Various other related nuclear waste issues also have been litigated, including safety standards for disposal, Nuclear Waste Fund fees (no longer being collected), and the federal government's contract liability for failure to take title to and dispose of nuclear waste.", "In June 2016, the U.S. Court of Appeals for the District of Columbia Circuit rejected a challenge to the NRC's rule and environmental impact statement supporting the continued, and possibly indefinite, storage of nuclear waste, saying \"[t]o the extent that the petitioners disagree with the NRC's current policy for the continued storage of spent nuclear fuel, their concerns should be directed to Congress.\"", "Meanwhile, in the absence of a permanent repository, private companies have sought to establish consolidated interim storage facilities, which would require legislative authorization as well as agency approvals." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, -1, -1, -1, 0, -1, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3 ] }
CRS_R42733	{ "title": [ "", "Introduction", "Analysis", "\"Like Products\" and \"Treatment no Less Favorable\" Under Article 2.1 of the TBT Agreement", "Analytical Framework", "Relevance of Regulatory Purpose of the Technical Regulation to the Likeness Determination", "Like Products", "End-Uses", "Consumer Tastes and Habits", "Less Favorable Treatment", "Analytical Framework", "Product Scope of the \"Treatment No Less Favorable\" Comparison", "Temporal Scope of the \"Treatment No Less Favorable\" Comparison", "Legitimate Regulatory Distinction", "\"Reasonable Interval\" Under Article 2.12 of the TBT Agreement", "Paragraph 5.2 of the Doha Ministerial Decision as a Legally Binding Interpretation Adopted Under Article IX:2 of the WTO Agreement", "Paragraph 5.2 of the Doha Ministerial Decision as a Subsequent Agreement Within Article 31(3)(a) of the Vienna Convention", "Interpretation of Article 2.12 of the TBT Agreement In Light of Paragraph 5.2 of the Doha Ministerial Decision", "Prima Facie Case That the United States Violated Article 2.12 of the TBT Agreement", "The U.S. Response", "Conclusion" ], "paragraphs": [ "", "In an effort to curb youth smoking, Section 907(a)(1)(A) of the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) banned all flavorings in cigarettes except menthol. The ban took effect three months after the Tobacco Control Act became law. This ban was in response to the burgeoning market for cigarettes with flavors, like spice, fruit, and candy, that appealed to youth. Although menthol cigarettes also appeal to youth, they represent over a quarter of all the cigarettes smoked, meaning they have broad appeal among adults also. Rather than ban menthol cigarettes, therefore, Congress authorized the Food and Drug Administration (FDA) to \"ban or modify the use of menthol in cigarettes based on scientific evidence.\" The FDA is studying the matter and has taken no action to date with respect to banning menthol in cigarettes. Clove cigarettes, which are banned by the Tobacco Control Act as non-menthol flavored cigarettes, are primarily imported from Indonesia, while menthol cigarettes are primarily produced domestically.\nThe United States and Indonesia are Members of the World Trade Organization (WTO), a multilateral international economic organization created by the Marrakesh Protocol, which was signed in 1994. The Agreement Establishing the World Trade Organization (WTO Agreement) includes a number of agreements to which all WTO Members must agree. Among these agreements are the Agreement on Technical Barriers to Trade (TBT Agreement) and the General Agreement on Tariffs and Trade (GATT 1994). Article 2.1 of the TBT Agreement requires WTO Members to treat \"like\" imported products no less favorably than \"like\" domestic products with respect to domestic regulations that set forth product characteristics. Article 2.2 of the TBT Agreement provides that such regulations cannot be \"more trade restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment would create.\"\nIndonesia brought a claim before the WTO, arguing, among other things, that imported clove cigarettes are like domestically produced menthol cigarettes; that the Tobacco Control Act treats clove cigarettes less favorably than menthol cigarettes in violation of Article 2.1; and that the Tobacco Control Act is more trade restrictive than necessary under Article 2.2. Indonesia also claimed that the ban, in taking effect after three months, violates Article 2.12 of the TBT Agreement, which requires a \"reasonable interval\" between a law's publication and its taking effect. The panel hearing Indonesia's claim agreed with Indonesia as to Articles 2.1 and 2.12, but rejected its argument with respect to Article 2.2. The United States appealed the panel's finding with respect to Articles 2.1 and 2.12 to the Appellate Body. Indonesia did not appeal the panel's finding with respect to Article 2.2.\nAlthough the Appellate Body disagreed with the panel's interpretation of certain terms, it upheld the panel's conclusion that the Tobacco Control Act violated Article 2.1 of the TBT Agreement, concluding that clove cigarettes are like menthol cigarettes and that clove cigarettes receive less favorable treatment under Section 907(a)(1)(A) than menthol cigarettes. In reaching this conclusion, the Appellate Body treated this as a case of de facto , not de jure , discrimination. It concluded that Article 2.1 should be interpreted in conjunction with Article III:4 of the GATT 1994 and that likeness under Article 2.1, therefore, is based on the competitive relationship of the products. The Appellate Panel stated also that detrimental impacts on like imported products are permissible provided they are due exclusively to legitimate regulatory distinctions. The Appellate Body rejected that the United States had a legitimate reason for banning clove cigarettes, while not banning menthol cigarettes. The United States had argued that because millions of adults smoke menthol cigarettes, a ban would result in the development of a black market for menthol cigarettes and the health care system being overwhelmed by the many people who satisfied their nicotine addiction by smoking menthol cigarettes. The Appellate Body focused on the purpose of the ban, which was to ban cigarettes with characterizing flavors that mask the harshness of cigarette smoke because such cigarettes appeal to youth smokers. However, the Appellate Body stated that menthol cigarettes share with clove cigarettes the very characteristic that justified the ban—they have a characterizing flavor that masks the harshness of tobacco smoke. Moreover, the Appellate Body questioned the likelihood of the development of a black market and the health care system being overwhelmed by menthol smokers in the event the United States were to ban menthol cigarettes, noting that regular cigarettes contain nicotine and would remain available. Therefore, the Appellate Body found that the decision to exempt menthol cigarettes from the ban on flavored cigarettes was not justified by a legitimate policy distinction. However, it reiterated that public health concerns, such as curbing youth smoking, are legitimate regulatory ends.\nAs mentioned above, Indonesia claimed that the Tobacco Control Act was more trade restrictive than necessary in violation of Article 2.2, but the panel found that Indonesia failed to make its case. Indonesia did not appeal that conclusion. In particular, the panel found that the ban's purpose, to reduce youth smoking, was a legitimate regulatory end; that Indonesia failed to demonstrate that the ban would make no \"material contribution\" to the goal of reducing youth smoking; and that Indonesia had failed to establish that there were less trade restrictive measures that the United States could take that would achieve a comparable reduction in youth smoking. Accordingly, the panel concluded that Indonesia had failed to establish that the ban on clove cigarettes was more trade restrictive than necessary. Because Indonesia did not appeal that part of the decision, the panel's conclusion stands.\nArticle 2.12 of the TBT Agreement requires a \"reasonable interval\" between publication of a technical regulation and its effective date. Indonesia complained that the Tobacco Control Act provided an interval between publication and effective date of three months while the term \"reasonable interval\" meant not less than six months. Indonesia based this claim on the fact that paragraph 5.2 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns (Doha Ministerial Decision) interpreted \"reasonable interval\" within Article 2.12 to mean not less than six months. Paragraph 5.2, Indonesia argued, was a legally binding interpretation under Article IX:2 of the WTO Agreement. Without finding that paragraph 5.2 was a legally binding interpretation under Article IX:2, the panel determined that it must \"guide\" the panel's interpretation of \"reasonable interval.\" In the alternative, the panel found that paragraph 5.2 could be considered a subsequent agreement of the parties within Article 31(3) of the Vienna Convention on the Law of Treaties (Vienna Convention). Ultimately, it found that the Tobacco Control Act violated Article 2.12.\nThe Appellate Body determined that paragraph 5.2 was not a legally binding interpretation under Article IX:2 of the WTO Agreement, but it was a subsequent agreement under Article 31(3) of the Vienna Convention. Therefore, the burden to present a prima facie case that the interval provided by the Tobacco Control Act is less than six month fell on Indonesia, as the complaining Member, and the burden to rebut this prima facie showing by demonstrating that the interval is reasonable fell on the United States, as the responding Member. Because the Appellate Body concluded that Indonesia presented a prima facie case which the United States failed to rebut, it held that the Tobacco Control Act violated Article 2.12 of the TBT Agreement.\nIn response to the Appellate Body's decision, the United States suggested that it will likely maintain the ban on clove cigarettes and stated that it will act in a way that respects its obligations under the WTO Agreement. However, it appears that the United States has not yet settled on a course of action.", "", "Article 2.1 of the TBT Agreement requires Members to treat imported products that are like domestic products no less favorably than the domestic products with regard to technical regulations. The Appellate Body upheld the panel's conclusion that imported clove cigarettes are like domestically produced menthol cigarettes and that the Tobacco Control Act treats imported clove cigarettes less favorably than it treats domestic menthol cigarettes. This case presented one of the first opportunities for the Appellate Body to interpret what \"likeness\" and \"treatment no less favourable\" mean in Article 2.1.", "The Appellate Body began its analysis by \"consider[ing] Article 2.1 as a whole in its context and in light of the object and purpose of the TBT Agreement.\" The Appellate Body focused on the Preamble of the TBT, in particular, the second, fifth, and sixth recitals.\nThe second recital states: \" Desiring to further the objectives of GATT 1994.\" The Appellate Body interpreted this recital to mean that \"the TBT Agreement expands on existing GATT disciplines and emphasizes that the two Agreements should be interpreted in a coherent and consistent manner.\"\nThe fifth recital provides: \" Desiring however to ensure that technical regulations and standards, … and procedures for assessment of conformity with technical regulations and standards do not create unnecessary obstacles to international trade.\" The Appellate Body observed that the fifth recital is \"reflected in those TBT provisions that aim at reducing obstacles to international trade and that limit Members' right to regulate, for instance, by prohibiting discrimination against imported products (Article 2.1) or requiring that technical regulations be no more trade restrictive than necessary to fulfill a legitimate objective (Article 2.2).\"\nHowever, the fifth recital is qualified by the sixth recital, which states:\nRecognizing that no country should be prevented from taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement.\nThe Appellate Body read the sixth recital \"to suggest that Members have a right to use technical regulations in pursuit of their legitimate objectives, provided that they do so in an even-handed manner and in a manner that is otherwise in accordance with the provisions of the TBT Agreement.\" Characterizing the preamble as balancing \"on the one hand, the desire to avoid creating unnecessary obstacles to international trade and, on the other hand, the recognition of Members' right to regulate,\" the Appellate Body stated that the balance \"is not, in principle, different from the balance set out in the GATT 1994, where obligations such as national treatment in Article III are qualified by the general exceptions provision of Article XX.\"\nNext, the Appellate Body noted that Article 2.1 applied to \"technical regulations,\" which are defined as \"[d]ocument[s] which lay[] down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory.\" The Appellate Body concluded that \"in the case of technical regulations, the measure itself may provide elements that are relevant to the determination of whether products are like and whether less favourable treatment has been accorded to imported products.\"\nFinally, the Appellate Body noted the similarity of the language of the national treatment obligation of Article 2.1 and the language of Article III:4 of the GATT 1994. Noting that the two Articles share the same core terms—\"like products\" and \"treatment no less favourable\"—and the same scope of application, the Appellate Body determined that \"in interpreting Article 2.1 of the TBT Agreement, a panel should focus on the text of Article 2.1, read in the context of the TBT Agreement, including its preamble, and also consider other contextual elements, such as Article III:4 of the GATT 1994.\" Therefore, the Appellate Body recognized the similarity of Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 for their core terms (\"like products\" and \"less favourable treatment\"), as well as their similarity in providing room for Members to regulate for domestic purposes.", "One of the issues before the Appellate Body was the extent to which the regulatory purpose of the technical regulation at issue should influence the likeness analysis. The panel wrote that the purpose of Section 907(a)(1)(A) of the Tobacco Control Act must inform the likeness analysis under Article 2.1 of the TBT Agreement: \"the declared legitimate public health objective of Section 907(a)(1)(A), i.e. the reduction of youth smoking, must permeate and inform our likeness analysis.\"\nThe Appellate Body rejected the panel's approach, concluding that the regulatory purpose of the measure at issue does not directly factor in the likeness analysis. It explained that \"the concept of 'like products' serves to define the scope of products that should be compared to establish whether less favourable treatment is being accorded to imported products.\" The Appellate Body \"consider[ed] that the determination of likeness under Article 2.1 of the TBT Agreement, as well as under Article III:4 of the GATT 1994, is a determination about the nature and extent of a competitive relationship between and among the products at issue.\" Regulatory concerns behind a technical regulation may nonetheless play a role in the likeness determination \"[t]o the extent that they are relevant to the examination of certain 'likeness' criteria and are reflected in the products' competitive relationship.\" As explained below, however, regulatory concerns primarily relate to analyzing less favorable treatment.", "There are four traditional likeness criteria in GATT 1994 jurisprudence: physical characteristics; end-uses; consumer tastes and habits; and tariff classification. The United States only appealed the panel's findings that clove and menthol cigarettes are like products with respect to end-uses and consumer tastes and habits.", "The panel determined that menthol cigarettes and clove cigarettes shared the same end-use: \"to be smoked.\" The United States argued that there are two distinct end-uses: \"satisfying an addiction to nicotine\" and \"creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke.\" The United States claimed menthol cigarettes are used primarily for satisfying an addiction, while clove cigarettes are used primarily for providing a pleasurable experience.\nThe Appellate Body first distinguished end-uses from consumer tastes and habits. \"[E]nd-uses describe the possible functions of a product, while consumer tastes and habits reflect the consumers' appreciation of these functions.\" In another case decided under Article III:4 of GATT 1994, \"the Appellate Body described end-uses as the extent to which products are capable of performing the same, or similar, functions and consumer tastes and habits as the extent to which consumers are willing to use the products to perform these functions.\" The Appellate Body concluded: \"that consumers smoke to satisfy an addiction or that they smoke for pleasure are relevant to the examination of both end-uses and consumer tastes and habits.\" The Appellate Body, therefore, agreed with the United States that the end uses being compared should be \"to satisfy an addiction to nicotine\" and \"creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke.\"\nHowever, the Appellate Body found, based on the findings of the panel, that both menthol and clove cigarettes serve both end-uses. First, it concluded that because menthol and clove cigarettes contain characterizing flavors that mask the harshness of tobacco smoke, they are both \"capable of performing a social/experimentation function and, thus, share the end-use of 'creating a pleasurable smoking experience associated with the taste of the cigarette and the aroma of the smoke.'\" Because both kinds of cigarettes contain nicotine, they are both capable of performing the function of \"satisfying an addiction to nicotine.\" \"The fact that more 'addicts' smoke menthol than clove cigarettes does not mean that clove cigarettes cannot be smoked to 'satisfy an addiction to nicotine.… [W]hat matters in determining a product's end-use is that a product is capable of performing it, not that such end-use represents the principal or most common end-use of that product.\"\nAlthough the Appellate Body agreed with the United States that the panel should have considered the two specific end-uses proffered by the United States, it upheld the panel's finding of likeness with respect to end-uses because it concluded that both menthol and clove cigarettes could serve both end-uses of satisfying an addiction and creating a pleasurable experience.", "The panel below determined that the purpose of Section 907(a)(1)(A) should determine the consumers whose tastes and habits should be considered. Because the purpose of Section 907(a)(1)(A) was to curb smoking by youth, therefore, the panel considered potential and actual youth smokers and concluded that because both kinds of cigarettes have characterizing flavors, they both appeal to youth and are \"similar for the purpose of starting to smoke.\" On appeal, the United States noted that Section 907(a)(1)(A) made a regulatory distinction between cigarettes, not only based on their appeal to youth, but also based on their appeal to adults. The panel, the United States argued, should have considered the tastes and habits of adult smokers also.\nThe Appellate Body agreed with the United States that the panel should have considered adult smokers as well as youth smokers: \"In an analysis of likeness based on products' competitive relationship, it is the market that defines the scope of consumers whose preferences are relevant.\"\nThe proportion of youth and adults smoking different types of cigarettes may vary, but clove, menthol, and regular cigarettes are smoked by both young and adult smokers. To evaluate the degree of substitutability among these products, the Panel should have assessed the tastes and habits of all relevant consumers of the products at issue, not only of the main consumers of clove and menthol cigarettes, particularly where it is clear that an important proportion of menthol cigarette smokers are adult consumers.\nAlthough the Appellate Body agreed with the United States that the consumers whose tastes and habits should be considered included adult and youth smokers, it sustained the panel's conclusion that menthol and clove cigarettes were like for the criterion of consumer tastes and habits. The Appellate Body explained:\nIn order to determine whether products are like under Article 2.1 of the TBT Agreement, it is not necessary to demonstrate that the products are substitutable for all consumers or that they actually compete in the entire market. Rather, if the products are highly substitutable for some consumers but not for others, this may also support a finding that the products are like.\nThe Appellate Body noted, therefore, that substitutability did not have to exist throughout the market in order for products to be like. Rather it is enough that the products are substitutable within a segment of the market.\n[T]he mere fact that clove cigarettes are smoked disproportionately by youth, while menthol cigarettes are smoked more evenly by young and adult smokers does not necessarily affect the degree of substitutability between clove and menthol cigarettes. The Panel found that, from the perspective of young and potential young smokers, clove-flavoured cigarettes and menthol-flavoured cigarettes are similar for purposes of starting to smoke. We understand this as a finding that young and potential young smokers perceive clove and menthol cigarettes as sufficiently substitutable. This, in turn, is sufficient to support the Panel's finding that those products are like within the meaning of Article 2.1 of the TBT Agreement, even if the degree of substitutability is not the same for all adult smokers.\nThus, even though the Appellate Body held that the panel should have considered adult and youth smokers, ultimately it only considered the substitutability of menthol and clove cigarettes among youth smokers. Therefore, the Appellate Body found that they were like products for the consumer tastes and habits criterion.", "The panel found that Section 907(a)(1)(A) treated imported clove cigarettes less favorably than it treated domestically produced menthol cigarettes because it banned clove cigarettes while exempting menthol cigarettes. The United States argued on appeal that the panel erred in focusing solely on clove and menthol cigarettes. Instead, the United States argued, the panel should have compared the treatment accorded to the group of imported from all Members to the treatment accorded the group of domestic like products.\" In addition, the United States complained that the panel considered only the products on the market when the ban went into effect and did not consider products that had been on the market previously. Finally, the United States claimed the panel erred in finding that the less favorable treatment accorded clove cigarettes was related to their origin.", "Although the United States and Indonesia agreed that the test for less favorable treatment is whether the \"technical regulation at issue modifies the conditions of competition in the relevant market to the detriment of imported products,\" they could not agree on the circumstances under which a detrimental impact on imported products constituted less favorable treatment. Indonesia argued that any detrimental impact constituted less favorable treatment, while the United States argued the detrimental impact will not constitute less favorable treatment if it is \"explained by factors or circumstances unrelated to the foreign origin of the product.\"\nTo settle this dispute, the Appellate Body began by considering the meaning of the term \"technical regulation.\"\nA technical regulation is defined in Annex 1.1 [] as a \"[d]ocument which lays down product characteristics or their related processes and production methods with which compliance is mandatory.\" As such, technical regulations are measures that, by their very nature, establish distinctions between products according to their characteristics or their related processes and production methods. This suggests, in our view, that Article 2.1 should not be read to mean that any distinction, in particular those that are based exclusively on particular product characteristics or their related processes and production methods, would per se accord less favorable treatment within the meaning of Article 2.1.\nNext, the Appellate Body considered Article 2.2 of the TBT Agreement: \"Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment would create.\"\nThe Appellate Body stated, \"The context provided by Article 2.2 suggests that 'obstacles to international trade' may be permitted insofar as they are not found to be 'unnecessary,' that is 'more trade-restrictive than necessary to fulfill a legitimate object.'\" To the Appellate Body, this meant that \"Article 2.1 does not operate to prohibit a priori any obstacle to international trade.\"\nNext, the Appellate Body considered the sixth recital of the TBT Agreement's preamble. The sixth recital explicitly provides that Members may take \"measures necessary for, inter alia, the protection of human life or health, provided such measures 'are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination' or a 'disguised restriction on international trade' and are 'otherwise in accordance with the provisions of this Agreement.'\"\nLooking again at the object and purpose of the TBT Agreement, the Appellate Body wrote that, given that the purpose of the TBT Agreement is to \"strike a balance between, on the one hand, the objective of trade liberalization and, on the other hand, Members' right to regulate,\" \"Article 2.1 should not be interpreted as prohibiting any detrimental impact on competitive opportunities for imports in cases where such detrimental impact on imports stems exclusively from legitimate regulatory distinctions.\" Article 2.1 of the TBT Agreement, therefore, prohibits de jure and de facto discrimination but allows detrimental impacts on imported products if those impacts arise exclusively from legitimate regulatory distinctions.\nThe Appellate Body next outlined the jurisprudence concerning less favorable treatment developed under Article III:4 of GATT 1994, which it considered instructive in assessing the meaning of this concept. After reviewing a number of cases, the Appellate Body stated, \"the 'treatment no less favourable' standard of Article III:4 of the GATT 1994 prohibits WTO members from modifying the conditions of competition in the marketplace to the detriment of the group of imported products vis-à-vis the group of domestic like products.\"\nThe Appellate Body elaborated on how its standard should be applied when de facto discrimination is alleged:\nAccordingly, where the technical regulation at issue does not de jure discriminate against imports, the existence of a detrimental impact on competitive opportunities for the group of imported vis-à-vis the group of domestic like products is not dispositive of less favourable treatment under Article 2.1. Instead, a panel must further analyze whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction rather than reflecting discrimination against the group of imported products. In making this determination, a panel must carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue, and, in particular, whether that technical regulation is even handed in order to determine whether it discriminates against the group of imported products.\nTherefore, the Appellate Body agreed with the United States that detrimental impact on a group of like imported goods is not sufficient to establish a violation of Article 2.1 of the TBT Agreement. If the detrimental impact stems exclusively from a legitimate regulatory distinction, it will be permitted.", "On appeal, the United States argued that the panel improperly limited the less favorable treatment analysis to one imported product (Indonesian clove cigarettes) and one domestic product (domestically produced menthol cigarettes). Instead, the United States argued, the panel should have included menthol cigarettes imported from all Members; and all domestic non-menthol flavored cigarettes. Had the panel done so, the United States implied, the panel would not have found that the Tobacco Control Act treated clove cigarettes less favorably than menthol cigarettes.\nThe United States argued that the panel should not have limited its analysis to Indonesian clove cigarettes. Instead, it should have also considered menthol cigarettes imported from all Members. The Appellate Body disagreed because \"the national treatment obligation of Article 2.1 calls for a comparison of treatment accorded to the group of like products imported from the Member alleging a violation of Article 2.1, and treatment accorded to the group of like domestic products.\" Because the vast majority of the cigarettes imported from Indonesia consist of clove cigarettes, the Appellate Body found that the panel did not err in finding that the group of like products imported from Indonesia consisted of clove cigarettes. The product scope of the less favorable treatment analysis, therefore, begins with the group of like products from the complaining Member.\nThe United States argued also that the panel should have considered the treatment accorded non-menthol domestically produced flavored cigarettes. The Appellate Body noted that the United States did not challenge on appeal the panel's exclusion of non-menthol domestically produced flavored cigarettes from the determination of like products. Therefore, without a finding by the panel that non-menthol domestically produced flavored cigarettes are like clove cigarettes, the Appellate Body could not determine whether the panel erred in failing to include non-menthol domestically produced flavored cigarettes in its less favorable treatment comparison. However, the Appellate Body noted that the United States had confirmed that non-menthol domestically produced flavored cigarettes did not have \"any sizeable market share in the United States.\" Therefore, the Appellate Body \"considered it safe to assume\" that inclusion of non-menthol domestically produced flavored cigarettes in the comparison would not have altered the panel's conclusion that the group of like domestic products consisted of menthol cigarettes.", "The United States argued that the panel erred to the extent it did not consider the effect of the Tobacco Control Act on non-menthol flavored domestic cigarettes based on its finding that at the time the ban on non-menthol flavored cigarettes went into effect, there were no non-menthol domestic flavored cigarettes on the market. The United States asserted the panel should have considered the effect of the Tobacco Control Act on domestically produced non-menthol flavored cigarettes before the ban went into effect. Specifically, the United States argued that \"Article 2.1 … does not establish a rigid temporal limitation in relation to the evidence that a panel may consider in performing a less favourable treatment analysis.\" The Appellate Body agreed with the United States that nothing in Article 2.1 prohibits a panel from\ntaking into account evidence pre-dating the establishment of a panel to the extent that such evidence informs the panel's assessment of the consistency of the measure at [the time the panel was established]. This is particularly so in the case of a de facto discrimination claim, where a panel must base its determination on the totality of facts and circumstances before it, including the design, architecture, revealing structure, operation, and application of the technical regulation at issue.\nHowever, the Appellate Body stated that the panel's statement that at the time of the ban, there were no non-menthol domestic flavored cigarettes was related to its consideration of the costs imposed by Section 907(a)(1)(A), not to its consideration of less favorable treatment.", "Although the United States acknowledged that Section 907(a)(1)(A) treats imported clove cigarettes differently from domestically produced menthol cigarettes to the detriment of clove cigarettes, it argued that the detrimental impact stems exclusively from a legitimate regulatory distinction. The United States argued the exemption for menthol cigarettes addressed two distinct objectives: first, avoiding the health care system becoming overwhelmed by the millions of smokers addicted to menthol cigarettes seeking treatment; and second, avoiding the development of a black market to supply the needs of menthol smokers. The panel rejected these as legitimate objectives because they amounted to the United States avoiding costs associated with banning all flavored cigarettes while imposing costs on the producers of clove cigarettes. Because the panel did not address the U.S. claim that its decision not to ban menthol cigarettes was based on legitimate public health considerations, the panel did not make any factual findings about those considerations.\nAlthough the Appellate Body did not agree with the panel's analysis based on costs, ultimately it upheld the panel's conclusion that Section 907(a)(1)(A) violated Article 2.1 of the TBT Agreement. First, the Appellate Body noted that the panel found that virtually all clove cigarettes imported into the United States in the three years prior to the ban came from Indonesia and that the vast majority of clove cigarettes consumed in the United States came from Indonesia. Moreover, the United States had confirmed that non-clove flavored cigarettes subject to Section 907(a)(1)(A)'s ban were on the market for a very short time and represented a relatively small market share. Finally, the Appellate Body pointed out that the record revealed that between 2000 to 2009, between 94.3% and 97.4% of all cigarettes sold in the United States were produced domestically and that menthol cigarettes accounted for 26%. In light of those facts, the Appellate Body concluded \"the design, architecture, revealing structure, operation and application of Section 907(a)(1)(A) strongly suggest that the detrimental impact on competitive opportunities for clove cigarettes reflects discrimination against the group of like products imported from Indonesia.\"\nSecond, the Appellate Body rejected the U.S. claim that the detrimental impact on clove cigarettes was based on legitimate public health considerations. The Appellate Body noted that the purpose of Section 907(a)(1)(A) was to curb youth smoking. However, the Appellate Body stated, menthol cigarettes share with clove cigarettes the characteristic that makes them appealing to youth smokers—a characterizing flavor that masks the harshness of tobacco smoke. Furthermore, the Appellate Body rejected the U.S. justification for not banning menthol cigarettes. The Appellate Body doubted that the health care system would be overwhelmed by menthol cigarette smokers or that a black market would develop because regular cigarettes, which contain nicotine and could therefore satisfy the addiction of menthol smokers, would still be on the market. The Appellate Body, therefore, upheld the panel's conclusion that by exempting menthol cigarettes from the ban on flavored cigarettes, Section 907(a)(1)(A) accords less favorable treatment to imported clove cigarettes than to domestically produced menthol cigarettes.", "Article 2.12 of the TBT Agreement requires Members to \"allow a reasonable interval between the publication of technical regulations and their entry into force.\" The Tobacco Control Act gave three months notice before its ban went into effect.\nIndonesia argued before the panel that paragraph 5.2 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns (Doha Ministerial Decision) defined \"reasonable interval\" within Article 2.12 to mean not less than six months and that paragraph 5.2 constitutes \"a legally binding interpretation pursuant to Article IX:2 of the WTO Agreement.\" Paragraph 5.2 provides that \"reasonable interval\" \"shall be understood to mean\" not less than six months. Article IX:2 of the WTO Agreement provides:\nThe Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of the Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members.\nWithout deciding whether paragraph 5.2 of the Doha Ministerial Decision was a legally binding interpretation under Article IX:2, the panel stated that it \"must be guided by [the Doha Ministerial Decision] in its interpretation of the phrase reasonable interval as [the Doha Ministerial Decision] was agreed to by all WTO Members meeting in the form of the Ministerial Conference, the highest ranking body of the WTO.\" Furthermore, the panel stated that paragraph 5.2 could be a \"subsequent agreement of the parties\" on the meaning of \"reasonable interval\" in Article 2.12 of the TBT Agreement within the meaning of Article 31(3)(a) of the Vienna Convention on the Law of Treaties (Vienna Convention). Article 31(3)(a) of the Vienna Convention provides: \"There shall be taken into account, together with context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions.\" The panel ultimately concluded that Indonesia had established a prima facie case that Section 907(a)(1)(A) violated Article 2.12 and that the United States failed to rebut it.\nOn appeal, the United States argued that the panel erred (1) in attributing \"interpretive value\" to paragraph 5.2 of the Doha Ministerial Decision and (2) in finding that Indonesia had established a prima facie case of inconsistency with Article 2.12 of the TBT that the United States failed to rebut.", "The Appellate Body began its analysis of the status of paragraph 5.2 of the Doha Ministerial Decision by noting that Article IX:2 of the WTO Agreement on legally binding interpretations has \"clearly articulated and strict decision-making procedures.\" Specifically, it provides \"(i) a decision by the Ministerial Conference or the General Council to adopt such interpretations shall be taken by a three-fourths majority of Members; and (ii) such interpretations shall be taken on the basis of a recommendation by the Council overseeing the functioning of the relevant Agreement.\" Because the United States only appealed the panel's decision based on the lack of a recommendation from the relevant Council, the Appellate Body limited its decision to that issue. It found \"in the absence of evidence of the existence of a specific recommendation from the Council for Trade in Goods concerning the interpretation of Article 2.12 of the TBT Agreement, paragraph 5.2 of the Doha Ministerial Decision does not constitute a multilateral interpretation adopted pursuant to Article IX:2 of the WTO Agreement.\" Because the Council on Trade in Goods had not made a recommendation to the Ministerial Council, the Appellate Body concluded that paragraph 5.2 did not satisfy the requirements of Article IX:2 of the WTO Agreement.", "Next, the Appellate Body considered whether, as the panel found, paragraph 5.2 could be considered a subsequent agreement of the parties within the meaning of Article 31(3)(a) of the Vienna Convention on the interpretation of \"reasonable interval\" in Article 2.12 of the TBT Agreement. The United States argued that \"a decision by the Ministerial Conference that does not conform with the specific decision-making procedures established by Article IX:2 of the WTO Agreement cannot constitute a 'subsequent agreement between the parties' within the meaning of Article 31(3)(a) of the Vienna Convention.\"\nDistinguishing legally binding subsequent interpretations adopted under Article IX:2 of the WTO Agreement from subsequent agreements under Article 31(3)(a) of the Vienna Convention, the Appellate Body rejected the U.S. argument. The Appellate Body explained, \"Multilateral interpretations under Article IX:2 of the WTO Agreement provide a means by which Members … may adopt binding interpretations that clarify WTO law for all Members.\" In contrast,\nArticle 31(3)(a) of the Vienna Convention is a rule of treaty interpretation, pursuant to which a treaty interpreter uses a subsequent agreement between the parties on the interpretation of a treaty provision as an interpretive tool to determine the meaning of that treaty provision. Pursuant to Article 3.2 of the [Dispute Settlement Understanding (DSU)], panels and the Appellate Body are required to apply the customary rules of interpretation of public international law—including the rule embodied in Article 31(3)(a) of the Vienna Convention—to clarify the existing provisions of the covered agreements. Interpretations developed by panels and the Appellate Body in the course of a dispute settlement proceeding are binding only on the parties to a particular dispute. Article IX:2 of the WTO Agreement does not preclude panels and the Appellate Body from having recourse to a customary rule of interpretation of public international law that, pursuant to Article 3.2 of the DSU, they are required to apply.\nThe Appellate Body proceeded to consider whether paragraph 5.2 of the Doha Ministerial Decision was such a subsequent agreement. It stated: \"a decision adopted by Members may qualify as a 'subsequent agreement between the parties' regarding the interpretation of a covered agreement or the application of its provisions if (i) the decision is, in a temporal sense, adopted subsequent to the relevant covered agreement; and (ii) the terms and content of the decision express an agreement between Members on the interpretation of application of WTO law.\" As there was no doubt that paragraph 5.2 was adopted after Article 2.12 of the TBT Agreement, the only issue for the Appellate Body was whether paragraph 5.2 expressed an agreement among the Members on the meaning of \"reasonable interval\" within Article 2.12 of the TBT Agreement.\nThe Appellate Body began its analysis by noting that in a previous WTO case,\nthe Appellate Body observed that the International Law Commission (the \"ILC\") describes a subsequent agreement within the meaning of Article 31(3)(a) of the Vienna Convention as \"a further authentic element of interpretation to be taken into account together with context.\" According to the Appellate Body, by referring to \"authentic interpretation,\" the ILC reads Article 31(3)(a) as referring to agreements bearing specifically upon the interpretation of the treaty .\nThe Appellate Body concluded that paragraph 5.2, in expressly addressing Article 2.12, \"bears specifically\" on the meaning of \"reasonable interval\" within Article 2.12 of the TBT Agreement.\nNext, it considered whether paragraph 5.2 was an agreement among the Members. Noting that Article 31(3)(a) of the Vienna Convention does not specify a form that a subsequent agreement must take, the Appellate Body stated that Article 5.2 \"can be characterized as a 'subsequent agreement' … provided that it clearly expresses a common understanding, and an acceptance of that understanding among Members with regard to the meaning of the term 'reasonable interval.'\" Because paragraph 5.2 of the Doha Ministerial Decision provides that \"reasonable interval\" in Article 2.12 of the TBT Agreement \"shall be understood to mean\" not less than six months, the Appellate Body concluded that paragraph 5.2 was a subsequent agreement on the meaning of \"reasonable interval\" within Article 31(3)(a) of the Vienna Convention. Therefore, \"the terms of paragraph 5.2 of the Doha Ministerial Decision constitute an interpretive clarification to be taken into account in the interpretation of Article 2.12 of the TBT Agreement.\"", "The Appellate Body began its interpretation of Article 2.12 of the TBT by noting that the reason for allowing a reasonable interval from publication of a technical regulation and its going into force is to allow producers in exporting Members to adapt to the rule. Therefore, Article 2.12, in conjunction with paragraph 5.2 of the Doha Ministerial Decision, establishes a rule that, normally, producers in exporting Members require a period of at least six months to adapt to the new technical regulation.", "The panel put the burden on Indonesia to establish a prima facie case that the six-month period provided in Article 2.12 was reasonable and found that Indonesia had set forth a prima facie case which the United States failed to rebut. The United States made two arguments on appeal. First, the United States argued that in order to make a prima facie case, Indonesia needed to establish that the three month period allowed by the Tobacco Control Act was unreasonable, which it failed to do. Second, the United States argued that even if the panel was correct that \"the elements of a prima facie case may be drawn exclusively from paragraph 5.2 of the Doha Ministerial Decision, the Panel erred in finding that Indonesia had succeeded in making such a case.\"\nThe Appellate Body declared that a complaining Member establishes a prima facie case of inconsistency with Article 2.12 of the TBT Agreement when it shows that the importing Member allowed a period of less than six months from the time the technical regulation is published until its effective date. Then, the burden shifts to the importing member to rebut the prima facie case. In order to identify the elements of a rebuttal, the Appellate Body spelled out the exceptions to Article 2.12:\nFirst, Article 2.12 of the TBT Agreement excludes from the obligation to provide a \"reasonable interval\" between the publication and the entry into force of technical regulations \"those urgent circumstances\" referred to in Article 2.10 of the TBT Agreement. Thus, where \"urgent problems of safety, health, environmental protection or national security\" arise for a Member that is implementing a technical regulation, a period of six months or more cannot be considered to be a \"reasonable interval\" within the meaning of Article 2.12. Second, Article 2.12 expressly states that the rationale for providing a \"reasonable interval\" … is \"to allow time for producers in exporting members, and particularly in developing country Members, to adapt their products or methods of production\" to the requirements of the importing Member's technical regulation. If these producers can adapt their products or production methods to the requirements of an importing Member's technical regulation in less than six months, a period of six months or more cannot be considered to be a \"reasonable interval\"…. Third, paragraph 5.2 allows an importing Member to depart from the obligation to provide a \"reasonable interval\" of, \"normally,\" not less than six months … if this interval would be \"ineffective to fulfill the legitimate objectives pursued\" by its technical regulation. Therefore, a period of \"not less than six months\" cannot be considered to be a \"reasonable interval,\" within the meaning of Article 2.12, if this period would be ineffective to fulfill the legitimate objectives pursued by the technical regulation at issue.\nIn order to rebut a prima facie case, therefore, the responding member must establish\n(i) that the \"urgent circumstances\" referred to in Article 2.10 of the TBT Agreement surrounded the adoption of the technical regulation at issue; (ii) that producers of the complaining Member could have adapted to the requirements of the technical regulation at issue within the shorter interval that it allowed; or (iii) that a period of \"not less than\" six months would be ineffective to fulfill the legitimate objectives of its technical regulation.\nThus, the Appellate Body disagreed with the panel's allocation of the burden of proof, but ultimately agreed that Indonesia had set forth a prima facie case, which the United States failed to rebut.", "At the April 24, 2012, meeting of the Dispute Settlement Body (DSB), the United States made a statement about the Appellate Body's decision. The United States explained that the Tobacco Control Act was aimed at \"cigarettes that were smoked by a small fraction of the population and predominantly by young people.\" Although tobacco and menthol cigarettes, which are smoked by \"tens of millions of addicted adults,\" pose a serious public health issue, those issues are different from the issue which the Tobacco Control Act was intended to address—youth smoking.\nThe United States noted that the panel, in finding the Tobacco Control Act consistent with Article 2.2 of the TBT, concluded that the Tobacco Control Act serves the legitimate objective of reducing youth smoking by removing \"trainer cigarettes\" from the market and that it was not more trade restrictive than necessary. However, in light of those conclusions, the United States found it \"very hard\" to understand the Appellate Body's conclusion that the Tobacco Control Act breaches Article 2.1 of the TBT Agreement. In particular, the United States appreciated that the Appellate Body recognized that Members may make \"legitimate regulatory distinctions between like products, even where there is a detriment to the competitive conditions for the group of like imported products compared to the group of like domestic products.\" However, the United States stated that the Appellate Body's findings and analysis on Article 2.1 are \"problematic\" because it fails to appreciate that, \"from the perspective of public health regulation, there is a clear difference between a product, such as clove cigarettes, that is smoked in the United States experimentally by a small number of young people but relatively few adults, and a product such as menthol cigarettes, that is not only used by youth during initiation but also by tens of millions of addicted adults.\"\nBecause the Appellate Body recognized that the panel failed to explain why it rejected the U.S. regulatory approach and, therefore, made no factual findings, the United States asserted, the Appellate Body should have overturned the panel's conclusion. Instead, the United States complained, the Appellate Body engaged in its own analysis and rejected the U.S. explanation without citing to any facts to support its view that the basis for the distinction was not legitimate. \"The Appellate Body thus reached conclusions that were not, as they should be in any dispute, based on Panel findings or undisputed facts.\" By doing so, the United States stated, the Appellate Body in effect put itself in the position of regulator, weighing the risks and benefits from including menthol cigarettes in the ban. The United States asserted that the Appellate Body rejected the judgment of the U.S. regulators that menthol cigarettes should not be included in the ban and substituted its own judgment on the basis that \"it is not clear\" that the concerns of the U.S. regulators would materialize if menthol cigarettes were banned. \"The result in this dispute should be of grave concern to any Member regulating for the benefit of public health as, without the benefit of analysis based in any factual findings, it was decided that a public health regulation must be applied to additional types of products, despite the potential harms of an extended ban.\"\nFinally, the United States expressed disappointment with the Appellate Body's determination that the Tobacco Control Act's interval of three months between publication and effective date was not \"reasonable\" and thus inconsistent with Article 2.12 of the TBT Agreement. First, the United States asserted, the Appellate Body's treatment of paragraph 5.2 of the Doha Ministerial Decision undermines its own finding that paragraph 5.2 was not a legally binding interpretation of \"reasonable interval\" under Article IX:2 of the WTO Agreement. \"[B]y treating paragraph 5.2 of the Doha Decision as a 'subsequent agreement' that establishes the meaning of the covered agreements, the Appellate Body report effectively eliminates the safeguards that Members have included in Article IX:2 of the WTO Agreement.\" Second, the United States stated, by finding that a prima facie case under Article 2.12 of the TBT Agreement is establishing that the technical regulation allows less than six months between publication and effective date, the Appellate Body reversed the burden of proof for Article 2.12 claims. \"[A]s members generally recognize, it must be the complaining party's burden to prove all the elements of its legal claim. This should include that the complaining Member's producers could not have adapted to the requirements within the interval actually allotted and that a period of not less than six months would be effective to fulfill the legitimate objective of the challenged measure.\"\nOn May 24, 2012, the United States issued the following statement at the meeting of the DSB about how it intends to respond to the conclusions of the Appellate Body:\n[T]he United States wishes to state that it intends to implement the recommendations and rulings of the [Appellate Body] in a manner that protects public health and respects the obligations of the United States under the WTO Agreement.\n• In this regard, the United States would emphasize the [panel's] finding that the U.S. measure reflects the overwhelming view of the scientific community that banning clove and other flavored cigarettes benefits the public health by reducing the likelihood that youth will enter into a lifetime of cigarette addiction.\n• Accordingly, the [panel] found that a ban on clove cigarettes meets the requirements of Article 2.2 of the TBT Agreement and is thus no more trade restrictive than necessary to fulfill a legitimate public health objective.\nThe United States will need a reasonable period of time in which to implement in this dispute.\nThe United States and Indonesia agreed that 15 months—until July 24, 2013—was a reasonable period of time for the United States to comply with the Appellate Body decision.\nThe statement that the United States will act in a manner that protects the public health, coupled with the highlighting of the panel's finding that Section 907(a)(1)(A) reflects the overwhelming view of the scientific community that banning clove and other flavored cigarettes benefits the public health, appears to suggest that the United States intends to maintain the ban on clove cigarettes. The United States also states that it will act in a way that respects its obligations under the WTO Agreement. It is unclear from this statement what the United States intends to do.", "The Appellate Body determined that Section 907(a)(1)(A) of the Tobacco Control Act violates Article 2.1 of the TBT Agreement in that it bans clove cigarettes, which are predominantly imported from Indonesia, while allowing menthol cigarettes, which are predominantly produced domestically. The Appellate Body concluded that clove cigarettes and menthol cigarettes are like products: with respect to end-uses, they are both capable of satisfying a nicotine addiction and creating a pleasurable smoking experience; and, with respect to consumer tastes and habits, they compete with each other and are substitutable within the youth segment of the overall market. The Appellate Body also determined that Section 907(a)(1)(A) treats clove cigarettes less favorably than menthol cigarettes and that this less favorable treatment is not justified by a legitimate regulatory distinction. The United States had argued that because millions of adult smokers are addicted to menthol cigarettes, banning them would run the risk of menthol smokers overwhelming the health care system as they sought treatment for nicotine withdrawal and turning to a black market to obtain menthol cigarettes. However, the Appellate Body noted the addictive ingredient in cigarettes is nicotine and that regular cigarettes, which contain nicotine, would continue to be available.\nThe Appellate Body also found that Section 901(a)(1)(A) violated Article 2.12 of the TBT Agreement because it did not provide a \"reasonable interval\" between its publication and its effective date. In arriving at this finding, it determined that paragraph 5.2 of the Doha Ministerial Decision is not a legally binding interpretation of \"reasonable interval\" under Article IX:2 of the WTO Agreement because it did not satisfy the procedural requirements of Article IX:2. The Appellate Body determined, however, that paragraph 5.2 of the Doha Ministerial Decision constituted a subsequent agreement on the meaning of \"reasonable interval\" within Article 31(3) of the Vienna Convention. It also determined that a complaining Member establishes a prima facie case by establishing that the technical regulation allows less than six months between publication and effective date. A responding Member rebuts a prima facie case by establishing that the time provided by the technical regulation is reasonable.\nThe U.S. statement in response to the Appellate Body's decision seems to suggest that the United States intends to maintain the ban on clove cigarettes, while at the same time respecting its obligations under the WTO Agreement. It appears the United States has not yet decided how it intends to accomplish this goal. The United States and Indonesia agreed to a compliance date of July 24, 2013." ], "depth": [ 0, 1, 1, 2, 3, 3, 3, 4, 4, 3, 4, 4, 4, 4, 2, 3, 3, 3, 3, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h1_full", "h0_title h2_title h1_title", "h0_title h1_title", "", "h1_full", "", "", "", "h0_title h1_title", "h0_full", "", "", "h1_full", "h0_title h2_full", "h0_full h2_full", "h2_full", "", "h2_full", "h3_full h1_full", "h1_full" ] }	{ "question": [ "What is the purpose of the Tobacco Control Act?", "Why did Indonesia challenge the Tobacco Control Act?", "What do articles 2.1 and 2.2 require?", "What did the WTO panel decide?", "How did the U.S. respond to the panel’s finding on Article 2.1?", "Why did the Appellate Body uphold the panel's decision?", "According to the Appellate Body, what did the case involve?", "What did the Appellate Body find about the Tobacco Control Act?", "What was the Appellate Body's ultimate decision?", "Why did Section 907(a)(10)(A) violate article 2.12 of the TBT Agreement?", "How did the United States react to 907(a)(10)(A)'s violation?", "What did the Appellate Body reject?", "What did the Appellate Body declare under Article 2.12?", "How did the United States respond to the Appellate Body's decision?", "How will the United States accomplish this response?", "What did the United States and Indonesia agree upon?" ], "summary": [ "In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act), which banned the sale of all flavored cigarettes, except menthol cigarettes, in Section 907(a)(1)(A).", "Indonesia, a major producer of clove cigarettes, challenged the Tobacco Control Act's ban on non-menthol flavored cigarettes before a World Trade Organization (WTO) panel, claiming, among other things, that it violated Articles 2.1 and 2.2 of the Agreement on Technical Barriers to Trade (TBT Agreement).", "Article 2.1 requires WTO members to ensure that domestic regulations setting forth product characteristics treat like imported products no less favorably than like domestic products. Article 2.2 requires that such regulations be no more trade restrictive than necessary to fulfill a legitimate objective.", "The panel hearing the dispute agreed with Indonesia on Article 2.1 but found for the United States on Article 2.2.", "The United States appealed the panel's finding on Article 2.1.", "Although the Appellate Body disagreed with certain legal standards applied by the panel, it ultimately upheld the panel's conclusion that menthol cigarettes and clove cigarettes are like products and that the Tobacco Control Act's ban of non-menthol flavored cigarettes treats imported clove cigarettes less favorably than domestic menthol cigarettes.", "The Appellate Body stated that this case involved de facto discrimination and drew on jurisprudence developed under Article III:4 of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which is similar to Article 2.1 of the TBT Agreement, to hold that \"likeness in Article 2.1 [] is based on the competitive relationship between and among products.\"", "The Appellate Body accepted that domestic regulations may legitimately distinguish between products to serve a public health interest. However, it found that the differential treatment of menthol and clove cigarettes in the Tobacco Control Act did not stem from a legitimate regulatory distinction.", "The Appellate Body, therefore, found that Section 907(a)(1)(A) violated Article 2.1 of the TBT Agreement.", "The panel found that Section 907(a)(10)(A), in providing a period of three months before the ban took effect, violated Article 2.12 of the TBT Agreement, which requires a \"reasonable interval\" between publication of the law and its effective date.", "The United States appealed.", "The Appellate Body rejected Indonesia's argument that paragraph 5.2 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns, which interpreted \"reasonable interval\" within Article 2.12 to mean \"a period of not less than six months,\" was a legally binding interpretation of Article 2.12 under Article IX:2 of the Agreement Establishing the World Trade Organization (WTO Agreement).", "The Appellate Body stated that under Article 2.12 the complaining Member must establish a prima facie case by demonstrating that the technical regulation provides an interval between publication and effective date of less than six months; then the burden shifts to the responding Member to demonstrate that the interval provided is reasonable.", "In response to the Appellate Body's decision, the United States has suggested that it will likely maintain the ban on clove cigarettes while fulfilling its obligations under the WTO Agreement.", "It appears the United States has not yet settled on how it will accomplish this.", "The United States and Indonesia agreed that the United States would comply with the Appellate Body decision by July 24, 2013." ], "parent_pair_index": [ -1, 0, -1, -1, 3, -1, 0, -1, -1, -1, 0, -1, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3 ] }
GAO_GAO-16-644	{ "title": [ "Background", "Military Services’ Reported Actual Spending on Fuel Consumption Has Differed from Budget Estimates since Fiscal Year 2012, Which Officials Attributed Largely to Changes in Operations and Training", "Military Services’ Reported Actual Spending on Fuel Consumption Decreased from Fiscal Years 2012 through 2015 but Differed from Budget Estimates", "Military Services Identified Various Factors that Contributed to Differences between Actual and Estimated Spending on Fuel Consumption", "DOD Does Not Fully Reconcile Differences in Reported Fuel Consumption Spending and Does Not Include Certain Fuel Consumption Data in Annual Budget Requests", "DOD and the Military Services Perform Steps to Validate and Report Fuel Consumption Data When Developing Annual Budget Requests", "DOD Does Not Reconcile Differences between the Military Services’ Fuel Consumption Budget Data and DLA Fuel Sales", "DOD’s Annual Budget Requests Provided to Congress Do Not Include Certain Fuel Consumption Data", "DOD Provides Some Fuel Consumption Spending Data in Its Annual Budget Requests", "Fuel Volume Data and O&M Base Obligations Are Not Included in Budget Requests", "DOD’s Approach for Determining the Fiscal Year 2017 Standard Price Methodology Is Consistent with Federal Budget Guidance and Leading Practices for a Credible Cost Estimate, but DOD Has Not Fully Documented Its Rationale for Estimating the Price", "Prior Weaknesses Found with DOD’s Standard Price Methodology", "Fiscal Year 2017 Standard Price is Consistent with Federal Budget Guidance and Leading Practices for a Credible Cost Estimate, but DOD Has Not Fully Documented Its Rationale for Estimating the Price", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Defense", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Congress provides the military services with O&M funds for certain expenses, such as pay and benefits for most of DOD’s civilians; operations at military bases; training, education, and medical care for individual service members; and fuel and spare parts for DOD equipment, among other expenses. When developing annual O&M funding requests, the military services report that estimates of their fuel consumption are based on planned activity levels, which can vary by service. For example, the Air Force, Navy, and Marine Corps estimate their fuel consumption based on planned operational and training flying hours. According to Navy and Marine Corps officials, the Navy estimates its fuel consumption based on a planned number of steaming days for ship operations (i.e., the number of days a ship is not in port), and the Marine Corps estimates its fuel consumption for its ground units based on the number of days for planned training exercises. The Army estimates its fuel consumption based on historical fuel usage rates for vehicle miles during training events and operational fuel requirements as determined by Army major commands and Army operations and plans.\nIn general, the military services follow a similar process for estimating fuel consumption requirements, with some differences in the extent to which they use actual fuel consumption data to estimate future fuel consumption. For example, officials from both the Air Force and Navy reported using historical averages to calculate fuel consumption estimates for their flying hour program and ship operations. However, the Air Force uses five years of data while the Navy uses three years of data to estimate fuel consumption for ship operations and data from the previous year to calculate fuel consumption estimates for its air operations. Officials with two military services—the Army and the Marine Corps—stated that they used other data points to approximate actual fuel consumption in order to calculate a fuel consumption estimate. For example, according to Army officials, the Army uses three to five years of sample test data from ground vehicles and equipment, fuel efficiency rates in technical manuals, and manufacturer’s data for equipment to approximate fuel efficiency for each type of equipment item. Taken together, the Army uses these data points to approximate its actual fuel consumption. According to Marine Corps officials, the Marine Corps bases its fuel consumption requirements on the previous year’s sales data from DLA and adjusts its fuel consumption estimate to reflect changes in operational and training requirements for the budget request year.\nThe military services and other fuel customers use O&M funding to reimburse DOD for the costs of purchasing bulk fuel on the world market to support their operations. The military services calculate their total O&M funding needs for fuel in a given fiscal year by using their planned volume of fuel consumption expressed in millions of barrels of fuel and the standard price per barrel that DOD will charge its fuel customers for fuel. The OUSD Comptroller, in coordination with DLA, estimates and sets a standard price for its fuel and other fuel-related commodities for each budget request. For its fiscal years 2016 and 2017 budget estimates, DOD established the standard price based on two components: the projected cost of refined fuel and operating costs, which cover various overhead and transportation costs. According to DOD officials, in setting the standard price, DOD endeavors to closely approximate the actual per barrel price that will be paid during budget execution, which occurs almost a year later. If the actual market price of fuel is higher than the price DOD is charging its customers, DOD will have to pay more for fuel than it is being reimbursed from its customers. If the actual price is lower than the standard price, DOD will be reimbursed with more cash than it anticipated.\nDOD and military service financial management officials prepare budget justification materials for their O&M funding requests on an annual basis. Beginning in fiscal year 2010, the military services have prepared separate budget justification materials for O&M base and O&M OCO funding requests. O&M base funding is used to pay for enduring day-to- day programs and activities—including fuel for training activities. O&M OCO funding is used to support activities associated with overseas contingency operations. DOD’s Financial Management Regulation governs how the military services formulate these budget requests and communicate them to Congress. Specifically, the Regulation directs statutory and regulatory financial management requirements, systems, and functions for all appropriated and non-appropriated, working capital, revolving and trust fund activities. For fuel consumption estimates, the military services prepare two principal budget exhibits:\nPetroleum, Oil, and Lubricants Consumption and Costs budget exhibit (the “OP-26”): Contains information on direct consumption by type of petroleum product. The military services prepare and submit to the OUSD Comptroller three separate exhibits for each budget submission: (1) OP-26A for flying hours; (2) OP-26B for unit fuel costs; and (3) OP-26C for sources of purchases for petroleum, oil, and lubricants consumption. According to DOD’s Financial Management Regulation, the OP-26 is not provided to Congress with the budget justification materials accompanying the President’s annual budget request.\nSummary of Price and Program Changes budget exhibit (the “OP- 32”): Contains information by specific line items detailing, among other items, Defense-wide Working Capital Fund supplies and materials purchases related to fuel consumption, such as fuel purchases from the DLA’s Defense Fuel Supply Center and locally- purchased fuel. According to DOD’s Financial Management Regulation, the OP-32 is provided to Congress with the budget justification materials accompanying the President’s annual budget request.\nDLA, as the department-wide executive agent for bulk petroleum, is tasked with executing supply chain management for all bulk fuel owned by DOD. DLA utilizes the Defense-wide Working Capital Fund to purchase bulk fuel for customers. DOD prepares Defense-wide Working Capital Fund operating and capital budget materials. These budget materials describe DLA’s budget requests, provide justifications for any changes in the budget request from previous years, and report changes in the standard price of fuel across fiscal years. Generally, DOD’s O&M budget justification materials for fuel consumption present data for three years, including actual total obligations for fuel consumption spending for the previous fiscal year, estimated obligations for fuel consumption spending for the current fiscal year, and estimated obligations for fuel consumption spending for the budget request fiscal year.\nThe Defense-wide Working Capital Fund covers DLA’s costs for purchasing bulk fuel and is reimbursed through its sale of fuel to the military services and other customers at a standard price. The standard price is intended to remain unchanged until the next budget year. This helps to shield the military services from market price volatility by allowing the cash balance in the fund to absorb minor fuel price fluctuations. For example, from fiscal years 2010 through 2015, the military services purchased an average of approximately 102 million barrels per year from DOD. Therefore, a standard price increase of even $1 per barrel would result in a $102 million difference from the military services’ budget requests. According to DOD’s Financial Management Regulation, working capital funds were established to satisfy recurring DOD requirements using a businesslike buyer-and-seller approach, and the goal for the Defense-wide Working Capital Fund is to remain revenue neutral, allowing the fund to break even over time—that is, to neither make a gain nor incur a loss.\nDuring the year the budget is executed, the actual price for a barrel of fuel on the world market may be higher or lower than DOD’s standard price. If the actual price is higher, the cash balance in the Defense-wide Working Capital Fund will go down. If the actual price is lower, the cash balance in the fund will go up. To correct for these fluctuations, DOD may adjust the standard price for the following year. For example, DOD may increase the standard price to make up for losses in the previous year and bolster the cash balance in the fund. Alternatively, DOD may decrease the standard price to reimburse the military services, which had paid a higher price the previous year. DOD can also cover fund losses during the execution year by obtaining an appropriation from Congress, transferring funds from another DOD account into the fund, or adjusting the standard price out of cycle.\nFigure 1 illustrates the process and the main organizations involved in budgeting for fuel.", "During fiscal years 2012 through 2015, the military services reported a decrease in total obligations for fuel consumption spending but reported actual obligations differed from budget estimates during these years, which officials attributed to changes in operations and training that affected the level of fuel consumption. Specifically, each of the military services either over- or underestimated actual obligations for fuel consumption spending when compared to their budget estimates. DOD officials identified changes in operations and training levels during these years as the primary reasons for the differences between actual and estimated spending on fuel consumption, although other factors, such as changes in the standard price DOD charges its fuel customers, have contributed to differences in prior years.", "In fiscal years 2012 through 2015, the military services’ reported a decrease in total obligations for fuel consumption spending from a high of about $13 billion in fiscal year 2012 to a low of about $10.1 billion in fiscal year 2015. The Army reported the greatest overall decrease in total obligations for fuel consumption spending during these years, from a high of about $3.4 billion in fiscal year 2012 to a low of about $1.3 billion in fiscal year 2015. Decreases reported in total obligations for fuel consumption spending for these fiscal years varied by military service, as shown in figure 2.\nOur analysis of DOD’s budget justification materials comparing the military services’ reported actual obligations for fuel consumption spending against their budget estimates found that each of the military services over- or underestimated fuel consumption spending in each fiscal year from 2012 through 2015. For example, the Army underestimated its fuel consumption spending by about $840 million in fiscal year 2012, while the Navy overestimated its spending by about $2.4 billion in fiscal year 2014. The differences in actual obligations and estimated spending reported for each military service are shown in figure 3.", "According to military service officials, differences between actual obligations and estimated spending on fuel consumption are mainly attributable to changes in planned operations and training. For example: Army budget officials told us that fiscal year 2015 marked a change in its mission in Afghanistan, from the end of Operation Enduring Freedom to the beginning of Operation Freedom’s Sentinel. According to these officials, changes in operational missions were the main driver of the difference between its actual and estimated fuel consumption spending for that fiscal year.\nAir Force financial management officials identified changes in fighter and tanker support during overseas missions as factors that contributed to differences between its actual and estimated fuel consumption spending.\nOne Navy budget official told us that delays in the delivery of ships and equipment can lead to differences between actual and estimated fuel consumption spending. For example, Navy budget officials cited the delay in deployment of the Littoral Combat Ship in fiscal year 2015, noting that they included fuel consumption spending estimates for these ships in annual budget requests for that year, but the ships were not yet ready to deploy, and thus the fuel consumption spending estimates were over stated.\nMarine Corps budget officials told us that it is difficult to identify an accurate budget estimate for fuel consumption spending up to 18 months in advance of the year of budget execution, because factors like a change in operational tempo or a sudden need to deploy or redeploy forces can have a significant effect on actual fuel consumption spending.\nOfficials told us that other factors can result in differences between actual and estimated spending on fuel consumption, such as inclement weather or maintenance issues. For example, Air Force and Navy officials stated that inclement weather can affect fuel efficiency for air and ship operations or result in delays or the cancellation of training activities. Army officials stated, for instance, that entire training schedules have been canceled as a result of inclement weather. Unforeseen maintenance issues during the year of budget execution can also have an effect on fuel consumption spending. For example, Army officials stated that funding budgeted for fuel can be used for spare parts and other costs related to operation and maintenance instead of fuel, which has contributed to differences between actual and estimated spending on fuel consumption.\nBudgetary actions that affect O&M funding levels for fuel have also affected actual consumption spending, according to service officials. In fiscal year 2013, for example, officials reported that actual fuel consumption spending was lower than estimated spending as a result of actions DOD took to address sequestration. In our prior work, we highlighted several actions identified by DOD officials that DOD and the military services took to address these budgetary reductions. For instance, all four of the military services cancelled or reduced participation in training exercises in fiscal year 2013. Additionally, the Air Force stood down 17 of 62 operational squadrons for 3 months during fiscal year 2013 and reduced flying hours for 10 other squadrons for a period of 1 to 3 months.\nMilitary service officials also described changes in the standard price that DOD charges its fuel customers that can result in differences between actual and estimated fuel consumption spending. The military services use the standard price as a key component when developing their O&M budget requests. If DOD changes the standard price actually charged to fuel customers during the year of budget execution, the military services’ O&M budgets can be affected as a result. For instance, in 2014, we reported that from fiscal years 2009 through 2013, the differences between the price DOD paid for fuel and the standard price it charged its fuel customers accounted for, on average, 74 percent of the difference between DOD’s actual and estimated fuel costs. DOD officials told us that they try to avoid changes to the standard price when possible to avoid the negative effect on the military services’ O&M budgets. We found that for fiscal years 2012 through 2015, DOD generally kept the standard price it charged fuel customers the same throughout the year or decreased it. For example, DOD decreased the standard price three times in fiscal year 2012 (from $165.90 to $97.02 per barrel) and left it unchanged for fiscal years 2013 and 2014. In fiscal year 2015, DOD decreased the standard price from $155.40 to $136.92 per barrel. As a result, changes in the standard prices charged to fuel customers had a limited effect on the differences between actual and estimated fuel consumption spending for these years.", "DOD takes some steps to report fuel consumption data in annual budget estimates, but it does not fully reconcile differences between the military services’ reported actual fuel consumption spending and DLA’s reported fuel sales and does not include certain data that the Congress could use to evaluate the military services’ funding requests for fuel. For each budget request, DOD validates the military services’ fuel consumption data by reviewing the military services’ fuel consumption estimates to ensure that the estimates align with DOD’s overall funding priorities, among other steps. However, DOD does not reconcile differences between the military services’ actual obligations for fuel consumption spending reported in O&M budget requests and DLA’s reported fuel sales to the military services that could potentially improve the accuracy of the military services’ annual budget estimates. Further, DOD’s annual O&M budget requests for fuel contain some actual and estimated fuel consumption spending data, but the requests did not include fuel volume data or separate the military services’ actual O&M base obligations for day-to-day activities, such as training, from its actual O&M OCO obligations for fuel consumption spending.", "Each military service develops an annual O&M funding estimate for fuel consumption based on planned activity levels, such as flying hours, steaming days, tank miles, and base operations, among other factors, and the standard price provided by the OUSD Comptroller. Consistent with requirements established in DOD’s Financial Management Regulation, the military services each prepare an OP-26 (“Petroleum, Oil, and Lubricants Consumption and Costs”) and OP-32 (“Summary of Price and Program Changes”) budget exhibit to justify their O&M funding requests for fuel consumption. More specifically, the military services prepare the OP-26 budget exhibit for planned fuel consumption that describes estimates for a total of both O&M base and O&M OCO fuel volume requirements (i.e., millions of barrels of fuel) and dollars, which are used by the military services and the OUSD Comptroller to gauge the effect of any fuel price changes on DOD’s O&M funding requests during the budgeting process. For example, during the budget development process, the services prepare the OP-26 budget exhibit showing fuel volume requirements and the standard price to develop their O&M funding estimates. An OUSD Comptroller official explained that the department would use the OP-26 data to assess any effect on the military services’ O&M estimates and funding needs if it were to adjust the standard price for the President’s budget request submission, but it does not submit the OP-26 to Congress with its annual O&M budget justification materials. Separately, the military services prepare individual OP-32 budget exhibits for their O&M base and O&M OCO funding requests. The OP-32 exhibits summarize the total price and program changes in dollars from the previous fiscal year to the current fiscal year and from the current fiscal year to the budget request year. Unlike the OP-26, DOD submits the OP-32 to Congress with the budget justification materials accompanying the President’s annual budget request.\nAccording to an OUSD Comptroller official who oversees the bulk fuel program, the OUSD Comptroller evaluates the military services’ fuel consumption estimates contained in these budget exhibits to ensure that they align with overall DOD funding priorities to support the President’s budget request and that the data are consistent among all exhibits. The official stated these budget exhibits are also reviewed to ensure that the military services’ fuel consumption estimates are in line with historical fuel consumption. The official stated that the OUSD Comptroller reviews DLA data on fuel sales to the military services as one point of comparison when evaluating the military services’ fuel consumption budget estimates, but the official noted that differences between DLA and the military services’ fuel sales data can exist. Specifically, DLA reports its actual and estimated fuel sales in the Defense-wide Working Capital Fund budget exhibit provided annually to Congress. DLA also publishes a fact book each fiscal year, which contains information regarding DLA’s business operations that includes data on fuel sales to the military services, among other information. Following the requirements established in DOD’s Financial Management Regulation, the OP-32 budget exhibits are then incorporated into the overall O&M budget request for each service.", "Based on our review of military service and DLA data for fiscal years 2012 through 2015, we found significant differences between the military services’ reported actual obligations for fuel consumption spending reported in annual O&M budget requests and DLA fuel sales data. For example, in the President’s budget request for fiscal year 2016 that was submitted to Congress in February 2015, DOD reported that the Navy’s actual obligations for fuel consumption spending in fiscal year 2014 were about $2.7 billion less than what DLA’s fuel sales data show was sold to the Navy in that year. In addition, in this same budget request, DOD reported that the Army’s actual obligations for fuel consumption spending in fiscal year 2014 were about $1.2 billion more than what DLA’s fuel sales data show was sold to the Army for the same fiscal year. Figure 4 shows differences between military services’ actual obligations for fuel consumption spending that were reported in the President’s annual budget requests and fuel sales to the military services reported by DLA for fiscal years 2012 through 2015.\nDLA and military service officials provided some explanations for why differences may exist between the military services’ actual obligations for fuel consumption spending reported in annual budget requests and DLA fuel sales data, but neither DLA nor the military services could fully account for these differences, even though they compared the two data sets during the budget review process during the budget review process. For example, according to DOD officials, DLA fuel sales for an individual service may include sales to DOD’s combatant commands, such as U.S. Transportation Command. Officials explained that the large differences between the Air Force’s reported obligations for fuel consumption spending and DLA’s fuel sales to the Air Force could be attributable to the inclusion of fuel sales to U.S. Transportation Command in DLA’s data sets if Air Force aircraft flew missions for the command. However, the obligations for fuel consumption spending would not necessarily be accounted for in the Air Force’s data.\nAdditionally, according to an official from the OUSD Comptroller, the Air Force might purchase fuel from DLA in order to support an Army mission. The Army would then be responsible for reimbursing the Air Force for this fuel consumption.\nAnother reason for these discrepancies, officials explained, is the result of the military services’ accounting practices for fuel consumption spending. For example, when an Air Force aircraft is used to support a U.S. Transportation Command or other DOD component mission, the fuel purchased from DLA for that aircraft is initially charged to an Air Force account. Officials stated that through a monthly review of accounting records, the Air Force’s fuel charges for that particular aircraft would eventually be charged to the appropriate DOD component organization. Yet, DLA would not be informed of the final consumer of the fuel, and would thus record the sale of the fuel to the Air Force. DOD and military service officials stated these reasons would not account for all discrepancies between DLA’s data and military services’ actual obligations for fuel consumption spending. However, despite these significant differences in military service and DLA data, DOD officials were unable to provide an analysis or other documentation that explained the differences between the military services’ actual obligations for fuel consumption spending reported in annual budget requests and DLA fuel sales data.\nDOD has not established an approach to reconcile data on fuel consumption reported by the military services and DLA fuel sales to the military services, although DLA’s Strategic Plan for 2015-2022 emphasizes DLA’s commitment to collaborating with the military services to increase transparency. The plan highlights the need to have an ongoing, open dialogue with the military services about DLA’s costs. On an annual basis, DLA coordinates with the military services to define estimated fuel requirements, which DLA uses to purchase fuel worldwide for eventual sale to the military services. DOD officials told us that during the annual budget development process, the OUSD Comptroller uses DLA’s fuel sales data to validate the military services O&M fuel consumption estimates; however, neither OUSD Comptroller, DLA, nor the military services act to reconcile any differences between data on DLA’s fuel sales and the military services’ actual obligations for fuel consumption spending. These officials noted that the directive establishing DLA as the department’s executive agent for bulk fuel does not require DLA to record or report fuel sales data to the military services or other fuel customers or reconcile any differences with the military services’ data, and there is no department-wide policy that requires consistency between DLA fuel sales data and military service actual obligations for fuel consumption spending. Standards for Internal Control in the Federal Government states that appropriate control activities include the establishment of activities to monitor performance measures and indicators, which may include comparisons and assessments relating different sets of data to one another so that analyses of the relationships can be made and appropriate actions taken.\nThe OUSD Comptroller official who is responsible for the bulk fuel program told us that, based on issues we raised during the course of our work, the department is taking some initial steps to understand the differences between the military services’ and DLA’s fuel consumption data. Specifically, the department held a series of initial working group meetings in April and May 2016 to discuss the military services’ fuel consumption O&M budget exhibits and DLA’s process for reporting its fuel sales, including how DLA fuel sales are recorded and reported and how DLA’s data relate to the information the military services report in their O&M budget justification materials. For example, in May 2016, the OUSD Comptroller, DLA, and the military services discussed possible adjustments to DOD’s accounting practices for fuel consumption spending to more accurately record DLA fuel sales to fuel customers. However, while DOD held an initial set of working groups at the time of our review, it did not have specific plans or milestones to address the limitations and inconsistencies between the military services’ and DLA’s data, although an OUSD Comptroller official agreed that a more formal process to reconcile differences would help validate the military services’ annual O&M budget estimates for planned fuel consumption spending. Given the significant differences between the military services’ and DLA’s fuel data, having an approach to reconcile differences would provide DOD with a means to understand any discrepancies in its fuel consumption data and better assess the accuracy of the military services’ actual fuel consumption spending that is reported in annual budget requests.", "DOD’s annual O&M budget requests and the accompanying budget justification materials provide Congress with certain information on the military services’ actual and estimated fuel consumption spending that can help it make appropriations decisions, conduct oversight, and provide control over funds. However, the Senate Armed Services Committee has expressed its concern with DOD’s fuel consumption estimates, noting that as DOD transitions from large-scale contingency operations in Afghanistan, the military services' fuel consumption estimates should be more consistent as full-spectrum training resumes. The committee also stated that given recent fuel price fluctuations due to changes in the global oil market, accurate fuel consumption estimates become even more important in trying to adequately determine budget requests, particularly in times of fiscal constraints. Standards for Internal Control in the Federal Government emphasizes using quality and complete information to make decisions and communicate such information externally. Moreover, the Handbook of Federal Accounting Standards states that agencies should provide reliable and timely information on the full costs of their federal programs in order to assist congressional and executive decision makers in allocating federal resources and making decisions to improve economy and efficiency.", "Our analysis of DOD’s annual O&M budget requests to Congress found that they contain some actual and estimated fuel consumption spending data. For example, the OP-32 budget exhibits included in DOD’s annual O&M budget materials provide the military services’ fuel consumption spending estimates for both their O&M base and O&M OCO funding needs for the current fiscal year and budget request year. In addition, the military services’ budget exhibits report data on actual obligations for fuel consumption spending for the total of both O&M base and O&M OCO spending combined for the prior fiscal year. The military services also report actual obligations for O&M OCO-only fuel consumption spending for the prior fiscal year in the OP-32 budget exhibit accompanying the O&M OCO budget request for each service. Separately, DLA reports information on its energy management activities in the Defense-wide Working Capital Fund budget justification materials provided to Congress on an annual basis. These budget materials include DLA’s estimated fuel sales to the military services (for both O&M base and O&M OCO) for the current fiscal year and budget request year and actual fuel sales to the military services (for O&M OCO only) for the prior fiscal year. Also included are details on DLA’s overhead costs and the standard price the military services will be charged for fuel.", "We also found, however, that DOD’s annual budget requests do not provide information in two areas that could be used by Congress to evaluate the military services’ funding requests for fuel. Specifically, DOD’s budget requests did not (1) provide fuel volume data and (2) separate the military services’ actual O&M base obligations for fuel consumption spending for day-to-day activities from its actual O&M OCO obligations for war-related fuel consumption spending. The military services do provide the OUSD Comptroller with actual and estimated fuel volume data in the OP-26 budget exhibits during the budget development process. These budget exhibits describe the volume of fuel (i.e., millions of barrels of fuel) that the military services estimate they will use for a total of their base and OCO needs when developing annual budget estimates. However, although DOD collects and evaluates fuel volume data from the military services, it does not include the OP-26 budget exhibits in the O&M budget justification materials it provides annually to Congress. According to an OUSD Comptroller official who oversees the bulk fuel program, DOD’s historical practice has been to use the fuel volume requirements data included on the OP-26 during the budget development process. Although the DOD Financial Management Regulation states that the OP-26 will not be included with the military services’ budget justification materials submitted to Congress, it does not specifically preclude DOD from providing fuel volume information. The official could not explain the reasoning behind the Financial Management Regulation direction to exclude the OP-26 from DOD’s budget request. Because the military services’ O&M funding estimates for fuel can be affected by market price fluctuations from one year to the next, fuel volume data would provide another measure of estimated or actual fuel consumption to justify DOD’s funding requests for fuel.\nAdditionally, the military services’ O&M budget materials submitted to Congress do not report actual O&M base obligations for fuel consumption spending separately from actual O&M OCO obligations for the prior fiscal year. For example, as noted above, the OP-32 budget exhibits accompanying the military services’ O&M budget requests provide data on (1) actual obligations for the total of O&M base and O&M OCO fuel consumption spending combined and (2) O&M OCO-only spending. According to the OUSD Comptroller official who oversees the bulk fuel program, DOD and the military services collect and track O&M base obligations and O&M OCO obligations for fuel consumption spending separately, but DOD’s Financial Management Regulation does not require O&M base obligations to be reported separately from O&M OCO obligations in its budget justification materials and does not specifically preclude DOD from doing so. This official also stated that Congress has not asked the department to report O&M base obligations for fuel consumption spending separately from its O&M OCO obligations.\nTable 1 shows the extent to which DOD’s various O&M budget documents contain fuel consumption information and are reported to Congress.\nAdditional data on the military services’ actual fuel consumption could assist Congress in determining funding levels that are needed for their activities, including full-spectrum training. In the absence of such data, congressional decision makers may not have the data they need to assess any trends in actual O&M base obligation for non-war-related purposes when evaluating the military services’ budget requests for fuel. For example, although DOD does not report actual O&M base obligations for fuel consumption spending separately from actual O&M OCO obligations for prior fiscal years, we conducted an analysis to separate the military services’ actual O&M base and actual O&M OCO obligations for fuel consumption spending. In conducting this analysis, we calculated O&M base obligations, because DOD does not report this information in its budget justification materials, as noted above. To do this, we first compiled and summed data on actual O&M OCO obligations for fuel consumption spending reported in the OP-32 budget exhibits accompanying the military services’ O&M OCO requests for fiscal years 2012 through 2015. We then subtracted this amount from the total O&M obligations for fuel consumption spending for these same years that are reported in the OP-32 budget exhibits accompanying the military services’ O&M base budget requests which, as we also noted above, included actual obligations for fuel consumption spending in the prior fiscal year for the total of both O&M base and O&M OCO obligations combined. We then compared this amount to the estimates for fuel consumption spending included in the military services’ O&M base budget request for each fiscal year.\nOur analysis found that the military services generally overestimated the amount of actual O&M base fuel consumption spending for fiscal years 2012 through 2015, with one exception, as figure 5 shows. For example, the Army, Navy, and Marine Corps each overestimated O&M base fuel consumption spending each year during this time period. The amount and percent difference of the overestimate for these services, comparing our estimate of actual O&M base obligations for fuel consumption spending with the original estimates, varied each year from a high of about $2.5 billion for the Navy in fiscal year 2014, or about a 280 percent difference from its original estimate, to a low of about $17 million for the Marine Corps in fiscal year 2013, or about a 17 percent difference from its original estimate. Our analysis also showed that the Air Force over- estimated its O&M base fuel consumption in three out of the four years during this time frame. For example, the Air Force underestimated O&M base fuel consumption spending by about $477 million in fiscal year 2012, or about a 13 percent difference from its original estimate. In fiscal year 2015, however, the Air Force overestimated its O&M base fuel consumption spending by about $895 million, or about a 24 percent difference from its original estimate.\nNavy officials noted that congressional budget actions can affect the amount of O&M base fuel consumption spending in a particular fiscal year. Navy officials stated that, in fiscal year 2014, Congress realigned funds from base funding to OCO funding, which resulted in a difference of $800 million from the Navy’s original O&M base budget request for fuel. This realignment then affected the base activities the Navy was able to execute for that fiscal year. A Navy official noted that this realignment was one explanation for the differences between actual and estimated fuel consumption spending in the Navy’s O&M base spending for fuel.\nDOD also produces additional sources of information that contain data that could be used by decision makers to measure the military services’ fuel consumption, but these sources lack details in these same areas and are not provided to Congress. For example, DLA publishes annually a fact book in which, among other activities, it reports the total dollar amount of fuel it recorded having sold to the military services for that fiscal year, but the fact book does not report the fuel volume associated with these sales. Further, according to a DLA official, DLA does not submit the fact book to Congress with its annual budget request. As our analysis shows, there is no single document or set of documents that provides Congress with information on actual and estimated fuel volume and fuel consumption spending that it could use to evaluate the military services’ budget requests for fuel. Unless DOD reports more complete information on its actual and estimated fuel consumption, Congress will not have full visibility over the amount of fuel volume the military services require on an annual basis for their activities, or trends in the military services’ spending for non-war-related fuel consumption, which has varied considerably from budget estimates.", "DOD’s approach for determining the fiscal year 2017 standard price of fuel is consistent with federal budget guidance and leading practices for a credible cost estimate, but DOD has not fully documented its rationale for estimating the standard price. In 2014 and 2015, we found weaknesses with DOD’s methodology for developing its standard price. DOD adjusted its methodology for establishing the fiscal year 2017 standard price that aligns with federal budget guidance and leading cost estimating practices because DOD used valid and reliable data and it assessed the relative risks and limitations of various pricing options. However, DOD has not fully documented its process for establishing the standard fuel price as we have previously recommended.", "In July 2014, we found that DOD had not updated its approach to establishing the standard price for fuel to reflect current market conditions since 2007, nor had it documented its rationale for the assumptions it uses in estimating the standard price. We recommended that DOD reevaluate its approach for establishing the standard price to allow DOD to develop more informed estimates and be better positioned to minimize risks and uncertainty resulting from changing market conditions. We also recommended that DOD document its assumptions, including providing detailed rationale for how it establishes the standard price.\nIn November 2015, we found that, consistent with our recommendation, DOD had evaluated a range of options to establish the standard price for the President's fiscal year 2016 budget request and developed a new methodology. However, we found that the new methodology did not reflect actual market conditions or fully account for risks to the reliability of DOD’s fuel cost estimates. More specifically, we found that DOD had not used valid and reliable data on market conditions when evaluating options for adjusting its fuel pricing methodology because it used OMB's Gas and Oil price index as a dollar value rather than applying it in its analyses as a percentage to measure the change in prices from one year to the next. Our analysis showed that applying the Gas and Oil price index as a measure of a change in fuel prices from one year to the next produced results that differed from what DOD found. For example, DOD applied the Gas and Oil price index for fiscal year 2016 as a dollar price of $122.56 per barrel of refined fuel. In contrast, we calculated a refined fuel price estimate between $58.10 and $83.58, depending on how the Gas and Oil price index is applied to actual fuel prices.\nFurthermore, we found that DOD's analysis of the methodology based on the use of the price index did not review and understand the limitations and risks to the reliability of its fuel estimate which, in this case, resulted from determining a projected fuel price that applied the price index to actual fuel prices that would be almost 2 years old at the time of DOD’s budget request. According to its budget materials, DOD had a fiscal year 2016 estimate of planned fuel consumption totaling 81 million barrels of fuel, which, according to our analysis, led DOD to request in its fiscal year 2016 budget request $9.9 billion for refined fuel based on the refined fuel portion of the standard price of $122.56 per barrel of refined fuel. In contrast, our analysis found that the difference between the estimates for refined fuel when applying the Gas and Oil price index as a reflection of the change in prices from fiscal year 2014 would have resulted in a budget request based on the refined fuel portion of the standard price of between about $8.6 billion and about $8.9 billion, depending on how the price index was applied to fiscal year 2014 actual refined fuel prices.\nAs a result, we recommended that, in addition to fully implementing our prior recommendations, DOD use valid and reliable data on market conditions and review and understand the risks and limitations of using data, such as actual fuel price data from 2 years prior when it developed its standard price for fiscal year 2017 and future fiscal years. In commenting on our draft report in November 2015, DOD agreed or partially agreed with our previous recommendations but did not state the reasons for the partial concurrence or what actions it planned to take in response to our recommendations.", "For its fiscal year 2017 budget request, DOD adjusted its methodology to address our prior recommendations. According to documentation from the OUSD Comptroller, DOD evaluated three methodologies for developing the fiscal year 2017 standard price. The first option DOD evaluated used projections of the price of regular gasoline contained in the Energy Information Administration’s November 2015 Short-Term Energy Outlook to calculate a future price of regular grade gasoline upon which to base the standard price. The second and third options calculated a two-year percentage change in the Gas and Oil price index applied against two different periods of actual average refined product costs. One of these options used a 1-year average of DOD’s actual refined fuel costs for fiscal year 2015; the other used a 5-year average of actual refined fuel costs for fiscal years 2011 through 2015. According to DOD’s analysis, DOD chose the option using the percent change in the Gas and Oil price index applied against the most recent 1-year average of actual refined product costs.\nAn official with the OUSD Comptroller who oversees the bulk fuel program stated that several factors underpinned the department’s decision to select the fiscal year 2017 standard price methodology. First, leadership within the department felt strongly that fuel pricing should be developed in a consistent manner for each budget cycle that is based on information included in the Administration’s economic assumptions. Second, the methodology DOD selected provided an estimate that seemed reasonable compared with the actual fiscal year 2015 average price for refined petroleum products. Finally, the official noted that the methodology is based on actual fuel prices that were adjusted to account for projected market changes.\nFigure 6 shows a comparison of how DOD calculated the fiscal year 2017 standard price with the approach it used in prior years. For fiscal year 2017, DOD established the projected price of refined fuel at $105 per barrel.\nWe evaluated DOD’s standard price methodology for fiscal year 2017 and found that it is consistent with federal budget guidance and leading practices for a credible cost estimate because DOD used valid and reliable data and it assessed relative risks and limitations by reviewing various pricing options. OMB’s Circular No. A-11 requires that federal agencies’ budget submissions be consistent with OMB’s economic assumptions. Our Cost Estimating and Assessment Guide states that one characteristic of a credible cost estimate is the availability of valid data that are suitable and relevant, and that data should be fully reviewed before being used in a cost estimate to understand the limitations and risks. In our prior work, we reported that DOD has discretion over which economic assumptions provided by OMB to apply in developing its bulk fuel estimates for budgeting purposes. For its fiscal year 2017 methodology, DOD (1) incorporated the administration’s economic estimates and (2) applied the Gas and Oil price index against actual refined fuel prices to develop a price estimate that, according to DOD’s analysis, it concluded was reasonable compared with the fiscal year 2015 average price for refined petroleum products.\nWhile DOD revised its standard price methodology to address our prior recommendations, it has not fully documented its rationale for the assumptions it used in estimating the fiscal year 2017 standard price. For its fiscal year 2017 standard price, DOD documented parts of the methodology it used. Specifically, DOD detailed in an internal OUSD Comptroller memorandum the various options it considered, the reasons why it chose the methodology it used, and the calculations it used to arrive at its estimated standard price. However, we found that DOD has not documented its process for establishing the standard price in three areas. First, DOD has not documented a formalized process that describes the steps it will take on an annual basis to determine the standard price for future fiscal years. Second, documentation detailing the options DOD considered and the rationale behind the methodology it chose is not available to Congress and its fuel customers. Third, DOD has not documented the formal review and approval of the new methodology by senior Comptroller officials.\nOur Cost Estimating and Assessment Guide states that a cost estimate should be supported by detailed documentation that describes how it was derived. According to the guide, the documentation should include, among other things, the estimating methodology used to derive the costs for each element of the cost estimate, and it should also discuss any limitations of the data or assumptions. Further, a well-documented methodology allows decision makers to understand and evaluate the budget request and make proper determinations. In partially agreeing with our 2014 recommendation, DOD noted the department did not have a documented, specific, step-by-step process to develop the standard price but that it priced fuel by using a formal process that had been presented to the department’s leadership, briefed to congressional staff, discussed with the administration, and reproduced in various instructional and informational briefings and papers.\nThe OUSD Comptroller official responsible for managing the bulk fuel program stated that the department does not have a similar formal process for determining rates for other commodities and working capital funds. The official stated that, therefore, DOD does not want to make the bulk fuel standard price determination unique and apart from these other commodities. However, because of concerns with the quality and transparency of information available to congressional decision makers and department fuel customers concerning the methodology selected each year and its application to relevant data used in estimating fuel rate prices for the next fiscal year, the Senate Armed Services Committee directed DOD to submit detailed guidance to the congressional defense committees no later than February 1, 2017, that includes the following elements:\nThe steps DOD will take to develop and implement a process for the annual review and selection and application of an appropriate methodology for estimating fuel rate prices for the next fiscal year;\nThe process for identifying an appropriate methodology to assess the accuracy of estimated fuel rate prices as compared with actual fuel prices for the most recent fiscal year; and\nThe establishment of a detailed process for the annual development of estimated fuel rate prices for the next fiscal year, to include requiring documentation of the rationale for using one methodology over another for estimating the next fiscal year’s fuel rate price and the limitations and assumptions of underlying data, and establishing a timeline for developing annual estimated fuel rate prices for the next fiscal year.\nWe continue to believe that documentation by DOD of its assumptions would provide greater transparency and clarify for fuel customers and decision makers the process DOD uses to set the standard price, as we recommended in 2014 and 2015.", "The military services have reported actual spending on fuel consumption that differed from their fuel consumption budget estimates, attributing most of the differences to changes in operations and training that affected fuel consumption during the year of budget execution. The OUSD Comptroller takes some steps to validate the military services’ fuel consumption estimates, but neither this office nor the military services have an approach to reconcile the military services’ reported fuel consumption spending data with DLA’s fuel sales during the annual budget development process. Having an approach to reconcile differences would provide DOD with a means to understand any discrepancies in its fuel consumption data and determine whether any actions are needed to better assess the accuracy of the military services’ actual fuel consumption spending that it reports to Congress in annual budget requests. DOD’s O&M budget materials provide some actual and estimated fuel consumption spending data but are limited in the amount of information they convey because they do not provide data on fuel volume or separate actual O&M base obligations for the military services’ fuel consumption spending for day-to-day activities from their O&M OCO obligations. As a result, Congress does not have full visibility over the amount of fuel volume the military services require on an annual basis for their activities, or trends in the military services’ spending for non-war- related fuel consumption, which has varied considerably from budget estimates. DOD adjusted the methodology it used to set the standard price in fiscal year 2017 to address our prior recommendations, but it has not fully documented the rationale it uses in the standard price process. As we previously reported, until DOD documents its rationale for how it establishes the standard price, fuel customers and decision makers will not have the transparency and clarity they need to understand the process and make fully informed decisions.", "In order to improve the accuracy of the information included in the O&M budget justification material submitted to Congress and provide complete information to review the military services’ fuel consumption spending requests, we recommend that the Secretary of Defense direct the Under Secretary of Defense (Comptroller), in consultation with the military services and DLA, to take the following two actions:\nDevelop an approach to reconcile data on fuel consumption reported by the military services and fuel sales to the military services reported by DLA and take any appropriate corrective actions to improve the accuracy of actual fuel consumption spending data, and\nReport complete fuel consumption information to Congress, to include actual and estimated fuel volume and actual O&M base obligations for fuel consumption spending separate from O&M OCO obligations. This information could be provided as part of DOD’s annual O&M budget justification materials, or through other reporting mechanisms.", "We provided a draft of this report to DOD for review and comment. In its written comments, which are summarized below and reprinted in Appendix II, DOD concurred with the first recommendation and did not concur with the second recommendation.\nDOD concurred with the first recommendation that it develop an approach to reconcile the military services’ and DLA fuel consumption data. DOD stated that the OUSD Comptroller had established a working group with representatives from the military services and DLA to reconcile fuel sales reports. DOD further stated that the working group expected to complete its work to support the development of the President’s Budget for fiscal year 2018.\nDOD did not concur with the second recommendation that it report more complete fuel consumption information to Congress. DOD stated that it agreed that including additional fuel consumption detail could be useful information and stated that it will look at ways to incorporate additional data in upcoming budget submissions. However, DOD stated that it would be very difficult and labor intensive to implement a system to separate base from OCO data and cited several reasons. Among those reasons, DOD stated that many legacy financial systems currently in use cannot easily distinguish between base and OCO execution data. DOD also stated that manually identifying these data would be extremely labor intensive. However, DOD stated that once all DOD components convert from the legacy systems, the department should be able to report base and OCO obligations consistently and effectively. We acknowledge DOD’s ongoing efforts to transition from its legacy systems; however, in our report, we note that fuel volume information is available and that the military services already provide the OUSD Comptroller with actual and estimated fuel volume data during the annual budget development process. Further, our report discusses the basic steps we took to calculate O&M base obligations separately from O&M OCO obligations for fuel consumption spending with DOD’s existing budget materials. These steps included compiling and summing data on actual O&M OCO obligations for fuel consumption spending reported in budget exhibits accompanying the military services’ O&M OCO requests and subtracting these amounts from the total O&M obligations for fuel consumption spending that are reported in the budget exhibits accompanying the military services’ O&M base budget requests. As we noted in our report, the budget exhibits include actual obligations for fuel consumption spending for the total of both O&M base and O&M OCO obligations combined. We then compared this amount to the estimates for fuel consumption spending included in the military services’ O&M base budget request.\nDOD also stated that it is already required to report total obligations to Congress by appropriation. However, neither the OMB circular that governs federal agencies’ preparation, submission, and execution of their budgets nor relevant sections of the U.S. Code preclude the department from providing additional detail on O&M base obligations. As we discuss in our report, the military services generally over-estimated the amount of actual O&M base fuel consumption spending for the period we reviewed; therefore, without additional data that distinguishes between O&M base and O&M OCO spending, Congress does not have the information to assess trends in the military services’ spending for non-war-related fuel consumption, which has varied considerably from budget estimates. Moreover, as we also noted in our report, DOD produces data in various sources that could be used by decision makers to measure the military services’ fuel consumption. DOD could report additional information on actual O&M base obligations for fuel consumption spending as well as actual and estimated fuel volume as we recommended as part of DOD’s annual O&M budget justification materials, or through other reporting mechanisms that the department determined would assist Congress in its decision making. Without more complete information, Congress does not have full visibility over the amount of fuel volume the military services require on an annual basis for their activities.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense (Comptroller), the Secretaries of Army, Navy, and Air Force, and the Commandant of the Marine Corps. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-5431 or russellc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "Our objectives were to (1) describe the military services’ reported actual spending on fuel consumption compared to their budget estimates since 2012 and factors that were reported to have contributed to any differences; (2) assess the steps the Department of Defense (DOD) takes to report accurate and complete fuel consumption data in its annual budget requests; and (3) evaluate the extent to which DOD’s approach for determining the fiscal year 2017 standard price charged to fuel customers is consistent with federal budget guidance and leading practices for a credible and well-documented cost estimate.\nTo describe how the military services’ reported actual spending on fuel consumption compared to their budget estimates since 2012 and factors that were reported to have contributed to any differences, we analyzed DOD’s operation and maintenance (O&M) budget justification materials for fiscal years 2012 through 2015. We focused our analysis on fiscal years 2012 through 2015 because this period covered the most recent complete year of DOD fuel sales and provided three years of cost data to analyze any trends. We identified the specific accounting lines in each O&M budget exhibit related to fuel for both O&M base and O&M Overseas Contingency Operations (OCO) fuel consumption. We then compared the military services’ reported actual obligations for fuel consumption spending that are contained in these accounting lines against the military services’ budget estimates. To determine the reliability of the data, we obtained information on how the data were collected, managed, and used through interviews with and questionnaires to relevant officials and determined that the data presented in our findings were sufficiently reliable to present trends in this report on the military services’ actual and estimated O&M spending for fuel consumption for fiscal years 2012 through 2015. We interviewed an official from the Office of the Under Secretary of Defense (OUSD) Comptroller, who is responsible for managing the bulk fuel program, and budget and financial management officials with the military services to better understand any factors that contributed to differences between actual and estimated fuel consumption.\nTo assess the steps DOD takes to report accurate and complete fuel consumption data in annual budget requests, we analyzed DOD’s budget justification materials for fiscal years 2012 through 2015, as well as military service and Defense Logistics Agency (DLA) fuel data. We interviewed an official from the OUSD Comptroller who is responsible for managing the bulk fuel program, officials with military service budget and financial management offices, and DLA to determine how O&M budget justification materials generally, and fuel consumption estimates specifically, are prepared, evaluated, and reported to Congress. We interviewed officials from each military service to determine how budget justification materials are prepared for their annual O&M budget requests. We interviewed officials from DLA to determine how it reports its fuel sales to the military services. To understand the differences between the military services’ fuel consumption data and DLA fuel sales, we analyzed the military services’ actual obligations for fuel consumption spending reported in their O&M budget materials for fiscal years 2012 through 2015 against DLA data on fuel sales to the military services for these same years. To determine the reliability of both the O&M budget justification data and DLA fuel sales data provided to us by DOD, we obtained information on how the data were collected, managed, and used through interviews with and questionnaires to relevant officials. We assessed the information against federal internal controls and accounting standards that describe practices regarding how information should be recorded and communicated to management and others. We determined that the data were sufficiently reliable to present the military services’ total O&M obligations for fuel consumption spending for fiscal years 2012 through 2015 and DLA fuel sales data to the military services for these same years. However, as discussed in this report, we identified differences in the fuel consumption data reported by the military services and DLA. To understand the differences between the military services’ O&M base request for fuel and actual fuel consumption for O&M base programs and activities, we calculated O&M base spending, because DOD does not report this information separately from O&M OCO spending in its budget justification materials. To do this, we compiled and summed the O&M OCO obligations for fuel consumption spending that were reported in the O&M OCO budget materials for each military service for fiscal years 2012 through 2015 and subtracted this amount from total O&M obligations for fuel consumption spending reported in the military services’ O&M base budget exhibits (which included the total of O&M base obligations and O&M OCO obligations). We then compared this amount to fuel consumption estimates included in the military services’ O&M base budget requests for each fiscal year. We assessed this information against the Standards for Internal Control in the Federal Government and Handbook of Federal Accounting Standards on how information should be recorded and communicated to management and others.\nTo determine the extent to which DOD’s approach for determining the fiscal year 2017 price charged to fuel customers is consistent with federal budget guidance and leading practices for a credible and well- documented cost estimate, we reviewed documentation on DOD’s analysis of various methodologies it examined, as well as its justification for the one it ultimately chose to apply for fiscal year 2017. We did not evaluate the relative costs or benefits of the methodologies that DOD considered—such as the limitations or uncertainties that may be inherent in selecting one methodology over another. Specifically, we determined how DOD evaluated methodologies for setting the standard fuel price for fiscal year 2017. To better understand the steps DOD took, we determined how it applied OMB’s Gas and Oil price index when evaluating methodologies for setting the standard fuel price, compared to what it did in prior years. We also interviewed an official from the OUSD Comptroller, who is responsible for managing the bulk fuel program, about DOD’s methodology for developing its standard price in fiscal year 2017 and its plans for determining the methodology in the future. We compared DOD’s methodology for establishing the fiscal year 2017 standard price for budgeting purposes with OMB’s Circular A-11, which governs federal agencies’ budget development, and with our Cost Estimating and Assessment Guide, which is a compilation of best practices, including the characteristics of a credible and well-documented cost estimate, which federal cost-estimating organizations and industry use to develop and maintain reliable cost estimates.\nWe interviewed official, and, where appropriate, obtained documentation, from the following organizations:\nOffice of the Under Secretary of Defense (Comptroller)\nDefense Logistics Agency – Energy\nDefense Logistics Agency – Finance\nAir Force Petroleum Agency\nNaval Supply Systems Command\nOffice of the Assistant Secretary of the Air Force, Financial\nOffice of the Assistant Secretary of the Army, Financial Management\nOffice of the Assistant Secretary of the Navy, Financial Management We conducted this performance audit from July 2015 to September 2016, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Matthew Ullengren (Assistant Director), Robert Brown, Amy Bush, Adam Hatton, Amie Steele Lesser, Felicia M. Lopez, and Pedro Almoguera made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 2, 3, 3, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "h1_title", "", "", "h1_full", "", "", "", "", "", "", "", "h1_full", "h0_full h1_full", "", "", "", "" ] }	{ "question": [ "What does Senate Report 114-49 include?", "What does the report describe?", "How did GAO review DOD's approach to estimating fuel consumption?", "What does GAO recommend that DOD do?", "How did DOD react to GAO's recommendations?", "Despite DOD's reaction, what does GAO believe about the recommendation?" ], "summary": [ "Senate Report 114-49, accompanying a bill for the National Defense Authorization Act for fiscal year 2016, included a provision for GAO to review DOD's approach to estimating fuel consumption.", "Among other objectives, this report (1) describes the military services' reported actual spending on fuel consumption compared to their budget estimates since 2012, and factors that were reported to have contributed to any differences, and (2) assesses the steps DOD takes to report accurate and complete fuel consumption data in annual budget requests.", "GAO analyzed DOD budget documents, including military service and DLA fuel data for fiscal years 2012 through 2015 and interviewed DOD officials responsible for preparing fuel consumption budget materials.", "GAO recommends that DOD (1) develop an approach to reconcile the military services' and DLA fuel consumption data and (2) report more complete fuel consumption data to Congress.", "DOD concurred with the first recommendation and did not concur with the second recommendation, stating that providing additional fuel consumption information could be useful, but doing so would be difficult and labor intensive.", "GAO believes the recommendation remains valid to ensure that Congress has information to assess trends in fuel consumption, as discussed in the report." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0 ], "summary_paragraph_index": [ 1, 1, 1, 5, 5, 5 ] }
GAO_GAO-15-24	{ "title": [ "Background", "Federal Assistance to Servicemembers, Veterans, and Their Families", "GPRA Modernization Act and Agency Coordination", "We Identified 99 DOD Programs That Address the Effects of Combat", "We Identified 87 DOD and VA Programs That Help Servicemembers Transition and Veterans Readjust to Civilian Life", "We Identified 12 DOD and VA Programs That Raise Awareness and Understanding of Servicemembers’ and Veterans’ Experiences", "Variation in Definitions Limits the Ability to Compare Our Lists with DOD and VA Inventories", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Identifying DOD and VA Programs", "Comparing Lists of Programs", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Program Name", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Program Name", "Program Name", "Program Name", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Program Name", "Program Name", "Program Name", "Program Name", "Program Name", "Program Name", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Program Name", "Program Name", "Program Name", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Program Name", "Program Name", "Program Name", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Program Name", "Appendix IV: Comments from the Department of Defense", "Appendix V: Comments from the Department of Veterans Affairs", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "During the last decade of U.S. military operations, servicemembers have experienced numerous deployments, which increase the risk for posttraumatic stress disorder (PTSD) and traumatic brain injury (TBI), two common conditions that many post-9/11 servicemembers and veterans Additionally, more seriously wounded servicemembers survive suffer.their injuries—injuries that in previous wars would have been fatal—given improvements to body armor and military medicine, but may be left with significant disabilities.\nLess than 1 percent of the American population has served on active duty in an all-volunteer, professional military—an historic low—resulting in a so-called “military-civilian” gap. While Americans generally hold the military in high regard, there is a reported lack of awareness and understanding of the difficult challenges many post-9/11 servicemembers have faced while transitioning from the military to civilian life.", "DOD and VA play key roles in offering assistance to servicemembers, veterans, and their families. In particular, DOD has a role in preparing servicemembers, including those who have served from 9/11 onward, for careers beyond the military and helping them transition from active duty to veteran status. After servicemembers separate from the military, VA’s role is generally to help veterans readjust to civilian life. VA provides health care and other benefits to veterans who have served in all conflicts and wars, such as World War II; Vietnam; and Operation Enduring Freedom, Operation Iraqi Freedom, and Operation New Dawn or OEF/OIF/OND.\nDOD and VA have coordinated in assisting servicemembers and veterans and have jointly developed and implemented policies for the care, management, and transition of recovering servicemembers. These policies address certain issues such as care coordination and the disability evaluation process. In a subsequent but related effort, in May 2012, a joint entity known as the DOD/VA Warrior Care & Coordination Task Force began an inventory of DOD and VA programs and established the Interagency Care Coordination Committee (IC3) to guide the development of shared care coordination policies and practices. Additionally, DOD, VA and other agency partners administer the Transition Assistance Program (TAP), which provides counseling to departing servicemembers, and offers employment assistance and information on federal veteran benefits, among other things.to the revised TAP as Transition, Goals, Plans, Success (Transition GPS).\nOur past reports, as well as reports by others, have highlighted issues surrounding DOD and VA programs, including issues concerning fragmentation, overlap, and duplication; lack of coordination; and challenges in providing some benefits and services.have recommended in two GAO reports that DOD and VA need to better integrate care coordination and case management programs to reduce duplication and better assist recovering servicemembers, veterans, and their families by helping to ensure the continuity of their care. In response, a joint DOD-VA council approved the implementation of specific initiatives that are intended to improve care coordination procedures by facilitating communication between departments and eliminating duplicative efforts. As of September 2014, the departments had not fully implemented these initiatives, according to a senior DOD official. As previously noted, this report does not address fragmentation, overlap, and duplication in benefits or services.\nOther federal agencies also offer assistance to servicemembers and veterans and bring to bear a variety of policy tools. For example, as we have previously reported, the Department of Labor administers four employment programs targeted to veterans. In addition, the Department of Housing and Urban Development provides permanent housing and case management for eligible homeless veterans; and the Internal Revenue Service administers tax expenditures, such as tax credits for businesses hiring veterans, as well as other special tax benefits.", "With various federal programs spread across multiple federal agencies, concerns have been raised that no full accounting of the breadth and effectiveness of these programs exists. Among its aims, GPRAMA seeks to instill a more coordinated and crosscutting perspective to federal performance; that is, improving connections across organizations and policy tools. As we have noted in our past work and OMB states in its guidance, effective implementation of GPRAMA could play an important role in clarifying desired outcomes, addressing program performance spanning multiple organizations, and facilitating future actions to reduce duplication, overlap, and fragmentation.requirements and related OMB guidance that emphasize collaboration include:\nFederal government priority goals: GPRAMA requires OMB to coordinate with agencies to establish federal government priority goals that include outcome-oriented goals covering a limited number of policy areas, as well as goals for needed management improvements across the government.\nAgency priority goals: Certain agencies are required by GPRAMA to identify from among their performance goals a limited number of priority goals every 2 years. Each agency’s priority goals are to reflect the agency’s highest priorities, as identified by the head of the agency, and be informed by the federal government priority goals, as well as input from relevant congressional committees.\nAgency performance plans: Agencies’ performance plans are required to describe how the performance goals (including priority goals) are to be achieved, including a description of how the agency is working with other agencies to achieve its performance goals.\nStrategic reviews: In its 2012 guidance (and subsequent updates) for implementing GPRAMA, OMB guidance directs agencies to conduct annual strategic reviews of progress toward strategic objectives to inform their decision making, beginning in 2014. Agency leaders are responsible for assessing progress on each strategic objective established in the agency strategic plan, including mission, as well as management or crosscutting objectives. Among other things, the reviews are intended to strengthen collaboration on crosscutting issues by identifying and addressing crosscutting challenges or fragmentation.\nFederal program inventory: As previously noted, GPRAMA requires OMB to make publicly available a list of all federal programs identified by agencies, and to include the purposes of each program, how it contributes to the agency’s mission and goals, and recent funding information. GPRAMA also requires OMB to issue guidance to ensure that this information presents a coherent picture of all federal programs. OMB is taking a phased approach to implement this provision and published the inventories developed by 24 agencies in May 2013.", "Using our definition of “program,” we identified 99 healthcare and benefit programs administered by DOD and the military services that address the effects of combat on servicemembers, their families, or both. Some of these 99 programs we identified share a common name, but are independently implemented by each branch of the military service. For example, each military service administers wounded warrior programs. These programs provide care coordination for recovering servicemembers and their families as they transition to and readjust to civilian life. This population includes servicemembers and veterans who suffer from TBI, amputations, burns, spinal cord injuries, visual impairment, and PTSD. Over a third of the 99 programs that we identified offer multiple types of services. A sample of programs we identified is contained in table 1, which we categorize by type of service to illustrate the range of services provided. The full array of programs is listed in appendix II. In addition, a detailed, interactive list of programs is available at http://www.gao.gov/products/GAO-15-24.\nThe three services most common in the 99 programs are support for mental health and substance abuse (50), information and referral (37), and case management or care coordination (15). The number and types of services in the DOD programs are presented in figure 1.\nIn addition, for 73 of the 99 programs (about 75 percent), a servicemember’s or veteran’s family is also eligible for the services or benefits provided. Also, one of these 99 programs—the Federal Recovery Coordination Program—is jointly administered by DOD and VA.", "Using our definition of “program,” we identified 87 programs administered by DOD and VA that help servicemembers transition and veterans readjust to civilian life. Some of these programs share a common name, but are independently implemented through their respective military service branch, such as the Yellow Ribbon Reintegration Program. As a result, we separately counted each military service’s program. A sample of the programs we identified is contained in Table 2, which we categorize by type of service. The full array of programs is listed in appendix III. In addition, a detailed, interactive list of programs is available at http://www.gao.gov/products/GAO-15-24.\nThe three services most common in the 87 programs are disability benefits or services (19); employment assistance (18); and, case management/care coordination, counseling, information and referral, as well as physical health (the frequency for these types of services is 16). The frequency and types of service offered across these 87 programs are portrayed in Figure 2.\nWe also present the number of programs by type of service provided by each agency in table 3.\nNine of the programs are jointly administered by DOD and VA, such as the Pre-Discharge Program for active duty servicemembers or activated National Guard or Reserve members. This program affords these servicemembers the opportunity to file claims for disability compensation up to 180 days prior to separation or retirement from active duty.\nMany of the 87 programs we identified not only support servicemembers and veterans but also their families. Of the 87 programs, 35 offer services to the families of servicemembers and veterans, and 5 provide support to the caregivers of wounded, injured, or disabled veterans. These caregivers generally include family members and friends, according to a RAND study.", "Using our definition of “program,” we identified 12 programs administered by DOD, the military services, and VA that raise awareness and understanding of servicemembers’ and veterans’ experiences in combat and coming home. DOD and the military services administer 9 of 12 programs, which are listed in table 4. A detailed, interactive list of programs is also available at http://www.gao.gov/products/GAO-15-24.", "The lists of programs that we developed are generally not comparable with DOD’s and VA’s 2013 GPRAMA program inventories. As we reported in October 2014, incomparability is due, in large measure, to differences in how agencies defined their programs. OMB’s guidance for developing the inventories allowed agencies to define their programs using different approaches, but within a broad definition of what constitutes a “program.”by outcomes, customers, products/services, organizational structure, or budget structure—and notes that agencies could use a mix of these approaches. The guidance also notes that agencies and their stakeholders use the term “program” in different ways, and that because agencies have varying missions and achieve their missions through different programmatic approaches, such differences are legitimate and meaningful.\nThe guidance presents possible approaches— However, as we concluded in October 2014, the flexibility afforded to agencies limits the usefulness of the resulting inventories as a tool for addressing crosscutting issues because the various approaches agencies used to define their programs prevent meaningful comparisons and connections both within and across agencies. As a result, we recommended that OMB take several actions to improve the inventories, such as revising its program inventory guidance to direct federal agencies to collaborate in defining and identifying programs that contribute to common outcomes. OMB staff agreed with this recommendation and said that they will consider how to address it as they move forward with implementation of the program inventory. Once addressed, this recommendation could help facilitate the creation of a more coherent picture of all federal programs that could be used for promoting collaboration and for identifying potential fragmentation, overlap, or duplication, or gaps in services among federal programs or activities.\nWithin this report, we defined “programs” at a more detailed level than the definition used by DOD and VA for their GPRAMA inventories; that is, we aggregate fewer activities into a program than what is used in DOD’s and VA’s inventories. DOD and VA described their approaches to define a program as follows:\nDOD uses its budget structures and areas related to each strategic goal, such as Land Forces and Strategic Defense. DOD’s program inventory is grouped and aligned to the five DOD strategic goals. The programs are aligned to the strategic goals that they support.\nVA designed its approach to closely mirror the budget structure, which aligns to the way VA manages. The list of programs in the inventory is intended to be recognizable to key external stakeholders, including but not limited to Congress and veterans service organizations.\nNone of the programs that we identified on our three lists matches any of the 91 programs that DOD identified on its GPRAMA inventory. DOD’s inventory is organized by its budget and the strategic goals contained in its 2010 strategic plan. For instance, one goal is “preserving and enhancing the all-volunteer force,” and as part of this goal, the strategic plan states that “wounded warrior care” is one of DOD’s highest priorities. Under this goal, DOD cites “hospitals and other medical activities”— including “medical care for active-duty personnel in regional defense and non-defense facilities”—as programs. However, DOD’s list does not contain any of the programs that we included on our lists, such as the Army Wounded Warrior Program, the Federal Recovery Coordination Program, or Warrior Transition Units. With regard to programs that may raise public awareness and understanding, DOD’s inventory cites, “the American Forces Information Service, other personnel support activities dedicated to enhancing morale and improving community relations— including bands and choruses and ceremonial and public relations activities.” In contrast, our list includes, for example, the Statement of Support Program and Army National Guard Funeral and Honors program, as noted previously in table 4.\nTwenty of 49 VA (or joint DOD-VA) programs we identified that help veterans readjust to civilian life are also listed in VA’s GPRAMA inventory. VA’s inventory contains 93 programs. Some of the programs on both lists include the Readjustment Counseling at Vet Centers, the Post-9/11 GI Bill, and Vocational Rehabilitation and Employment programs. However, VA’s inventory does not include other programs on our lists, such as the Operation Enduring Freedom, Operation Iraqi Freedom, and Operation New Dawn (OEF/OIF/OND) Care Management program and the Transition Assistance Program (a joint DOD-VA program). Only one of the programs on our list of VA programs that raise public awareness and understanding of veterans’ readjustment experiences is listed in VA’s GPRAMA inventory. As noted above, such differences may be due to differing contexts in which the respective lists were compiled. Such differences in how federal agencies define programs go beyond DOD and VA, as we recently reported in our review of government-wide efforts to implement the federal program inventory.\nVA’s OEF/OIF/OND Care Management program provides case management and care coordination to recovering servicemembers and veterans, aimed at helping them access resources within VA and the local community. This program is available at all VA Medical Centers.", "We are not making recommendations in this report. We provided a draft of this product to the Departments of Defense (DOD) and Veterans Affairs (VA) for comment. DOD and VA provided written comments, which are reproduced in appendix IV and V. DOD and VA also provided technical comments that were incorporated, as appropriate.\nDOD and VA officials suggested that we include some additional programs. We reviewed these programs and revised the report to include nine additional programs. The following provides more details.\nIn its comments submitted on October 29, 2014, DOD neither agreed nor disagreed with our findings. In DOD’s technical comments, DOD officials suggested that we delete the Directorate of Mental Health under the first objective. We revised the report by removing this program because it is an office, not a program. DOD officials also suggested that we consider including nearly a dozen additional programs under the first or second objectives. After reviewing these programs, we decided not to include several of them because they did not meet the program definitions we had developed for the objectives. However, we revised the report to include six programs under the first or second objectives:\nUnder the first objective, we revised the report to include (1) the Comprehensive Soldier Family Fitness (CSF2) program, (2) pre- deployment health assessment, (3) post-deployment health assessment, and the (4) post-deployment health reassessment.\nUnder the second objective, we revised the report to include (5) the Army Retirement Services Program and (6) the Army Soldier for Life Program.\nIn its comments, VA generally concurred with our findings. VA officials suggested additional programs for inclusion under the second objective and provided additional information and examples of its efforts related to employment and raising awareness of benefits available to children and spouses of veterans. Several of these efforts do not focus primarily on helping active duty servicemembers transition or veterans readjust to civilian life. However, we revised the report to include (1) the Automobile and Adaptive Equipment program, (2) Veterans Employment Center, and (3) the VA Liaison for Healthcare Program.\nWe subsequently reviewed whether any of the nine additional programs that we added to our report were included in the DOD or VA inventories. Only one of the nine programs was included. Specifically, the Automobile and Adaptive Equipment program was included in VA’s GPRAMA inventory.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of Veterans Affairs, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions regarding this report, please contact me at (202) 512-7215 or sherrilla@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI.", "This appendix summarizes our work to identify Department of Defense (DOD) and Department of Veterans Affairs (VA) programs as well as to compare the lists of programs that we generated under objectives 1-3 with DOD and VA’s 2013 program inventories that were included in the Office of Management and Budget’s (OMB) program inventory compiled in response to a requirement in the GPRA Modernization Act of 2010 (GPRAMA).", "To address the first three objectives, we identified DOD and VA programs through the following four-step process: 1. We established a definition for “programs” to clarify the types of DOD and VA programs and activities to be included on our lists because no standard definition of “program” exists. Past GAO work and OMB have defined “program” in very broad terms. For this report, our definitions reflect the specific area of interest specified in the mandate; therefore, we did not attempt to develop a definitive definition. We established a definition for program by reviewing our prior work and other relevant studies on related programs for servicemembers and veterans who have served in recent conflicts. We also obtained input from internal GAO experts on research methods and federal programs for servicemembers and veterans, as well as officials from DOD and VA. In general, we defined “programs or activities” as a federally funded, organized set of activities directed toward a specific purpose or goal that an agency undertakes and is being administered in fiscal year 2014. We further scoped our definition for each of our objectives as follows:\nObjective 1: DOD or military services’ programs or activities that address the effects of combat—including physical, mental, or social heath—on post-9/11 active-duty servicemembers or their spouses or dependents.\nObjective 2: DOD, military services, or VA programs that focus primarily on helping active duty servicemembers transition or veterans readjust to civilian life.\nObjective 3: DOD, military services, or VA programs that focus primarily on raising civilian public awareness of the combat experiences of servicemembers and the readjustment experiences of veterans.\nFor the first objective, we scoped our definition of programs differently than for the second and third objectives. Specifically, for the first objective, although servicemembers and their spouses or dependents must benefit from a program or activity that addresses the effects of combat as we have defined that term, a program or activity does not have to only benefit servicemembers that directly experience combat. For example, the Joint Family Support Assistance Program supports military families who are geographically dispersed from a military installation. This program could support military families in which one or more servicemembers are serving in a combat zone or deployed to Germany (or other noncombat zone) while the family is living stateside. For the second and third objectives, we defined programs as focusing primarily on servicemember transition and veteran readjustment to civilian life as well as efforts to raise public awareness and understanding of servicemembers’ and veterans’ experiences in combat, coming home, and transitioning to civilian life. An example of such a program includes VA outreach and readjustment counseling services through Vet Centers. VA administers other programs that provide interventions or treatments to help certain veterans, such as the homeless and those contemplating suicide. However, we did not include those types of programs or activities because helping veterans readjust to civilian life is not their primary focus.\nFor all three objectives we excluded the following types of programs:\nPrograms conducting research.\nPrograms in which post-9/11 Iraq and Afghanistan servicemembers or veterans are not eligible, such as efforts aimed only at veterans of conflicts or wars prior to Operation Enduring Freedom/Operation Iraqi Freedom/Operation New Dawn (OEF/OIF/OND).\nPrograms developed and administered by individual military installations or VA hospitals specifically for the populations they serve at those locations. For example, for the second objective we excluded the Road to Reintegration, a program designed to serve Michigan veterans with a network of resource providers as they return to civilian life. Thus, our findings are limited to the national perspective.\nPrograms providing a one-way, passive transmission of information (for example, a directory that lists services available).\nPrograms that may have been created or revised to meet our inclusion criteria after fiscal year 2014.\nThe following further elaborates on these definitions.\nGeneral Definition of Terms for Objectives 1–3\nDOD or military services: DOD, Office of the Secretary of Defense (OSD) and all subordinate agencies, offices, and programs under DOD; departments of the Army; Air Force, and Navy (including the Marine Corps); the reserve components for each of the military services, including the National Guard. (We exclude U.S. Coast Guard programs because they are administered by the Department of Homeland Security.)\nVA: All VA administrations, centers, offices, and programs.\nProgram or activities: Federally funded, organized set of activities directed toward a specific purpose or goal that an agency undertakes and are being administered in fiscal year 2014. These activities may include assistance for health, housing, employment, and family support, as well as various program types (e.g., direct federal programs, direct federal benefits programs, and grants). In addition, our definition included tax expenditures (credits, deductions, deferrals, or preferential tax rates) that are managed or administered by DOD or VA (and related offices and departments as defined above); however, we did not identify any such programs.\nActive-duty servicemembers: Those who are currently serving on active duty in the United States armed forces. This includes activated members of the National Guard and Reserve under Title 10 (full-time duty in the armed forces) or Title 32 (duty performed for which National Guard receives pay from federal government).\nVeterans: A person who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable. This also includes Title 10 or Title 32 active Guard and Reserve components that have deployed but are still serving in the Reserve Component.\nPublic: The broader civilian community in the United States, including citizens, public and private employers, police, and court systems.\nSpecific Definition of Terms for Objective 1 I. Definition: DOD or military services’ programs or activities that address the effects of combat—including physical, mental, or social heath—on post-9/11 active-duty servicemembers or their spouses or dependents.\nSpecific definitions for this objective: IA. Effects of combat - One or more of the following that results from combat, warfare, or armed conflict: 1. Physical health - care for extremity, hearing, vision, burns, or other physical injuries and pain, as well as clinical case management and coordination support. 2. Mental / emotional health - care for psychological and brain injuries— such as posttraumatic stress disorder (PTSD) psychotherapies and traumatic brain injury (TBI) treatments—substance abuse, suicide prevention, as well as clinical case management and coordination support. 3. Social domains - support for family and caregivers, legal support, non- medical case management, support for reserve components, post- deployment reintegration support for servicemembers and their families, and spiritual support, and other related effects. 4. While servicemembers and their spouses or dependents must benefit from a program or activity that addresses the effects of combat, a program or activity does not have to only benefit servicemembers that directly experience combat. For example, the Joint Family Support Assistance Program supports military families who are geographically dispersed from a military installation. This program could support military families in which one or more servicemembers are serving in a combat zone or deployed to Germany (or other noncombat zone) while the family is living stateside.\nIB. Criteria for excluding programs 1. Exclude programs that exclusively provide services to post-9/11 active-duty servicemembers who are transitioning to VA or civilian employment or civilian life (these programs are included in objective 2).\nSpecific Definition of Terms for Objective 2 II. Definition: DOD, military services, or VA programs or activities whose primary focus is to help post-9/11 servicemembers transition or veterans or deactivated members of the reserve components readjust to civilian life, including their spouses or dependents.\nSpecific definitions for this objective: IIA. Primary focus: Key reasons for which the program or activity was designed or created (or one of its main missions or objectives) as stated in the agency’s description of the program or activity.\nIIB. Help: Assist transition or readjustment through services and efforts, such as: providing physical and mental health services; counseling and outreach; training, job placement and support, employment benefits, and career guidance, education benefits; campaigns designed to raise awareness of DOD or VA resources available to post-9/11 servicemembers or veterans or their spouses or dependents; providing technology like assistive technology, equipment; case management, legal support; housing benefits/support; and, support for family or caregivers, benefits counseling, or other related efforts.\nIIC. Civilian Life: Time after separating from the military, including VA care, services, or benefits; nonmilitary employment; or higher education.\nIID. Criteria for excluding programs 1. Exclude programs that provide services to post-9/11 servicemembers who remain in the military or transition back to active-duty. (These types of programs are covered in objective 1.) 2. Exclude programs to enhance overall coordination between DOD and VA (e.g., Joint Executive Council).\nSpecific Definition of Terms for Objective 3 III. Definition: DOD, military services, or VA programs whose primary focus is to raise civilian public awareness of the combat experiences of post-9/11 active-duty servicemembers and the readjustment experiences of veterans.\nSpecific definitions for this objective: IIIA. Primary focus: Key reasons for which the program or activity was designed or created (or one of its main missions or objectives) as stated in the agency’s description of the program or activity.\nIIIB. Raise public awareness and understanding 1. Welcome home and reintegration events in communities and college campuses as well as parades and appreciation events aimed at informing the nonservicemember population. 2. Awareness and appreciation campaigns and events as well as public service announcements aimed at civilians, and efforts to educate business leaders about the skills veterans can provide employers, and other related efforts.\nIIIC. Criteria for excluding programs 1. Excludes programs and public awareness campaigns aimed specifically at providing assistance, service, or awareness to servicemembers, veterans or their families. (These types of programs are covered in objective 2.) 2. Excludes DOD and VA efforts to provide stakeholder assistance to nonfederal entities, such as nonprofits, that provide support or assistance to servicemembers, veterans, and their families. 2. We identified publicly available sources that contain lists of relevant federal programs. We identified these sources based on discussions with DOD and VA officials and internal GAO experts on research methods and federal programs for servicemembers and veterans, as well as through online searches. Table 5 provides the name and description of each source we used by objective. 3. We used the definitions and sources from steps 1 and 2 to identify the relevant programs for our lists. For the programs included on our lists, we used the sources identified in step 2 to collect information about the (1) program/activity’s name, (2) purpose/objectives, (3) the agency and/or office responsible for its administration, and (4) the population served. For a subset of the programs identified in the searches, we conducted tests to determine the degree to which analysts agreed on the same programs for inclusion. Once we compiled preliminary lists of programs, we provided the lists to internal GAO experts on research methods and federal programs for servicemembers and veterans for review and comment. We modified the lists accordingly.\nNext, a GAO analyst reviewed all of the sources and documented a judgment about whether the programs identified conformed to the definitions we developed in step 1. A second GAO analyst then reviewed separately the assessment and documented an agreement or disagreement with the initial decision. If any differences emerged, the two analysts discussed the differences and made changes based on a verbal resolution of those differences. For any instances in which the two analysts did not resolve differences, a third GAO analyst adjudicated and a final decision was reached. 4. We sent our preliminary list of programs to officials at DOD and VA for comment and verification. Agencies either confirmed that programs on our preliminary lists should be included, identified those that should not be on our lists, or added programs that were not included on our preliminary lists. We modified the lists accordingly.\nThis four-step process identified 170 separate programs, although some of them are relevant to more than one objective. Specifically, 26 programs are included in more than one objective, such as the Air Force Wounded Warrior Program (AFW2) that addresses the effects of combat and helps wounded and injured servicemembers and veterans transition to civilian life. In addition, some programs share a common name but are independently implemented by each military service branch. For example, the Yellow Ribbon Reintegration Program provides similar services but is independently administered by each service branch. With such programs, we separately counted each military service’s program. In carrying out this four step process, we did not conduct an independent legal analysis of the statutory or regulatory basis or requirements for any of the programs we identified. We used the various documentary and data sources to corroborate one another and determined that the documentary and data sources used together were sufficiently reliable for our descriptive purposes.\nTo help convey our findings, we developed categories to group the types of service provided by the programs. The categories include (1) caregiver support, (2) case management/care coordination, (3) counseling, (4) disability, (5) education assistance, (6) employment assistance, (7) information and referral, (8) mental health and substance abuse, (9) physical health, (10) spiritual health, and (11) other. Because some programs offer more than one type of service, programs can fall into more than one category or service type. Although a service may be included in many programs or activities, the service may not or may be commonly used by servicemembers or veterans. For example, the Transition Assistance Program (TAP) is one program, but the services provided through the program are widespread because all eligible, transitioning servicemembers are generally required to participate in this program.\nFinally, our scope for the first three objectives was limited to identifying DOD and VA programs based on the types of service provided; we did not analyze these programs to identify instances of fragmentation, overlap, duplication, or gaps in benefits or services. In addition, the programs included in our review were accurate and up-to-date when we issued the report. However, some may change over time.", "To address the fourth objective, we compared the lists of programs that we generated under objectives 1-3 with DOD and VA’s 2013 program inventories—part of OMB’s federal program inventory compiled in response to a GPRAMA requirement—to identify similarities and differences between the agencies’ inventories and our lists. To help make this comparison, we drew upon prior GAO work on agencies’ GPRAMA program inventories. Although this objective was not included in the mandate, we added it because of the parallels between the mandate and the GPRAMA requirement for developing program inventories.\nWe conducted our work from March 2014 to November 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings based on our audit objectives.", "Appendix II: Programs Addressing the Effects of Combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)", "Mental health and substance abuse description of “Other”", "Appendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Appendix II: Programs Addressing the Effects of combat (Objective 1) Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”", "Appendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nService- member, Veteran, and Family Marine Forces Reserve (MARFORR ES) Psycholog- ical Health Outreach Program (P- HOP)\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”", "Appendix II: Programs Addressing the Effects of combat (Objective 1)", "", "Appendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”", "Appendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”", "Appendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix II: Programs Addressing the Effects of Combat (Objective 1)\nAppendix II: Programs Addressing the Effects of combat (Objective 1)", "Mental health and substance abuse description of “Other”\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nMental health and substance abuse “Other”\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”\nX Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2) Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”\nX Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nMental health and substance abuse “Other”\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)\nAppendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse description of “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse description of “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse description of “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse description of “Other”", "Appendix III: Programs for Transitioning and Readjusting to Civilian Life (Objective 2)", "Mental health and substance abuse description of “Other”", "", "", "", "", "In addition to the contact named above, individuals making key contributions to this report were Brett Fallavollita, Assistant Director; James Whitcomb, Analyst-in-Charge, Deitra Lee, and Joel Marus. In addition, key support was provided by Bonnie Anderson, James Bennett, David Chrisinger, Debra Draper, Alex Galuten, Kathy Leslie, Ben Licht, Sheila McCoy, Paul Schearf, Stacy-Ann Spence, Walter Vance, and Amber Yancey-Carroll." ], "depth": [ 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "h0_full h2_full", "", "", "h1_full", "", "h2_full h1_full", "h2_full h1_full", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What is the purpose of the 99 programs GAO identified?", "What do the programs offer?", "What types of service do the programs offer?", "What is the problem with the list of programs GAO developed?", "Why do the list of programs have limited comparability?", "How did DOD identify programs at a broad level?", "How does GAO contrast with DOD when identifying programs?", "What are the purposes of the programs GAO identified in the report?", "What else did GAO examine in the report?", "How did GAO address its objectives?", "How did GAO define programs?" ], "summary": [ "GAO identified 99 programs provided by the Department of Defense (DOD) to help address the effects of combat on post-9/11 servicemembers, their families, or both.", "These programs often offer multiple types of services.", "The services most common are mental health and substance abuse (50), information and referral (37), and case management or care coordination (15).", "The lists of programs that GAO developed using its definition are not comparable with those in DOD's 2013 program inventory and have only limited comparability with VA's 2013 program inventory.", "This limited comparability is primarily due to differing contexts in which the lists were compiled. While GAO's lists address specific mandated questions, DOD's and VA's lists were developed following Office of Management and Budget guidance, which generally provides flexibility in how agencies define their programs.", "For example, DOD's inventory is partially organized by its strategic goals. One goal is “preserving and enhancing the all-volunteer force,” for which wounded warrior care is cited as a high priority. Under this goal, DOD lists “hospitals” and “regional defense facilities” as programs.", "In contrast, GAO identified individual programs, such as the Army Wounded Warrior Program and Warrior Transition Units, which were not listed in DOD's inventory.", "In this report GAO identified the number of programs, including the types of services offered that: 1) address the effects of combat on post-9/11 active-duty servicemembers and their families, 2) help post-9/11 servicemembers and veterans transition to civilian life, and 3) help raise public awareness and understanding of servicemembers' and veterans' combat and transition experiences.", "Also, GAO examined how the lists of programs identified compare with program inventories prepared by DOD and VA pursuant to law.", "To address these objectives, GAO established and applied its definition of “program.” GAO also searched publicly available sources that contain lists of programs; sent preliminary lists of programs to DOD and VA for verification; and reviewed relevant reports and 2013 program inventories for DOD and VA.", "In general, GAO defined programs as federally funded, organized sets of activities agencies undertake that are directed toward specific purposes or goals and are being administered in fiscal year 2014." ], "parent_pair_index": [ -1, 0, 1, -1, 0, -1, 2, -1, 0, -1, 2 ], "summary_paragraph_index": [ 3, 3, 3, 7, 7, 7, 7, 1, 1, 1, 1 ] }
GAO_GAO-13-522	{ "title": [ "Background", "Postpayment Claims Reviews", "Providers’ and CMS’s Experience with the Recovery Audit Demonstration Program", "Assessing Efficient and Effective Operations", "The Four Medicare FFS Contractor Types Were Established under Different Laws and Have Different Primary Functions and Characteristics", "Changes in Medicare’s Contracting Authority Resulted in Four Medicare FFS Contractor Types", "Many CMS Requirements for Postpayment Claims Review Differ across Contractor Types, Which Can Impede Effectiveness and Efficiency", "CMS Sets More Limits on RAs through Review Requirements Than on Other Contractors Due to Experience in the Demonstration", "Other Differences in CMS Requirements across Contractors Can Impede Effectiveness and Efficiency by Complicating Providers’ Responses to and Understanding of Claims Reviews", "CMS Has Begun an Effort to Examine Whether Its Activities Add Administrative Burden for Providers", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: List of Provider Associations GAO Interviewed", "Appendix II: Comments from the Department of Health and Human Services", "Related GAO Products" ], "paragraphs": [ "Contractors have a long-standing and essential role in the Medicare program. Program integrity activities—particularly postpayment claims reviews—have been a core component of contractors’ roles.", "When conducting postpayment claims reviews, contractors apply the same criteria—Medicare regulations, and coverage and coding policies— to determine whether or not a claim was paid properly. CMS outlines the general process and contractor requirements for conducting claims review in its manuals and contractor statements of work.\nPostpayment claims reviews may be automated, semiautomated, or complex.\nAutomated reviews use computer programming logic to check claims Contractors can for evidence of improper coding or other mistakes. use automated postpayment reviews to analyze paid claims and identify those that can be determined to be improper without examining any additional documentation, such as when a durable medical equipment (DME) supplier bills for items that should have been included as part of a bundled payment for a skilled nursing facility stay.\nSemiautomated reviews use computer programming logic to check for possible improper payments, but allow providers to send in information to rebut the claim denial before it is implemented. Only the RAs conduct such reviews. If providers send in information, RA staff review it before making a final determination.\nComplex reviews are conducted if additional documentation is needed to determine whether a payment was made in error. Complex reviews involve manual examinations of each claim and any related documentation requested and received from the provider, including paper files, to determine whether the service was billed properly, and was covered, reasonable, and necessary. Licensed clinical professionals, such as licensed practical nurses, and certified coders typically perform the reviews. Contractors have physician medical directors on staff who provide guidance about making payment determinations on the basis of medical records and other documentation and who may discuss such determinations with providers.\nThe postpayment claims review process involves selection of the claims to be reviewed, the review itself, communicating with providers during and about the review, and a process for assuring quality of the contractor’s reviews and decisions. Each contractor establishes its own claims selection criteria. A contractor may use data analyses, knowledge of Medicare billing requirements, and clinical expertise to develop its claims selection criteria to focus on claims with a high likelihood of being improper. As a part of the review, the contractor may notify the provider that a claim is under review, or ask for medical records or other documentation to substantiate the claim. The latter is called an additional documentation request (ADR). If the contractor requires additional documentation, the provider must submit the requested documents within a specified time frame. If the review has determined that the Medicare payment amount was improper, either the contractor or the MAC for that jurisdiction will notify the provider that an overpayment was made and will need to be recouped, or an underpayment was made and the remainder of the remittance will be paid to the provider. Providers may appeal any of the contractors’ decisions. The contractors’ quality assurance (QA) processes may include various steps to assure consistency, reliability, and quality in claims reviews. The QA process may include some type of examination of the work that has been done and may be performed internally, by the contractors themselves, or externally, by CMS or an independent third party. A contractor’s QA process may include comparing multiple reviewers’ decisions about the same claim to determine the extent of their agreement (known as interrater reliability testing) or reviews to validate the claims review decisions by others who are either internal or external to the reviewer’s organization. The QA process may also include staff training, to ensure that the reviewers understand Medicare program and payment rules so that their determinations can be consistent. The QA processes followed may also be outlined in a QA plan.", "The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directed CMS to establish a demonstration program to test the use of RAs on a contingency fee basis in the Medicare program. Other contractors that review claims are given a set amount of funding to conduct reviews. In the demonstration project, RAs were paid contingency fees on claims that were identified as improper, including on claims for which the RA determinations were overturned on appeal at the second through fifth levels of review. Subsequently, the Tax Relief and Health Care Act of 2006 required CMS to implement a permanent and national Medicare recovery audit contractor program to increase efforts to identify and recoup improper payments.\nDuring the course of the RA demonstration program, providers reported several specific problems. In providers’ views, the RA’s contingency fee payment structure created an incentive for these contractors to be too aggressive in determining that claims were improper. Providers also faulted CMS for not penalizing RAs for inaccurate claim determinations, noting that contractor determinations resulted in thousands of provider appeals that were expensive and burdensome for providers. In addition, providers stated that during the demonstration project RAs did not have the necessary medical expertise to make their determinations, because they were not required to have a physician medical director on staff or coding experts conducting the claims reviews.\nWe indicated in a previous report that CMS took a number of steps to address issues raised by providers about the RA demonstration program when it implemented the RA national program. For example, CMS put in place more rigorous staffing requirements and eliminated contingency fee payments when RAs’ claims determinations are overturned on appeal. In addition, CMS took steps to improve oversight of the accuracy of RAs’ claims review determinations and the quality of RA service to providers in the national program. CMS added processes to review the accuracy of RA determinations and established performance metrics to monitor RA accuracy and service to providers.", "Internal control is the component of an organization’s management that provides reasonable assurance that the organization achieves effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations.postpayment claims reviews, should provide reasonable assurance that the Medicare program is appropriately reimbursing for services provided to beneficiaries, thereby protecting the integrity of the Medicare program. Ineffective or inefficient claims reviews present the risk of generating false findings of improper payments and an unnecessary administrative and financial burden related to provider appeals for Medicare-participating providers and the Medicare program. CMS requirements for contractors performing postpayment claims reviews help establish the control environment and control activities, such as monitoring. The manner in which the agency delegates authority and responsibility through these requirements establishes part of the control environment. Contractor requirements also establish the mechanisms that contractors use to communicate and interact with providers.\nInternal controls, in this case In addition, Executive Order 13571—Streamlining Service Delivery and Improving Customer Services—was issued in April 2011 to improve government services to individuals and entities by requiring agencies to develop customer service plans in consultation with OMB.\nSubsequently, OMB issued implementation guidance for agencies for those services that the agencies plan to focus on improving. The guidance calls for improving the customer service experience through practices such as developing a process for ensuring consistency and coordinating with others to identify opportunities to use common processes. Among other things, the guidance also suggests analyzing customer preferences and redirecting resources from less preferred and more costly channels—like printed materials—to preferred, less costly and more widely accessible channels (such as internet communications) where appropriate.", "Over time, Congress provided for CMS to use contractors to carry out functions in connection with the FFS program, which has resulted in the use of more types of contractors to conduct postpayment claims reviews. These contractors also have different primary functions and characteristics, which affect their use of postpayment claims reviews.", "Although contractors have been used for Medicare since the beginning of the program, several statutory changes since the 1990’s increased CMS’s resources and authority to use new types of contractors—MACs, RAs, ZPICs, and CERT contractors—to conduct postpayment claims reviews in order to help detect and recoup overpayments or repay underpayments, and to investigate potential fraud.\nIn 1965 when Medicare was established, Congress provided for two types of contractors that could be used to administer the program. From then until 1996, responsibility for processing and paying Medicare claims, as well as for the program integrity tasks of developing potential cases and coordinating with law enforcement regarding any investigations of suspected Medicare fraud, resided with contractors called fiscal intermediaries and carriers.\nThe Health Insurance Portability and Accountability Act of 1996 (HIPAA) established the Medicare Integrity Program (MIP), which authorized CMS to contract separately for program safeguard contractors (PSC)—the precursor to the ZPICs—to conduct activities, such as identifying and investigating potential fraud, that had previously been conducted by fiscal intermediaries and carriers and provided funding for MIP.\nIn 2003, the MMA required CMS to replace the fiscal intermediaries and carriers with the MACs. (See table 1.) During the implementation of the MACs, CMS consolidated the number of contractors that process and pay Medicare FFS claims, enlarged their geographic jurisdictions compared to the previous contractors, and combined Part A and Part B claims processing within each jurisdiction. As part of changes made while implementing MACs, CMS also transitioned fraud investigation from PSCs to ZPICs in all but one zone.\nThe MMA also directed CMS to establish a demonstration project to test the use of recovery audit contractors in the Medicare program.\nSubsequently, the Tax Relief and Health Care Act of 2006 required CMS to implement a permanent and national Medicare recovery audit contractor program to increase efforts to identify and recoup improper payments.\nAlthough HHS had begun estimating the extent of improper payments in Medicare FFS claims in 1996, the Improper Payments Information Act of 2002 (IPIA) requires executive-branch federal agencies to annually review all programs and activities to identify those that are susceptible to significant improper payments, estimate the annual amount of improper payments for these programs and activities, and report these estimates along with actions taken to reduce improper payments for programs with estimates that exceed $10 million. In fiscal year 2003 as part of its IPIA compliance efforts, CMS established the CERT program to measure improper payment rates for Medicare FFS claims, including one CERT contractor that is responsible for reviewing a random sample of claims nationwide, with their related medical records and other documentation to determine if they are proper.\nCMS has established responsibility for overseeing these four types of contractors in different parts of its matrixed organization (see fig.1). Three different organizational components within CMS—Center for Medicare (CM), Office of Financial Management (OFM), and Center for Program Integrity (CPI)—oversee these four different types of contractors. CM oversees the MACs, which conduct several program integrity activities, including postpayment claims review. CMS’s Provider Compliance Group within OFM oversees the RAs and CERT contractors. The Provider Compliance Group has overall responsibility for the oversight of the claims review activity conducted by MACs, RAs, and CERT contractors and for measurement of the FFS improper payment rate. CPI oversees the ZPICs and has direct responsibility for program activities involved in investigating potential fraud.\nFour types of CMS contractors conducting postpayment reviews have different primary functions and characteristics (see table 2.) Postpayment claims reviews are the main focus of the RA and CERT contractors’ functions, but that is not the case for MACs and ZPICs. The contractors also vary in the number of states and size of their geographic jurisdictions and the volume of claims they review.\nMACs. Our analysis of MACs’ statement of work indicates that MACs have primary responsibility for processing and paying Medicare FFS claims in their geographic jurisdictions. In addition, MACs conduct several program integrity activities, including prepayment and postpayment claims review, audits of hospitals and other institutional providers to ensure the accuracy of payments paid based on institutions’ reported costs and recoupment of overpayments. They also implement local coverage determinations (LCD) in their jurisdictions, as long as such determinations do not conflict with national coverage policy or other Medicare payment requirements. As of June 2013, there are 12 MACs that process part A and part B claims (A/B MAC), one for each of 12 jurisdictions, and 4 MACs that process DME claims (DME MAC), one for each of 4 jurisdictions. Jurisdictions of other contractors, such as ZPICs and RAs, were designed to align with MAC jurisdictions.\nMACs conduct postpayment reviews to help ensure accurate payment and specifically to identify payment errors. This includes identifying ways to address future payment errors—for example, through automated controls that can be added on a prepayment basis and educating providers with a history of a sustained or high level of billing errors to ensure that they comply with Medicare billing requirements. In 2012, MACs performed about 84,000 complex postpayment claims reviews. Because each jurisdiction has a MAC responsible for claims administration, if another contractor identifies an improper payment, the MAC for that jurisdiction is responsible for correcting any underpayments and recouping any overpayments, and, in some cases, for corresponding with providers whose claims are under review.\nZPICs. The ZPICs’ primary function is to identify and investigate potentially fraudulent FFS claims and providers in each of seven geographic jurisdictions, which are called zones. CMS established ZPICs in 2008 to investigate potential fraud through a jurisdiction-based approach similar to that of the MACs. CMS officials indicated that this approach consolidated responsibility with the ZPICs for investigating potential fraud for all types of claims and for all parts of Medicare in each geographic jurisdiction.\nThe Fraud Prevention System is intended to analyze Medicare claims, provider, and beneficiary data before claims are paid to identify those that are potentially fraudulent. See GAO, Medicare Fraud Prevention: CMS Has Implemented a Predictive Analytics System, but Needs to Define Measures to Determine Its Effectiveness, GAO-13-104 (Washington, D.C.: Oct. 15, 2012). reviews generally focus on providers whose billing patterns are unusual or aberrant in relation to similar providers in order to identify potential fraud or abuse. When ZPICs identify improper payments, they refer these to the MACs to be recouped or repaid. ZPICs performed about 108,000 complex postpayment claims reviews in 2012.\nCERT contractor. Our analysis of its statement of work indicates that the primary function of the CERT review contractor is to conduct postpayment claims reviews used as a basis to estimate the annual FFS Medicare improper payment rate—the percentage of claims paid improperly. HHS began to estimate the rate of improper payments in Medicare FFS in fiscal year 1996. CMS began estimating the FFS Medicare improper payment rate in fiscal year 2003. Since then, the CERT review contractor has had the responsibility of reviewing a sample of claims for the entire nation for this estimate.central part of the CERT review contractor function. CERT reviews also help identify program integrity vulnerabilities by measuring the payment accuracy of each MAC, and the Medicare FFS improper payment rate by type of claim and service.\nThe CERT claims review sample is pulled semimonthly from MAC processed claims and encompass those that have been paid, denied, or selected for a MAC claims review. This report will refer to the CERT claims reviews as “postpayment;” because all of the claims were processed prior to CERT claims review even though not all were paid. not make recoupments or repayments. If the CERT contractor determines that an improper payment has been made, the CERT contractor is required to refer the claim to the appropriate MAC for recoupment of overpayments or repayment of underpayments. In fiscal year 2012, the CERT review contractor reviewed just over 41,000 postpayment claims.\nRAs. Our analysis of the RA statement of work indicates that conducting postpayment claims reviews is the RAs’ primary function. Use of RAs was designed to be an addition to MACs’ existing claims review processes, since the number of postpayment reviews conducted by the MACs and other contractors was small relative to the number of claims paid and amount of improper payments.\nTo implement the national recovery audit program, CMS contracted with four RAs to conduct postpayment reviews of Medicare FFS claims to identify overpayments and underpayments within four geographic jurisdictions. In part because of issues that were raised during the RA demonstration program, CMS made changes in the RA’s requirements to provide more oversight over their activities. As in the demonstration, under the national program the RAs are paid on a contingency fee basis, but CMS officials indicated that the percentage is smaller. For the national program, the fee ranges from 9 to 12.5 percent of the overpayments and underpayments collected. In contrast to the MACs, ZPICs, and CERT contractor, which are paid on the basis of the contractually negotiated costs for the tasks performed, RAs are compensated from the funds that are recouped. However, if an RA’s overpayment determination is overturned on appeal, the RA is not paid for that claim. The RAs conducted nearly five times as many complex reviews in fiscal year 2012 as the other three contractors combined—over 1.1 million complex postpayment claims reviews and nearly 1 million automated review denials.\nWith an increased focus on measuring and reducing Medicare improper payments and the implementation of RAs, there has been a significant increase in the number of claims being reviewed postpayment (see table 3). Our analysis of data from CMS indicates that from 2011 to 2012, the RA’s complex postpayment reviews increased 77 percent. Except for the CERT contractor, which reviews a randomly selected sample of claims each year to estimate the error rates, all contractors increased their postpayment claims reviews by 16 percent or more. However, the 2.3 million reviews performed by these contractors accounted for less than 1 percent of the over 1 billion FFS claims paid annually, and about 1.4 million were complex reviews.", "CMS has different requirements for postpayment claims reviews across different contractor types, and some of these differences can sometimes impede effectiveness and efficiency by increasing administrative burden on providers. Due in part to CMS’s experience with the RA demonstration and issues raised by providers during the demonstration, CMS sets more limits through claims review requirements on RAs than on other contractors. CMS officials generally described some other differences as developing when different requirements were set by different groups within the agency at different times. CMS has begun an effort to examine whether its claims reviews activities add administrative burden for providers.", "As a result of lessons learned during the RA demonstration project and to establish tighter controls on RAs, CMS imposed certain postpayment requirements unique to the RAs when it implemented the national program (see table 4). For example, RAs are required to limit the number of ADRs made to a single provider during a given period, while the other contractors do not have such limits. Similarly, unlike the other contractors, RAs cannot make claim denials for lapses in documentation standards unrelated to reasonableness or medical necessity, such as illegible physician signatures or dates. Other requirements unique to the RAs include submitting to CMS for review and approval descriptions of the billing issues that they propose to review and the basis for assessing whether the claims for those services are proper prior to widespread use, posting notice of billing issues targeted for postpayment review on reimbursing certain providers for the expense entailed in providing requested medical records, making claims reviewers’ credentials available upon provider request, providing access to RA staff physicians for discussion of claim denials upon provider request, and giving providers 40 days to request an opportunity to provide additional documentation to the contractor and informally discuss any revision prior to having to file an appeal.\nIf the contractor sent the provider an ADR, and the claim is found to be proper, RAs are the only type of postpayment review contractor required to notify the provider. This means that providers who have sent in documentation do not routinely get a definitive answer that a MAC, ZPIC, or CERT contractor claim review has been concluded—unless an improper payment has been detected. Representatives of three provider associations indicated that it was important for financial management purposes for providers to be informed when a review was concluded and whether or not funds would be recouped.\nRepresentatives of three provider associations indicated if certain RA requirements were applied to the other contractors, this could reduce administrative burden and improve claims reviews efficiency. For example, representatives from one provider association indicated that it is valuable to discuss informally any revision to the contractor’s initial claims determination prior to providers filing an appeal. When such discussion results in providers being able to properly explain their billing, it can lessen administrative burden by reducing the number of appeals filed. However, according to preliminary CMS data, nearly 20 percent of the 1.4 million RA claim overpayment determinations were appealed to the first level in 2012. Among the appealed overpayment determinations about 28 percent were overturned at the first level of appeal by MACs, which suggests that providers may not be having such discussions or the discussions are not succeeding in resolving issues prior to appeal. Three provider associations also indicated that having a limit on the number of medical records that could be requested in a given time period helped manage the burden of responding to the requests. However, adding such limits to contractors other than RAs might limit the number of claims reviews these other contractors could conduct.", "Many of the other requirements CMS developed for postpayment review activities, including documentation submission, staffing, and quality assurance, vary across the four contractor types. Some of the differences in the contractors’ postpayment claims review requirements can impede effectiveness and efficiency of the claims reviews by complicating providers’ responses to ADRs or their understanding of claims review decisions, according to representatives from three provider associations with whom we spoke. According to CMS officials, differences in requirements generally developed because the contracts or requirements were written at different times by staff within different parts of CMS, or the contractors’ functions and activities have changed over time. However, some differences were due to other factors, such as cost.\nAdditional Documentation Requests. Differences in contractors’ requirements for sending ADRs and timelines for providers’ responses to the contractors are illustrated in table 5. In some cases, in addition to reviewing documentation from the provider whose claim is under review, the contractor will also need to review documentation from a third party— such as the provider who referred the beneficiary for the service or item to the service provider whose claim is being reviewed. For example, while reviewing a claim for an X-ray, the contractor might want to review additional documentation from the referring physician, in order to determine the medical necessity of the X-ray service. The MACs, ZPICs, and RAs have the discretion to send a separate ADR to a third-party provider (in the example above, the referring physician) for additional documentation to support the medical necessity of the service or supply. If the service provider cannot obtain the necessary third-party documentation or if the contractor decides that the documentation is insufficient to support the claim, the claim will be denied, but not the third- party’s claim. The CERT contractor is the only one that is required to directly contact the third party for an ADR if the provider being reviewed requests it and the claim exceeds $40. Four provider associations we interviewed indicated that it can sometimes be difficult for the providers whose claims were being reviewed to obtain the needed documentation from third parties in a timely manner. There is no financial incentive for the third parties to forward requested documentation to the service providers because the third parties’ claims are not denied as improper if the documents are not submitted to the contractor. In the view of four provider associations, requiring providers to obtain documentation not directly under their own control can hinder their compliance with the ADR, because they are sometimes unable to provide the documentation.\nProviders have 30 days to respond to an ADR sent by a ZPIC, 45 days to respond to an ADR sent by a MAC or RA, and 75 days to respond to an ADR sent by the CERT contractor. If the provider does not respond within the required time frame, the contractor may find the payment improper and refer the claim for recovery. MACs, ZPICs, and the CERT contractor also have discretion in setting the number of extensions, if any, whereas All of the CMS requires RAs to give providers one extension. contractors have discretion on setting the length of extensions. Representatives from two provider associations stated that having different timeframes makes responding to ADRs more challenging. In addition, ensuring consistency in common processes is consistent with OMB guidance on streamlining service delivery and a strong control environment.\nCMS officials told us that, in practice, RAs give providers as much time as they need and the CERT contractor may also extend the time period so as not to unnecessarily deny the claim for lack of documentation. However, the CERT contractor is constrained by its schedule to estimate the annual Medicare improper payment rate.\nSubmission Requirements. Different types of contractors are subject to different requirements regarding the formats in which they will accept providers’ documentation, whether paper, fax, or electronic submission (see table 6). While RAs and the CERT contractor are required to accept submission of files stored electronically on compact discs or digital video discs (DVD), the other contractors are not. CMS has developed a system called electronic submission of medical documentation (esMD) for providers to transmit medical documentation electronically, which began to be adopted by contractors in 2011. Though its use is discretionary, most of the MACs, all of the RAs, the CERT contractor, and about one- third of ZPICs accept electronic submissions through esMD.provider association indicated that having all contractors accept electronic submissions, such as submissions of e-documents on compact discs and DVDs could reduce the administrative burden on providers. Further, making electronic submission acceptable across all contractors would be consistent with OMB guidance on streamlining service delivery.\nStaffing requirements. CMS requirements for staffing, including claims reviewers’ qualifications, vary depending on the type of contractor (see table 7). CMS specifies the minimum number of physicians serving as medical directors that each contractor must have on staff. The minimum number of medical directors and their responsibilities vary for each of the four types of contractors. CMS requires that medical directors serve as a readily available source of medical expertise to provide guidance on claims reviews for all of the contactors, but their scopes of responsibility vary across contractors. This could lead to differences in the number of medical directors needed. For example, the MAC medical directors are also responsible for oversight of prepayment review, providing provider outreach and education, developing local coverage policy, and representing the contractor in appeals. In contrast, while the RA medical directors do not have some of the other responsibilities of the MAC medical directors, they have much larger geographic jurisdictions than MACs. Requirements for the minimum number of medical directors include the following:\nA/B MACs must have at least three full-time equivalent (FTE) medical\nRAs are required to have one FTE medical director on staff,\nZPICs are required to have at least one part-time medical director, the CERT contractor is required to have two FTE medical directors.\nGiven the variability of the medical directors’ responsibilities and the differing sizes of their jurisdictions, direct comparisons cannot be made across the contractors to determine the number of medical directors needed. CMS officials acknowledged differences in staffing requirements across contractor types, and differences in expectations for the roles of medical directors. CMS officials also indicated that they have not required similar numbers of medical directors or required a certain number of medical directors to be responsible for oversight of a specific number of claims reviews because of cost issues.differences, CMS officials indicated that they do not want to incur additional costs that could be involved in establishing consistent minimum staffing requirements for conducting claims reviews, if that would increase the number of medical directors that contractors would have to hire.\nRequirements for other staff conducting claims reviews also differ across contractors. Specifically, CMS requires RAs to use registered nurses or therapists in making determinations of medical necessity, but the others may use licensed practical nurses. CMS also requires RAs and the CERT contractor to employ certified coders to determine compliance with Medicare coding requirements, but does not require MACs or ZPICs to do so. CMS has a requirement for ZPICs, that when Medicare policy for a given service is not clearly articulated, the ZPICs must involve a medical specialist trained and experienced in providing the type of service being reviewed. There is no similar requirement for the other contractors. CMS officials indicated that making claims reviewers’ staffing requirements more consistent could increase the cost of claims reviews— for example that requiring A/B MACs and ZPICs to hire RNs instead of LPNs to conduct claims reviews would likely increase the contract costs. Representatives from six provider associations indicated that on the basis of some of the claims review results, their members had questioned whether some reviewers were qualified to review claims, and several associations indicated that erroneous claims reviews led to appeals that would not have been needed had the determination been correct.\nQuality assurance requirements. While CMS requires QA processes to ensure the quality of claims reviews, the requirements differ by contractor type (see table 8). GAO’s Internal Control Management and Evaluation Tool states that monitoring (such as the monitoring carried out with QA processes) should be conducted to assess performance and determine whether controls (such as claims reviews) continue to be effective.\nProviders have questioned the quality of contractors’ decision making— specifically that the contractors are not consistently making proper determinations that appropriately apply Medicare coverage, coding, and payment rules in evaluating the claims. Having effective QA processes can help ensure that claims determinations are made properly and consistently—which is part of having strong internal controls. When asked about the reason for differences among specific requirements for QA processes for different contractors, CMS officials responded that different offices in CMS were responsible for the contract specifications and contractor management and the contracts were written at different times and therefore vary.\nWith regard to internal QA processes, CMS requires that the MACs, ZPICs, and CERT contractor conduct interrater reliability testing and participate in annual clinical judgment training in support of postpayment claims review determinations. CMS also requires that the CERT contractor’s QA process include internal secondary reviews of any claim that was determined improper and internal interrater reliability testing. CMS does not require the RAs to conduct interrater reliability testing or participate in clinical judgment training. Each contractor type is also required to have an internal QA plan, but CMS does not require any specific QA steps regarding consistency and quality of postpayment claims reviews’ determinations in any of the contractors’ plans.\nThe different types of contractors also have different requirements for external QA review processes. While the RAs are not required to have some of the internal QA processes, CMS has established an external validation process conducted by a different contractor for the RAs’ postpayment claims reviews. To validate the claims review determinations for each RA on a monthly basis, the RA validation contractor reviews a random sample of 400 claims proportional to the provider types that each RA determined had been paid improperly. Unlike the RAs, the MACs, ZPICs, and CERT contractor are not subject to external validation reviews of their postpayment claims reviews.", "In 2011, CMS established an internal work group known as the Provider Burden Reduction Work Group to inventory CMS and contractor activities that may create administrative burden for providers, to assess providers’ complaints, and identify areas for improving efficiency of processes. As part of this effort, CMS officials indicated that they found differences in contractor requirements related to claims reviews. As an example, they indicated that contractors’ form letters were not standardized; instead different types of contractors were required to include different information in their form letters. Representatives of two provider associations had indicated that having different contractors send out different versions of the same type of form letters seemed to be confusing to providers. As of November 2012, CMS officials told us that the work group had briefed CMS senior management about its work, but this effort was still in progress. CMS has not publicly announced the results of the work group’s efforts, whether it would make any requirements more consistent, or a time frame for any changes. Having less variation in requirements for providers would be consistent with OMB guidance on streamlining service delivery. Further, internal control standards indicate the importance of deciding on corrective actions when needed and setting time frames for completing them.\nCMS officials told us that they have taken steps to increase provider awareness and reduce confusion about the different review contractors and their review processes to help providers in complying with review efforts. These steps include the following: In July 2012, CMS published a 15-page booklet about Medicare claim review programs, including claims reviews by MACs, ZPICs, RAs, and the CERT review contractor on CMS’s website, and the booklet was announced in an e-newsletter that providers can sign up to receive.\nIn August 2012, CMS published an interactive map on its website that allows the public and providers to identify the MACs, ZPICs, and RAs that perform claims reviews in each state.\nIn September 2012, CMS published an update to a chart, the original of which was first published in July 2011, to educate providers about the definitions and responsibilities of contractors and other entities involved in various aspects of Medicare and Medicaid claims determinations. The chart explains why providers may need to communicate with multiple entities as well as why multiple entities may contact the same provider.\nIn January 2013, CMS published a three-page description about the Medicare FFS Recovery Audit Program process that includes references to other information, such as appeals.\nIn addition, CMS officials reported that they are developing web-based training about the audits done by its contractors.", "Differences in CMS’s postpayment claims review requirements for the four types of contractors may reduce the efficiency and effectiveness of claims reviews by complicating providers’ compliance with the requirements. Some of these differences may be appropriate given the different functions and responsibilities of the contractors. However, CMS officials explained that differences in some requirements came about because the contractors’ requirements were developed at different times or the contractors’ activities have changed over time. In addition, some of these differences could have come about because different types of contractors and associated requirements are managed by different parts of CMS.\nGreater consistency in the claims review requirements across contractors may improve the efficiency of postpayment reviews by strengthening the control environment, lessening providers’ confusion, and reducing administrative burdens. In addition, improving consistency across the contractors would be consistent with the Executive Order 13571 on Streamlining Service Delivery and Improving Customer Services and OMB guidelines for implementing it. Greater consistency could make it easier for providers to comply with ADR requests and claims requirements. It could also help reduce claims payment error determinations based on providers’ inability or failure to provide documentation in a timely manner. It might also reduce any inconsistencies in making determinations, which can lead to unneeded appeals, and might increase providers’ confidence that reviews will also be consistent and correct.", "In order to improve the efficiency and effectiveness of Medicare program integrity efforts and simplify compliance for providers, we are making three recommendations. We recommend that the Administrator of CMS: 1. examine all postpayment review requirements for contractors to determine those that could be made more consistent without negative effects on program integrity, 2. communicate publicly CMS’s findings and its time frame for taking 3. reduce differences in postpayment review requirements where it can be done without impeding the efficiency of its efforts to reduce improper payments.", "We provided a draft of this report to HHS for comment, and received written comments, which are reprinted in appendix II. In its comments, HHS concurred with our three recommendations and agreed to take steps to reduce differences in postpayment review requirements where appropriate. HHS noted that CMS had begun to examine its requirements for postpayment claims reviews as discussed in our report.HHS stated that it is currently examining requirements related to ADRs to see if the requirements could be standardized across contractor types. HHS indicated that standardizing the minimum number of days a contractor must give a provider to respond to an ADR before the contractor has the authority to deny the claim could help minimize provider confusion. HHS also agreed to publicly communicate its findings from the review of the requirements on CMS’s website and include a timeframe for implementing agreed-upon changes in procedures.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Acting Administrator of CMS, appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff has any questions about this report, please contact me at (202) 512-7114 or at kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report were: Sheila K. Avruch, Assistant Director; Carrie Davidson; Leslie V. Gordon; and Laurie Pachter.", "", "", "GAO’s 2013 High-Risk Update: Medicare and Medicaid. GAO-13-433T. Washington, D.C.: February 27, 2013.\nMedicare Program Integrity: Greater Prepayment Control Efforts Could Increase Savings and Better Ensure Proper Payment. GAO-13-102. Washington, D.C.: November 13, 2012.\nMedicare Fraud Prevention: CMS Has Implemented a Predictive Analytics System, but Needs to Define Measures to Determine Its Effectiveness. GAO-13-104. Washington, D.C.: October 15, 2012.\nProgram Integrity: Further Action Needed to Address Vulnerabilities in Medicaid and Medicare Programs. GAO-12-803T. Washington, D.C.: June 7, 2012.\nMedicare Integrity Program: CMS Used Increased Funding for New Activities but Could Improve Measurement of Program Effectiveness. GAO-11-592. Washington, D.C.: July 29, 2011.\nImproper Payments: Reported Medicare Estimates and Key Remediation Strategies. GAO-11-842T. Washington, D.C.: July 28, 2011.\nFraud Detection Systems: Centers for Medicare and Medicaid Services Needs to Ensure More Widespread Use. GAO-11-475. Washington, D.C.: June 30, 2011.\nImproper Payments: Recent Efforts to Address Improper Payments and Remaining Challenges. GAO-11-575T. Washington, D.C.: April 15, 2011.\nStatus of Fiscal Year 2010 Federal Improper Payments Reporting. GAO-11-443R. Washington, D.C.: March 25, 2011.\nMedicare and Medicaid Fraud, Waste, and Abuse: Effective Implementation of Recent Laws and Agency Actions Could Help Reduce Improper Payments. GAO-11-409T. Washington, D.C.: March 9, 2011.\nMedicare: Program Remains at High Risk Because of Continuing Management Challenges. GAO-11-430T. Washington, D.C.: March 2, 2011.\nMedicare Recovery Audit Contracting: Weaknesses Remain in Addressing Vulnerabilities to Improper Payments, Although Improvements Made to Contractor Oversight. GAO-10-143. Washington, D.C.: March 31, 2010.\nMedicare Contracting Reform: Agency Has Made Progress with Implementation, but Contractors Have Not Met All Performance Standards. GAO-10-71. Washington, D.C.: March 25, 2010." ], "depth": [ 1, 2, 2, 2, 1, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title", "h0_full", "", "", "h0_full h2_full", "h0_full h2_full", "h2_title h1_full", "h1_full", "h2_full h1_full", "h2_full", "h1_full", "", "", "", "", "h2_full" ] }	{ "question": [ "How are the CMS contractors different?", "What contractors conduct postpayment reviews on Medicare FFS claims?", "What do the contractors have in common?", "How do the RAs differ from the other contractors?", "How does the number of claims reviewed by contractors compare to the number of claims processed?", "What effects do the different requirements for the four contractors have?", "What are the different requirements?", "How does CMS place more limits on RAs?", "Why are there different requirements for the different contractors?", "How do the differences between contractors impact providers?", "How has CMS reacted to provider comments?", "What did CMS estimate in fiscal year 2012?", "How does CMS identify improper payments?", "What does the report describe?", "How did GAO construct the report?" ], "summary": [ "The Centers for Medicare & Medicaid Services' (CMS) contractors that conduct postpayment reviews on Medicare fee-for-service (FFS) claims were established by different legislative actions; are managed by different offices within CMS; and serve different functions in the program.", "These contractors include (1) Medicare Administrative Contractors that process and pay claims and are responsible for taking actions to reduce payment errors in their jurisdictions; (2) Zone Program Integrity Contractors (ZPIC) that investigate potential fraud, which can result in referrals to law enforcement or administrative actions; (3) Recovery Auditors (RA) tasked to identify improper payments on a postpayment basis; and (4) the Comprehensive Error Rate Testing (CERT) contractor that reviews a sample of claims nationwide and related documentation to determine a national Medicare FFS improper payment rate.", "All four types of contractors conduct complex reviews, in which the contractor examines medical records and other documentation sent by providers to determine if the claims meet Medicare coverage and payment requirements.", "RAs are paid fees contingent on the amount of the claims that are found improper and recouped or adjusted, whereas the other contractors' reimbursement is not dependent on the amount of their claims reviews. The RAs conducted almost five times as many reviews as the other three contractors combined.", "Overall, compared to over one 1 billion claims processed in 2012, all four types of contractors combined reviewed less than one 1 percent of claims, about 1.4 million reviews, for which providers might be contacted to send in medical records or other documentation.", "Some of these differences may impede efficiency and effectiveness of claims reviews by increasing administrative burden for providers.", "There are differences in oversight of claims selection, time frames for providers to send in documentation, communications to providers about the reviews, reviewer staffing, and processes to ensure the quality of claims reviews.", "CMS places more limits on the RAs in its requirements for reviews conducted by them than by other contractors. For example, RAs must submit the criteria that they will use to determine if a service is paid improperly to CMS for approval.", "The additional requirements for RAs are due in part to CMS's experience during an initial demonstration testing the use of RAs. CMS officials indicated that other requirement differences across contractors generally developed due to setting requirements at different times by staff in different parts of the agency.", "Providers indicated that some differences hindered their understanding of and compliance with the claims review process. Having inefficient processes that complicate compliance can reduce effectiveness of claims reviews, and is inconsistent with executive-agency guidelines to streamline service delivery and with having a strong internal control environment.", "CMS has begun to examine differences in requirements across contractors, but did not provide information on any specific changes being considered or a time frame for action.", "In fiscal year 2012, CMS estimated that $32.4 billion in Medicare FFS payments were improper.", "CMS uses several types of contractors to conduct postpayment claims reviews to identify improper payments.", "This report (1) describes these contractors and (2) assesses the extent to which requirements for postpayment claims reviews differ across the contractors and whether differences, if any, could impede effective and efficient claims reviews.", "GAO reviewed CMS's requirements for claims reviews in manuals and contracts, interviewed CMS officials and selected provider associations, and assessed the requirements against internal control standards and executive-agency guidance on streamlining service delivery. GAO also obtained data on numbers of claims reviewed, and appealed." ], "parent_pair_index": [ -1, 0, 0, -1, -1, -1, 0, -1, -1, -1, 4, -1, -1, -1, 2 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0 ] }
GAO_GAO-19-102	{ "title": [ "Background", "Composition of the MHS Total Workforce", "DOD’s Total Workforce Provides Operational Medical Care at Four Levels", "DOD Provides Beneficiary Medical Care in the United States and around the World", "Legislation, Policies, and Processes Governing the MHS Workforce Mix", "Roles and Responsibilities for Managing the MHS Workforce", "Recent MHS Personnel Reform Efforts", "Department Planning Processes for Operational Medical Personnel Requirements Do Not Include an Assessment of All Medical Personnel or the Full Cost of Military Personnel", "Each Military Department Has Its Own Process to Plan for Operational Medical Personnel Requirements, Including the Balance of Active and Reserve Component Personnel", "DOD Has Not Assessed Using Federal Civilians or Contractors to Meet Operational Medical Personnel Requirements", "The Military Departments Do Not Consider the Full Cost of Active and Reserve Component Medical Personnel When Planning for Operational Requirements and Do Not Have Full Cost Information", "The Military Departments Have Established a Process to Assess the Appropriate Workforce Mix for Beneficiary Care within MTFs, but Face Challenges in Executing Their Plans", "The Military Departments Have Established Policies and Procedures to Evaluate the Risks, Costs, and Benefits of the Use of Personnel within Its Military Treatment Facilities", "Military Departments Face Challenges in Executing Workforce Mixes at Military Treatment Facilities, and DHA Does Not Plan to Develop a Strategy to Address These Challenges", "Length of Federal Civilian Hiring and Contracting Process", "Uncompetitive Federal Civilian Salaries and Contractor Compensation", "FTE Targets and Hiring Freezes", "The Military Departments and DHA Have Not Decided How Military Personnel Will Meet Operational and Beneficiary Missions after the Transfer of Administrative Responsibility for MTFs to DHA", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Scope and Methodology", "Appendix II: Comments from the Department of Defense", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "The MHS has a dual mission of maintaining the skills of the medical force and providing health care and beneficiary medical care in its MTFs in the United States and overseas. It accomplishes this in part by providing (1) operational medical care via deployable health care platforms in an operational environment, such as forward surgical teams and combat support hospitals, and (2) beneficiary medical care in its MTFs in the United States and around the world. DOD’s total workforce supporting this dual mission comprises three main components: military personnel (including active and reserve personnel), federal civilian personnel, and private sector contractor personnel. Active duty medical personnel simultaneously support operational medical care and the delivery of beneficiary health care to patients across the globe. Reserve component medical personnel generally provide health care to deployed military personnel, but may also provide personnel to support MTFs when active duty personnel are deployed or otherwise unavailable. Federal civilians and contractors generally provide beneficiary care within MTFs. Figure 1 shows the number of the active and reserve components of the military, federal civilians, and estimated contractor full-time equivalents (FTEs) that comprised DOD’s total medical workforce in fiscal year 2017.", "DOD has established four levels of operational medical care provided to servicemembers and other eligible persons. The levels of care extend from the forward edge of the battle area to the United States, with each level providing progressively more intensive treatment. Level 4 care facilities are MTFs that also provide beneficiary medical care. In addition to the four levels of medical care, en-route care to transport patients is also provided via casualty evacuation, medical evacuation, and/or aeromedical evacuation from the point of patient injury, illness, or wounding. Figure 2 illustrates the different levels of care.\nThe four levels of care are:\nLevel 1—First responder care. This level provides immediate medical care and stabilization in preparation for evacuation to the next level, and treatment of common acute minor illnesses. Care can be provided by the wounded soldiers, medics or corpsmen, or battalion aid stations.\nLevel 2—Forward resuscitative care. This level provides advanced emergency medical treatment as close to the point of injury as possible to attain stabilization of the patient. In addition, it can provide postsurgical inpatient services, such as critical care nursing and temporary holding. Examples of level 2 units include forward surgical teams, shock trauma platoons, area support medical companies, and combat stress control units.\nLevel 3—Theater hospital care. This level provides the most advanced medical care available in Iraq and Afghanistan. Level 3 facilities provide significant preventative and curative health care. Examples include Army combat support hospitals, Air Force theater hospitals, and Navy expeditionary medical facilities.\nLevel 4—U.S. and overseas definitive care. This level provides the full range of preventative, curative, acute, convalescent, restorative and rehabilitative care. Examples of level 4 facilities include MTFs such as Brooke Army Medical Center at Joint Base San Antonio, Texas and Naval Medical Center Portsmouth at Portsmouth, Virginia.", "DOD’s MHS workforce provides beneficiary medical care to 9.4 million eligible individuals, including active duty personnel and their dependents (i.e., spouse, children), medically eligible Reserve and National Guard personnel and their dependents, and retirees and their dependents and survivors. Located in the United States and around the world and ranging from small clinics to major hospitals, these facilities serve as training platforms for active duty medical personnel to maintain their skills and play a key role in the military departments’ Graduate Medical Education programs for training medical professionals.\nIn addition to the direct provision of health care in its own hospitals and clinics, DOD maintains its TRICARE purchased care system that is used to augment the direct care system when needed. Through regional contracts, TRICARE administers the purchased care system, which comprises a civilian network of hospitals and providers. Retirees who qualify for care under Department of Veterans Affairs’ rules may also be eligible to receive health care within the Veterans Health Administration system of hospitals and clinics.", "DOD’s management of its workforce is governed by several workforce management statutes of title 10 of the United States Code, including:\nSection 129a directs the Secretary of Defense to establish policies and procedures for determining the most appropriate and cost- efficient mix of military, civilian, and contracted services to perform the mission of the department.\nSection 2463 directs the Under Secretary of Defense for Personnel and Readiness to devise and implement guidelines and procedures to ensure that consideration is given to using, on a regular basis, DOD civilian employees to perform new functions and functions performed by contractors that could be performed by DOD civilian employees.\nSection 2461 directs that no DOD function performed by civilian employees may be converted, in whole or in part, to performance by a contractor unless the conversion is based on the results of a public– private competition that formally compares the cost of performance by civilian employees with the cost of contractors, among other considerations. There is currently a government-wide moratorium on performing such public-private competitions.\nDOD’s total workforce management policy generally emphasizes the need for agencies to utilize the least costly mix of personnel while ensuring the workforce is sufficiently sized, and comprised of the appropriate mix of personnel to carry out the mission of DOD. The departments use DOD guidance to assess the use of military, federal civilian, and contractor personnel, which includes the consideration of two key factors: (1) the risk to the military mission, and (2) the cost of the workforce. To help assess risk, the departments determine what work should be performed by military, federal civilian, or contractor personnel. For example, work that is inherently governmental must be performed only by military or civilian personnel, while work that is commercial in nature could be performed by any personnel type. To make this determination, DOD Instruction 1100.22 directs components to: use the manpower mix criteria outlined in the instruction to identify inherently governmental and commercial activities; and review the annual inventory of commercial and inherently governmental activities. In addition, DOD and the departments have established policies and procedures to assess the costs and benefits of different workforce mix options. DOD Instruction 1100.22 directs components to conduct a cost comparison of personnel when considering outsourcing new requirements that are not required to be performed by government personnel, or when considering in-sourcing functions that are currently performed by private sector contractors.", "Several officials have responsibility for governing DOD’s management of its total workforce, including\nThe Under Secretary of Defense for Personnel and Readiness (USD(P&R)). This official has overall responsibility for issuing guidance on total workforce management to be used by the DOD components, providing guidance on manpower levels of the components, and developing manpower mix criteria and other information to be used by the components to determine their workforce mix.\nThe Under Secretary of Defense (Comptroller). This official is responsible for ensuring that the budget for DOD is consistent with the total workforce management policies and procedures.\nThe Secretaries of the military departments and heads of the defense agencies. These officials have overall responsibility for the requirements determination, planning, programming, and budgeting execution for total workforce management policies and procedures, as well as having numerous responsibilities related to total workforce management as detailed in DOD guidance.\nThe Assistant Secretary of Defense for Health Affairs (ASD(HA)).\nThis official serves as the principal advisor for all DOD health related policies, programs, and activities. The ASD(HA) has the authority to: develop policies, conduct analyses, provide advice, and make recommendations to the USD(P&R), the Secretary of Defense, and others; issue guidance; and provide oversight to the DOD Components on matters pertaining to the MHS. Further, the ASD(HA) prepares and submits a DOD unified medical program budget which includes, among other things, the defense health program budget to provide resources for the DOD MHS.\nThe Director of the Defense Health Agency (DHA). This official, among other things, manages the execution of policies issued by the ASD(HA) and manages and executes the Defense Health Program appropriation, which partially funds the MHS.", "The National Defense Authorization Act for Fiscal Year 2017 directed the transfer of administrative responsibility for MTFs from the military departments to the DHA. Specifically, the Director of the DHA shall be responsible for the administration of each MTF, including budgetary matters, information technology, health care administration and management, administrative policy and procedure, military medical construction, and any other matters the Secretary of Defense determines appropriate. Since 2016, DHA’s responsibilities in the administration of MTFs have been further articulated in DOD memoranda and in statute. In 2018, DOD directed that the DHA shall be responsible for: (1) the planning, programming, budgeting, and execution processes for the MTFs; (2) clinical and health delivery services in each MTF; and (3) for these services, the hiring and management of federal civilians and contract staffing. Further, in 2018, Congress amended the law to specify that at each MTF, the Director of the DHA has the authority to determine total workforce requirements, direct joint manning, and address personnel staffing shortages, among other things.\nAlso in December 2016, Congress enacted legislation that allows the prohibition of converting military medical and dental positions to federal civilian positions, which had been in place since 2008, to be lifted. This change is contingent upon DOD satisfying a reporting requirement on the size and composition of its operational medical force. Specifically, Congress directed DOD to report on the process established to define the military medical and dental requirements necessary to meet operational medical force readiness requirements, and provide a list of those military medical and dental requirements.", "The military departments each have their own process to determine their operational medical personnel requirements. After determining the number of medical personnel needed to support operational needs, the military departments generally consider only military personnel when conducting their planning processes to meet these requirements, and have not formally assessed the extent to which federal civilians and contractor personnel could be utilized. Further, the departments do not generally consider the full cost of active and reserve component medical personnel when determining their balance of active and reserve component medical personnel, and they have not developed such information to use in their assessment of active and reserve balance.", "Each military department has its own process to plan for operational medical personnel requirements. The departments’ operational medical personnel requirements are based on their analysis of DOD’s Defense Planning Guidance and Defense Planning Scenarios. Specifically, possible casualty streams are estimated based on the scenarios, and the required medical support is determined in conjunction with department- specific medical planning factors, such as rotation policy, the population at risk, and evacuation policy, among others. Each military department incorporates these factors to estimate the number of medical personnel needed. The Army integrates medical planning into its general process for estimating all operational requirements, whereas the Navy and Air Force have separate, medical-specific processes. The following represents an overview of each military department’s approach:\nArmy. The Army uses its Total Army Analysis model to determine the number and type of support units across the Army, including medical forces, which will be needed to support the Army’s combat forces in operational settings.\nNavy. The Navy uses a medical-specific model, called the Medical Manpower All Corps Requirements Estimator, to estimate its total medical personnel readiness requirements. The Navy readiness mission is to support all Navy and Marine Corps operational missions, including operational operations (such as hospital ships and expeditionary medical facilities) and day-to-day operations (such as ships, submarines, and Special Forces).\nAir Force. The Air Force uses a medical-specific sizing model named the Critical Operational Readiness Requirements tool to project its minimum military personnel requirements. This tool identifies the number of military medical personnel needed to meet requirements, including requirements for en-route casualty support, theater hospitals, and critical care air transport teams.\nAccording to military department officials, the decision to apportion medical personnel requirements among the active and reserve components is based on an assessment of risk across a range of factors. In a 2013 DOD report issued in response to section 1080A of the National Defense Authorization Act for Fiscal Year 2012. DOD noted that there are several important factors in active component and reserve component mix decisions, including, among others, the timing, duration, and skills required for anticipated missions. Moreover, the report notes that active components are best suited for unpredictable and frequent deployments, dealing with complex operational environments, and unexpected contingencies and the reserve components are best suited for predictable and infrequent deployments. As noted in the report, active component personnel typically mobilize and deploy to theater the fastest. The sum of these considerations results in a different mix of active and reserve component medical personnel within each military department. Specifically, reserve personnel (as a percentage of the total workforce) varied by military department in fiscal year 2017, with reservists representing 41 percent of medical personnel of the Army, 17 percent of the Navy, and 34 percent of the Air Force, as shown in figure 3.", "The military departments have not assessed the extent to which federal civilians and contractor personnel can be used to meet identified operational medical personnel requirements. Specifically, after the military departments have determined their operational medical personnel requirements, they generally have designated all such positions as “military-essential” (i.e., the activity must be performed by a military servicemember) and have not formally assessed the extent to which civilians or contractors could be utilized to fill these positions, according to officials. Army, Navy, and Air Force officials stated that they have historically relied on active and reserve component military personnel when planning for operational medical requirements, with a few exceptions. For example, according to Navy officials, the few federal civilians that are planned to fill operational medical requirements are technical representatives who do not travel on ships for extended periods of time.\nIn interviews, military department officials cited key reasons for not incorporating federal civilians and contractors into their planning for operational medical care. Specifically, officials said they did not believe that federal civilians or contractors were viable workforce alternatives to military servicemembers for operational medical care roles and functions due to the unique nature of such assignments (e.g. providing medical care in a deployed setting). Moreover, officials noted that federal civilians and contractors supporting operational medical requirements are generally considered to be a temporary solution. Officials also expressed concern regarding their military department’s ability to identify and recruit federal civilians and contractors for such positions. Officials stated that while there is currently no guidance outlining the potential role of federal civilians and contractors providing medical care in operational settings, they noted that DOD workforce mix guidance includes a provision that highlights the military-essential nature of medical personnel embedded in non-medical units engaged in hostile action. However, this instruction does not otherwise address the role of federal civilians and contractors in providing medical care, including whether they can serve in medical- specific operational platforms, such as combat support hospitals providing level 3 care.\nTo ensure that its federal civilian employees will deploy to combat zones and perform operational roles such as critical combat support functions in theater, DOD established the emergency-essential civilian program in 1985. Under this program, DOD designates as “emergency-essential” those federal civilian employees whose positions are required to ensure the success of combat operations or the availability of combat-essential systems. DOD’s emergency-essential workforce is now governed under the Expeditionary Civilian Workforce program. DOD can deploy emergency-essential federal civilian employees either on a voluntary or involuntary basis to accomplish the DOD mission. In certain DOD functional communities, federal civilians and contractors play a critical role in combat support roles. For example, as we previously reported, DOD relies on the federal civilian personnel it deploys to support a range of essential missions, including logistics support and maintenance, intelligence collection, criminal investigations, and weapons system acquisition and maintenance. Further, as we have previously reported, DOD has long used contractors to provide supplies and services to deployed forces. Since the early 1990s, much of this support has come from logistics support contracts—contracts that are awarded prior to the beginning of contingencies and are available to support the troops as needed.\nAlthough they are generally not a part of the military departments’ planning processes, and there is no guidance dedicated to delineating the role of federal civilians and contractors in providing care in deployed operational settings according to officials, these personnel have deployed within the past 5 years. Based on our analysis of DOD federal civilian deployment data—for fiscal years 2013 through 2017—about 120 DOD federal civilians, including nurses, physicians, and technicians, were deployed to provide medical services. U.S. Central Command officials stated that they have used federal civilians minimally, and U.S. Africa Command officials stated they have not used federal civilians. In addition, based on our analysis of DOD contractor deployment data for deployments from fiscal years 2013 through 2017, there were more than 1,900 deployed contractors providing medical services. U.S. Central Command officials told us that they have not used contractors to provide care to military personnel. Officials noted that the deployed contractors were not contracted by DOD for purposes of providing medical care and instead provided medical care to other contractors as they were part of a larger contract for other services, such as security services or logistics support. U.S. Africa Command officials told us that they have used contractors to provide medical care to support casualty evacuation and personnel recovery requirements, which includes providing medical care to military personnel and other eligible persons.\nOfficials with the Joint Staff Surgeon’s Office and the Surgeon’s offices at U.S. Central Command and U.S. Africa Command agreed with the possibility of using federal civilians and contractors for certain operational medical personnel requirements. Specifically, officials stated that federal civilians and contractors likely represent an acceptable workforce alternative if they are medically ready to deploy and appropriately trained for the unique environment at a fixed facility in theater, such as a level 3 fixed expeditionary medical facility or theater hospital.\nWhile agreeing that the use of federal civilians and contractors for certain operational medical personnel requirements may be acceptable, officials also expressed concerns with this approach. A senior official with the U.S. Central Command Surgeon’s office noted concerns regarding the pre- deployment training provided to contractors. Specifically, the official stressed the importance of such training to operating effectively in the unique operational environment of a deployed medical team and that such training is only required to be completed by military personnel and DOD expeditionary civilians. U.S. Africa Command officials expressed concerns regarding challenges in obtaining clinical privileging rights (i.e., the right for a physician to perform specific health care services) for contractors supporting small teams in an operational setting. Further, OASD(HA) officials noted that a key factor to determining if federal civilians or contractors should be used to provide operational medical care is whether or not using those workforces would achieve any cost savings.\nMoreover, officials with the Defense Civilian Personnel Advisory Service noted that they have had limited success with using DOD’s Expeditionary Civilian Workforce program for the provision of medical administrative support and medical advising functions. A senior official from the U.S. Central Command Surgeon’s office noted this was due to relatively few qualified federal civilians within the program with medical skills. Defense Civilian Personnel Advisory Service officials noted that the fiscal year 2019 force pool that defines the number and types of federal civilian requirements needed for the program included 7 medical related positions and none of these were for medical care; 1 was administrative and 6 were medical advisors. Defense Civilian Personnel Advisory Service officials stated that the DHA has a responsibility to build 1 or 2 of the medical advisor positions in the force pool into their planning as a continuing requirement, and noted that DHA has made some recent progress with 1 medical advisor scheduled to deploy in fiscal year 2019. While there may be challenges with utilizing federal civilian personnel to fulfill operational medical requirements, DOD also faces challenges with regard to military personnel. In 2018, we reported that DOD has experienced gaps between its military physician authorizations (i.e., funded positions) and end strengths (i.e., number of physicians), and that it did not have targeted and coordinated strategies to address key physician shortages.\nDOD has issued several documents to guide total workforce and personnel planning. DOD Directive 1100.4 states that authorities should consider all available sources when determining workforce mix, including federal civilians and contractors. Moreover, DOD’s 2017 Workforce Rationalization Plan recognizes DOD’s federal civilians as an essential enabler of its mission capabilities and operational readiness and noted that there are numerous opportunities for the military departments, combatant commands, and others to make well-reasoned adjustments to workforce mix. Further, DOD’s National Defense Business Operations Plan for Fiscal Years 2018 to 2022 states that workforce rationalization strategies include, among other things, reassessing military manpower allocations for military essentiality, determining whether workload requires deployments and whether traditional military performance is necessary, and identifying functions and positions that are commercial in nature that may be appropriately or efficiently delivered via private sector support.\nFederal civilians and contractors are not incorporated into the military departments’ planning to meet operational medical requirements because DOD has not performed an assessment of the suitability of federal civilian or contractor personnel to provide operational medical care. Such an assessment could assist in developing policy for use by medical planners in determining when, where, and how federal civilians or contractors may serve in operational roles. For example, an assessment may include what level(s) of care would be appropriate for federal civilians and contractors to support, if any, and factors to take into consideration in making such decisions, such as exposure to danger and cost. By conducting such an assessment and incorporating the results into relevant policies, DOD can have greater certainty that it is planning for the most appropriate and cost-effective mix of personnel to meet the mission, and, depending on the outcome of the assessment, more options to meet its operational medical personnel requirements.", "The military departments’ planning to meet DOD’s operational personnel requirements generally do not consider the full cost of active and reserve component personnel when determining the balance of active and reserve component medical forces. Officials from Army and Navy medical headquarters stated that cost generally does not inform their decisions about the balance of active and reserve personnel. Army officials noted they consider cost of a unit when making tradeoffs within the reserve component; however, cost was not cited by Army officials as a factor when determining between the active and reserve components. Navy officials noted that while it uses certain cost information when preparing the President’s budget submission, cost is not explicitly considered when determining the balance of the active and reserve components. The Air Force is the only military department that has performed an assessment of the cost effectiveness of using active or reserve component medical personnel, although it had some limitations and did not impact the Air Force’s active and reserve component mix decisions. Army, Navy, and Air Force officials cited other key factors which they consider in determining the balance of active and reserve component personnel, such as the availability of forces to deploy quickly, length of time needed in theater, capability needed, and frequency of deployments.\nMoreover, the military departments have not developed full cost information of medical personnel to use in their assessment of active and reserve balance. Army and Navy officials stated that they do not maintain full cost information on its active component and reserve component medical personnel. Navy provided programming cost for the reserve component but these rates were averages across the reserve component and not specific to medical. The Air Force’s 2016 High Velocity Analysis attempted to assess the cost of active and reserve medical personnel and identify potential efficiencies within its medical workforce. However, this study was limited because it did not include the full cost of active and reserve component medical personnel. Specifically, the Air Force analysis considered only compensation and did not consider other benefits, such as medical education costs, and used average pay for officers and enlisted personnel regardless of the specialty or skill level. However, the full costs for certain medical personnel, such as officers, are generally higher than average military pay, as they are eligible for a significant number of special pays and benefits, such as graduate medical education and training. In fiscal year 2017, DOD obligated $788 million for special pays for active duty medical personnel, representing approximately 24 percent of the $3.3 billion obligated for all special pays across DOD, and $707 million for medical education. While the Air Force had full cost data for active component personnel, according to officials, they did not include it in their analysis because they did not have comparable cost data for the reserve component. Reserve medical personnel, when not mobilized, receive a fraction of what active duty personnel receive, and typically do not encumber significant education and training costs as reserve medical personnel generally are recruited as fully trained medical professionals.\nWe have previously reported that when the reserve forces can successfully meet deployment and operational requirements, individual reserve-component units are generally less costly than similar active- component units. However, the full cost of medical personnel can vary based on a number of factors. Specifically, more than one reserve- component unit may be needed to achieve the same output as a single active-component unit. For example, the Army has a policy that states reserve-component physicians, dentists, and nurse anesthetists shall not be deployed for longer than 90 days. Thus, the Army would need to deploy four different reserve component physicians for successive 90-day rotations to fill a single 1-year active component requirement. Therefore, in some cases, using reserve units to achieve the same operational capacity over time may be more costly than using active units. However, the lack of full cost information on active and reserve component medical personnel is a barrier to an analytical-based determination on the balance between active and reserve component medical personnel.\nIn 2013, we reported limitations with the DOD-wide software tool developed by Cost Assessment and Program Evaluation—the Full Cost of Manpower—which, among other things, is used to identify the full cost of active duty military personnel. Specifically, we reported that this tool has certain limitations for determining cost for certain cost elements. For example, instead of determining training cost by specialty, it estimates such costs by dividing total funding for such cost estimates by the number of military personnel. We recommended, among other things, that DOD, in order to improve its estimates and comparisons of the full cost of its workforces, develop guidance for cost elements that users have identified as challenging to calculate, such as general and administrative, overhead, advertising and recruiting, and training. DOD partially concurred with this recommendation but has not implemented this recommendation. We continue to believe that developing such costs is needed, especially for the medical community since training and education costs can be higher than in other communities. Moreover, in that report we also found that DOD did not include Reserve and National Guard personnel in their methodology for estimating and comparing the full cost to the taxpayer of work performed. We recommended DOD, among other things, develop business rules for estimating the full cost of National Guard and Reserve personnel. DOD partially concurred with this recommendation but has not implemented the recommendation and noted that a cost estimating function for reserve component personnel would be more complex than for active component and DOD federal civilian cost estimates. While we agree that developing cost estimates for the reserve component could be more complex, we continue to believe it is advisable for DOD to implement our recommendation.\nIn a 2013 DOD report, DOD identified the cost of unit manning, training, and equipping as one of five factors that play a key role in decisions concerning the mix of active and reserve component forces. According to the report, cost is often outweighed by other factors when making active component and reserve component mix decisions, but should always be considered in active component and reserve component mix decisions. Further, DOD policy states that workforce decisions must be made with an awareness of the full costs of personnel to DOD and more broadly to the federal government, and highlights that the full cost of active duty personnel extends beyond cash compensation, and also includes other costs such as education and training.\nThe military departments do not assess the full cost of personnel when determining the balance of active and reserve component medical forces because there is no DOD requirement to do so. Although DOD guidance states that cost is one of several factors that should be considered in active and reserve component balance decisions, the military departments have not conducted assessments of the full cost of active and reserve component personnel to inform their decisionmaking. Further, DOD and the military departments are unable to conduct any such assessments because they have not developed full cost information for active and reserve component medical personnel. Without developing full cost information for active and reserve component medical personnel and using that information in its determinations regarding the correct balance of such personnel, decision makers will not have complete information to make cost-effective choices about the balance of active and reserve component medical personnel.", "The military departments have taken actions, such as establishing policies and procedures, to aid the execution of the appropriate workforce mix for providing beneficiary health care within MTFs. However, the military departments face challenges in executing their plans in several areas, including lengthy hiring and contracting processes and uncompetitive salaries and compensation. Further, the transfer of administrative responsibility for MTFs from the military departments to the DHA may present challenges to the management of the military medical personnel.", "The military departments manage the workforce within their MTFs by using various policies and procedures to determine their workforce needs and help assess the risks, costs, and benefits of using military, federal civilian, and contractor personnel to carry out their missions. Currently, each military department is responsible for determining its MTF personnel requirements: that is, the number of personnel needed to operate its MTFs based on predicted demand for health care from their military and beneficiary populations. To determine MTF personnel requirements, the military departments use their respective suite of manpower models or standards based on a number of factors, including historical medical workload information and the size of population eligible for care. According to Army and Navy medical command officials, the Army and Navy suites of models respectively include at least 36 and 46 medical specialties, and generally express historical medical workload in relative value units, a metric of the level of professional time, skill, training and intensity to provide a given clinical service. In contrast, according to Air Force medical agency officials, the Air Force suite of standards includes 11 medical specialties and expresses workload in patient encounters.\nAccording to military department officials, when considering how to meet their MTF personnel requirements given available resources, the number of military personnel is fixed and must be preserved since the operational medical personnel requirements support the readiness mission. The military departments therefore prioritize the distribution of military personnel across MTFs, and then consider how to fill the remaining authorizations with federal civilian personnel or by contracting medical services as appropriate. To make these decisions, the military departments utilize DOD workforce guidance, which requires a balance of risk and cost, but states that risk mitigation shall take precedence over cost-related concerns when necessary. DOD total workforce policies and procedures are outlined in: (1) DOD Directive 1100.4, which establishes guidance for total workforce management; and (2) DOD Instruction 1100.22, which outlines policies and procedures for determining the appropriate mix of personnel. In 2018, we reported that a DOD study found that the cost of federal civilian and contractor full-time equivalents varied by organization, location, and function being performed. According to Army, Navy, and Air Force officials, any changes to funded positions are made through formal processes and require an evaluation of the cost of the personnel options and the approval of the military departments’ respective medical commands or agencies.\nThe military departments’ collective decisions determine their workforce mix. Figure 4 shows the number and percentage of each personnel type that provided or supported care in DOD-owned and operated MTFs for fiscal year 2017, in the United States and overseas.", "The military departments face challenges to implementing their workforce mix of military, federal civilian, and contractor personnel. Our review, including interviews with military department officials responsible for medical personnel management and with the senior leadership of six MTFs, highlighted, as discussed below, the following distinct challenges: (1) the length of federal civilian hiring and contracting process, (2) uncompetitive federal civilian salaries and contractor compensation, and (3) FTE targets and hiring freezes.", "Federal civilian hiring process. Senior officials at each of the six MTFs we spoke with stated the federal civilian hiring process, including its length and restrictions imposed by statute or policy, impedes their ability to hire desirable federal civilian candidates. Officials primarily attributed delays to the extended time for human resources offices to post a position and to process and refer applicants for interviews. For federal civilian personnel in DOD medical locations in fiscal year 2018, DOD officials reported an average hiring time of: 121 days for the Army, 157 days for the Navy, and 134 days for the Air Force.\nLegal restrictions can also extend the hiring process and hinder hiring desirable federal civilian candidates. For example, senior officials at five of six MTFs cited a statute requiring a 180-day waiting period before retired military personnel can be hired as DOD federal civilians and noted valuable candidates with military-specific subject matter expertise will instead seek employment in the private sector. Senior officials from one Air Force MTF stated they successfully submitted waivers to bypass the 180-day waiting period, but senior officials from one Army and one Navy MTF stated that the waiver process often takes as long as the waiting period.\nSenior officials from each of the six MTFs stated that hiring authorities, such as direct or expedited hiring authority, can help address challenges, but officials at four of six MTFs also expressed concerns about the adequacy of such flexibilities. Direct-hire authority allows agencies to fill occupations that have a severe candidate shortage or a critical hiring need, and is meant to expedite hiring. DOD designated a number of health care occupations as shortage category positions or critical need occupations in accordance with this expedited hiring authority. In 2017, DOD reported that it used expedited hiring authority in approximately 30 percent of hiring actions for its medical employees. Officials from one Navy MTF stated they have direct hiring authority, but their human resources office extends the process by requiring that the position be announced within the last 90 days, or else be re-announced, before they can utilize it. Army officials from one MTF stated interest in expanding the list of medical specialties granted direct hiring authority. Air Force officials from one MTF stated direct hire authority can help obtain qualified candidates, but does not necessarily shorten the hiring process.\nChallenges in the federal hiring process are a longstanding issue. In 2003, we reported on the need to improve executive agencies’ hiring process, with the majority of federal agencies included in our review reporting that it takes too long to hire quality employees. Our 2016 review of the extent to which federal hiring authorities were meeting agency needs found that the Office of Personnel Management (OPM) and other agencies do not know if the authorities are meeting their intended purposes. In 2018, we reported that DOD’s review of selected sites, including two MTFs, found: varying use of hiring authorities, management unfamiliarity with all available authorities, and a belief among managers that expanded use of some authorities is needed to produce more quality hires. Finally, our 2018 review of DOD laboratories’ use of hiring authorities found that officials used hiring authorities, but identified challenges such as delays in processing the personnel action and the overall length of the hiring process.\nContracting process. Senior officials at five of six MTFs stated there are challenges in obtaining contractor services, including the process time before personnel are available to perform work and restrictions imposed by statute. Senior officials from two Air Force MTFs stated that after the contract is awarded, contractors may have up to 60 days to present a candidate; officials from one MTF stated if the MTF rejects the candidate, then the vendor has another 30 to 60 days to find a candidate. According to officials at one Air Force MTF, at times they have to consider whether to accept a subpar candidate or leave a position vacant. Further, senior Air Force officials stated that controls on contract spending limit their flexibility in hiring. To help fill temporary contract positions, which are less attractive to candidates, officials stated the Air Force pays higher rates to the vendor that include the salaries of the personnel and vendor’s overhead costs. In 2018, we reported that DOD’s negotiated price of a contract includes direct costs, such as labor and non-labor costs, and indirect costs, such as overhead, and service contractor profit. Senior officials from the two Army MTFs stated that the moratorium on public- private competitions is a challenge because they cannot outsource federal civilian functions to contracted services when there are shortages of military or federal civilian personnel, even when it is the optimal choice. For example, according to officials, contractors cannot perform the functions of a civilian position when a civilian position is vacated.", "Federal civilian employee salaries. Senior officials at each of the six MTFs stated it is a challenge to fill federal civilian medical positions because of lower salaries compared to the private sector. In 2017, DOD reported difficulty hiring and retaining health care workers due to competition from the private sector, among other things. We have previously reported challenges related to the ability to provide competitive salaries for some DOD health care providers. Specifically, in 2015 we reported that officials from all three military departments stated their inability to create compensation packages for federal civilian mental health providers to compete with the private sector affected their recruiting and retention of providers. In 2018, we noted similar concerns in recruiting military physicians.\nSenior officials from each of the six MTFs we spoke with stated that the ability to utilize hiring flexibilities, such as special salary rates, helps mitigate this challenge, but at four of six MTFs also expressed concerns about their adequacy. To provide higher pay for some occupations, OPM may establish a higher salary rate for an occupation or group of occupations in one or more geographic areas to address existing or likely significant handicaps in recruiting or retaining well-qualified employees. Senior officials from four of six MTFs stated special salary rates are helpful but not sufficient. Officials at one Navy MTF noted that two primary care providers left within the last year for better pay in the private sector, negatively affecting access to care. Officials at one Army MTF noted that the application for special salary rates can take 2 years or more, and therefore may not address short-term hiring needs. Further, officials from one Navy MTF stated they continue to face difficulty hiring for positions allowed special salary rates, such as pharmacist and registered nurse positions. Our 2017 review of federal agency use of special payment authorities approved by OPM—such as special salary rates—found that agencies reported that access to authorities had positive effects—such as on staff retention and applicant quality—but had few documented effectiveness assessments.\nDOD is also authorized to offer DOD health care personnel a number of salary rates established for Veterans Health Administration (VHA) personnel. For example, DOD established a civilian physicians and dentists pay plan using this authority. However, officials stated concerns about the rates’ usefulness. Senior officials from one Air Force hospital noted that although the VHA salary levels are higher than the General Schedule levels that DOD typically offers, they may not be competitive with the private sector. Moreover, senior officials from one Army MTF expressed an interest in accessing VHA salary rates for additional occupations because Army personnel often leave to work at a nearby Veterans Affairs hospital for higher pay. In 2017, we reported on VHA physician recruitment and retention strategies and officials from the six VA medical centers in our review stated that physician salaries were often below those offered by local private sector, academic, and some state government employers.\nContractor compensation. Senior officials from five of six MTFs stated private sector contractor vendors face the same challenges as the government regarding uncompetitive salaries. As a result, some contracts have low fill rates or go unfilled. For example, senior officials at one Navy MTF said one of its vendors has not been able to fill a clinical pharmacy position for more than a year. Additionally, senior officials at the other Navy MTF we spoke with stated that a vendor was not meeting its local needs because the fill rate at their MTF is lower than the average fill rate across all Navy MTFs, which is what the vendor is required to meet. Further, senior officials at two of six MTFs—one Navy and one Air Force—stated some of their vendors have attempted to fill positions by sending multiple providers on a part-time basis to fill the equivalent of one full-time position; they noted the part-time assignments are undesirable and can affect the quality of care.", "Federal civilian FTE targets. Headquarters officials from each of the military departments stated that federal civilian FTE targets are a barrier to effective workforce mix management because they reduce flexibility in utilizing the most efficient personnel type to accomplish the beneficiary mission of the MHS. From fiscal years 2012 to 2017, OSD guidance directed the military departments to manage to a federal civilian FTE target. These targets were intended to prevent an increase in the size of the federal civilian workforce, even when federal civilians’ performance of work is most cost-effective. For example, Air Force headquarters officials stated that due to the federal civilian FTE target, they generally default to hiring contractor personnel when new personnel needs arise. Further, Air Force headquarters officials stated they have not pursued in-sourcing of some contracted functions even though such actions might result in cost savings.\nThe federal civilian FTE targets had varying effects on the operations of the six MTF’s we spoke with. Senior officials at two of six MTFs—one Navy and one Air Force—stated that they have not been adversely affected by the federal civilian FTE targets because the relatively high number of vacancies in their funded federal civilian positions means that they never exceed their target. Conversely, officials at one Air Force MTF stated they have considered hiring additional private sector contractor services when they reach their allowed federal civilian FTEs.\nDuring the course of our review, DOD issued its National Defense Business Operations Plan for Fiscal Years 2018 to 2022, which states that it would discontinue the use of federal civilian FTE targets because they acted as artificial and arbitrary constraints on the workforce, and encouraged the military departments to utilize hiring flexibilities to identify the most appropriate and economical personnel type to achieve their mission. In 2002 we reported that federal hiring policies should, among other things, avoid arbitrary full-time equivalent or other arbitrary numerical goals.\nFederal civilian hiring freezes. Senior officials at five of six MTFs stated that federal civilian hiring freezes adversely affect MTF operations. As part of planning for sequestration in fiscal year 2013, DOD imposed hiring freezes on federal civilian personnel. Further, there was a federal civilian hiring freeze from January 2017 to April 2017. Senior officials from three of six MTFs reported that hiring freezes lower morale and elongate the already lengthy hiring process, even when they are granted waivers to continue to hire. Further, senior officials from one Army MTF stated hiring freezes limit their ability to shape their workforce, and often result in higher costs when they increase the size of their contracted workforce in accordance with their needs. We reported in 2018 that defense laboratory officials we surveyed identified government-wide hiring freezes as a challenge to hiring candidates, stating that candidates accepted other offers due to delays created by the freeze and that hiring efforts continue to be adversely affected even after a freeze is lifted.\nThese three key hiring challenges limit the military departments’ ability to strategically consider the advantages of converting one source of support to another, and limit their ability to hire the appropriate personnel type or for contract vendors to fill positions. According to senior MTF officials, these key hiring challenges and low fill rates in some areas can result in personnel gaps that can adversely affect the operations of MTFs. When personnel gaps arise, officials stated, military personnel often must work additional hours or must be borrowed from other facilities. Senior officials from one Navy MTF cited the example of a cost of about $16,000 in travel expenses for the temporary transfer of an active duty nurse stationed in Japan to work for a MTF in the United States for 3 months because the MTF was not able to fill the position by other means. Additionally, senior officials from one Air Force MTF noted that morale of its military staff is negatively affected by extra hours and additional responsibilities placed on them to ensure continued operations.\nFurther, officials stated that personnel gaps can negatively affect care. Due to concerns about patient safety, MTFs may decide to discontinue some services at MTFs. Senior officials from five of six MTFs reported discontinuing some services as a result of these challenges and referred patients to the TRICARE network or to Veterans Affairs facilities. Referring patients to the private sector can have secondary effects on MTF operations, such as on hospital accreditations. Senior officials from one Navy MTF noted that in the past fiscal year they had to refer patients to private sector care after two hematology-oncology physicians resigned, which may affect their hematology-oncology program’s accreditation. Senior officials at the other Navy MTF stated that in the last fiscal year they could not meet the minimum staffing standards for labor and delivery staff and therefore sent patients to the TRICARE network. They noted they are also having difficulty filling key administrative positions related to quality control of laboratory services and are concerned about maintaining their pathology program accreditation.\nSenior officials from MTFs reported varying fill rates for military and civilian personnel, and for the contractor personnel provided by private sector vendors. However, officials from the MTFs we spoke with stated that fill rates may not illustrate the availability of personnel. For example, officials stated that authorizations for military personnel are counted as filled even when a servicemember is deployed and therefore not working at the MTF. In addition, MTF officials stated that any on-board civilians without corresponding authorizations inflate the civilian fill rate, resulting in a fill rate of greater than 100 percent. In addition, DOD officials noted that DOD pays for contracted services and does not directly employ contractor personnel. Therefore, the fill rate for contractors represents either the number of authorized FTEs in the individual contract or positions filled by contactors noted on the MTF’s force planning document, which could also result in fill rates of greater than 100 percent, even as other positions remain unfilled. The MTFs that we spoke with reported the following fill rates:\nTwo Navy MTFs. The fill rates for military personnel, federal civilian personnel, and funded positions designated for contracted services were 79 percent, 81 percent, and 94 percent, respectively, at one Navy MTF and 93 percent, 53 percent, and 62 percent, respectively, at the other MTF.\nTwo Air Force MTFs. The fill rates for military personnel, federal civilian personnel, and funded positions designated for contracted services were 98 percent, 86 percent, and 91 percent, respectively at one Air Force MTF and 94 percent, 74 percent, and 90 percent, respectively at the other MTF.\nTwo Army MTFs. The fill rates for military personnel, federal civilian personnel, and funded positions designated for contracted services were 91 percent, 118 percent, and 87 percent, respectively at one Army MTF. At the other MTF, the fill rate for military personnel fill rate was 94 percent and for federal civilian personnel was 107 percent, but the MTF officials did not provide fill rate information for positions designated for contracted services because there are no corresponding authorizations on their force planning document.\nDOD has been taking some steps to attempt to address these key hiring challenges. Specifically, DOD’s 2016 Strategic Workforce Plan included steps DOD was taking to address personnel gaps, such as a targeted recruitment program for critical skills, including 27 harder-to-fill medical occupations. In 2018, DOD published a Human Capital Operating Plan which states that it replaces the previously required Strategic Workforce Plan, but DOD does not yet have a plan of action specific to the medical professions. Further, DOD officials stated that components are encouraged to consider developing their own human capital operating plans. With regard to contracting, in response to a requirement in the National Defense Authorization Act for Fiscal Year 2017, DOD issued a status report in January 2018 on the development of its acquisition strategy for health care services at MTFs. The report notes that contracting for health care services is fragmented, and the report outlines DOD’s plan to move toward a single contract vehicle for health care services and to establish metrics for the strategy, such as measurement of contract fill rates.\nWhile these steps represent efforts to address these challenges, responsibility for management of the federal civilian and contractor workforces within the MHS will soon see significant changes. Specifically, in December 2016, Congress directed the transfer of administrative responsibility for MTFs from the military departments to the DHA. Further, Congress amended the law in 2018 to specify that the transfer should be completed by September 30, 2021. The law also states that at each MTF, the Director of the DHA has the authority to determine total workforce requirements, direct joint manning, and address personnel staffing shortages, among other things.\nAlthough the DHA will soon begin to assume these responsibilities and the challenges associated with them, a senior OASD(HA) official responsible for human capital issues stated that the DHA currently has no strategic total workforce plan, or similar document, to help ensure execution of an appropriate workforce mix at its MTFs. According to GAO’s key questions to assess agency reform efforts, strategic workforce planning should precede any staff realignments or downsizing, so that changed staff levels do not inadvertently produce skills gaps or other adverse effects that could result in increased use of overtime and contracting. GAO’s key principles for effective strategic workforce planning and applicable federal regulations have shown that addressing a critical human capital challenge—such as closing or reducing personnel gaps—requires tailored human capital strategies and tools and metrics by which to monitor and evaluate progress toward reducing gaps. Although many hiring challenges are longstanding government-wide issues, GAO’s model of strategic human capital management states that agencies need not wait for comprehensive civil service reform to modernize their human capital approaches. In addition, according to OPM’s standards for strategic workforce planning, human capital strategies should be integrated with acquisition plans, among other things, such as DOD’s acquisition strategy for health care services at MTFs.\nAs the DHA finalizes its plans for assuming administrative control of MTFs, senior leaders may find that they face the same challenges reported by the military departments in executing an appropriate workforce mix. DHA could mitigate these challenges to executing the appropriate workforce mix in the MTFs by engaging in strategic workforce planning, including tailored human capital strategies, tools, and metrics by which to monitor and evaluate progress toward reducing gaps, and integrating this planning with DOD’s acquisition strategy for health care services at MTFs.", "The planned transfer of administrative responsibility for MTFs from the military departments to the DHA may present challenges to DOD’s management of military personnel. Specifically, the military departments and DHA have not determined how military personnel will meet both the operational and beneficiary missions of the MHS after the transfer of administrative responsibility for MTFs to the DHA. Historically, each military department has been responsible for managing its military personnel to ensure it meets its operational mission and appropriately staffs its MTFs, and the challenge of balancing these missions was the responsibility of each respective military department. However, the transfer of administrative responsibility for MTFs to the DHA will separate these missions—the operational mission will be the responsibility of the military departments, and the beneficiary mission will be the responsibility of the DHA, with military personnel used to support both missions. The plan for transfer of administrative responsibility for MTFs to the DHA states that the military departments will retain ultimate control over military personnel, who will work within the MTFs on a day-to-day basis to maintain their readiness to provide operational medical care, while the DHA will eventually assume responsibility for federal civilian and contractor personnel and all other aspects of MTF management. DOD officials stated that the planned transfer will allow the military departments to focus their attention on readiness to provide operational medical care, while the DHA will focus its attention on efficient management of beneficiary health care operations. As a result of this separation of missions, challenges in the management of military personnel could be exacerbated by transfer of responsibility for achieving these missions to separate organizations in the following three ways.\nFirst, DHA and the military departments have not clearly identified how they will manage the assignment of military personnel to MTFs. The implementation plan for transfer of administrative responsibility for MTFs to the DHA states that the departments will continue to be responsible for assignment of military personnel to MTFs. However, DOD’s stated desire to place greater emphasis on the readiness mission may affect current MTF staffing practices. For example, military department officials told us that it is common practice to assign military personnel to locations that face challenges in hiring federal civilian and contractor medical personnel to maintain access to medical care in these locations. However, the transfer implementation plan states that the departments will provide military personnel to the MTFs only to the extent that the MTFs can provide sufficient workload to maintain providers’ military medical Knowledge, Skills, and Abilities (KSAs). KSAs are a metric for military operational readiness that DOD has not yet finalized. Officials responsible for planning the transfer of administrative responsibility for MTFs to the DHA stated that the emphasis on fulfilling KSAs in the future may result in concentrating military providers in larger MTFs, which can provide opportunities for providers to fulfill KSAs. However, this change could create a disadvantage for smaller facilities, which may not be able to provide military providers with as much practice and already face challenges in hiring federal civilian and contractor personnel.\nSecond, DHA and the military departments have not clearly identified how they will mitigate the effect of deployments of military medical personnel on MTF operations. When medical personnel are deployed out of MTFs to provide operational care, their absence can create a gap or reduction in capability at the affected MTF, according to military department officials. The military departments, prior to the transfer, manage deployments and are responsible for ensuring appropriate staffing at the MTFs in the absence of deployed personnel. Officials at all six of the MTFs we visited cited challenges with mitigating the effect of deployments on MTF operations. DOD has stated that after the transition, there will be no barriers to the military departments’ access to personnel for deployment, and has highlighted options for addressing staffing gaps, such as using borrowed military personnel, contractors, or referral to the TRICARE network. However, officials at all six of the MTFs we spoke with stated that contracting for medical services was not sufficiently timely or effective, and officials at one MTF noted that referral to the TRICARE network was difficult in their area.\nAccording to officials within the MTFs of the National Capital Region, which is directly managed by the DHA and not the military departments, management of deployments and their adverse effect on hospital staffing has been a challenge. For example, officials cited a period in the summer of 2017 when, due to overlapping deployments across military departments, 8 of 9 general surgeons at Fort Belvoir Community Hospital in Virginia were simultaneously deployed, and patients had to be referred to private providers within the TRICARE network or sent to Walter Reed National Military Medical Center in Maryland.\nAlthough the military departments and the DHA have executed a Memorandum of Agreement concerning coordination for service personnel to fill scheduled deployments, this does not always prevent gaps in medical specialties. For example, officials noted that requests for volunteer deployments are not always vetted through NCR management. Further, addressing these gaps can be challenging. Specifically, officials cited difficulties in successfully contracting for medical services and reported that requests for backfill support from the reserve components has associated costs and is difficult to execute.\nThird, DHA and the military departments have not clearly identified how they will manage changes to the size or composition of the active duty medical workforce that affect workforce balance within MTFs. Since 2008, the military departments have been prohibited from converting medical positions designated for military personnel to positions that can be filled by federal civilians—even when such conversions would result in cost savings. Air Force headquarters officials noted that they have identified more than 4,000 medical positions to review for possible conversion to achieve cost savings, particularly in medical specialties with excess military personnel, such as family practice and pharmacy. Air Force officials previously identified 4,724 positions for conversion beginning in fiscal year 2005, of which 1,449 were completed before the prohibition was enacted. The Army planned to convert 4,340 military positions from fiscal year 2006 through fiscal year 2011, of which 1,459 were completed before the prohibition was enacted. The Army restored 165 of planned conversions for fiscal year 2007, and reversed, or offset the remaining through growth in the active duty medical force after the prohibition was enacted.\nThe National Defense Authorization Act for Fiscal Year 2017 allows for the prohibition on such conversions to be lifted after DOD submits a report that defines the military medical and dental requirements necessary to meet operational medical force readiness requirements, and lists the positions necessary to meet such requirements. However, decisions on conversions taken by the departments could affect MTF operations. Specifically, existing challenges with hiring federal civilian personnel could create challenges with military-to-civilian conversions. For example, DOD has stated that during the previous round of military to federal civilian conversions, changes in local market conditions affected the ability of the military departments to fill converted positions with civilians in a timely fashion. Medical headquarters officials the Army stated that they currently have no intention to use conversions if the prohibition is lifted; Navy officials stated they currently do not plan to use conversions since their military personnel requirements exceed their authorizations. Senior officials from one Navy MTF we spoke with stated that if conversions occurred, recruitment and retention challenges related to hiring federal civilian employees would need to be addressed to ensure such positions are filled.\nIn addition, military department policies can affect workforce balance within MTFs. Specifically, in its modeling for operational medical personnel requirements, the Air Force includes a preference for uniformed personnel to receive primary care from uniformed medical personnel. Officials told us that this approach, known as the Critical Home Station, is because Air Force leadership believes that performance of this function by military personnel provides for increased accountability for medical readiness. For example, senior officials from one Air Force MTF stated they believe the policy is important for the Air Force to maintain access to information about health factors that could render a servicemember not medically qualified to deploy. Air Force medical headquarters officials estimate that the policy results in 2,000 positons reserved for military personnel that could be designated for federal civilian or contractor performance.\nLeading practices for results-oriented government state that cooperating federal agencies need to sustain and enhance their collaboration in several ways, including the development of policies and procedures to operate across agency boundaries and agreement on their respective roles and responsibilities. However, planning for the transition by the DHA and the military departments has not yet included development of policies and procedures for management of military personnel and agreement on specific roles and responsibilities for the military departments and the DHA in this process. The MHS process for collaborating across agency boundaries, known as MHS Governance, emphasizes collaborative work in the management of the MHS. This forum could provide an opportunity for the military departments and the DHA to develop policies and procedures for management of military personnel and agree on specific roles and responsibilities for the military departments and the DHA in this process. Until DHA and the military departments develop such policies and procedures and agrees on roles and responsibilities, the MHS may continue to face a number of challenges related to the transfer of administrative responsibility for MTFs to the DHA.", "Given the size of the MHS, its central importance to the success of DOD’s mission, and its cost, having the right mix of military, federal civilian, and contractor personnel providing medical care within MTFs and in deployed operational settings should be a key priority for DOD leadership. While the military departments have policies and procedures in place to assess medical workforce mix in both settings, the shortcomings we have highlighted present barriers to achieving an appropriate workforce mix. Recently, such as in the 2018 National Defense Business Operations Plan, DOD has emphasized the need to reassess who can most efficiently perform all aspects of DOD’s mission. However, the military departments’ planning processes for operational medical personnel requirements continue to rely solely on military personnel, despite the use of federal civilians and contractors in operational settings, and the military departments have not developed full information on the cost of their medical forces and incorporated such information into decision-making processes about the mix of active and reserve component personnel. Similarly, the transfer of administrative responsibility for MTFs to the DHA represents an opportunity to reassess workforce mix at the MTFs. However, long-standing challenges in the management of federal civilian and contractor personnel, coupled with challenges related to the management of medical personnel after the transfer, could overshadow and cast doubt on the success of that reform. Without addressing the concerns we have highlighted, DOD may miss the opportunity presented by current transformation efforts in the MHS to ensure it has in place the most cost-effective mix of personnel in its workforce to accomplish its medical mission.", "We are making five recommendations to the Department of Defense.\nThe Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in coordination with the military departments, perform an assessment of the suitability of federal civilian and contractor personnel to provide operational medical care and incorporate the results of the assessment into relevant policies, if warranted. (Recommendation 1)\nThe Secretary of Defense should ensure that the Under Secretary of Defense for Personnel and Readiness require consideration of cost when making determinations regarding the mix of active and reserve component medical personnel. (Recommendation 2)\nThe Secretary of Defense should ensure that the Assistant Secretary of Defense for Health Affairs, in collaboration with the Director of Cost Assessment and Program Evaluation and the military departments, develop full cost information for active and reserve component medical personnel, and the military departments use that information in its determinations regarding the mix of active and reserve component medical personnel. (Recommendation 3)\nThe Secretary of Defense should ensure that the Director of the Defense Health Agency develop a strategic total workforce plan which includes, among other things: (1) tailored human capital strategies, tools, and metrics by which to monitor and evaluate progress toward reducing personnel gaps, and; (2) integration of human capital strategies with acquisition plans, such as DOD’s acquisition strategy for health care services at DOD’s military treatment facilities. (Recommendation 4)\nThe Secretary of Defense and the Secretaries of the Army, the Navy, and the Air Force, respectively, should ensure that accompanying the transfer of administrative responsibility for military treatment facilities to the Defense Health Agency, that the Defense Health Agency and the military departments develop policies and procedures for management of military personnel, including agreement on specific roles and responsibilities for the military departments and the Defense Health Agency in this process. (Recommendation 5)", "In written comments on a draft of this report, DOD concurred with our five recommendations concerning additional assessments needed to better ensure an efficient MHS total workforce. DOD’s comments are reprinted in appendix II.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, the Assistant Secretary of Defense for Health Affairs, the Director of Cost Assessment and Program Evaluation, the Director of the Defense Health Agency, and the Secretaries of the Army, the Navy, and the Air Force. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions regarding this report, please contact me at (202) 512-3604 or farrellB@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "To address the extent to which the military departments’ planning process for operational medical personnel requirements have assessed the mix of federal civilian, contractor, active and reserve medical personnel (i.e. workforce mix), we compared the military departments’ efforts in planning for operational medical personnel requirements to the Department of Defense (DOD) and department-level policies and guidance on workforce mix determination and identifying the full cost of its military medical personnel. DOD Directive 1100.4 states that authorities should consider all available sources when determining workforce mix. DOD Instruction 1100.22 directs the steps that workforce planning authorities must take in planning for personnel requirements and emphasizes consideration of all potential workforce sources and an accurate understanding of personnel costs. We also reviewed related DOD documentation on identifying military essential positons and the use of alternative workforces. Specifically, DOD’s National Defense Business Operations Plan for fiscal years 2018 through 2022 states that workforce rationalization strategies include, among other things, reassessing military manpower allocations for military essentiality and identifying functions and positions that are commercial in nature that may be appropriately or efficiently delivered via private sector support. Moreover, DOD’s 2017 Workforce Rationalization Plan recognizes DOD’s civilians as an essential enabler of its mission capabilities and operational readiness and noted that there are numerous opportunities for the military departments, combatant commands, and others to make well-reasoned adjustments to workforce mix.\nTo determine the extent to which federal civilians and contractors were deployed to provide medical care we reviewed federal civilian and contractor deployment data from fiscal years 2013 through 2017. We analyzed data for this timeframe to enable us to identify deployments over the last 5 years, and fiscal year 2017 was the most recent full fiscal year of available data at the time of our review. To assess the reliability of these data, we electronically tested the data to identify obvious problems with completeness or accuracy and interviewed knowledgeable agency officials about the data. We found the data to be limited in that the deployment data may not be sufficiently reliable for identifying the universe of deployments. However, we found the data to be sufficiently reliable for the purposes of reporting that federal civilians and contractors have been deployed to provide medical care. Further, we interviewed officials from the Office of the Under Secretary of Defense for Personnel and Readiness (USD(P&R)), Office of the Assistant Secretary of Defense for Health Affairs (OASD(HA)), Defense Civilian Personnel Advisory Service, the military departments, and selected combatant commands to identify considerations and any challenges of using different personnel categories as workforce alternatives for meeting operational medical requirements.\nTo determine the appropriate use of the active and reserve components for DOD’s operational medical personnel military requirements, we compared the military departments’ efforts in assessing their active and reserve balance to DOD and department-level policies and guidance. Specifically, in a 2013 DOD report issued in response to section 1080A of the National Defense Authorization Act for Fiscal Year 2012, DOD established five factors that play a key role in active and reserve component balance decisions, including the cost of unit manning, training, and equipping. According to the report, cost is often outweighed by other factors when making active component and reserve component mix decisions, but should always be considered in active component and reserve component mix decisions. DOD Instruction 7041.04 has guidance for military departments to use to identify the full cost of their active component, federal civilian, and contractor workforces. Moreover, we interviewed officials from the military departments to discuss: (1) how they determine their operational medical requirements and if they identified the full cost of active and reserve component medical personnel, and (2) the use of the active and reserve components for operational requirements and any efforts to assess the balance of active and reserve component medical personnel.\nTo determine the mix of active and reserve component medical personnel, we analyzed authorization data from the Health Manpower and Personnel Data System for fiscal year 2017. We analyzed data for fiscal year 2017 because this was the most recent year of available data at the time of our review. To assess the reliability of these data, we electronically tested the data to identify obvious problems with completeness or accuracy and interviewed knowledgeable agency officials about the data. We found the data to be sufficiently reliable for reporting on the allocation of authorizations for active and reserve component medical personnel.\nTo address how the military departments determine the most appropriate workforce mix at military treatment facilities (MTFs) and any challenges in executing an appropriate workforce mix, we reviewed DOD and department-level policies and guidance on workforce mix determination. We also reviewed the military departments’ efforts in planning, staffing, and filling MTF requirements. We spoke with knowledgeable officials from the Office of the USD(P&R), OASD(HA), DHA, and the military departments and requested documentation related to how they oversee or implement legal or policy requirements, such as DOD Instruction 1100.22’s manpower mix criteria, and the annual inventory of inherently governmental and commercial activity. To determine the proportion of reported military, federal civilian, and contractor personnel providing or supporting care in MTFs, we obtained budgetary data for fiscal year 2017, which was the most recent full fiscal year of available data at the time of our review. To assess the reliability of these data, we compared them to the information reported in the fiscal year 2017 Defense Health Program justification estimates published in February 2018 to identify key differences and interviewed knowledgeable agency officials about the data. We found the data to be sufficiently reliable for the purposes of describing workforce mix of military, federal civilian, and contractor personnel within MTFs.\nTo understand how policies and procedures to determine and execute an appropriate workforce mix are implemented at MTFs, we interviewed military department medical command or agency officials responsible for implementing DOD total force policy. To better understand policy and procedure implementation at MTFs we selected six MTFs - two each from the Army, Navy, and Air Force - to allow a cross-section of views concerning the management of the military departments’ workforce mix at the MTFs and hiring conditions in different types of labor markets. The two MTFs from each military department were selected based on consideration of average daily patient load and MTF bed size, which we obtained from the Defense Health Agency.\nFor each MTF, we interviewed officials responsible for the leadership and management of MTF personnel and operations and requested and reviewed relevant documentation. We reviewed their responses, which highlighted some challenges related to achieving an appropriate workforce mix, and DOD’s plans for addressing these challenges. We compared these to GAO’s key questions to assess agency reform efforts, which note that strategic workforce planning should precede any staff realignments or downsizing, and GAO’s key principles for effective strategic workforce planning, which state that addressing a critical human capital challenge—such as closing or reducing personnel gaps—requires tailored human capital strategies and tools and metrics by which to monitor and evaluate progress toward reducing gaps. We also reviewed these plans in light of OPM’s standards for strategic workforce planning, which note that human capital strategies should be integrated with acquisition plans, among other things, such as DOD’s acquisition strategy for health care services at MTFs. Finally, we requested from officials at each MTF information on personnel inventory and authorizations to understand their ability to fill military and civilian positions, and the contract vendors’ ability to fill positions designated for contracted services.\nWe also reviewed how the planned transfer of administrative responsibility for MTFs from the military departments to the DHA might affect DOD management of military personnel within the MHS. To identify (1) responsibilities of the military departments that may be transferred to the DHA, and (2) challenges that may continue under the new organizational structure, we reviewed relevant documentation and interviewed knowledgeable officials. To understand potential challenges related to the assignment of military personnel to MTFs, we interviewed military department officials responsible for the assignment of military personnel. To identify how deployments affect MTF operations, if at all, we interviewed officials responsible for the leadership and management of MTF personnel and operations. Lastly, to understand how the military departments manage the size and composition of the active duty medical workforce, we requested documentation related to the development of operational personnel requirements and interviewed knowledgeable officials. We also reviewed previous efforts to alter the size or composition of the active duty medical workforce, such as military to civilian conversions. We compared DOD’s efforts to plan for these challenges to leading practices for results-oriented government, which state that cooperating federal agencies need to sustain and enhance their collaboration in several ways, including the development of policies and procedures to operate across agency boundaries and agreement on their respective roles and responsibilities.\nWe conducted this performance audit from September 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Lori Atkinson, Assistant Director; Tracy Barnes; Alexandra Gonzalez; Adam Howell-Smith; Kirsten Leikem; Amie Lesser; Richard Powelson; Clarice Ransom; Stephanie Santoso; Amber Sinclair, and John Van Schaik; made key contributions to this report.", "Military Personnel: Additional Actions Needed to Address Gaps in Military Physician Specialties. GAO-18-77. Washington, D.C.: February 28, 2018.\nDefense Health Reform: Steps Taken to Plan the Transfer of the Administration of the Military Treatment Facilities to the Defense Health Agency, but Work Remains to Finalize the Plan. GAO-17-791R. Washington, D.C.: September 29, 2017.\nDefense Health Care Reform: DOD Needs Further Analysis of the Size, Readiness, and Efficiency of the Medical Force. GAO-16-820. Washington, D.C.: September 21, 2016.\nHuman Capital: Additional Steps Needed to Help Determine the Right Size and Composition of DOD’s Total Workforce. GAO-13-470. Washington, D.C.: May 29, 2013.\nMilitary Personnel: DOD Addressing Challenges in Iraq and Afghanistan but Opportunities Exist to Enhance the Planning Process for Army Medical Personnel Requirements. GAO-11-163. Washington, D.C.: February 10, 2011.\nMilitary Personnel: Enhanced Collaboration and Process Improvements Needed for Determining Military Treatment Facility Medical Personnel Requirements. GAO-10-696. Washington, D.C.: July 29, 2010.\nMilitary Personnel: Status of Accession, Retention, and End Strength for Military Medical Officers and Preliminary Observations Regarding Accession and Retention Challenges. GAO-09-469R. Washington, D.C.: April 16, 2009." ], "depth": [ 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 3, 3, 3, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "", "", "", "", "h0_title h1_title", "", "h0_full", "h1_full", "h2_title", "h2_full", "h2_title", "h2_full", "", "h2_full", "h2_full", "", "", "", "h3_full h2_full", "", "", "", "", "" ] }	{ "question": [ "What has DOD not assessed?", "What can assessment of the suitability of federal civilians and contractors provide?", "What roles do federal civilians and contractors play?", "What preference do military department officials express?", "What is not considered when determining balance of active and reserve component medical personnel?", "What does DOD policy state?", "What did DOD specifically identify as important in its policy?", "How can DOD ensure an appropriate and cost-effective mix of personnel?", "What actions have military departments taken?", "What challenges do military departments still face?", "What specific challenge did senior officials cite?", "What effects have the challenges had on the decisions of the senior officials?", "What is the MHS preparing for?", "Why will DHA face the same challenges as military departments in executing an appropriate and efficient workforce mix at its MTFs?", "What does Senate Report 115-125 contain?", "What does this report examine?", "What does GAO compare?", "What other action does GAO take?" ], "summary": [ "The Department of Defense (DOD) has not assessed the suitability of federal civilians and contractors to meet operational medical personnel requirements.", "An assessment of the suitability of federal civilians and contractors could provide options for meeting operational medical personnel requirements.", "Federal civilians and contractors play key roles in supporting essential missions, i.e. providing operational assistance via combat support.", "Military department officials expressed a preference for using military personnel and cited possible difficulties in securing federal civilian and contractor interest in such positions.", "When determining the balance of active and reserve component medical personnel, the military departments' processes generally do not consider full personnel costs, including education and benefits.", "DOD policy states that workforce decisions must be made with an awareness of the full costs.", "Further, in a 2013 report, DOD identified the cost of unit manning, training, and equipping as one of five factors that play a key role in decisions concerning the mix of active and reserve component forces.", "By developing full cost information for active and reserve component medical personnel, DOD can better ensure an appropriate and cost-effective mix of personnel.", "The military departments have taken actions, such as establishing policies and procedures, to assess the appropriate workforce mix for beneficiary care within Military Treatment Facilities (MTFs), but challenges remain. The military departments distribute military personnel across the MTFs and then use policies and procedures to consider risks, costs, and benefits to determine how to fill the remaining positions with federal civilians and contractors.", "However, a number of challenges, including lengthy hiring and contracting processes and federal civilian hiring freezes affect DOD's ability to use federal civilians and contractors.", "For example, senior officials at each of the six MTFs that GAO spoke with cited challenges with the federal civilian hiring process, and five of six MTFs cited challenges with the contracting process.", "As a result, senior officials from five of six MTFs reported discontinuing some services and referring patients to DOD's TRICARE network of private sector providers or Veterans Affairs facilities.", "The Military Health System (MHS) is also preparing for the phased transfer of administrative responsibility for MTFs to the Defense Health Agency (DHA), including management of the MTF workforce.", "According to GAO's report on agency reform efforts, strategic workforce planning should precede any staff realignments or downsizing. However, according to a senior official, the DHA has not developed a strategic workforce plan. Without developing such a plan, the DHA may continue to face the same challenges experienced by the military departments in executing an appropriate and efficient workforce mix at its MTFs.", "The Senate Report 115-125 accompanying a bill for the National Defense Authorization Act for Fiscal Year 2018 contained a provision for GAO to review how DOD determines its mix of military, federal civilian, and contractor personnel.", "This report examines the military departments' planning processes for determining (1) operational medical personnel requirements, including an assessment of the mix of federal civilian, contractor, and active and reserve medical personnel; and (2) the most appropriate workforce mix at MTFs and any challenges in executing their desired workforce mix.", "GAO compared MHS staffing practices with DOD policy, and analyzed fiscal year 2017 budgetary data to determine the proportion of military, federal civilian, and contractor personnel.", "GAO also interviewed senior leaders at six MTFs." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 1, -1, -1, 0, 1, 2, -1, -1, -1, 0, -1, 2 ], "summary_paragraph_index": [ 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5, 5, 5, 1, 1, 1, 1 ] }
GAO_GAO-14-511	{ "title": [ "Background", "RUS’s Oversight Indicates Most Projects Will Be Completed on Time and As Approved but Faces Challenges Given the Program’s Scope", "RUS Monitors BIP Projects and Expects Most Will Be Completed by the 2015 Deadline, but Awardees Face Challenges", "RUS Expects That Projects Will Be Completed as Approved, but Faces Challenges Given Scope of Program", "RUS’s Oversight Processes to Ensure Projects Are Completed as Approved", "Challenges to RUS’s Oversight Processes", "RUS Collects BIP’s Performance Information but Provides Limited Reporting of Program’s Impact", "RUS Collects and Has Provided Limited Reporting of BIP Performance Information despite Efforts to Improve Reliability", "USDA Annual Performance Reports Do Not Track BIP’s Performance against a Related Goal", "Conclusion", "Recommendation", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Rural areas tend to lag behind urban and suburban areas in broadband deployment. The provision of broadband Internet networks and services in the United States is generally privately financed. Rural areas, though, can have conditions that increase the cost of broadband deployment— such as remote areas with challenging terrain like mountains, which increase construction costs—or conditions that make it difficult to recoup deployment costs—such as relatively low population densities and incomes. These conditions make it less likely that a private service provider will build out or maintain a broadband network. Low population density can mean fewer potential subscribers, and low-income populations are less likely to use broadband. Other evidence suggests that rural low-income households are less likely to use broadband than metropolitan low-income households are.\nHowever, because of broadband’s perceived economic and social benefits, several federal programs aim to encourage its deployment, and the Recovery Act represented an unprecedented investment in this area.\nTo extend access to broadband and therefore increase rural economic opportunity, RUS finances broadband infrastructure deployment in rural areas. The BIP program represented an unprecedented federal investment in broadband deployment in general and for RUS in particular. Prior to the enactment of the Recovery Act, RUS’s Rural Broadband Access Loan and Loan Guarantee and Community Connect programs were the only federal programs exclusively dedicated to deploying broadband infrastructure. Together, these programs were appropriated a total of $295 million in the past decade (See table 1). The $2.5 billion appropriated to BIP through the Recovery Act represented over eight times the federal investment in RUS broadband programs over the past decade.\nBIP awardees must meet requirements set by the Recovery Act and RUS—such as requirements to deploy broadband infrastructure within and throughout service areas that are at least 75 percent rural—and regularly report information on progress to RUS. The Recovery Act authorized RUS to award grants, loans, and loan guarantees for broadband infrastructure in any area of the United States and mandated that areas to be served be at least 75 percent rural without sufficient access to high-speed broadband service to facilitate rural economic development. The rest of the project could be located in an area that was not rural. As a condition of the award, RUS requires BIP awardees to provide service to all customers who request and subscribe to its services within and throughout the approved service area. In addition, RUS officials say they require BIP awardees to submit quarterly financial and performance reports for at least 5 years after the completion of BIP projects. These quarterly reports, called Broadband Collection and Analysis System (BCAS) reports, require awardees to list detailed financial information and the number of subscribers in the approved service area.\nBy September 2010, RUS awarded $3.5 billion in BIP loans, grants, and loan and grant combinations to 320 projects, of which about $3.4 billion went to 297 infrastructure projects to enable service to end users such as households and businesses. RUS solicited applications and made awards in two rounds, with the first round beginning in June 2009 and ending in April 2010, and the second round beginning in January 2010 and ending in September 2010. BIP awards went mainly to private-sector entities, including for-profit companies and cooperatives, to construct “last-mile” infrastructure projects, meaning a project that provides service directly to end users. Specifically, of the 297 infrastructure projects originally awarded, 267 were awarded to for-profit companies or cooperatives. In addition, 285 were last-mile projects, while the remaining 12 projects were middle-mile projects to provide a link from the Internet backbone to the last-mile networks of local providers that serve end users. RUS also funded 19 technical assistance and four satellite projects that accounted for approximately $103 million awarded.\nBased on information provided in the applications selected for award, in 2010 RUS estimated that 847,239 subscribers would receive new or improved broadband service through BIP infrastructure projects (see table 2). However, since the time of award to March 31, 2014, approximately 14 percent of the awarded BIP infrastructure projects (42 out of 297) were terminated. According to RUS officials, these projects were turned down by the awardee or terminated by RUS for a variety of reasons, such as awardee financial difficulties or inability to meet requirements. Consequently, in a BIP status report as of March 31, 2014, RUS updated its subscribership estimate goal to show that 728,733 subscribers were expected to receive new or improved broadband access as a result of BIP funding. According to RUS officials, this new number was calculated by removing the subscribership estimates attributed to terminated projects. In addition, after the terminated projects were removed, RUS estimated that 61,047 fiber miles and 1,391 wireless access points would be installed through BIP infrastructure projects.\nBIP projects have encountered delays, and in response, RUS has pushed back the project completion deadline to shortly before funds expire in September 2015. Initially, when BIP grants and loans were awarded to projects in 2010, RUS stated that projects should be substantially completed within 2 years of award and should be fully completed within 3 years. However, BIP projects generally follow a process that includes planning/contracting, construction, funding, and reporting phases (see fig. 1). We previously found that some BIP projects experienced delays in the planning and contracting phase, such as delays in environmental reviews, securing permitting and rights-of-way agreements, and obtaining RUS approval of contracts and plans. Projects also encountered challenges during construction due to severe weather or terrain and difficulty securing fiber due to a shortage. In response to these delays, in October 2011, RUS extended the BIP completion deadline to June 2015 to ensure that awardees could be reimbursed before the appropriation is closed on September 30, 2015. In October 2011, RUS modified BIP requirements, requiring that construction commence within 180 days of the latter of the completion of the project’s historic preservation or environmental reviews, and be fully completed no later than June 30, 2015. After September 30, 2015, the expired appropriation account will be closed and any balances remaining will be cancelled.\nTo address the challenge of overseeing the approximately 300 BIP projects and over $3 billion in funding, RUS hired temporary staff and a contractor. Before BIP implementation, RUS reported having 26 GFRs in fiscal year 2008. RUS awarded a contract to ICF International to assist with reviewing technical and financial materials and developing the post- award monitoring and reporting framework. In addition, RUS hired eight temporary GFRs to assist with the additional BIP workload. In August 2010, we recommended that USDA address the variability in funding levels for post-award oversight of BIP, given that the Recovery Act BIP funds could not be obligated after September 30, 2010, which ended the period of availability of the BIP appropriation. In response, RUS extended its contract with ICF International through fiscal year 2013.However, that contract and temporary staff appointments expired at the end of September 2013. As a result, fewer RUS staff, including engineers, loan specialists, and GFRs, are now responsible for BIP oversight. Since the contract ended on September 30, 2013, RUS has been transitioning the contractor’s work back to RUS staff.", "", "RUS monitors projects and takes oversight actions through all BIP project phases, as shown in figure 2. For example, RUS engineers are responsible for ensuring that projects meet the specifications listed in applications and loan specialists are responsible for ensuring that projects are financially sustainable by reviewing funding requests and reporting.Meanwhile, GFRs are the primary RUS point of contact for awardees and are responsible for collecting and reporting information on projects. For example, RUS GFRs submit monthly reports on projects’ status and the number of fiber miles and wireless access points deployed.\nBased on GFR monthly reports, as of March 31, 2014, most projects were completed or partially operational. Specifically, 87 percent of the 255 BIP infrastructure projects were completed, meaning they were providing service throughout the entire approved service area, or were partially operational, meaning they were providing service to some subscribers in the approved service area (see table 3). Therefore, about 87 percent of BIP projects were beginning to offer broadband service to subscribers. However, since the partially operational projects had not yet been completed totally, as of this date, 216 projects, or about 85 percent of BIP infrastructure projects, were incomplete.\nRUS also tracks projects by the amount of funding they have received, as RUS disburses funds to projects incrementally during implementation. As of March 31, 2014, RUS had disbursed about $2.2 billion, about 72 percent of the $3.1 billion in total BIP funds, to awardees. In addition, awardees of approximately 85 percent of the Recovery Act BIP infrastructure projects had received over half of the funds they had been awarded. The remaining approximately 15 percent have received less than half of the funds they had been awarded. However, the disbursement of funds by RUS does not fully reflect the amount of work completed on projects. RUS disburses BIP funds incrementally through advancements or reimbursements after awardees submit funding requests. Funding schedules vary among projects and can lag behind project construction. For example, representatives from one awardee told us that they are currently constructing a wireless tower and that given the nature of the contract, they would not be reimbursed by RUS until after construction was completed.\nBased on data RUS tracks on project status and funds disbursed, RUS officials stated that they expect almost all BIP projects to be completed by the 2015 deadline. However, they predicted a small number of projects may have difficulty meeting the deadline due to project challenges and delays. RUS officials told us that because building out the entire service area was a condition of the original award agreement, awardees must use their own funds to complete the project if construction extends beyond the 2015 deadline. They also told us they are currently working with their Office of General Counsel to develop policies and potential actions in response to projects that have not built out the entire service area of the project by the 2015 deadline.\nAccording to RUS officials and GFRs, current project delays were due to a variety of challenges, some of which the awardee and RUS have limited options to overcome. These challenges include lengthy environmental reviews, weather, compliance with reporting requirements, and approval of contracts and plans. To address these challenges, awardees have tried to construct projects in compressed time frames but can encounter further construction delays, such as weather. For example, representatives from one awardee we spoke to noted that environmental review delays caused the project to miss an entire construction season, while subsequent seasons were shortened due to severe weather. Additionally, RUS officials reported that some awardees faced financial challenges. For example, according to a GFR, one BIP project was struggling due in part to the awardee’s overall financial problems. The GFR noted that RUS was limited in taking action against the awardee, since holding back BIP funds would only make the financial problems worse, putting the project further at risk.\nAwardees who were unfamiliar with RUS’s processes encountered particular challenges and delays. We previously found that, according to RUS officials, BIP awardees that had not received funding from RUS in the past were more likely to experience difficulties complying with reporting requirements than those awardees with a history of borrowing from RUS.projects went to new awardees that had not previously received funding from RUS, we found these projects made up a majority of projects terminated (64 percent). RUS officials and GFRs told us that new awardees faced continued challenges complying with RUS’s reporting and contracting requirements. Representatives from one such new awardee we spoke to, a local government entity, noted they faced challenges in filing BCAS reports regularly because their financial systems were not designed to produce the information required on a quarterly basis. These BCAS reporting problems resulted in RUS withholding funding, and consequently, project delays. Representatives from another new RUS awardee said they were a small company that was unable to handle the additional BIP workload and, as a result, hired an outside consultant to handle the required reporting. To help address Although 38 percent of the original 297 BIP infrastructure these challenges, RUS GFRs have provided additional assistance to new awardees. For example, a GFR we spoke to told us he reminded a new awardee of BIP reporting requirements. In another case, GFRs we spoke to worked to ensure that a new awardee’s contracts met RUS requirements by acting as a liaison to RUS headquarters staff to help resolve issues.", "", "RUS takes several steps to ensure projects are completed as approved. First, according to RUS officials and GFRs, RUS did not allow projects to make changes to the approved service areas specified in their applications. RUS officials expect all projects to provide service within and throughout the areas specified in their applications. However, in some cases, RUS officials said they approved other types of project changes. We were unable to assess the nature of project changes because RUS did not systematically track them and did not provide us Second, as mentioned earlier, RUS with a list of all project changes.also has a framework of oversight activities in place to ensure projects are completed as specified in their applications (see fig. 2). As part of its overall oversight framework, RUS relies on GFRs located throughout the country to verify that project construction and subsequent service are within and throughout approved service areas. GFRs are generally assigned to BIP projects based on the state where the project or awardee is located. GFRs monitor the implementation and status of project build- out through three steps, as described below: 1. Ongoing construction inspections: RUS requires GFRs to conduct construction inspections to confirm that BIP funds are used for approved purposes and within the designated service areas. Through periodic inspections, GFRs verify the work is aligned with the approved application. The frequency of these inspections depends on factors such as whether construction is active on site to inspect. GFRs we interviewed described various ways they inspected construction. For example, one GFR we spoke to described how he tracked planned and completed construction on a map to ensure the awardee was building within the approved service area. Another GFR we spoke to mentioned viewing equipment installed, such as the placement of fiber cables, to verify the construction was within the service area. 2. Verification of subscribership: RUS requires GFRs to review and verify that the subscribership numbers reported by awardees are reasonable. Once BIP project awardees begin signing up customers, they submit subscribership numbers to RUS quarterly through BCAS. GFRs we interviewed described various ways they verify the awardee-reported subscribership numbers. For instance, a GFR told us he requested copies of billing records from an awardee to verify that subscribers were located within the project’s service area. Another GFR we spoke to stated that he confirmed subscribership by traveling throughout the project service area and viewing the placement of equipment on subscribers’ property. 3. Final project closeout inspections: As part of the closeout process, RUS requires GFRs to conduct a final inspection to ensure that service is available throughout the approved service area. RUS instructs GFRs to test service throughout the service area, including areas difficult to reach, and to interview local residents and businesses regarding the service. If GFRs find any problems with service coverage, they will investigate other areas within the service area and bring any issues to the attention of RUS management. RUS officials told us that as of April 2014, they had conducted approximately 25 closeout inspections out of about 40 completed projects. GFRs we spoke to described various ways they plan to verify the service availability in the approved service area. For example, one GFR told us he will test the availability of wireless service by using a smart phone to test the signal strength in multiple locations within the service area. Another GFR told us he will proactively reach out to residents in the service area to solicit feedback on service quality and availability to ensure service was being provided at the level indicated in the awarded application.\nAs mentioned above, RUS officials said they did not allow changes to project service areas although they did allow other types of changes, such as changes in technology. However, we were unable to verify this because RUS did not provide us with any information about these changes. According to RUS officials, awardees could request project changes, which RUS engineers reviewed and approved on a case-by- case basis. RUS engineers told us they evaluated requested changes based on the approved application and budget, with a focus on whether the proposed change affected the access to or speed of broadband service. RUS documented project change decisions in letters to awardees. However, RUS does not have policies on the types of changes allowed or a master list of changes considered, and did not provide us with a list of projects with approved changes. As a result, we could not evaluate these changes. According to RUS officials, less than 15 projects made significant changes for reasons such as updates in technology. For example, representatives from one awardee told us they changed their project because the equipment specified in their application was no longer available. Representatives from another awardee said they changed the design of their project to include one less wireless tower to provide the same level of service at a lower cost than was proposed in their application.", "Despite these oversight processes, RUS faces challenges ensuring that all projects are completed as approved for the following reasons. 1. Reduced RUS Staffing: RUS staffing resources have been reduced while BIP projects are ongoing, and as a result, staff workload has increased. In 2009 and 2010, we found that RUS’s ability to oversee BIP projects faced challenges because it lacked sufficient staff and resources, among other reasons. RUS officials stated that they did not request or receive additional funds to cover administrative costs beyond funding appropriated by the Recovery Act. Furthermore, most of the eight temporary GFRs RUS hired to assist with BIP oversight left when their terms ended in September 2013, while some were hired as permanent GFRs, according to RUS officials. RUS now has approximately the same number of GFRs as before the Recovery Act was enacted, but has an increased workload given that 216 BIP projects were still ongoing as of March 2014. Specifically, RUS officials report that there were 26 GFRs in fiscal year 2008 before BIP implementation, and that as of April 2014, RUS had 25 GFRs and 2 vacancies. GFRs are now responsible for BIP projects previously overseen by temporary GFRs, in addition to the other projects they oversee, such as projects from the Community Connect Grant Program and the Rural Broadband Access Loan and Loan Guarantee Program. 2. Reduced Travel Funds: RUS has also faced challenges overseeing BIP projects with reduced travel funds. At a minimum, RUS requires GFRs to conduct visits quarterly, which can be conducted in-person or remotely through a teleconference. In-person visits can take place at the project’s service area location or at the awardee’s offices or headquarters when the offices are in a different location from the project. GFRs we spoke to overseeing six of the seven projects we examined noted that reduced travel funds have been a challenge. GFRs noted reduced travel funds resulted in fewer in-person visits to the project than on a quarterly basis in some cases. For example, GFRs overseeing one of the seven projects in our sample had conducted visits with the awardees’ headquarters, but had not yet conducted an in-person inspection of the project service areas. A senior RUS official said that although funding has been limited at times throughout BIP implementation, such as the end of budget cycles, RUS is not concerned about there being sufficient travel funds to conduct the needed BIP closeout visits. 3. Scope of Work Remaining: Given that BIP projects must be completed within one year, RUS faces challenges in completing its oversight processes, including a final in-person closeout inspection to verify service availability, for all projects as they finish construction. As mentioned previously, RUS officials said that as of April 2014, RUS had completed about 25 closeout inspections among approximately 40 completed projects. Given that an additional 216 BIP infrastructure projects were ongoing (under construction or partially operational) as of March 2014, GFRs will have numerous closeout inspections to complete in a short time frame. A RUS senior official noted that GFRs will likely continue conducting closeout inspections beyond the 2015 deadline.\nGFR on-site inspections are RUS’s key oversight mechanism for ensuring that remote areas are built out as planned and that Recovery Act funds reach hard-to-serve rural areas. We have previously concluded that companies may have an incentive to build first where they have the most opportunity for profit and leave the more remote parts of their projects for last in order to achieve the highest number of subscribers as possible.\nAs the deadline for the BIP program nears, some awardees may be stretched to complete remaining construction. While awardees try to complete their projects before the Recovery Act BIP appropriation is closed, RUS may likewise be stretched to complete close out inspections with fewer staff than when the Recovery Act was enacted and with limited travel funds to visit projects throughout their territories, which can cover thousands of miles and multiple states. To help address these challenges, RUS plans to monitor projects beyond the 2015 deadline to ensure service is provided throughout the approved service area. RUS officials stated that they are currently working with their Office of General Counsel to explore options to take regarding awardees that have not provided service throughout the approved service area by the September 2015 deadline.", "", "Although RUS collects performance information to measure BIP’s impact on broadband subscribership, it has provided limited reporting of this information. OMB’s Recovery Act guidance required federal agencies to measure specific program outcomes, supported by corresponding quantifiable output measures. To this end, RUS requires awardees to submit quarterly BCAS reports on the number of households, businesses, educational providers, libraries, health care providers, and public safety providers subscribing to new or improved broadband service through BIP.\nAlthough RUS has met the Recovery Act reporting requirements, it has provided limited reporting on BIP program status and results during project implementation. However, it plans to now publish reports quarterly until at least September 2015. The Recovery Act required that RUS submit quarterly reports to Congress on the use of BIP funds until all funds were obligated. Further, OMB guidance calls for federal agencies to report the public benefits of Recovery Act funds clearly, accurately, and in a timely manner. As required by the Recovery Act, RUS provided quarterly reports to Congress during the period while BIP’s funding was being obligated. From May 2009 through December 2010, RUS published seven quarterly reports on its website. These quarterly reports detailed RUS’s actions to obligate BIP funds, including information on the funding announcements and obligated awards. Since then, RUS status reporting has been limited and inconsistent. Specifically, since December 2010, RUS has issued three status reports, reporting data as of April 3, 2013; August 26, 2013; and March 31, 2014. These reports have included performance results, including the number of households, businesses, educational providers, libraries, health care providers, and public safety providers subscribing to new or improved broadband service through BIP. Beginning with the March 2014 report, RUS intends to publish reports quarterly until the end of fiscal year 2015, according to a senior official. This official noted that if BIP does not appear to have met its subscribership goals by then, RUS may consider continuing to publish quarterly reports given that projects will continue to add, and awardees will continue to report, BIP subscribers for at least 5 years after projects are completed. A senior RUS official previously noted that projects will continue to add subscribers for years after completing construction.\nGAO-12-937.\nRUS lacked adequate controls to ensure the reliability of the data. USDA’s OIG recommended that RUS revise the BCAS guidance for awardees and staff and provide detailed and clear instructions on the entry and review of BIP performance data in BCAS. In response to this recommendation, according to a senior RUS official and USDA OIG officials, RUS is developing guidance and anticipates this corrective action will be implemented in June 2014. This could improve the reliability of subsequent reports.\nIn addition, RUS does not track subscribership by rural area and, as a result, is not able to show the impact of the BIP program on rural broadband availability. The OIG previously found that RUS’s performance information makes it impossible to measure BIP’s impact in rural areas because the information was not collected by rural area. The Recovery Act required that BIP service areas be at least 75 percent rural without sufficient access to high-speed broadband service to facilitate economic development. The rest of the project area may not be rural. According to a RUS official, very little of projects’ service areas were non-rural. Despite this, BIP awardees may potentially attract subscribers disproportionately in the non-rural areas of the service area. Therefore, BIP’s subscribership measures do not indicate the extent to which Recovery Act funding was used to deploy broadband access in rural areas. To address this gap, OIG recommended that RUS report performance data that directly measure the impact of each award on the expansion of broadband service in rural areas. In its response to OIG, RUS reported it that cannot report this level of detailed information because it was not specified that way in RUS’s agreements with its awardees. RUS further indicated that since BIP is a one-time program, it does not believe using taxpayers’ funding to make substantial changes to its reporting system in order to collect subscribership information in rural areas would be appropriate. In response, USDA’s OIG accepted RUS’s management decision.", "In addition, USDA has missed opportunities to report on BIP’s impact. Over the life of the BIP program, USDA’s annual performance reports have not tracked BIP’s performance results against a goal. The GPRA Modernization Act requires that each year agencies establish performance goals in performance plans and provide an update by comparing actual performance achieved against performance goals in annual performance reports. Regarding a goal related to BIP, although USDA performance reports identified expanding broadband access as a goal, they did not include BIP. For example, USDA’s most recent annual performance report, from fiscal year 2013, and its most recent performance plan, for fiscal year 2015, listed the “number of borrowers/subscribers receiving new or improved telecommunications services” as a performance goal. This goal was listed under a strategic objective to “enhance rural prosperity.” The numbers reported under this annual performance goal did not include BIP and instead included other RUS programs, such as the Rural Broadband Access Loan and Loan Guarantee program. A USDA official told us that BIP performance was not included in USDA’s annual performance report because it was part of the Recovery Act reports. However, as mentioned previously, RUS is no longer required under the Recovery Act to provide reports. Regarding reporting on BIP performance, instead of reporting actual results, RUS reported its performance goal, or estimate of BIP subscribership, as results. Specifically, in fiscal year 2010, USDA reported the 847,239 subscribers that it anticipates will receive new or improved broadband service as results. As previously reported by the USDA OIG, RUS officials said the results were reported in fiscal year 2010 because that was the year the funds were obligated. As we found in 2012, this total did not reflect actual program results, because it was calculated by RUS using estimates contained in applications and developed prior to the Further, the estimated number of execution of the funded projects.subscribers to receive new or improved service through BIP that RUS reported in fiscal year 2010—847,239—is now out of date given that as of March 31, 2014, RUS reduced this estimate to 728,733, as we explained earlier in this report.\nGiven the amount of funding devoted to BIP, having information on BIP’s actual performance is important for determining the program’s effectiveness. By not reporting annually on BIP’s actual performance, USDA is not demonstrating the impact of Recovery Act funds and BIP’s progress on improving broadband availability. Without this information, future efforts to expand broadband may lack important information on the types of projects that were most effective at meeting subscribership goals, thereby limiting the ability to apply federal resources to programs with the best likelihood of success.", "BIP represented an unprecedented level of federal investment in broadband infrastructure, amounting to over eight times the funds RUS otherwise had available for broadband in the past decade. RUS collects and is taking steps to improve the reliability of BIP performance information. However, BIP’s reporting has been limited and is not reflected in USDA annual performance reports. As a result, RUS has not shown how the approximately $3 billion in funds awarded to BIP projects have affected broadband availability. Reporting on and tracking the number of subscribers receiving service through BIP is particularly important given that the majority of projects are ongoing and that projects are to continue to add, and awardees are to continue to report, BIP subscribers for at least 5 years after construction is completed. Without reliable and regular information on the results of BIP projects, it will be difficult for USDA, RUS, and policy makers to determine the impact of Recovery Act funds and BIP’s progress on improving broadband availability. Without this information, future efforts to expand broadband may lack important information on the types of projects that were most effective at meeting subscribership goals, thereby limiting the ability to apply federal resources to programs with the best likelihood of success.", "To provide information on the impact of federal investments in expanding broadband infrastructure, we recommend the Secretary of Agriculture include BIP performance information as part of the USDA’s annual performance plan and report by comparing actual results achieved against the current subscribership goal.", "We provided a draft of this report to the Secretary of Agriculture for review and comment. In an email received June 4, 2014, a Management Analyst with USDA on behalf of USDA Rural Development stated that RUS generally agreed with the report and its recommendation and will institute procedures to fully address the recommendation. However, RUS cited concerns that our discussion of RUS’s requirement to serve the entire service area in the context of design changes may give the impression that project service areas were not completely served. RUS stated this is a mischaracterization and that, although it does not have a master list of considered project changes or policies on the types of changes allowed, it does have information on changes that were approved. However, RUS stated it did not provide us with this information because the effort to provide it would not be efficient. In response, we clarified language in the report to indicate that RUS did not—rather than could not—provide the information. RUS also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees and the Secretary of Agriculture. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov If you or your staffs have any questions, please contact me at (202) 512- 2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix II.", "This report discusses (1) how the Rural Utilities Service (RUS) ensures that funded Broadband Initiatives Program (BIP) projects are completed within required time frames and as approved, including within designated service areas and (2) the extent to which RUS is providing information to show the program’s impact on broadband availability.\nTo determine how RUS ensures that funded BIP infrastructure projects are completed within required time frames and as approved, including within designated service areas, we collected and analyzed documents from RUS on its monitoring policies and procedures. This information included RUS policies and guidance on general field representative (GFR) quarterly visits and monthly reporting, contracting and disbursement of funds procedures, and awardee Broadband Collection and Analysis System (BCAS) instructions. We conducted interviews with RUS officials who oversee loan specialists, engineers, and GFRs with BIP-related duties. We also reviewed previous reports on BIP oversight from GAO, US Department of Agriculture’s (USDA) Office of Inspector General (OIG), and the Congressional Research Service (CRS).\nTo determine how RUS tracks infrastructure project completion, describes the status of all infrastructure projects, and characterizes the types of projects terminated and ongoing, we collected and analyzed data from RUS on all BIP projects as of December 2013 and summary data as of March 31, 2014. The data as of December 2013 included the size of award, completion status, location (state) of designated or approved service area, whether the awardee had previously received RUS funding, and amount of funds disbursed. We later updated this information by collecting summary data from RUS as of March 31, 2014. To determine the reliability of RUS data, we reviewed relevant documentation— including guidance, descriptions of internal controls, and USDA’s OIG reviews—and interviewed RUS officials about their databases and collection practices. Based on this information, we determined that the data provided to us were sufficiently reliable for our reporting purposes.\nTo further characterize RUS’s oversight actions, we selected a nongeneralizable sample of six ongoing infrastructure projects and one completed project. We selected ongoing projects to understand BIP’s current oversight activities and one completed project in order to understand project impact. First, we initially selected two infrastructure projects, one completed and one ongoing. These projects were selected based on factors such as the total size of the award, number of premises proposed to be served, and not covered by previous GAO or USDA’s OIG audit work. Both projects’ approved service areas were in Michigan. We then selected an additional five projects that were not substantially completed, according to RUS’s definition (having received less than 67 percent of BIP funds disbursed), and were not previously sampled by previous USDA OIG or GAO audit work. We selected case study projects based on: approved service area location; total award size; percentage of BIP funds disbursed as of December 2013; type of broadband technology (wireline or wireless); and awardee type (for example, for-profit company or state or local government). We selected infrastructure projects dispersed throughout the US with approved service areas in Pennsylvania, South Carolina, Iowa, Texas, and Nevada. The sample of infrastructure projects we chose is not representative of all BIP projects. For each selected case-study project, we reviewed documentation provided by RUS such as award applications, grant or loan agreements, letters documenting project changes (if any), and GFR quarterly visit reports. In addition, we interviewed GFRs assigned to each case study project and representatives from the awardee.\nTo determine the extent to which RUS is providing information to show the program’s impact on broadband availability, we reviewed publicly available RUS performance information, such as BIP project directories, BIP quarterly and status reports, and USDA annual performance plans and reports. We also reviewed previous GAO, CRS, and USDA OIG reports on BIP performance measures, including previous recommendations regarding RUS performance information. To determine RUS’s policies and procedures for collecting and reporting performance information and the agency’s actions in response to recommendations made by USDA OIG, we interviewed officials from RUS and USDA OIG. We also reviewed RUS’s data collection policies and procedures and spoke with GFRs from the seven case studies and awardee representatives from five of the seven, in regard to how they report, collect, and verify performance information. We also reviewed applicable criteria related to agency performance measurement and reporting, such as reporting provisions in the American Recovery and Reinvestment Act of 2009, associated Office of Management and Budget (OMB) guidance, and the GPRA Modernization Act of 2010.\nWe conducted this performance audit from August 2013 to June 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "In addition to the contact named above, Teresa Anderson (Assistant Director), Elizabeth Curda, Lorraine Ettaro, Colin Fallon, Thomas James, Bert Japikse, Emily Larson, Joshua Ormond, and Carl Potenzieri made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 3, 3, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full h2_full h1_full", "h0_title", "h0_full", "h0_title", "h0_full", "h0_full", "h1_title", "h1_full", "h1_full", "h2_full h1_full", "", "", "h0_full h3_full", "", "", "" ] }	{ "question": [ "What project has the RUS made?", "Why were projects terminated?", "What happened to the projects that were not terminated?", "How are projects monitored?", "What changes were made as a result of their monitoring?", "What challenges have an impact on RUS’s project monitoring efforts?", "What has the RUS reported?", "How as the RUS reported in response to the Recovery Act?", "How does RUS plan to increase the frequency of its reporting?", "What does the GPRA Modernization Act require?", "What shortcomings does the USDA’s annual performance plan have?", "Why did RUS officials say they reported the 2010 results?", "Why is reporting and tracking BIP results important?", "More recently, in 2014, what update did RUS report?", "What is vital to economic growth?", "What did the American Recovery and Reinvestment Act of 2009 do?", "What requirements did the RUS institute as part of the financial contributions?", "What did the GAO report address?", "How did the GAO complete this report?" ], "summary": [ "The Rural Utilities Service (RUS) expects most Recovery Act-funded Broadband Initiatives Program (BIP) projects will be completed by the June 2015 deadline and as approved, but RUS faces challenges given the large scope of the program.", "As of March 2014, approximately 14 percent (42 of 297) of BIP infrastructure projects were terminated for a variety of reasons according to RUS officials, such as financial difficulties or inability to meet requirements.", "Of the 255 projects remaining, 87 percent were completed (39 projects) or partially operational (184 projects), meaning they provide service to some subscribers.", "To monitor projects and ensure they are completed within approved service areas, RUS relies on general field representatives to conduct in-person inspections and report monthly on project status.", "RUS officials said that they did not allow changes to service areas, but approved other types of changes such as changes in technology. GAO could not confirm this since RUS did not systematically track changes and did not provide GAO with information on project changes.", "Also, several challenges affect RUS's ability to oversee projects. For example, reduced staffing and travel funding levels during BIP's implementation will challenge RUS to complete inspections given the scope of the program, including 216 ongoing infrastructure projects to be completed by the June 2015 deadline.", "RUS has reported limited information on BIP's impact since awarding funds to projects, and BIP results are not tracked in the Department of Agriculture's (USDA) annual performance reporting. Consequently, RUS has not shown how much the program's approximately $3 billion in project funding—an unprecedented level of federal investment in broadband—has affected broadband availability.", "RUS met the Recovery Act requirement to report to Congress quarterly until all funds were obligated. However, since the Recovery Act's reporting requirement ended, RUS has provided limited reporting on BIP program status and results during project implementation.", "A senior RUS official says RUS will now issue quarterly status reports until at least September 2015. USDA also has missed opportunities to report on BIP's impact as part of its annual performance plan and report.", "The GPRA Modernization Act of 2010 directs agencies to establish performance goals in annual performance plans and report the progress made toward these goals in annual performance reports.", "USDA's annual performance plan included a performance goal to provide new or improved broadband, but USDA did not include BIP results in its annual performance reports. USDA reported its BIP goal and results for fiscal year 2010 only and used the same estimate of BIP subscribership—developed before project execution—for both.", "RUS officials say the results were reported in fiscal year 2010 because that was the year funds were obligated.", "Reporting on and tracking BIP actual results against the updated goal is particularly important given that the majority of projects are ongoing and awardees are to continue to report the number of BIP subscribers added for at least 5 years after construction is completed. Without an updated performance goal and regular information reported on the results of BIP projects, it will be difficult for USDA, RUS, and policy makers to determine the impact of Recovery Act funds or BIP's progress on improving broadband availability.", "More recently, in March 2014, RUS updated the estimated number of subscribers from 847,239 to 728,733 to account for terminated projects.", "Access to affordable broadband is seen as vital to economic growth and improved quality of life, yet its deployment in rural areas can be costly.", "The American Recovery and Reinvestment Act of 2009 (Recovery Act) appropriated funding for BIP, a USDA RUS program to fund broadband projects to provide service to end users in mostly rural areas.", "By 2010, RUS had awarded over $3 billion, primarily to 297 infrastructure projects, and required that projects be completed by June 2015 in approved areas.", "GAO was asked to review BIP's results and impact. This report addresses (1) how RUS ensures that projects are completed by the deadline and as approved and (2) the extent to which RUS provides information to show BIP's impact.", "GAO interviewed RUS officials, reviewed policies, and analyzed RUS project data as of March 2014. GAO also interviewed five awardees from a nongeneralizable sample of seven BIP projects selected in part based on award size and location." ], "parent_pair_index": [ -1, -1, 1, -1, 3, 3, -1, 0, 1, -1, 3, 4, -1, 6, -1, -1, 1, -1, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 1, 1 ] }
GAO_GAO-13-131	{ "title": [ "Background", "Quick Closeout Procedures", "Prior Work", "DCAA Implemented Initiative to Focus on High Risk Incurred Cost Proposals, but Has Not Yet Fully Developed Measures to Evaluate the Initiative’s Results", "DCAA’s Initiative Prioritizes High Risk Incurred Cost Proposals for Audit", "DOD’s Efforts to Reduce Its Contract Closeout Backlog Is Hindered by Limited Data and Performance Metrics", "DOD Has Limited Data on Its Contract Closeout Backlog", "Military Departments Generally Did Not Have Performance Metrics to Measure Progress in Closing Out Contracts", "DOD Organizations Made Limited Use of Quick Closeout Procedures", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Defense", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Closing out contracts involves a number of tasks, such as verifying that goods or services were provided, making final payment to the contractor, and deobligating excess funds. A contract is generally eligible to be closed once all option provisions have expired, the contractor has completed performance, and the government has accepted the final delivery of goods or services, or when the government has provided the contractor a notice of complete contract termination. From this point, contracts are considered physically complete, and should be closed within time frames set by the FAR—6 months for firm-fixed-price contracts and 36 months for flexibly priced contracts. The FAR prohibits the closing of contract files if the contract is in litigation, under appeal, or where the contract is being terminated and all termination actions have not been completed. Contract documents can be stored and retained after the contracting officer signs and files the contract completion statement.\nAdditional time is allowed for the closeout of flexibly priced contracts because there are additional steps necessary to close out these types of contracts (see figure 1). Specifically, closing these contracts generally requires an audit and settlement of the contractor’s final indirect cost rates. Contracting officers and DCAA need to ensure all costs incurred by the contractor and charged to the government are allowable, allocable, and reasonable. Contracting officers also need to establish final indirect cost rates based on the contractor’s incurred costs, which determine, in part, the contractor’s final payment on flexibly priced contracts.\nContractors are required by the FAR to submit proposals that include information on all of their flexibly priced contracts in a fiscal year. Once submitted, DCAA audits the proposal to determine if the costs incurred are reasonable, allowable and allocable to government contracts (see figure 2 for incurred cost audit process). There is not a one-to-one relationship between an incurred cost audit and an individual contract. In a single fiscal year, a contractor may incur costs on multiple flexibly priced contracts, and all of these contracts would be included in the proposal. The total value of the proposal, called the auditable dollar value (ADV), is the sum of all the costs on flexibly priced contracts for that contractor during the fiscal year. Additionally, since the period of performance on an individual contract may span several fiscal years, several audits may need to be conducted to provide the information necessary to close one flexibly priced contract. Further, DCAA may assess a contractor’s incurred cost proposal as inadequate for a variety of reasons, for example if the proposal is not certified or contains math errors, and request that the contractor review, revise, and resubmit its incurred cost proposal.\nThe responsibility for closing out a contract resides with the DOD contracting officer within the military department or other defense agency that awarded the contract. The contracting officer may, however, delegate certain administrative responsibilities, including contract closeout, to DCMA, which provides contract administration services to DOD. DFAS also plays a role in activities related to contract closeout, such as paying final vouchers, and, when needed, resolving unreconciled balances on a contract.", "To facilitate contract closeout of flexibly priced contracts, federal regulations authorize the use of quick closeout procedures, by which a contracting officer can negotiate the settlement of direct and indirect costs on a specific contract, task order, or delivery order without waiting for the determination of final indirect cost rates for the contractor’s fiscal year.\nTo use the quick closeout procedure, several conditions must be met. For example, the amount of unsettled direct and indirect costs to be allocated to the contract, task order, or delivery order must be relatively insignificant—which is defined as costs that do not exceed the lesser of $1,000,000 or 10 percent of the total contract, task order, or delivery order amount. The contracting officer also must perform a risk assessment and determine that the use of the quick closeout procedure is appropriate and consider such factors as the contractor’s accounting, estimating, and purchasing systems, and any concerns of cognizant DCAA auditors. When the quick closeout procedure is used for a contract, determinations of final indirect costs are considered binding for the specific contract covered, but the rates used during this process are not considered binding when establishing the final indirect cost rates for other contracts.\nDCMA has issued a memorandum authorizing its contracting officers to close specific contracts prior to the establishment of indirect cost rates regardless of the dollar value of the contract or the percent of unsettled direct and indirect costs allocable to the contract. This memorandum— known as a class deviation from the FAR because it allows for actions that are inconsistent with the regulation—was signed by the agency director in October 2011 and extends through September 2013. According to DCMA officials, DCMA has had similar deviations in place since 1999. The policy allows a DCMA contracting officer to waive the requirement for an incurred cost audit, in consultation with DCAA, when a compelling reason exists. DCMA guidance indicates that compelling reasons may include contracts with funds at risk of canceling, contracts that have been over-age for 6 or more years, and contracts where a contractor’s historical final indirect cost rates have been fairly consistent with proposed certified final indirect cost rates.", "Our prior work has highlighted challenges at DCAA as well as some of DOD’s challenges in closing out contracts, particularly those awarded to support operations in Iraq and Afghanistan. In 2009, we found problems with DCAA’s audit quality nationwide, including insufficient testing of contractors’ support for claimed costs. We recommended that DCAA develop a risk-based contract audit approach across the agency that included identification of resource requirements. DCAA officials reported that as a result of our findings, it now requires more testing and stricter compliance with government auditing standards, which adds to the amount of staff time required to complete each audit. In September 2011, we reported that DOD’s ability to close the contracts it awarded to support efforts in Iraq was hindered by several factors, including the failure to plan for or emphasize the need to close these contracts until reconstruction efforts were well under way.prioritized contract awards over other activities and DOD does not have visibility into the number of Iraq contracts eligible for closeout. We also reported that DOD’s efforts to close its large, cost-type contracts was hindered by staffing shortages at DCAA and unresolved issues with contractors’ cost accounting practices. We made recommendations to ensure DOD has sufficient resources to close its Iraq and Afghanistan We also found that DOD commands contracts and to better plan for and improve visibility of closeout efforts in future contingencies. In May 2012, DOD amended the Defense Federal Acquisition Regulation Supplement to require heads of contracting activities to monitor and assess on a regular basis the progress of contingency contract closeout activities and take appropriate steps if a backlog occurs.\nOur prior work has also identified some challenges at DCMA in relation to establishing indirect cost rates and workload. In November 2011, we reported that DCMA has been increasing its workforce and rebuilding key skills sets that had atrophied in recent years, such as cost and pricing capabilities. According to DCMA, loss of this skill set meant that many of the agency’s pricing-related contract administration responsibilities, such as establishing final indirect cost rates, were no longer performed to the same level of discipline and consistency as in prior years. As a result, DCMA stated that DOD’s acquisitions were subjected to unacceptable levels of cost risks. Both DCMA and DCAA have been increasing their workforce in recent years to address some of the challenges faced by the agencies.\nThe challenges faced by DOD in closing out contracts are not recent phenomena. For example, in 2001, the DOD Inspector General issued a report that found weaknesses in the closeout process, including inadequate monitoring of contracts that could be closed, inattention to closure requirements, erroneous data about contracts available for closure, lack of coordination, lack of sufficient funding, a shortage of personnel, and untimely contractor input. reported that DOD made progress by closing about 30,000 contracts from February 2000 to March 2001, though over 26,000 became over-age during that same period.\nDOD Office of the Inspector General, Closing Overage Contracts Prior to Fielding a New DOD Contractor Payment System, D-2002-027 (Arlington, Va.: Dec. 19, 2001).", "To address the backlog of incurred cost audits, DCAA implemented a new, risk-based initiative in 2012 which focuses DCAA’s resources on incurred cost proposals that have high dollar values or are determined by auditors to be high risk. In doing so, DCAA will significantly reduce the number of audits performed on incurred cost proposals that are determined to be low risk. Under its risk-based initiative, DCAA raised the threshold by which an incurred cost audit is automatically performed on a contractor’s incurred cost proposal, revised the criteria used to determine a proposal low risk, and decreased the percentages of low risk proposals that will be randomly selected for audit. DCAA plans to track certain data to help assess progress in eliminating the backlog, but DCAA has not fully developed measures to determine whether key features of the initiative, such as revised criteria for determining a proposal is low risk and revised sampling percentages, should be adjusted in the future. Further, DCAA estimates it will reach a steady state of audits, which DCAA defines as two fiscal years of proposals awaiting review, by 2016, but whether DCAA will achieve its goals will depend on a number of factors, including the number of proposals determined to be high risk and the completion of subsequent audits.", "In 2012, DCAA began implementing a new, risk-based approach that is expected to shift DCAA’s resources to focus on incurred cost audits involving high-dollar value and high risk proposals. DCAA officials told us that in 2011, DCAA recognized that the number of audits that needed to be conducted exceeded the capacity of DCAA’s staff to do so. Accordingly, DCAA reported that incurred cost audits were not prioritized in fiscal year 2011 since they did not provide as many financial benefits as other audits, such as forward pricing audits, which are used to determine fair and reasonable rates for the award or modification of a contract.\nIn developing the initiative, DCAA performed an analysis of which audits provided financial benefits by comparing how much money was saved or recovered by various types of audits (such as incurred cost and forward pricing audits) to how much money was invested in performing those audits. As a part of this analysis, DCAA officials found that the agency spent more in terms of staff resources to conduct incurred cost audits on proposals valued at less than $1 million than the financial benefits derived from the audits. DCAA’s analysis also determined that proposals valued over $1 million have provided more benefits than the cost to conduct them, with the benefits generally increasing as the value of the proposal increased.\nDCAA’s risk-based initiative includes key changes to its criteria and procedures that will decrease the number of audits conducted. These changes include (1) raising the threshold by which proposals automatically qualify for audit, (2) revising the criteria used to determine a proposal low risk, (3) lowering the percentage of low risk proposals to be randomly selected for audit, and (4) eliminating further review of proposals not selected for audit, and revising its adequacy review procedures to be more comprehensive. In addition to the changes to criteria and procedures, DCAA officials noted they plan to increase their staffing levels from 4,900 employees in 2011 to 5,600 by 2016. DCAA provided refresher training to its staff, and created 17 dedicated teams to incurred cost audit work.\nDCAA raised the threshold above which an audit is required based on ADV from $15 million to $250 million, thereby decreasing the number of proposals automatically qualifying for audit from 5,194 to 659, based on the backlog as of the end of fiscal year 2011 (see table 1). Proposals under the $250 million threshold will not be audited unless they are determined to be high risk or randomly selected for audit.\nIn conjunction with raising the threshold by which incurred cost proposals were automatically selected for audit, DCAA revised two of the three criteria that a contractor’s incurred cost proposal under the $250 million threshold must meet to be determined low risk (see table 2). For example, under DCAA’s prior criteria, DCAA must have performed an incurred cost audit within the past three years; under the new initiative, for proposals $100 million or under, the time frame for conducting the last incurred audit was eliminated—the requirement is now that the contractor has had at least one incurred cost audit. These changes will increase the potential number of contractor proposals that are eligible for low risk determinations. The other criterion—audit leads or other significant risks—did not change. However, DCAA did provide several examples of the types of risks that should be considered under this criterion, such as known business system deficiencies or risks identified by the contracting officer.\nOnce risk has been determined, those proposals that are determined to be low risk will be randomly sampled at DCAA’s five regional offices based on the proposal’s ADV, but now at a lower percentage than before. Currently, between 1 and 20 percent of low risk proposals are sampled depending on ADV, whereas under the previous procedure 33 percent of low risk proposals were sampled (see table 3).\nUnder DCAA’s risk-based initiative, low risk proposals that are not selected for audit are not subject to any further review, whereas previously all proposals not selected for audit were subject to desk reviews. Desk reviews included an evaluation of the proposal for unusual items and changes from prior year proposals, among other actions. Now, when a low risk proposal is not selected for audit, DCAA auditors issue memorandums to the contracting officers recommending that the contracting officer use his or her authority to determine the contractor’s final indirect cost rates, which allows the contracting officer to proceed with closing the contract. However, in November 2011, DCAA issued revised guidance to determine whether a contractor’s proposal is adequate, and DCAA officials explained that the revised adequacy review provides a more comprehensive determination that includes many areas previously covered in the desk review process.\nA summary of DCAA’s revised incurred cost audit procedures are outlined in figure 3.\nBy revising its policies and procedures and dedicating resources to incurred cost audits, DCAA estimates it will reduce its backlog and reach a steady state by 2016, which it defines as having two fiscal years of incurred cost proposals awaiting review. By randomly sampling low risk proposals, DCAA officials note that the possibility of an audit is still present, which is a deterrent for contractors to report inaccurate information. However, DCAA has not yet fully developed measures to evaluate the initiative’s results and assess whether the changes will require further adjustments. For example, DCAA is planning to track the number of risk determinations completed, the numbers of proposals deemed high and low risk, and the number of audits completed. Further, DCAA regional offices will be responsible for monitoring risk determinations on an ongoing basis to ensure that they are completed in a timely manner and to identify any field audit offices that have a significantly higher or lower percentage of high risk determinations than other field audit offices. However, DCAA has not determined how to assess whether the revised criteria for determining a proposal’s risk level or the revised sampling percentages are appropriate or should be adjusted in the future. DCAA stated that they plan to reassess the initiative in about a year, but did not provide details on what would be assessed at that time. Internal control standards require the establishment of clear, consistent objectives and the identification and analysis of what measures will be used to determine if an agency is achieving those objectives.\nAdditionally, it is too early to tell whether DCAA will achieve its goal of eliminating the backlog by 2016, in part because DCAA does not yet know how many proposals under $250 million ADV will be determined low or high risk and its initial estimates have proven inaccurate. DCAA reports that its auditors have completed risk assessments on 13,522 contractor proposals that had an ADV of less than $15 million—out of a universe of approximately 20,000 proposals—as of September 2012. Of 13,522 risk assessments completed, DCAA determined that 7,815 proposals were high risk, or about two-and-a-half times more than anticipated. DCAA determined that the number of high risk proposals is higher than expected because over 3,500 of those proposals belong to contractors with no incurred cost audit history. DCAA’s backlog includes multiple proposals covering several fiscal years for some contractors. DCAA officials stated the agency plans to audit older proposals first, thus contractors’ proposals for later years may become eligible for low risk status once an audit has been conducted for a single fiscal year and an audit history is established. DCAA’s ability to reach a steady state by 2016 will also depend on whether DCAA completes its audits within anticipated time frames. However, DCAA was not able to complete the number of audits it planned to in 2012. Specifically, DCAA planned to address 4,065 incurred cost proposals in fiscal year 2012 by, for example, completing an audit or desk review, but the agency reported that it addressed 2,930 as of the end of September 2012.", "DCAA’s efforts to reduce its incurred cost backlog will remove one factor hindering efforts to close out flexibly priced contracts; however, DOD is also hindered by limited data and performance metrics on contract closeout efforts. The military departments generally do not have data on the extent or nature of their contract closeout backlog, while DCMA is missing key information that would allow it to identify contracts on which it could take action. Additionally, the military departments generally lack performance metrics on contract closeout. For example, in November 2012, the Army announced its intent to close 475,000 over-age contracts by September 2014, but was still in the process of having its commands identify interim goals and did not yet have a final detailed implementation plan, while the Navy and Air Force have no department-wide metrics. In contrast, DCMA has established two agency-wide performance metrics related to contract closeout with regular reporting to the head of the agency on progress in meeting goals. Our work identified some efforts at local contracting offices to focus on contract closeout, but DOD has made limited use of quick closeout procedures— a tool that can be used to expedite the closeout of flexibly priced contracts.", "Data on the extent and nature of the contract closeout backlog can help organizations identify or tailor approaches to address the backlog. However, we found that the military departments had difficulty providing reliable data on the size of their backlogs and did not have information on where the contracts were in the closeout process. For example, we requested data from each of the military departments on the number of contracts in the backlog, type of contract, and what contracting office was administering the contract. The military departments took the following steps to provide the data:\nThe Army pulled data from its centralized data repository, but there were large discrepancies between the data provided by headquarters and data reported at the commands and local contracting offices. For example, according to the data provided by headquarters, one contracting office had about 30,000 over-age contracts, yet officials at the office reported about 3,700 over-age contracts.\nThe Air Force also pulled data from its centralized data repository for one command, but the command had to verify the data with its local contracting offices and acknowledged it needed to make adjustments based on the input from those offices before providing the data to us. Air Force officials told us that providing the data for the remaining commands would require significant effort because they would need to go through a similar verification process.\nNavy officials told us they did not have a centralized data repository, so the Navy requested data from its local contracting offices.\nAt the local level, seven out of the nine contracting offices we spoke with collected some information about their over-age contracts, such as the total number of contracts in the backlog and the type of contracts, but the offices generally were unable to provide us with detailed information as to where the contracts were in the closeout process, such as the number awaiting a DCAA incurred cost audit.\nDCMA collects data through its Mechanization of Contract Administration Services (MOCAS) system on where its over-age contracts are in the contract closeout process, but it is missing key information that would allow it to identify contracts that it could take action on. For example, DCMA’s data showed that as of July 2012 the agency had approximately 36,000 contracts awaiting closeout, including 28,000 that were awaiting establishment of final indirect cost rates. However, of these 28,000 contracts, DCMA did not know how many were awaiting a contractor’s submission of an adequate incurred cost proposal, a DCAA incurred cost audit, or final negotiation of rates. This information is important because it identifies who is responsible for moving the contract forward in the closeout process—for example, DCMA contracting officers may be able to advance the closeout of contracts awaiting final negotiation of rates. DCMA officials we spoke with thought that the majority of these contracts were awaiting DCAA’s audit, and thus would be addressed by DCAA’s initiative. In addition, DCMA’s MOCAS system was missing data on the DCMA reasons why contracts are over-age for about 1,700 contracts.officials told us the agency recently enhanced its efforts to identify and close contracts within the agency’s control due to an increase in the number of over-age contracts in fiscal year 2012. DCMA officials reported that specific categories of contracts are being targeted for closure, such as firm-fixed-price contracts with no outstanding obligations.\nThe limited visibility into the characteristics of the contract closeout backlog, particularly at the military departments, made it challenging for officials to fully assess the extent to which specific efforts to reduce the backlog would impact their over-age contracts. For example, we asked DOD officials their views on restoring the authority of the head of an agency to close out a contract that is administratively complete, was entered into 10 or more years ago, and has an unreconciled balance under $100,000. Many DOD officials we spoke with at various levels within the military departments and within DCMA stated they did not believe the option would affect the backlog, as they did not believe their contracting offices would have many contracts to which this option would apply. For example, based on DCMA’s over-age contract data, DCMA officials estimated that as of July 2012, only 85 of the approximately 36,000 contracts in their backlog would meet the criteria of the option. However, officials at the military departments, commands and local contracting offices that we asked generally could not provide specific numbers as to how many contracts this option would impact. Further, several officials noted that a similar temporary authority was granted in the mid-2000s that they believed was ineffective, in part because DOD established a process and administrative requirements that they termed burdensome. For example, DFAS officials reported that the authority was only used to close out 14 contracts.\nSimilarly, when we asked how useful it would be if legislation authorized a contracting officer to waive final payment in a case where a contractor has gone out of business and cannot be reached, DOD officials reported that this situation occurs infrequently. Yet DOD officials at several locations we reviewed said that they did not have data readily available on how often they had encountered this situation. Further, some officials noted that a contracting officer can use the authority in the FAR to unilaterally close a contract for this purpose.guidebook outlines procedures that contracting officers use to close a contract where the contractor has gone out of business.", "Performance measures, which compare actual performance against planned results, can be an important tool in demonstrating leadership commitment and maintaining adequate internal controls. We found that the Army recently communicated a goal to its commands for closing over- age contracts, but the Navy and Air Force did not have established performance metrics for closing out contracts within their organization. In November 2012, the Office of the Deputy Assistant Secretary of the Army (Procurement) sent an e-mail to its commands identifying a goal of closing over 475,000 over-age contracts by September 2014. The office requested that each command provide information on their over-age contracts by the end of November 2012, including identifying contracts that may be suitable to be grouped together and closed at the command level, such as low dollar contracts, and identifying contracts that fit into other priority categories, such as certain contracts with expiring funds. Further, the office directed the commands to establish monthly closeout goals and describe challenges that may impact the command’s ability to meet the Army’s September 2014 goal. According to an Army official, they have drafted an implementation plan for this effort, but the plan has not yet been approved. Although the Navy did not have department-wide performance metrics related to contract closeout, one Navy command established a goal of decreasing the contract closeout backlog from approximately 23,000 contracts to 13,000 contracts over fiscal year 2012, and reported it had exceeded that goal before the end of the year. Within the Air Force, headquarters officials told us in November 2012 that they plan to begin regular collection of data on contract closeout statistics starting in January 2013.\nIn contrast, DCMA had established two agency-wide performance measures related to contract closeout for contracts where they have been delegated contract administration responsibilities. For example, one of DCMA’s closeout measures looks at the total number of over-age contracts in the agency, with a target of reducing the total number of over- age contracts by 10 percent during a fiscal year. The measures are reviewed at a number of levels within DCMA, including a briefing to the DCMA Director approximately twice a year, and monthly reviews at each of the contract management offices. When the targets for each measure are not met, DCMA officials conduct a root cause analysis to identify the reasons why, as well as to identify potential methods for addressing the issues.\nWhile many DOD officials acknowledged that contract closeout is not a priority compared to other mission critical activities, we found some contracting offices were taking actions locally to address their contract closeout backlogs. For example, one Army contracting office made its contract closeout process more centralized, added two new staff, and tracked the number of contracts they closed. Officials at this office reported that they closed over 14,000 of a reported 20,000 low dollar firm- fixed-price contracts in its backlog over the past year. Further, we found four contracting offices established a contract closeout team whose work is focused on contract closeout activities. Officials from three of these offices noted that their office prioritizes closing out contracts when funds are close to canceling to preserve funds for other uses.\nFurther, DOD has established a contract with the AbilityOne program for contract closeout support services to help address some of the contract closeout backlog. According to DOD officials, this contract is limited to closing firm-fixed-price contracts across the department, whether over- age or not. AbilityOne representatives reported that the contractor has already provided contract closeout support services for over 50,000 contracts across DOD. DOD stated that using AbilityOne allows contracting officers to focus on other duties and mission-critical work such as awarding contracts; however, some DOD officials noted limitations, including the administrative burden on the contracting officer to locate all appropriate documentation to forward to the AbilityOne contractor, and ensuring AbilityOne staff have the proper clearance and access for the contractors. While AbilityOne’s efforts are currently limited to firm-fixed- price contracts, senior DOD officials told us they are looking into the feasibility of contracting with AbilityOne for contract closeout services on flexibly priced contracts.", "Our work found that DCMA and the contracting offices we reviewed made only limited use of quick closeout procedures. For example, even though DCMA has a policy, based on a FAR deviation, that allows for broader use of quick closeout procedures than what is allowed under the FAR, and DCMA’s guidance recommends that contracting officers use quick closeout where applicable, the two DCMA contract management offices we reviewed made little or no use of quick closeout procedures.at DCMA headquarters and one contract management office said they were unsure why quick closeout is not used more often. Officials at the other DCMA contract management office we spoke with told us one reason they had not made more use of DCMA’s policy related to quick Officials closeout procedures is that DCMA did not define what can be considered a compelling reason to waive an audit until December 2011. Further, once they started to assess eligibility, this office encountered challenges in identifying contractors that they considered to be eligible for the quick closeout procedure. Specifically, the office initially identified 1,489 contracts with 32 contractors that may be eligible for quick closeout procedures. However, after further analysis, officials reported that 463 contracts with 7 contractors were deemed potentially eligible. Contractors were excluded from eligibility due to issues such as contractor billing problems, DCAA concerns about the contractor, or contractor delays in submitting an incurred cost proposal.\nSimilarly, none of the nine military department contracting offices reported using quick closeout procedures currently, although three reported minimal use in the past. For example, one contracting office estimated using quick closeout procedures for about 40 to 50 contracts in fiscal years 2010 and 2011. Officials at two other contracting offices reporting use of quick closeout on a handful of contracts in the past, but are not making use of it now. With regard to the efficacy of the May 2011 change to the FAR that was intended, in part, to increase the use of quick closeout, officials at the two contracting offices that previously used quick closeout procedures reported that the May 2011 change reduced the number of eligible contracts by including direct costs in the eligibility criteria. Officials from one of these contracting offices explained that the previous language allowed the contracting officer to waive the dollar threshold based on a risk determination. Since the current language removed the waiver, officials explained that the contracting officer is no longer able to make a business decision for contracts above the dollar threshold to determine an acceptable level of risk.\nDCMA and contracting officials we interviewed also noted that other challenges to the use of quick closeout procedures included a lack of audit history by which to determine what a contractor’s rates should be. DOD officials told us there was sometimes a reluctance to use quick closeout procedures because they are uncertain of the risk they are taking on and concerned that their decisions may be questioned later by others.\nDuring our interviews with DOD officials, we asked about the advisability and feasibility of authorizing a contracting officer, in consultation with DCAA, to waive the requirement for an audit in the case of a low risk, low cost contract to assist in closing out contracts—one of the options we were asked to consider in our review. Officials throughout DOD—at DCMA, military commands, military department contracting offices, and others—told us they believed this option was similar to quick closeout procedures, a tool already available to them.", "DOD has fallen far behind in closing out its contracts, in part due to the large backlog of incurred cost audits that must be performed by DCAA. DCAA has recognized that completing the volume of these audits, as well as other high-priority audits, using its traditional approach exceeds the capacity of its resources. In response, DCAA launched a risk-based approach to focus its resources on audits that are considered to be high risk or high dollar value. Such an approach appears prudent and shows promise, but its success will depend upon reducing the audit backlog in a way that protects the taxpayers’ interests. DCAA, however, has not developed a plan with measures to assess progress toward achieving these goals. DCAA must ensure that the key changes to its criteria and procedures—such as increasing thresholds for audit, revising its risk determination criteria, and decreasing sampling percentages for low risk proposals—adequately direct resources to audits that will provide the greatest benefit to the taxpayer. Without a plan that includes appropriate measures, DCAA will not be well-positioned to assess whether the initiative is achieving its goals.\nReducing the incurred cost audit backlog should enable more flexibly priced contracts to be closed out, but the extent to which it will do so is uncertain. As there is not a one-to-one relationship between an incurred cost audit and a specific contract, and there are additional steps that need to be taken to close a contract, there is likely to be a lag in closing out contracts even if DCAA is successful in its efforts. Within the military departments, limited data on the extent of the backlog or the reasons why contracts are in the backlog hinders their ability to develop targeted approaches, with goals and performance metrics, to address over-age contracts. The Army is just starting to collect the information necessary to determine if it can realistically meet its goal of closing over-age contracts and has not issued an implementation plan. The Navy and the Air Force, while facing similar data issues, have no department-wide performance metrics. Even DCMA, which does have performance measures in place as well as some information on where the contract is in the closeout process, has incomplete information on who has responsibility for moving the contract forward in the closeout process. One technique—the use of quick closeout procedures—has been available for a number of years, but we found little evidence that any organization has made significant effort to use it, either before or after the May 2011 change in federal regulations. Until DOD prioritizes closing contracts in a timely fashion and underscores the need to do so by improving the availability of accurate data and establishing performance measures, it will not see a significant reduction in its contract closeout backlog.", "To improve DCAA’s ability to assess whether its incurred cost backlog initiative is achieving the objectives of reducing the incurred cost audit backlog while continuing to protect the taxpayer’s interests, we recommend that the Director, DCAA, develop a plan that includes time frames and measures to assess progress towards achieving its objectives, and as appropriate, to identify how it will assess whether the changes in DCAA’s procedures and criteria are appropriate or require further revisions.\nTo increase visibility and enhance management attention on closing out contracts within their departments, we recommend that the Secretaries of the Navy and Air Force, respectively, develop baseline data and performance measures for closing out contracts, including consideration of the use of quick closeout procedures, as appropriate.\nTo facilitate the closeout of contracts within the Army, we recommend the Secretary of the Army ensure that the Army’s contract closeout implementation plan includes baseline data and performance measures, and includes consideration of the use of quick closeout procedures, as appropriate.\nTo enable DCMA to better identify contracts that may be closed out, we recommend that the Director, DCMA, take steps to ensure the data in DCMA’s contract information system on who has responsibility for moving the contract forward in the closeout process is complete.", "DOD provided written comments on a draft of this report. DOD concurred with the four recommendations and identified a number of ongoing and planned actions to address them. For example, DCAA stated that by March 2013 it will develop a more detailed plan to monitor and assess its progress towards achieving the objectives of its initiative. DCAA stated that this plan will include time frames and measures to determine whether its current criteria and procedures will require future modification. Further, DCAA identified several factors that this plan will include, such as an analysis of high risk determinations and audit results to determine if some criteria are better indicators of risk than others and an analysis of DCAA’s return on investment to determine if revisions to the sampling variables are needed.\nEach of the military departments identified actions that they would take to increase visibility and management attention on closing out contracts within their departments. For example, the Navy plans to collect data and internal policies and procedures on closing out contracts, including the use of quick closeout procedures, from its contracting activities as an initial step developing Navy-wide baseline data and performance measures for closing out contracts. The Air Force stated that it plans to place additional emphasis on aging contracts at a joint forum focused on high priority issues between DCMA, DCAA, and the departments. The Army concurred with our recommendation and reiterated its goal of eliminating approximately 475,000 over-age contracts by the end of fiscal year 2014, but did not provide additional details on how baseline data, performance measures, or consideration of the use of quick closeout procedures would be integrated into its detailed implementation plan. We believe that doing so would facilitate the Army’s efforts and enable it to assess progress.\nIn response to our recommendation to better identify contracts that may be closed out, DCMA plans to begin requiring the use of a code within its MOCAS system that will clearly identify who is responsible for the next step in the closeout process, and to ensure the code is properly entered into the system. DOD’s comments are reprinted in appendix II.\nWe are sending copies of this report to the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Director, Defense Contract Audit Agency; the Director, Defense Contract Management Agency; appropriate congressional committees; and other interested parties. This report will also be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or by e-mail at dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III.", "The Senate Armed Services Committee report accompanying the National Defense Authorization Act for Fiscal Year 2012 directed us to review the Defense Contract Audit Agency’s (DCAA) criteria and procedures for conducting incurred cost audits and recommend steps DCAA could take to reduce the backlog, and to consider the feasibility and advisability of three options aimed at reducing the contract closeout backlog. The three options we were asked to consider were (1) restoring the authority of the head of an agency to close out a contract that is administratively complete, was entered into 10 or more years ago, and has an unreconciled balance of less than $100,000; (2) authorizing the contracting officer, in consultation with DCAA, to waive the requirement for an incurred cost audit in the case of a low risk, low-cost contract; and (3) authorizing the contracting officer to waive final payment in a case where the contractor has gone out of business and cannot be reached. It also asked us to assess the efficacy of a May 2011 change to the Federal Acquisition Regulation (FAR) that was intended, in part, to increase the use of quick closeout procedures. In response, this report addresses (1) DCAA’s efforts to reduce the backlog of incurred cost audits, and (2) the challenges the Department of Defense (DOD) faces in addressing the contract closeout backlog. Included within the scope of the second objective was a consideration of the three options outlined in the Committee report as well as the use of quick closeout procedures.\nTo conduct our work for each objective, we reviewed relevant sections of the FAR, including FAR Subpart 4.804, Closeout of Contract Files and FAR Subpart 42.1, Contract Audit Services, and the Defense Federal Acquisition Regulation Supplement (DFARS), including DFARS Subpart 242, Contract Administration and Audit Services. We also reviewed DOD policies, such as the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics memorandum on Increasing Contracting Opportunities with the AbilityOne Program. We also reviewed prior GAO and DOD Inspector General reports pertaining to challenges at DCAA and the Defense Contract Management Agency (DCMA), and contract closeout at DOD, including contract closeout in a contingency environment. And finally, we reviewed GAO’s Standards for Internal Controls in the Federal Government.\nTo assess DCAA’s efforts to reduce the backlog of incurred cost audits, we reviewed applicable sections of federal regulations and DCAA’s Contract Audit Manual to identify criteria and procedures for selecting and conducting incurred cost audits. We obtained and reviewed data from DCAA’s management information system on the agency’s incurred cost audit backlog. To assess the reliability of DCAA’s data on its incurred cost audit backlog, we reviewed related documentation, interviewed knowledgeable agency officials, looked for obvious inconsistencies in the data, and verified the accuracy of the data when necessary. From these efforts, we believe the information obtained is sufficiently reliable for this report. We also reviewed documentation on DCAA’s incurred cost audit initiative, such as DCAA guidance on its revised criteria and procedures for risk assessment, agency memorandums related to the timing and implementation of the new sampling procedures, new forms for documenting risk determinations, and data on which proposals were selected for audit. We reviewed analyses and projections DCAA used to establish its goal of becoming current on incurred cost audits by 2016. We interviewed senior DCAA officials responsible for the incurred cost audit initiative, and DCAA auditors from three field offices to obtain a better understanding of the process and considerations for determining risk for the contractor’s incurred cost proposals. We selected the three DCAA field offices that had completed the largest number of risk assessments under the new incurred cost audit initiative as of September 2012. We also interviewed officials at Defense Procurement and Acquisition Policy (DPAP) and DCMA to get their perspective on DCAA’s incurred cost audit initiative.\nTo identify the challenges DOD faces in addressing the contract closeout backlog and to assess the efficacy of the May 2011 change to the FAR pertaining to quick closeout procedures, we reviewed applicable sections of the FAR, including FAR Subpart 42.3, Contract Administration Office Functions and FAR Section 42.708, Quick Closeout Procedures, and DFARS Subpart 242.3, Contract Administration Office Functions. We also reviewed Air Force, Navy, Army, and DCMA guidance, as well as DCMA policy on contract closeout and quick closeout procedures, such as the agency’s March 2012 closeout instructions and DCMA’s deviation to the quick closeout procedures. We obtained available data from the Army, Navy, and Air Force, five commands and nine contracting offices within the military departments. We selected the commands and contracting offices based on factors such as the total reported volume of over-age contracts and interviews with senior DOD officials (see table 4). We determined that the data reported by the military departments was sufficient for our purposes of selecting which commands and contracting offices to review, but did not take steps to assess the reliability of the data collected from the local contracting offices.\nWe collected and analyzed available data and documentation on over- age contracts from DCMA headquarters and the two DCMA contract management offices with the largest volume of over-age contracts— located in Manassas, Virginia and Baltimore, Maryland. To assess the reliability of DCMA’s data, we reviewed related documentation, interviewed knowledgeable agency officials, looked for obvious inconsistencies in the data, and verified the accuracy of the data when necessary. We also compared the data received from DCMA headquarters to the data that we received from Manassas and Baltimore. From these efforts, we believe the information we obtained is sufficiently reliable for this report. We also interviewed officials from DCMA headquarters and the two contract management offices. Further, we interviewed and collected documentation from officials at DPAP, DCAA, and the Defense Finance and Accounting Services; and from Army, Navy, and Air Force officials at the headquarters and command level, as well as individual contracting offices. We interviewed two contractor industry associations as well as a DOD contractor to obtain their views on the incurred cost audit and contract closeout backlogs.\nTo address the options outlined in the Committee report, we reviewed applicable laws, such as the National Defense Authorization Acts of Fiscal Years 2004, 2005, and 2007, which had authorities similar to one we were asked to review, and related agency policies and guidance, such as DCMA’s contract closeout guidebook. We also solicited input about the availability and potential usefulness of the options in our interviews with DCAA, DCMA, military departments’ headquarters, commands, and local contracting offices, military departments’ general counsel, DFAS, and contractor representatives.\nWe conducted this performance audit from February 2012 to December 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above Tatiana Winger, Assistant Director; Arkelga Braxton, Virginia Chanley, Nicole Dery, John Krump, Janet McKelvey, Anh Nguyen, Robert Swierczek, and Omar Torres made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full h2_full", "", "h2_full", "h0_full", "h0_full", "h1_full", "h1_full", "h1_full", "", "h2_full h1_full", "", "", "h3_full", "", "", "", "" ] }	{ "question": [ "How will the backlog be reduced?", "How will this limit incurred cost?", "What do incurred cost audits consist of?", "What does the DCAA plan to track under the initiative?", "What ability does the DCAA lack?", "What is the goal of the DCAA?", "How will this goal be achieved?", "What existing problems are there?", "What data is needed to study these issues?", "How could this missing data be used?", "What is the Army's goal?", "How does the Navy and Air Forces’ establishment of performance metrics compare with DCMA’s?", "What problem does the DOD have with its contracts?", "What must be done to close a contract?", "What is the importance of closing contracts?", "Why are some contracts not being closed?", "What is the purpose of DCAA audits?", "How did the Senate Armed Services Committee direct the GAO?", "How did the GAO respond?", "How did the GAO conduct a review?" ], "summary": [ "To reduce the backlog of incurred cost audits, the Defense Contract Audit Agency (DCAA) implemented an initiative to focus its resources on auditing contractors' incurred costs that involve high dollar values or are otherwise determined to be high risk.", "Under the initiative, DCAA raised the dollar threshold that triggers an automatic audit on a contractor's incurred cost proposal from $15 million to $250 million, revised the criteria used to determine a proposal's risk level, and significantly reduced the number of low risk audits that will be randomly sampled.", "Incurred cost audits are conducted on a contractor's annual proposal that includes all costs incurred on certain types of contracts in that fiscal year.", "This initiative appears promising, and DCAA plans to track certain characteristics, such as the number of risk determinations made and audits completed.", "But DCAA has not fully developed the measures by which it will assess whether the initiative reduces the backlog in a manner that protects the taxpayers' interests. Specifically, DCAA does not have a plan for how it will determine whether key features of the initiative, such as the revised risk criteria and the revised sampling percentages, should be adjusted in the future.", "By 2016, DCAA estimates it will reduce the backlog and reach a steady state of audits, which it defines as two fiscal years of proposals awaiting review.", "DCAA's ability to achieve this goal will depend on a number of factors, including the number of proposals determined to be high risk, which as of September 2012 was about two-and-a-half times more than anticipated.", "Reducing the backlog of incurred cost audits will ease one obstacle to closing over-age contracts, but other obstacles, such as limited data and performance metrics, must still be overcome.", "The military departments have limited data on the extent and nature of their contract closeout backlog, and the Defense Contract Management Agency (DCMA)--which performs contract administration services for the Department of Defense (DOD)--is missing information that would allow it to identify contracts that it could act on.", "Such data can cue agencies on how to identify or tailor approaches to address the backlog. Further, the military departments generally do not have performance metrics to measure progress in closing out contracts.", "The Army recently announced a goal of closing over 475,000 contracts by September 2014; however, it does not yet have the information necessary to know if it can reach this goal and does not have an implementation plan.", "The Navy and the Air Force had not established any department-wide performance metrics for contract closeout. In contrast, DCMA has established two agency-wide performance metrics related to contract closeout that are regularly monitored.", "DOD has a large volume of contracts that have not been closed on time.", "Closing a contract includes tasks such as verifying that the goods and services were provided and making final payment to the contractor.", "Closing contracts within required time frames can limit the government’s exposure to certain financial risks.", "One reason why some contracts are not being closed is the large backlog of incurred cost audits that must first be completed.", "These audits, conducted by DCAA, ensure that the costs contractors have incurred are permissible under government regulations.", "The Senate Armed Services Committee report accompanying the National Defense Authorization Act for Fiscal Year 2012 directed GAO to review the criteria and procedures for conducting incurred cost audits, among other things.", "In response, GAO assessed (1) efforts to reduce the backlog of incurred cost audits and (2) the challenges DOD faces in addressing the contract closeout backlog.", "GAO reviewed DCAA’s policies and procedures for incurred cost audits; analyzed data on the audit and contract closeout backlogs; and interviewed officials in the military departments and agencies." ], "parent_pair_index": [ -1, 0, 1, 0, -1, -1, 5, -1, 0, 1, -1, -1, -1, 0, 1, -1, -1, -1, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 0, 0, 0, 0, 0, 1, 1, 1 ] }
CRS_RL32725	{ "title": [ "", "Hemp Production and Use", "Commercial Uses of Hemp", "Estimated Retail Market", "U.S. Hemp Imports", "U.S. Market Potential", "Global Production", "International Production", "Global Production (Excluding Canada)", "Production in Canada", "U.S. Production", "Federal Law and Requirements", "Controlled Substances Act of 1970", "Agricultural Act of 2014", "Selected Appropriations Actions", "State Laws", "DEA Policy Statements and Other Federal Guidance", "DEA Permit Requirements", "Dispute Over Hemp Imports (1999-2004)", "2013 DEA Guidance Outlined in \"Cole Memo\"", "DEA's Blocking of Imported Viable Hemp Seeds", "2016 Joint \"Statement of Principles\" on Industrial Hemp", "2018 Restrictions on SBA Loans", "Other Federal Agency Actions", "Ongoing Congressional Activity", "2018 Farm Bill Debate", "House Farm Bill (H.R. 2)", "Senate Farm Bill (H.R. 2)", "Industrial Hemp Farming Act", "Legislation Regarding Possible Medical Applications of Hemp", "Other Introduced Legislation", "Congressional Action on USDA Hemp Research Support155", "Groups Supporting/Opposing Further Legislation", "Concluding Remarks" ], "paragraphs": [ "F or centuries, industrial hemp (plant species Cannabis sativa) has been a source of fiber and oilseed used worldwide to produce a variety of industrial and consumer products. Currently, more than 30 nations grow industrial hemp as an agricultural commodity, which is sold on the world market. In the United States, however, production is strictly controlled under existing drug enforcement laws. Currently there is no large-scale commercial production in the United States, and the U.S. market depends on imports.\nCongress made significant changes to federal policies regarding hemp in the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79). The 2014 farm bill provided that certain research institutions and state departments of agriculture may grow hemp under an agricultural pilot program. In addition, in subsequent omnibus appropriations, Congress has blocked the U.S. Drug Enforcement Administration (DEA) and federal law enforcement authorities from interfering with state agencies, hemp growers, and agricultural research. Appropriators have also blocked the U.S. Department of Agriculture (USDA) from prohibiting the transportation, processing, sale, or use of industrial hemp that is grown or cultivated in accordance with the 2014 farm bill provision.\nDespite these efforts, industrial hemp continues to be subject to U.S. drug laws, and growing industrial hemp is restricted. Under current U.S. drug policy, all cannabis varieties—including industrial hemp—are considered Schedule I controlled substances under the Controlled Substances Act (CSA), and DEA continues to control and regulate cannabis production. Although hemp production is now allowed in accordance with the requirements under the 2014 farm bill provision, other aspects of hemp production are still subject to DEA oversight, including the importation of viable seeds.\nCongress has sought to further distinguish between industrial hemp and marijuana. Among the bills addressing industrial hemp, the Industrial Hemp Farming Act would amend the CSA to specify that the term marijuana does not include industrial hemp, thus excluding hemp from the CSA as a controlled substance subject to DEA regulation. This bill was reintroduced and expanded from bills introduced in previous Congresses dating back to the 109 th Congress. An expanded version of this bill was introduced in the 115 th Congress in both the House and Senate (H.R. 5485; S. 2667). Other provisions in these bills would further facilitate hemp production in the United States. Many of the provisions in these bills are included in the Senate version of the 2018 farm bill legislation ( H.R. 2 ) that has passed the Senate. Similar provisions are not part of the House-passed 2018 farm bill ( H.R. 2 ).\nOther introduced legislation would amend the CSA \"to exclude cannabidiol and cannabidiol-rich plants from the definition of marihuana\" intended to promote the possible medical applications of industrial hemp. Myriad other bills introduced in both the House and the Senate would further amend the CSA and other federal laws to address industrial hemp.", "Botanically, industrial hemp and marijuana are from the same species of plant, Cannabis sativa , but from different varieties or cultivars that have been bred for different uses. However, industrial hemp and marijuana are genetically distinct forms of cannabis that are distinguished by their use, chemical makeup, and differing cultivation practices in production. While marijuana generally refers to the psychotropic drug (whether used for medicinal or recreational purposes), industrial hemp is cultivated for use in the production of a wide range of products, including foods and beverages, personal care products, nutritional supplements, fabrics and textiles, paper, construction materials, and other manufactured goods.\nBoth hemp and marijuana also have separate definitions in statute. While marijuana is defined in U.S. drug laws, Congress established a statutory definition for industrial hemp as \"the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis\" as part of the 2014 farm bill. Hemp is generally characterized by plants that are low in delta-9 tetrahydrocannabinol (delta-9 THC), the dominant psychotrophic ingredient in Cannabis sativa .\nFor more background information, see CRS Report R44742, Defining \"Industrial Hemp\": A Fact Sheet . However, joint guidance issued in August 2016 by DEA, USDA, and the Food and Drug Administration (FDA) suggests that there continues to be questions about what constitutes industrial hemp and its oversight under federal law.", "The global market for hemp consists of more than 25,000 products in nine submarkets: agriculture, textiles, recycling, automotive, furniture, food and beverages, paper, construction materials, and personal care ( Table 1 ). Hemp can be grown as a fiber, seed, or dual-purpose crop. The stalk and seed are the harvested products. The interior of the stalk has short woody fibers called hurds; the outer portion has long bast fibers. Hemp seed/grains are smooth and about one-eighth to one-fourth of an inch long.\nHemp fibers are used in fabrics and textiles, yarns and spun fibers, paper, carpeting, home furnishings, construction and insulation materials, auto parts, and composites. Hurds are used in animal bedding, material inputs, papermaking, and oil absorbents. Hemp seed and oilcake are used in a range of foods and beverages (e.g., salad and cooking oil and hemp dairy alternatives) and can be an alternative food and feed protein source. Oil from the crushed hemp seed is used in soap, shampoo, lotions, bath gels, and cosmetics. Hemp is also being used in nutritional supplements and in medicinal and therapeutic products, including pharmaceuticals. It is also used in a range of composite products. Hempcrete (a mixture of hemp hurds and lime products) is being used as a building material. Hemp is also used as a lightweight insulating material and in hemp plastics and related composites for use as a fiberglass alternative by the automotive and aviation sectors. Hemp is also promoted as a potential biodiesel feedstock and cover crop.\nThese types of commercial uses are widely documented in a range of feasibility and marketing studies conducted by researchers at USDA and various land grant universities and state agencies. (A listing of these studies is in the Appendix A .) Currently, finished hemp products and raw material inputs are mostly imported into the United States and sold for use in further processing and manufacturing for a wide range of products.", "No official estimates are available of the value of U.S. sales of hemp-based products. The Hemp Industries Association (HIA) reports total U.S. retail sales of hemp products of nearly $700 million in 2016, which includes food and body products, dietary supplements, clothing, auto parts, building materials, and other consumer products ( Figure 2 ). HIA claims that U.S. hemp retail sales have increased by about 10% to more than 20% annually since 2011. Much of this growth is attributable to sales of hemp-based body products, supplements, and foods. Combined, these categories accounted for more than two-thirds of the value of U.S. retail sales in 2016.\nLittle detailed information is available on some other hemp-based sectors, such as for use in construction, biofuels, paper, textiles, or other manufacturing uses. Data are also not available on existing businesses or processing facilities.", "Hemp imports to the United States—consisting of hemp seeds and fibers often used as inputs for use in further manufacturing—totaled $67.3 million in 2017 ( Table 1 ). Although hemp imports have declined from a record high of $78.1 million in 2015, U.S. hemp imports have steadily increased since 2005 when hemp imports totaled $5.7 million. This increase in trade followed the resolution of a legal dispute over U.S. imports of hemp foods in late 2004 (see \" Dispute Over Hemp Imports (1999-2004) \") and also prior prohibitions on U.S. domestic production.\nIn 2017, nearly two-thirds (64%) of the value of all U.S. hemp imports were of hemp seeds, which were used mostly as inputs and ingredients for hemp-based products. Other ingredient imports—hemp oil, seed cake, and solids—accounted for another 28% of the value of total imports. Import hemp yarns and fibers accounted for about 8% of total import value in 2017 ( Table 1 ). Trade data are not available for finished products, such as hemp-based clothing or other products including construction materials, carpets, or paper products.\nCanada is the single largest supplier of U.S. hemp imports, accounting for about 90% of the value of annual imports. Other leading country suppliers include China (about 3-5% of annual imports) and Romania (2-4%). Remaining imports are supplied by other European countries, India, the Dominican Republic, and Chile. Canada is the primary source of U.S. imports of food-grade hemp seed and oilcake, with supplies also from China and Europe. China and some European countries are major suppliers of raw and processed hemp fiber and yarn.\nThree forms of seed are imported: (1) de-hulled seed —often referred to as hemp hearts, hulled seeds, or hemp nut—which is used in a range of food products; (2) non-viable whole seed , which is rendered non-viable through a sterilization process, usually through temperature exposure; and (3) viable whole seed , which is capable of germination under suitable conditions. Most hemp seed cultivars originate in Europe (France, Germany, Hungary, Italy, Poland, and Romania), Russia, Ukraine, and China.", "Most researchers acknowledge the potential profitability of industrial hemp, but also the potential obstacles to its development. Current challenges facing the industry include the need to re-establish agricultural supply chains, breed varieties with modern attributes, upgrade harvesting equipment, modernize processing and manufacturing, and identify new opportunities.\nIn the past two decades, researchers at the USDA and various land grant universities and state agencies (for example, Arkansas, Kentucky, Maine, Minnesota, North Dakota, Oregon, and Vermont; see Appendix A ) have conducted several feasibility and marketing studies. More recent available market reports indicate that the estimated gross value of hemp production per acre is about $21,000 from seeds and $12,500 from stalks.\nStudies by researchers in Canada and various state agencies provide a mostly positive market outlook for growing hemp, citing rising consumer demand and the potential range of product uses for hemp. Some state reports claim that if current restrictions on growing hemp in the United States were removed, agricultural producers in their states could benefit. A 2008 study reported that acreage under cultivation in Canada, \"while still showing significant annual fluctuations, is now regarded as being on a strong upward trend.\" Most studies generally note that hemp \"has such a diversity of possible uses, [and] is being promoted by extremely enthusiastic market developers.\" Other studies highlight certain production advantages associated with hemp or acknowledge hemp's benefits as a rotational crop or further claim that hemp may be less environmentally degrading than other agricultural crops. Other studies claim certain production advantages to hemp growers, such as relatively low input and management requirements.\nOther studies differ from the various state reports and provide a less favorable aggregate view of the potential market for hemp growers in the United States, highlighting challenges facing U.S. growers. For example, a 2000 study by USDA projected that U.S. hemp markets \"are, and will likely remain, small, thin markets.\" It also cited \"uncertainty about long-run demand for hemp products and the potential for oversupply\" among possible downsides of potential future hemp production. Similarly, a study by University of Wisconsin-Madison concluded that hemp production \"is not likely to generate sizeable profits,\" and, although hemp may be \"slightly more profitable than traditional row crops,\" it is likely \"less profitable than other specialty crops\" due to the \"current state of harvesting and processing technologies, which are quite labor intensive, and result in relatively high per unit costs.\" The study also noted that U.S. growers could be affected by competition from other world producers and by production limitations in the United States, including yield variability and lack of harvesting innovations and processing facilities, as well as difficulty transporting bulk hemp. The study further claimed that most estimates of profitability from hemp production are highly speculative and often do not include additional costs of growing hemp in a regulated market, such as the cost associated with \"licensing, monitoring, and verification of commercial hemp.\"\nA 2013 study by researchers at the University of Kentucky predicted that despite \"showing some positive returns, under current market conditions, it remained unclear whether anticipated hemp returns would be large enough to entice Kentucky grain growers to shift out of grain production\" under most circumstances. They also noted that \"short run employment opportunities evolving from a new Kentucky hemp industry appear limited (perhaps dozens of new jobs, not 100s),\" because of continued uncertainty in the industry. Overall, the study concluded that there were many remaining unknowns and that further analysis and production research was needed.\nA 2016 study notes that the most promising markets for North American hemp production is a continued focus on oilseed production and cannabidiol (CBD), a non-intoxicant cannabinoid that has promise for its therapeutic use as a pharmaceutical product.\nGiven the absence since the 1950s of any commercial and unrestricted hemp production in the United States, it is not possible to predict the potential market and employment effects of relaxing current restrictions on U.S. hemp production. While expanded market opportunities might exist in some states or localities if current restrictions on production are lifted, it is not possible to predict the potential for future retail sales or employment gains in the United States, either nationally or within certain states or regions. Little information is available from previous market analyses that have been conducted by researchers at USDA and land grant universities and state agencies.", "", "Approximately 30 countries in Europe, Asia, and North and South America currently permit farmers to grow hemp. Aggregated production data from the United Nations do not include all countries (most notably Canada) and may differ from other sources but comprise the most readily available source of information. Based on these data, excluding Canada, global acreage in hemp cultivation in 2016—both hemp seed and hemp tow waste—is reported at about 192,000 acres ( Figure 3 ), with a reported total production of 355 million pounds ( Figure 4 ). United Nations data do not include Canada, which is a major hemp producing and exporting country. Including other data for Canada, in 2016, aggregate acreage totaled at about 225,000 acres. Canada is also major supplier of U.S. hemp imports, particularly of hemp-based foods and food ingredients and other related imported products.\nPreliminary information for 2017 indicate that hemp acreage in Canada and the European Union (EU) countries reached record levels, which could put global acreage at more than 330,000 acres. Still, as a share of total crop production in these countries, hemp production accounts for a negligible share (less than 0.5%) of total acreage.", "Leading global hemp producers include Europe, China, South Korea, and Russia. Some countries never outlawed production; other countries banned production for certain periods in the past and later lifted these restrictions. Hemp production across these countries and regions account for nearly all the reported production and acreage reported in the U.N. database.\nAccording to Food and Agriculture Organization (FAO) of the United Nations data, Europe is the world's single largest hemp producing market. In 2016, European countries produced hemp on a reported more than 80,000 acres—a historical record high and accounting for about one-half of FAO-reported global acreage. The EU has an active hemp market, with production in most member nations. Production is centered in France, the Netherlands, Lithuania, and Romania. Many EU countries lifted their bans on hemp production in the 1990s and, until recently, also subsidized the production of \"flax and hemp\" under the EU's Common Agricultural Policy. Most EU production is of hurds, seeds, fibers, and pharmaceuticals. Other non-EU European countries with reported hemp production include Russia, Ukraine, and Switzerland.\nChina is another major producer, mostly of hemp textiles and related products, as well as a major supplier to the United States. In 2016, China's hemp was about 20,000 acres. FAO data also report hemp production in Chile, China, Iran, Japan, South and North Korea, Pakistan, Russia, Syria, and Turkey. Other countries with active hemp grower and/or consumer markets not included in FAO's annual compilation are New Zealand, India, Egypt, South Africa, Thailand, Malawi, and Uruguay.", "Canada's commercial hemp industry is fairly new: Canada began to issue licenses for research crops in 1994, followed by commercial licenses starting in 1998. Since hemp cultivation was legalized in Canada, production has been variable year to year ( Figure 5 ) but generally increasing—which some attribute to increased import demand in the United States. Acreage has ranged from 48,000 planted acres in 2006 to about 8,000 acres in 2008, rising again to a 100,000 acres in 2014 but then sharply dropping back again to 33,000 acres in 2016. In 2017, acreage in hemp cultivation and production rose sharply—reaching a record of nearly 140,000. Canada's hemp cultivation still accounts for only about 1% of the country's available farmland. The number of cultivation licenses has also varied from year to year, reaching a high of 560 licenses in 2006, followed by a low of 77 licenses in 2008 and rising to 340 licenses in 2011. Since then, the number of licenses has risen to more than 1,100 issued in 2015 and 2016. Annual retail sales of all Canadian-derived hemp seed products are estimated between $20 million and $40 million, and the number of businesses active in the sector has grown over the past few years.\nThe development of Canada's hemp market followed a 60-year prohibition and is strictly regulated. The Office of Controlled Substances of Health Canada, which issues licenses for all activities involving hemp administers the program. Under the regulation, all industrial hemp grown, processed, and sold in Canada may contain THC levels of no more than 0.3% of the weight of leaves and flowering parts. Canada has also set a maximum level of 10 parts per million for THC residues in products derived from hemp grain, such as flour and oil. To obtain a license to grow hemp, Canadian farmers must submit extensive documentation, including background criminal record checks, the Global Positioning System (GPS) coordinates of their fields, and supporting documents (from the Canadian Seed Growers' Association or the Canadian Food Inspection Agency) regarding their use of certified low-THC hemp seeds and approved cultivars; and they must allow government testing of their crop for THC levels.\nIn 2016, Canada further relaxed its regulations of industrial hemp production by amending its drug laws to provide for a \"class exemption\" for hemp in order to \"simplify the license application process for the 2017 growing season.\" According to Health Canada, the Section 56 Class Exemption \"better aligns regulation of industrial hemp with the demonstrated low public health and safety risks of the crop\" intended \"to simplify the license application process\" as Canada moves forward with \"its commitment to legalize, strictly regulate, and restrict access to marijuana.\" Among the types of simplifications and streamlining are\nreduced pre-requisite requirements (e.g., no longer need to pre-identify planting sites, no more minimum acreage requirements); reduced paperwork (to a single form), reduced proof requirements (to a single attestation), and growers may now apply electronically; THC testing requirements mostly eliminated (except for pedigreed seed or applications to be added to the list of approved cultivars); license expiry date extended until March the following year; and criminal record check valid now for one year.\nThe potential impact could greatly facilitate hemp production for Canadian farmers, which could continue to give them an advantage over U.S. growers, where hemp production remains restricted and legal in only few cases.", "Following enactment of the 2014 farm bill, hemp cultivation became allowed under certain circumstances by research institutions and state departments of agriculture. Official estimates of U.S. hemp production are not available. Information compiled by states and industry indicate that there were more than 25,500 acres of hemp production in 2017, up from 9,770 acres in 2016 ( Table 2 ). In 2017, there were 1,420 registered or licensed growers and 32 universities conducting hemp research nationwide. Investment in hemp processing facilities is underway in several states, including Kentucky, Tennessee, North Carolina, and New York.\nHemp was widely grown in the United States from the colonial period into the mid-1800s. Fine and coarse fabrics, twine, and paper from hemp were in common use. By the 1890s, labor-saving machinery for harvesting cotton made the latter more competitive as a source of fabric for clothing, and the demand for coarse natural fibers was met increasingly by imports. Industrial hemp was handled in the same way as any other farm commodity in that USDA compiled statistics and published crop reports and provided assistance to farmers promoting production and distribution. In the early 1900s, hemp continued to be grown, and USDA researchers continued to publish information related to hemp production and also reported on hemp's potential for use in textiles and in paper manufacturing. Several hemp advocacy groups, including HIA and Vote Hemp, Inc., have compiled other historical information and have copies of original source documents.\nBetween 1914 and 1933, in an effort to stem the use of Cannabis flowers and leaves for their psychotropic effects, 33 states passed laws restricting legal production to medicinal and industrial purposes only. The 1937 Marihuana Tax Act defined hemp as a narcotic drug, requiring that farmers growing hemp hold a federal registration and special tax stamp, effectively limiting further production expansion.\nIn 1943, U.S. hemp production reached more than 150 million pounds (140.7 million pounds hemp fiber; 10.7 million pound hemp seed) on 146,200 harvested acres. This compared to pre-war production levels of about 1 million pounds. After reaching a peak in 1943, production started to decline. By 1948, production had dropped back to 3 million pounds on 2,800 harvested acres, with no recorded production after the late 1950s.", "", "In 1937, Congress passed the first federal law to discourage cannabis production for marijuana while still permitting industrial uses of the crop (the Marihuana Tax Act; 50 Stat. 551). Under this statute, the government actively encouraged farmers to grow hemp for fiber and oil during World War II. After the war, competition from synthetic fibers, the Marihuana Tax Act, and increasing public anti-drug sentiment resulted in fewer and fewer acres of hemp being planted and none at all after 1958. The CSA placed the control of select plants, drugs, and chemical substances under federal jurisdiction and was enacted, in part, to replace previous federal drug laws with a single comprehensive statute.\nThe CSA adopted the same definition of Cannabis sativa that appeared in the 1937 Marihuana Tax Act. The definition of \"marihuana\" (21 U.S.C. §802(16)) reads:\nThe term marihuana means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound ... or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.\nThe statute thus retains control over all varieties of the cannabis plant by virtue of including them under the term marijuana and does not distinguish between low- and high-THC varieties. The language exempts from control the parts of mature plants—stalks, fiber, oil, cake, etc.—intended for industrial uses. Some have argued that the CSA definition exempts industrial hemp under its term exclusions for stalks, fiber, oil, cake, and seeds. DEA refutes this interpretation.\nStrictly speaking, the CSA does not make growing cannabis illegal; rather, it places strict controls on its production, making it illegal to grow the crop without a DEA permit. Regarding industrial hemp, however, growers that comply with the 2014 farm bill provision (discussed in the next section) do not need DEA approval.", "The 113 th Congress considered various changes to U.S. policies regarding industrial hemp during the omnibus farm bill debate. The 2014 farm bill (Agricultural Act of 2014 [P.L. 113-79], §7606) provides that certain \"institutions of higher education\" and state departments of agriculture may grow industrial hemp, as part of an agricultural pilot program, if allowed under state laws where the institution or state department of agriculture is located. The farm bill also established a statutory definition of industrial hemp as \"the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.\" The provision was included as part of the research title of the law. The provision did not include an effective date that would suggest any kind of program rollout, and there appears to be nothing in the conference report or bill language to suggest that the states might not be able to immediately initiate action on this provision.\nThis provision was adopted when Representatives Polis, Massie, and Blumenauer introduced an amendment to the House version of the farm bill (, the Federal Agriculture Reform and Risk Management Act of 2013) during floor debate on the bill. The amendment ( H.Amdt. 208 ) was to allow institutions of higher education to grow or cultivate industrial hemp for the purpose of agricultural or academic research and applied to states that already permit industrial hemp growth and cultivation under state law. The amendment was adopted by the House of Representatives. Although the full House ultimately voted to reject H.R. 1947 , similar language was included as part of a subsequent revised version of the House bill ( H.R. 2642 ), which was passed by the full House.\nIn the Senate, Senators Wyden, McConnell, Paul, and Merkley introduced an amendment to the Senate version of the farm bill ( S. 954 , the Agriculture Reform, Food and Jobs Act of 2013). The amendment (S.Amdt. 952) would have amended the CSA to exclude industrial hemp from the definition of marijuana. The amendment was not adopted as part of the Senate-passed farm bill.\nDuring conference on the House and Senate bills, the House provision was adopted with additional changes. The enacted law expands the House bill provision to allow both certain research institutions and also state departments of agriculture to grow industrial hemp, as part of an agricultural pilot program, if allowed under state laws where the institution or state department of agriculture is located.\nAs the farm bill did not include an effective date distinct from the date of enactment, several states responded by making immediate plans to initiate new hemp pilot projects. In addition, several states enacted legislation to allow for hemp cultivation, which is a precondition for allowances under the 2014 farm bill.\nSome have speculated whether the industrial hemp provision in the 2014 farm bill could terminate, expire, or require reauthorization in a subsequent farm bill. Although some individual authorizations in the farm bill specifically have provisions indicating that they expire in 2018 (such as authorized funding levels), the industrial hemp research provision in the 2014 farm bill does not have such language. Furthermore, the farm bill does not contain a default sunset provision for all its authorizations. Accordingly, the industrial hemp research provision in the 2014 farm bill appears to be intended to have some degree of permanence.\nDespite these efforts, industrial hemp continues to be subject to U.S. drug laws, and growing industrial hemp is restricted. Under current U.S. drug policy, all cannabis varieties—including industrial hemp—are considered Schedule I controlled substances under the CSA. Although hemp production is now allowed in accordance with the requirements under the 2014 farm bill provision, other aspects of production are still subject to DEA oversight, including the importation of viable seeds, which still requires DEA registration according to the Controlled Substances Import and Export Act (CSIEA, 21 U.S.C. §§951-971). This requirement was reinforced in a 2016 joint Statement of Principles on Industrial Hemp from DEA, USDA, and FDA. The 2016 guidance also clarifies DEA's contention that the commercial sale or interstate transfer of hemp continues to be restricted. (For more information, see \" 2016 Joint \"Statement of Principles\" on Industrial Hemp \".)", "Immediately following the 2014 farm bill, some states quickly responded by expanding their efforts to grow industrial hemp. However, the absence of viable seeds to grow industrial hemp and DEA efforts to block imports of viable seed slowed these efforts. (For more information, see \" DEA's Blocking of Imported Viable Hemp Seeds \".) To avoid future similar DEA actions that might further stall full implementation of the hemp provision of the farm bill, Congress acted swiftly. Both the House and Senate FY2015 Commerce-Justice-Science (CJS) appropriations bills contained provisions to block federal law enforcement authorities from interfering with state agencies and hemp growers and counter efforts to obstruct agricultural research. The enacted FY2015 appropriation blocked federal law enforcement authorities from interfering with state agencies, hemp growers, and agricultural research. The provision stated that \"none of the funds made available\" to the U.S. Justice Department and DEA \"may be used in contravention\" of the 2014 farm bill. Similar language has been included in each subsequent enacted CSJ appropriation and is now also part Agriculture appropriation.\nThe enacted FY2018 Agriculture appropriation states that none of the funds made available by the Agriculture or any other appropriation may be used in contravention of the 2014 farm bill provision or \"to prohibit the transportation, processing, sale, or use of industrial hemp that is grown or cultivated\" in accordance with the farm bill provision \"to prohibit the transportation, processing, sale, or use of industrial hemp, or seeds of such plant, that is grown or cultivated\" in accordance with the 2014 farm bill \"within or outside the State in which the industrial hemp is grown or cultivated.\" The FY2017 and FY2016 Agriculture appropriation contained similar language. Language referring to selling industrial hemp within a state addresses intrastate commerce, whereas language referring to selling hemp outside the state may be considered to address interstate commerce.\nThe FY2018 CJS appropriation (Division B of P.L. 115-31 ) states that \"none of the funds made available by this Act may be used in contravention of section 7606 (''Legitimacy of Industrial Hemp Research'') of the Agricultural Act of 2014 ( P.L. 113-79 ) by the Department of Justice or the Drug Enforcement Administration.\" The enacted FY2017, FY2016, and FY2015 CJS appropriation contained similar language to block federal law enforcement from interfering with state agencies, hemp growers, and agricultural research.\nOther proposed appropriations bills had also addressed industrial hemp. For example, the Senate FY2018 Energy and Water Development and Related Agencies appropriations proposed to prohibit regulators from denying hemp growers access to water if hemp is grown or cultivated in accordance with the laws of the state in which such use occurs. The provision was not enacted as part of the omnibus appropriation.\nIn prior appropriations debates, the House CJS bills also included provisions stating that no funds be used to prevent a state from implementing its own state laws that \"authorize the use, distribution, possession, or cultivation of industrial hemp\" as defined in the 2014 farm bill. These provisions were not adopted. In addition, as part of the FY2017 Agriculture appropriations debate, the Senate committee report urged USDA \"to clarify the Agency's authority to award Federal funds to research projects deemed compliant with Section 7606 of the Agricultural Act of 2014.\" The latter provision addressed questions by a number of state and private research institutions about the extent to which industrial hemp initiatives might be eligible for U.S. federal grant programs (both USDA and non-USDA program funds). This action built on previous efforts by several Members of Congress who sent a letter to USDA in November 2015 requesting clarification of the agency's research funds for industrial hemp.\nAdditional information on the legislative intent behind the 2014 farm bill provision and a congressional response to DEA has taken actions that are in contravention of the farm bill.", "Since the mid-1990s, there has been a resurgence of interest in the United States in producing industrial hemp. Farmers in regions of the country that are highly dependent upon a single crop, such as tobacco or wheat, have shown interest in hemp's potential as a high-value alternative crop, although the economic studies conducted so far paint a mixed profitability picture. Beginning around 1995, an increasing number of state legislatures began to consider a variety of initiatives related to industrial hemp. Most of these have been resolutions calling for scientific, economic, or environmental studies, and some are laws authorizing planting experimental plots under state statutes.\nFollowing enactment of the 2014 farm bill provision, several states have quickly been adopting new state laws to allow for cultivation. To date, nearly 40 states or territories have enacted or introduced legislation favorable to hemp cultivation ( Figure 6 ). Other states reportedly considering hemp legislation include Arizona, Georgia, Iowa, Kansas, Mississippi, New Mexico, Oklahoma, South Dakota, and Texas. (The status of state actions regarding hemp is changing rapidly, and information differs depending on source. )\nRequirements differ among the states, and some states have enacted laws that are considered more comprehensive than others. Some common provisions across these state laws include\ndefining industrial hemp (based on the percentage of THC it contains) and excluding hemp from the definition of \"controlled substances\" under state law; authorizing the growing and possessing of industrial hemp by creating an advisory board or commission; establishing or authorizing a state licensing or registration program for growers and/or seed breeders; requiring recordkeeping; requiring waivers or changes to federal law; establishing or authorizing fee structures; establishing inspection procedures; allowing state departments to collect funds for research programs; promoting research and development of markets for industrial hemp; establishing certified seed requirements or, in some states, \"heritage hemp seeds\" (e.g., in Colorado and Kentucky); and establishing penalties.\nSome states have well-developed guidelines for growers, covering issues such as registration and reporting requirements, inspection, THC testing and threshold determination, seed availability and certification, pesticide use, production standards, and other information. Other general requirements may apply under some circumstances. For example, in 2016, USDA published guidance on organic certification of industrial hemp products. Some are calling for the need to develop more far-reaching consensus standards for a range of cannabis varieties given concerns about the general lack of standards and test methods. Production of industrial hemp has been reported in several states ( Table 2 ).\nAmong the states that have enacted taxation and/or fees for industrial hemp are California, Colorado, Indiana, Kentucky, Maine, Montana, Nevada, North Dakota, Oregon, Tennessee, Vermont, and West Virginia.", "", "Federal law prohibits cultivation of cannabis without a permit, and DEA enforces standards governing the security conditions under which the crop must be grown. In other words, a grower needs to get permission from DEA to grow cannabis or faces the possibility of federal charges or property confiscation, regardless of whether the grower has a state-issued permit.\nPrior to the 2014 farm bill, although many states had established programs under which a farmer may be able to grow industrial hemp under certain circumstances, a grower would still need to obtain a DEA permit and abide by DEA's strict production controls. This situation resulted in some high-profile cases in which growers have applied for permits but DEA has not approved (or has denied) permits to grow hemp, even in states that authorize cultivation under state laws.\nEven if DEA were to approve a permit, production might be discouraged because of the perceived difficulties of working through DEA licensing requirements and installing the types of structures necessary to obtain a permit. Obtaining a DEA permit required that the applicant demonstrate that an effective security protocol will be in place at the production site, such as security fencing around the planting area, a 24-hour monitoring system, controlled access, and possibly armed guards to prevent public access. DEA application requirements also include a nonrefundable fee, FBI background checks, and extensive documentation. It could also be argued that the necessary time-consuming steps involved in obtaining and operating under a DEA permit, the additional management and production costs from installing structures, and other business and regulatory requirements could ultimately limit the operation's profitability.\nDuring this time there was ongoing tension between federal and state authorities over state hemp policies. After North Dakota passed its own state law authorizing industrial hemp production in 1999, researchers repeatedly applied for, but did not receive, a DEA permit to cultivate hemp for research purposes in the state. Also in 2007, two North Dakota farmers were granted state hemp farming licenses and, in June 2007, filed a lawsuit in U.S. District Court (North Dakota) seeking \"a declaratory judgment\" that the CSA \"does not prohibit their cultivation of industrial hemp pursuant to their state licenses.\" The case was dismissed in November 2007. The case was appealed to the U.S. Court of Appeals (Eighth Circuit) but was again dismissed in December 2009. The farmers filed an appeal in May 2010.\nAs some states began to allow U.S. producers to grow hemp under state law, some growers were foregoing the requirement to obtain a federal permit. For example, in 2009, Montana's Agriculture Department issued its first state license for an industrial hemp-growing operation in the state, and media reports indicated that the grower did not intend to request a federal permit. Such cases posed a challenge to DEA of whether it is willing to override the state's authority to allow for hemp production in the state.\nThere is limited information about DEA's permit process and on facilities that are licensed to grow hemp, even for research purposes. Previous reports indicate that DEA had issued a permit for an experimental quarter-acre plot at the Hawaii Industrial Hemp Research Program during the period from 1999 to 2003 (now expired). Most reports indicate that DEA was reluctant to grant licenses to grow hemp, even for research purposes. Some land grant university researchers have been granted licenses to conduct hemp research under certain conditions.", "Starting in late 1999, DEA acted administratively to demand that the U.S. Customs Service enforce a zero-tolerance standard for the THC content of all forms of imported hemp—and hemp foods in particular. Development of DEA's rules to support its actions sparked a fierce battle over the permissibility of imported hemp-based food products that lasted from 1999 until 2004.\nDEA followed up, in October 2001, with publication of an interpretive rule in the Federal Register explaining the basis of its zero-tolerance standard. It held that when Congress wrote the statutory definition of marijuana in 1937, it \"exempted certain portions of the Cannabis plant from the definition of marijuana based on the assumption (now refuted) that such portions of the plant contain none of the psychoactive component now known as THC.\"\nIn March 2003, DEA issued two final rules addressing the legal status of hemp products derived from the cannabis plant. It found that hemp products \"often contain the hallucinogenic substance tetrahydrocannabinols (THC) ... the primary psychoactive chemical found in the cannabis (marijuana) plant.\" Although DEA acknowledged that \"in some cases, a Schedule I controlled substance may have a legitimate industrial use,\" such use would be allowed only under highly controlled circumstances. These rules set forth what products may contain \"hemp\" and also prohibit \"cannabis products containing THC that are intended or used for human consumption (foods and beverages).\"\nBoth the proposed rule (which was published concurrently with the interpretive rule) and the final 2003 rule gave retailers of hemp foods a date after which DEA could seize all such products remaining on shelves. On both rules, hemp trade associations requested and received court-ordered stays blocking enforcement of that provision. DEA's interpretation made hemp with any THC content subject to enforcement as a controlled substance.\nHemp industry trade groups, retailers, and a major Canadian exporter filed suit against DEA, arguing that congressional intent was to exempt plant parts containing naturally occurring THC at non-psychoactive levels, the same way it exempts poppy seeds containing trace amounts of naturally occurring opiates. Industry groups maintain that (1) naturally occurring THC in the leaves and flowers of cannabis varieties grown for fiber and food is already at below-psychoactive levels (compared with drug varieties); (2) the parts used for food purposes (seeds and oil) contain even less; and (3) after processing, the THC content is at or close to zero. U.S. and Canadian hemp seed and food manufacturers have in place a voluntary program for certifying low, industry-determined standards in hemp-containing foods. Background information on the TestPledge Program is available at http://www.TestPledge.com . The intent of the program is to assure that consumption of hemp foods will not interfere with workplace drug testing programs or produce undesirable mental or physical health effects.\nOn February 6, 2004, the U.S. Court of Appeals for the Ninth Circuit permanently enjoined the enforcement of the final rule. The court stated that \"DEA's definition of 'THC' contravenes the unambiguously expressed intent of Congress in the CSA and cannot be upheld.\" In late September 2004 the Bush Administration let the final deadline pass without filing an appeal.\nIn January 2017, HIA petitioned the U.S. Court of Appeals for the Ninth Circuit to block DEA's implementation of its December final rule on marijuana extracts, which would designate certain hemp-derived nonpsychotropic products, such as CBD, as a \"marihuana extract\" subject to the CSA. Then, in February, 2017, HIA again petitioned the court alleging that DEA violated the court's 2004 order when it indicated that a North Dakota hemp company would need a DEA registration and would be subject to other requirements before it could ship processed hemp products outside the state, even though these products were in accordance with state law and the 2014 farm bill.\nIn May 2018, DEA issued an internal directive to further clarify the ruling in the 2004 court case. The directive acknowledges that products and materials made from the cannabis plant that fall outside the CSA's definition of marijuana —such as sterilized seeds incapable of germination, oil or cake made from the seeds, mature stalks, and fiber from mature stalks—are exempt from CSA and may be \"sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations.\" Exempt cannabis plant material also includes \"any other compound, manufacture, salt, derivative, mixture, or preparation\" of the above items, despite the presence of cannabinoids. The directive further acknowledges that such exempt products and materials may be imported into the United States without restriction (under the Controlled Substances Import and Export Act, 21 U.S.C. §§951-971) or exported from the United States (\"provided further that it is lawful to import such products under the laws of the country of destination\"). The directive does not address marijuana extracts and resins.\nSome are interpreting the 2018 directive as providing an indication of DEA's position regarding extracts such as CBD from exempt plant materials, including industrial hemp. They claim this could provide an indication that CBD extracted from hemp could be considered exempt from CSA regulation and DEA's jurisdiction. They also acknowledge that some research indicates that meaningful levels of CBD might not be readily extracted from exempt plant materials such as industrial hemp.", "In August 2013, the Department of Justice (DOJ) updated its federal marijuana enforcement policy following 2012 state ballot initiatives in Washington and Colorado that \"legalized, under state law, the possession of small amounts of marijuana and provide for the regulation of marijuana production, processing, and sale.\" The guidance—commonly referred to as the \"Cole memo\"—outlines DOJ's policy, clarifying that \"marijuana remains an illegal drug under the Controlled Substances Act and that federal prosecutors will continue to aggressively enforce this statute.\" DOJ identified eight enforcement areas that federal prosecutors should prioritize:\n1. Preventing the distribution of marijuana to minors, 2. Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels, 3. Preventing the diversion of marijuana from states where it is legal under state law in some form to other states, 4. Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity, 5. Preventing violence and the use of firearms in the cultivation and distribution of marijuana, 6. Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use, 7. Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands, and 8. Preventing marijuana possession or use on federal property.\nAlthough the Cole memo does not specifically address industrial hemp, because DOJ regards all varieties of the cannabis plant as \"marijuana\" and does not distinguish between low- and high-THC varieties, the August 2013 guidance appears to cover industrial hemp production as well. Accordingly, some are interpreting the guidance as allowing states to proceed to implement their laws regulating and authorizing the cultivation of hemp.\nChanges to Colorado's state laws in November 2012 now allow for industrial hemp cultivation. Industrial hemp was reported as being grown in Colorado in 2013. However, growers and state authorities continue to face a number of challenges implementing Colorado's law, including sampling, registration and inspection, seed availability and sourcing, disposition of non-complying plants, and law enforcement concerns, as well as production issues such as hemp agronomics, costly equipment, and limited manufacturing capacity, among other grower and processor concerns. There is also general uncertainty about how federal authorities will respond to production in states where state laws allow cultivation.\nIn November 2012, state authorities in Colorado requested clarification from DOJ about how federal enforcement authorities might respond to its newly enacted laws and forthcoming regulations. Since federal law regards all varieties of the cannabis plant as \"marijuana,\" many continue to regard DOJ's August 2013 guidance as also likely applicable to the regulation of industrial hemp. In November 2013, Colorado officials requested further clarification regarding the cultivation of industrial hemp specifically. It is not known whether either federal agency has responded to the state's requests.\nIn September 2013, Representative Blumenauer sent a letter to Oregon state officials urging them to implement that state's hemp laws. In response, DOJ officials in Oregon reiterated that since \"'industrial hemp' is marijuana, under the CSA, these eight enforcement priorities apply to hemp just as they do for all forms of cannabis\" and that \"federal prosecutors will remain aggressive\" when it comes to protecting these eight priorities. They further indicated that they do not intend to interfere with their state's hemp production so long as it is well-regulated and subject to enforcement. Some regard that correspondence as further indicative of how federal authorities might respond to production in states that permit growing and cultivating hemp.\nIn January 2018, Attorney General Jeff Sessions sent a memorandum to all U.S. Attorneys rescinding previous nationwide guidance specific to marijuana enforcement, including the 2013 Cole Memo. Since both the Cole Memo and the 2018 Sessions memorandum are focused on marijuana enforcement, some maintain that this action does not impact ongoing industrial hemp efforts in some states.", "In response to the enactment of the 2014 farm bill provision allowing for the cultivation of industrial hemp by research institutions and state departments of agriculture, several states made immediate plans to initiate new hemp pilot projects.\nKentucky announced plans for several pilot projects through the Kentucky Department of Agriculture. However, in May 2014, U.S. Customs officials blocked the department's shipment of 250 pounds of imported viable hemp seed from Italy at Louisville International Airport. DEA officials contend that the action was warranted since the \"importation of cannabis seeds continues to be subject to the Controlled Substances Import and Export Act (CSIEA)\" and to the implementing regulations, which restrict persons from importing viable cannabis seed unless they are registered with DEA and have obtained the necessary Schedule I research permit, among other requirements.\nViable seeds are seeds that are alive and have the potential to germinate and develop into normal reproductively mature plants, under appropriate growing conditions. DEA has required that seeds be either heat sterilized or steam sterilized to remove any naturally occurring traces of THC, which makes the seeds mostly incapable of germination. DEA regulates the importation, sterilization, and commercial distribution of hemp seed pursuant to CSIEA.\nTo facilitate release of the hemp seeds, the Kentucky Department of Agriculture filed a lawsuit in U.S. District Court against DEA, DOJ, U.S. Customs and Border Protection, and the U.S. Attorney General. In the lawsuit, the department contends that its efforts to grow industrial hemp are authorized under both state and federal law and that DEA should not seek to impose \"additional requirements, restrictions, and prohibitions\" on hemp production beyond requirements in the 2014 farm bill or otherwise interfere with its delivery of hemp seeds.\nKentucky's seeds were eventually released and planted; however, these actions resulted in uncertainty for U.S. hemp growers. Some in the industry claim that DEA continues to initiate policy changes specifically to block hemp cultivation. In response, Congress enacted additional legislation to stop DEA from intervening in implementation of the 2014 farm bill provision. (For more information, see \" Selected Appropriations Actions \".)\nAlthough hemp production is now allowed in accordance with the requirements under the 2014 farm bill provision, the importation of viable seeds still requires DEA registration according to CSIEA (21 U.S.C. §§951-971). This requirement was reinforced in a 2016 joint \"Statement of Principles\" on industrial hemp from DEA, USDA, and FDA. Purchasing viable seed for germination continues to be a complicated process. It can be difficult to locate a seed source, since there are no U.S. cultivars, and any seed must be sourced internationally. Also, the grower must submit a DEA 357 import form, and any seed source must be pre-screened by DEA and also meet USDA phytosanitary rules. Once the permit is obtained, a copy of the permit is then sent to the seed supplier and may be shipped by air freight. Other requirements include entry approval and ground transport to field sites and field site security.", "In August 2016, DEA issued three major decisions on marijuana and industrial hemp. Regarding marijuana, DEA announced it was rejecting a petition to reschedule marijuana (affirming its continued status as an illegal Schedule I controlled substance). It also announced certain policy changes regarding authorized marijuana cultivators for research. Regarding industrial hemp, DEA issued a joint statement with USDA and FDA on the principles on industrial hemp.\nThe three federal agencies acknowledged that the 2014 farm bill provision regarding industrial hemp \"left open many questions regarding the continuing application of Federal drug control statutes to the growth, cultivation, manufacture, and distribution of industrial hemp products, as well as the extent to which growth by private parties and sale of industrial hemp products are permissible.\" The 2014 farm bill also \"did not remove industrial hemp from the controlled substances list.\" Federal law continues to restrict hemp-related activities that were not specifically legalized under the farm bill provision, which did not amend CSA requirements regarding the manufacture and distribution of \"drug products\" containing controlled substances. The farm bill provision also did not amend the Federal Food, Drug, and Cosmetic Act regarding the approval process for new drug applications.\nThe joint statement restates the 2014 farm bill's requirement that hemp be grown and cultivated \"in accordance with an agricultural pilot program ... established by a State department of agriculture or State agency ... in a State where the production of industrial hemp is otherwise legal under State law.\" It further notes that \"state registration and certification of sites used for growing or cultivating industrial hemp\" were not addressed in the 2014 farm bill and recommends that \"such registration should include the name of the authorized manufacturer, the period of licensure or other time period during which such person is authorized by the State to manufacture industrial hemp, and the location, including Global Positioning System coordinates, where such person is authorized to manufacture industrial hemp.\"\nAmong the noted positive aspects of the joint statement is clarification by the federal agencies about who is able to grow or cultivate industrial hemp as part of a state's agricultural research pilot program and the applicability of USDA research and other programs to support industrial hemp. Other aspects of the joint statement, however, have raised concerns regarding how the federal agencies view the statutory definition of industrial hemp and also possible restrictions on the sale of industrial hemp products and the importation of viable seeds for growing and cultivation. Each of these is discussed in the following sections.\nMany in Congress and in the industry anticipated that the joint statement would clarify DEA's position on industrial hemp, given ongoing uncertainty about that notwithstanding support for hemp cultivation in the 2014 farm bill. The joint statement provides guidance to \"individuals, institutions, and states\" on a number of issues pertaining to the growing and cultivation of industrial hemp. While some in Congress and the U.S. hemp industry are encouraged by parts of the joint statement, they have also expressed concerns about other aspects of the joint statement. A summary of these issues is as follows.\nClarification regarding who can grow/cultivate hemp . The joint statement acknowledges that the 2014 farm bill authorized \"State departments of agriculture, and persons licensed, registered, or otherwise authorized by them\" and \"institutions of higher education or persons employed by or under a production contract or lease with them\" to grow or cultivate industrial hemp as part of an agricultural pilot program in accordance with the 2014 farm bill. This seemingly clears up confusion regarding the potential participation of private farmers licensed or under contract with authorized state departments of agriculture and institutions of higher learning. Clarification regarding USDA research support for hemp . The joint statement clarifies that institutions of higher education and other authorized participants \"may be able to participate in USDA research or other programs to the extent otherwise eligible for participation in those programs.\" This seemingly addresses questions raised in November 2015 by some Members of Congress as part of a letter sent to USDA requesting clarification on the extent to which federal funds may be used to support research on industrial hemp. Confusion regarding the definition of industrial hemp . Some in the hemp industry worry that the joint statement reinterprets the statutory definition of industrial hemp to cover fiber and seed only, excluding flowering tops, which they believe is covered by the farm bill definition. The flowering heads of the plant have the greatest cannabinoid content. They also worry that the joint statement expands upon inherent restrictions to the statutory definition in that it broadly highlights the term THC, which is defined to include \"all isomers, acids, salts, and salts of isomers of tetrahydrocannabinols,\" whereas the statutory definition in the 2014 farm bill specifies delta-9 THC, the dominant psychoactive cannabinoid of cannabis. Some in Congress claim that the executive branch is defining industrial hemp more narrowly than that defined in statute in that it \"drops the 'delta-9' when describing tetrahydrocannabinol\" and \"adds isomers, acids, and salts of isomers of THC to count against the 0.3% THC threshold.\" These Members of Congress have asked that the definition be removed from the guidance. Confusion regarding possible restrictions on commerce . Some in Congress note that the 2014 farm bill defined ''agricultural pilot program'' to mean \"a pilot program to study the growth, cultivation, or marketing of industrial hemp\" (italics added). These Members of Congress have asked for confirmation that \"general commercial activity\" does not prevent any types of sale from occurring from the framework of an approved pilot program. Likewise, the hemp industry remains concerned about the inclusion of language in the joint statement indicating that \"industrial hemp products ... may not be sold in States where such sale is prohibited.\" Broadly speaking \"industrial hemp products\" are already widely marketed, sold, and distributed. Some claim that this restriction on sales is contrary to provisions in both the CSA and the 2014 farm bill. Confusion regarding the transportation and sales of hemp . The joint statement also emphasizes that \"industrial hemp plants and seeds may not be transported across State lines,\" and restates DEA's position that the importation of viable cannabis seeds be carried out by DEA-registered persons, in accordance with CSIEA, seemingly to limit the sale of hemp products only in states with industrial hemp pilot programs. This remains a contentious issue following DEA's blocking of viable hemp seed in 2014. Some in Congress maintain that federal agencies do not have the authority to limit hemp sales or prohibit the transport of plants or seed under the 2014 farm bill.\nThe joint statement's guiding principles are provided in the Appendix B .\nAdditional confusion remains, however, since the joint statement explicitly says it \"does not establish any binding legal requirements,\" further raising questions about whether guidance in the statement could influence future DEA policies and enforcement action regarding industrial hemp cultivation and marketing.", "In April 2018, the Small Business Administration (SBA) prohibited banks from issuing SBA-backed loans to any \"business that grows, produces, processes, distributes or sells products purportedly made from 'hemp' … unless the business can demonstrate that its business activities and products are legal under federal and state law. Examples of legal hemp products include paper, clothing and rope.\" Given the continued uncertainty about the legality of the marketing of industrial hemp products, it may be difficult for SBA to determine if a business's activities and products are legal under federal law, which could restrict hemp businesses from obtaining SBA-backed loans.", "In 1994, President Clinton issued Executive Order 12919, \"National Defense Industrial Resources Preparedness,\" which was intended to strengthen the U.S. industrial and technology base for meeting national defense requirements. The order included hemp among the essential agricultural products that should be stocked for defense preparedness purposes. Some hemp supporters have argued that the executive order gives hemp a renewed value as a strategic crop for national security purposes in line with its role in World War II.\nUSDA has supported research on alternative crops and industrial uses of common commodities since the late 1930s. Some alternative crops have become established in certain parts of the United States—kenaf (for fiber) in Texas, jojoba (for oil) in Arizona and California, and amaranth (for nutritious grain) in the Great Plains states. Many have benefits similar to those ascribed to hemp but are not complicated by having a psychotropic variety within the same species.\nThe Critical Agricultural Materials Act of 1984 ( P.L. 98-284 , 7 U.S.C. §178) supports the supplemental and alternative crops provisions of the 1985 and 1990 omnibus farm acts and other authorities and funds research and development on alternative crops at USDA and state laboratories. In addition, Section 1473D of the National Agricultural Research, Extension, and Teaching Policy Act of 1977 (7 U.S.C. §3319d(c)) authorizes USDA to make competitive grants toward the development of new commercial products derived from natural plant material for industrial, medical, and agricultural applications. To date, these authorities have not been used to develop hemp cultivation and use.\nThe United States is a signatory of the United Nations Single Convention on Narcotic Drugs, 1961. The principal objectives of the convention are to \"limit the possession, use, trade in, distribution, import, export, manufacture and production of drugs exclusively to medical and scientific purposes and to address drug trafficking through international cooperation to deter and discourage drug traffickers.\" The convention requires that each party control cannabis cultivation within its borders. However, Article 28.2 of the convention states, \"This Convention shall not apply to the cultivation of the cannabis plant exclusively for industrial purposes (fibre and seed) or horticultural purposes.\" Thus the convention need not present an impediment to the development of a regulated hemp farming sector in the United States.", "", "Congress has continued to introduce legislation to further advance industrial hemp and address continued perceived obstacles to hemp production in the United States. Specifically, an expanded version of the Industrial Hemp Farming Act—first introduced in the 109 th Congress—was introduced in the 115 th Congress in both the House and Senate ( H.R. 5485 ; S. 2667 ). These bills are further discussed in \" Industrial Hemp Farming Act \". Many of the provisions in these bills are included in the Senate-passed 2018 farm bill ( H.R. 2 ).", "A number of amendments to the House committee bill (Agriculture and Nutrition Act of 2018, H.R. 2 ) were proposed and/or considered but not adopted.\nDuring House committee markup, Representative Comer considered but did not propose an amendment to H.R. 2 that would clarify that federally recognized Indian tribes are eligible to grow hemp in accordance with the conditions specified in the 2014 farm bill; it would have also required USDA to develop guidance on standardized testing procedures for the THC concentration for industrial hemp.\nAmendments regarding hemp were also submitted for consideration by the House Rules Committee but were not made in order and allowed to proceed during the House floor debate on H.R. 2 . One bipartisan proposal submitted by Representatives Massie and Polis proposed to remove industrial hemp from the CSA definition of marihuana . Another proposal submitted by Representatives Comer and Blumenauer, among others, also proposed to remove industrial hemp from the CSA definition and place hemp in the jurisdiction of the USDA as an agricultural commodity. Another amendment proposed by Representative Barr would create a safe harbor for financial institutions that provide services to hemp businesses authorized under the 2014 farm bill. None of these amendments or other provisions regarding industrial hemp are included in H.R. 2 .", "The Senate-passed farm bill (Agriculture and Nutrition Act of 2018, H.R. 2 ) includes a number of provisions regarding industrial hemp within the bill's Horticulture title, Research title, Crop Insurance title, and Miscellaneous title. ( Table 3 ) Many of these provisions originated in the Industrial Hemp Farming Act of 2018 ( S. 2667 ; H.R. 548 ).\nChief among these is a provision that would amend the CSA to exclude from the statutory definition of marijuana industrial hemp, as defined in the 2014 farm bill as containing no more than a 0.3% THC concentration. The Senate farm bill also creates a new hemp program under the Agricultural Marketing Act of 1946 (7 U.S.C. § 1621 et seq. ), expanding the existing statutory definition of hemp and expanding eligibility to other producers and groups, including tribes and territories. States or Indian tribes wanting primary regulatory authority over hemp production would be required to implement a \"plan\" to further monitor and regulate hemp production. Other provisions in the Crop Insurance title would make hemp producers eligible to participate in federal crop insurance programs, while provisions in the Research title of the bill would make hemp production eligible for certain USDA research and development programs.", "The Industrial Hemp Farming Act of 2018 (Comer/H.R. 5485; McConnell/S. 2667) is intended to facilitate the possible commercial cultivation of industrial hemp in the United States. The bills would amend Section 102 of the CSA (21 U.S.C. 802(16)) to exclude \"industrial hemp\" from the statutory definition of marijuana . Industrial hemp would be defined based on its THC content and not a threshold of 0.3% THC. Such a change could remove low-THC hemp from being covered by the CSA as a controlled substance subject to DEA regulation, thus allowing for industrial hemp to be grown and processed under some state laws. The bill could grant authority to any state permitting industrial hemp production and processing to determine whether any such cannabis plants met the limit on THC concentration as set forth in the CSA. In any criminal or civil action or administrative proceeding, the state's determination may be conclusive and binding.\nH.R. 5485 and S. 2667 would repeal the hemp pilot program established in the 2014 farm bill and replace it with a new program as part of a new \"Hemp Production\" subtitle under the Agricultural Marketing Act of 1946 (7 U.S.C. § 1621 et seq. ). The new program expands upon the existing statutory definition to include any part of the Cannabis plant, including \"the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing, or not.\" It would clarify that allowable cultivation includes, in addition to states, tribal governments, the District of Columbia, the Commonwealth of Puerto Rico, and any U.S. territory or possession. Eligibility of \"state department of agriculture\" would be amended to mean the \"agency, commission, or department of a state government responsible for agriculture in the state.\" State or Indian tribes wanting primary regulatory authority over hemp production would be required to implement a \"plan\" under which the state or Indian tribe monitor and regulate hemp production. State and tribal plans would require grower information collection and procedures for testing, disposal (of hemp grown in violation and the law), and compliance. H.R. 5485 and S. 2667 authorize appropriations (\"such sums as are necessary\") for USDA to support and enforce state and tribal plans and further specifies requirements regarding the plan approval process, USDA technical assistance to develop plans, and necessary corrective action for plan violations.\nH.R. 5485 and S. 2667 further address industrial hemp as part of the federal crop insurance program and include hemp as eligible for research funding under the Supplemental and Alternative Crops Act and the Critical Agricultural Materials Act, which are authorized to receive $1 million in annual appropriations through FY2018. Finally, the bills require that USDA conduct a study of USDA agricultural pilot programs, including the hemp pilot program, which would be repealed one year after enactment. USDA would also be required to conduct a study of USDA agricultural pilot programs, including the hemp pilot program in the 2014 farm bill.\nEarlier in the 115 th Congress, Representative Comer introduced a different version of the bill as part of the Industrial Hemp Farming Act of 2017 (H.R.3530). In addition to exempting industrial hemp from definitions of marijuana in CSA, this version of the bill proposed to further expand the statutory definition of hemp to include viable seeds and to clarify that allowable cultivation includes Native American tribes in addition to states. It also includes a new definition for research hemp to include any part or derivative of the C annabis plant (including viable seeds) that has a delta-9 THC concentration of more than 0.3% on a dry weight basis but less than 0.6% on a dry weight basis and that is used in scientific, medical, or industrial research conducted by an institution of higher education or a state department of agriculture. H.R. 3530 would also require that states and tribes, upon the request of the U.S. Attorney General, submit information regarding hemp production, storage, distribution, or use.\nEach of these versions of the Industrial Hemp Farming Act greatly expand upon previous versions of the bill. The Industrial Hemp Farming Act was first introduced in the 109 th Congress by former Representative Ron Paul and was reintroduced in subsequent legislative sessions (H.R. 1831, 112 th Congress; H.R. 1866, 111 th Congress; H.R. 1009, 110 th Congress; H.R. 3037, 109 th Congress). In the 112 th Congress, Senator Ron Wyden introduced S. 3501 in the Senate. Versions of these same bills were also introduced in the 113 th and 114 th Congresses by Representative Massie and Senator Wyden. Some in Congress believe that industrial hemp production could result in economic and employment gains in some states and regions.", "Legislation introduced in both the House and Senate has addressed the potential therapeutic uses of industrial hemp to allow for its production and use as CBD. CBD is a non-psychoactive compound in Cannabis that is low in delta-9 THC. CBD is sold as an extract and marketed as helping to address various ailments, including neuropathic pain, epilepsy, post-traumatic stress disorder, nausea as a result of chemotherapy, and other disorders. Most CBD extracts currently being marketed for certain therapeutic purposes are generally formulated from strains of medical cannabis with THC levels higher than 0.3% but generally less than 1% THC. Some hemp-based CBD products—mostly dietary supplements—have been marketed as being rich in CBD and as having comparable therapeutic uses to CBD extracts. Fraudulent marketing claims by some hemp-based CBD products have resulted in the FDA issuing a series of warning letters to several companies since 2015.\nIn the 115 th Congress, the Therapeutic Hemp Medical Access Act of 2017 (S. 1008) and the Charlotte's Web Medical Access Act of 2017 ( H.R. 2 273) would amend CSA by excluding cannabidiol and cannabidiol-rich plants, defined as having a delta-9 THC concentration of no more than 0.3% on a dry weight basis. Similar versions of these bills were introduced in the 114 th Congress and 113 th Congress. The House and Senate bills are related but are not identical. In addition to removing cannabidiol and cannabidiol-rich plants, as defined, from regulation under CSA, the House bill would further exclude these from being applicable to requirements under the Federal Food, Drug, and Cosmetic Act, which broadly regulates the quality and safety of foods and dietary supplements. This provision is not part of the Senate bill.\nThere is also growing concern that hemp-based CBD products, derived from industrial hemp, are being marketed as being rich in CBD and as having comparable therapeutic uses to CBD extracts. Medicine-grade CBD is not produced or pressed from hemp seeds. Hemp seed oil, marketed as \"hemp oil,\" is made by pressing hemp seeds that contain low levels of CBD (typically less than 25 parts per million). Most of the CBD extracts currently being marketed for certain therapeutic purposes are generally formulated from strains of cannabis with THC levels higher than 0.3% but generally less than 1% THC. Some claim that scientific research shows that meaningful levels of CBD cannot be extracted from hemp. Also, FDA has continued to issue a number of notices and warning letters regarding its concerns about CBD, which is being marketed across a range of therapeutic/medicinal products. For more information, see CRS In Focus IF10391, Potential Use of Industrial Hemp in Cannabidiol Products .\nTo date, FDA has not approved any drug product containing CBD for any indication and has issued warning letters to several companies that market CBD products to treat health conditions for both humans and pets. According to FDA, these products are not \"generally recognized as safe and effective,\" and the companies marketing these products are engaging in illegal interstate commerce. FDA has further determined that products containing CBD cannot be sold as dietary supplements and are excluded from the dietary supplement definition in the Federal Food, Drug, and Cosmetic Act. As such, FDA may consult with its federal and state partners about whether to initiate a federal enforcement action against the manufacturers of CBD products that are marketed as dietary supplements. In June 2015, the Senate Caucus on International Narcotics Control held a hearing on the barriers to research and the potential medical benefits of CBD. (Additional information is provided in the text box below.)\nMany agriculture-based groups continue to advocate for the need for additional research into the possible benefits and uses of industrial hemp-derived CBD. Some states continue to conduct research on the potential uses for industrial hemp-derived CBD.\nIn February 2017, the National Academies of Sciences, Engineering, Medicine (NASEM) published a comprehensive review of existing cannabis research. The study provides a broad set of evidence-based research conclusions on the health effects of cannabis and cannabinoids and provides recommendations to support advancing future research and inform public health decisions. It claims that there is conclusive or substantial evidence that oral cannabinoids are effective antiemetics in the treatment of chemotherapy-induced nausea and vomiting and for improving patient-reported multiple sclerosis spasticity symptoms. Others have also documented possible medical uses of cannabis. The study, however, does not distinguish between cannabinoids from low and high THC strains or between hemp-derived cannabinoids and cannabinoids from other cannabis strains.", "A number of other bills regarding industrial hemp have been introduced in the 115 th Congress. The Industrial Hemp Banking Act ( H.R. 4711 ) would identify hemp production as a legitimate business. It would similarly exempt hemp production from CSA's definition of marijuana and would also prohibit regulators from denying banking services to hemp producers. In addition, the Industrial Hemp Water Rights Act ( H.R. 4164 , S. 1576 ) would prohibit regulators from denying hemp growers access to water—regardless of whether the water is part of a federal water project—if the hemp cultivation is authorized under the laws of the state where it is grown.", "In November 2015, several Members of Congress sent a letter to USDA requesting clarification of the agency's research funds for industrial hemp. This action was in response to questions by a number of state and private research institutions on the extent to which industrial hemp initiatives were eligible for U.S. federal grant awards (both USDA and non-USDA program funds). These questions arose, in part, given mixed messages received by some land grant universities about whether they would qualify for USDA competitive grants to do industrial hemp research and initial indications that they would be denied such support. Some groups feared they could jeopardize eligibility for other grants if they pursued research into industrial hemp.\nIn late 2015, CRS staff attempted to get further clarification on USDA's policy regarding industrial hemp and federal grants and loans to support research of industrial hemp with limited success. Information provided from USDA was not always consistent and often conflicting. According to USDA's National Institute of Food and Agriculture (NIFA), the agency had not awarded any competitive research grants for industrial hemp (as of September 2015). However, subsequent searches of USDA's Current Research Information System (CRIS) database indicate that NIFA formula-funded grants were used at Colorado State University for 2015 under available Hatch Act funding to study hemp cultivation as part of bigger grants about profitability of alternative agriculture in southern Colorado. Other available information, including correspondence between USDA and various congressional staff, suggests that USDA has no record of any application for industrial hemp research being denied. No additional information is available on whether any such applications had been proposed or would or could be approved.\nA USDA memo dating back to December 2014 states that \"NIFA supports\" grants for industrial hemp research so long as that research meets existing state requirements consistent with the requirements in the 2014 farm bill ( P.L. 113-79 , §7606; 7 U.S.C. 5940). However, USDA staff indicated that the December 2014 memo pertains only to what the statutory provision authorizes and does not say anything explicitly about federal funding of industrial hemp research. Although this response did not address the underlying issue regarding federal funding, it likely indicates that researchers working on industrial hemp may carry on with this work at least on their own (according to requirements specified in the 2014 farm bill) without threatening their status and working relationship with USDA.\nOther communication with USDA's Rural Development Agency indicated that the agency's Rural Business-Cooperative Service has initiated conversation with USDA's Office of the General Counsel to review whether its programs could potentially support the industrial hemp industry. There does not appear to be any legal reason why USDA would not be able to provide grant funding for research activities on industrial hemp within the language of the 2014 farm bill provision, and the question remains about whether USDA will fund such applications in the future. Specifically, clarification is needed regarding whether industrial hemp research projects are eligible for USDA competitive grants (e.g., under USDA's Agriculture and Food Research Initiative program) and/or for Hatch Act formula funds, as well as clarification about whether hemp producers are eligible for other types of agricultural support from other USDA agencies (such as loans and grants administered by USDA's Rural Development Agency).\nSome have suggested that perhaps industrial hemp might qualify under certain other USDA grant programs, such as NIFA's Specialty Crop Research Initiative or USDA's Specialty Crop Block Grant Program. However, industrial hemp is not included among the crops that are considered \"specialty crops\" and technically would not qualify for any grant specifically designated for specialty crop producers. Other potential programs include the Organic Transitions Integrated Research Program and the Value-Added Producer Grant Program.\nSome constituent groups have also expressed an interest in applying for other non-USDA grants, such as the Small Business Innovation Research program intended to help certain small businesses conduct research and development and is coordinated by the Small Business Administration. CRS has not contacted other federal agencies aside from USDA.\nSome of the questions raised by Congress's November 2015 letter were addressed in the 2016 joint statement, but some questions remain, which were again posed in a follow-up letter by several Members of Congress. (For additional discussion, see \" 2016 Joint \"Statement of Principles\" on Industrial Hemp \".)", "In addition to industry groups as well as various state commissions and organizations that are actively promoting reintroducing hemp as a commodity crop in the United States, some key agricultural groups also support U.S. policy changes regarding industrial hemp. For example\nIn 2018, the National Association of State Departments of Agriculture (NASDA) sent a letter to Senate Majority Leader Mitch McConnell and Representative James Comer in support of the Hemp Farming Act of 2018 ( S. 2667 / H.R. 5485 ). NASDA claims that the bill addresses \"numerous issues hindering the success of industrial hemp pilot programs allowed under the 2014 farm bill.\" In 2017, the Wisconsin Farm Bureau Federation (WFBF) sent a letter to USDA Secretary Sonny Perdue recommending that the Trump Administration consider hemp to be an agricultural crop. A reported 27 other Farm Bureau presidents supported the initiative. The bipartisan Congressional Cannabis Caucus—launched in February 2017 by Representatives Dana Rohrabacher, Don Young, Earl Blumenauer, and Jared Polis—is focused on policy reforms regarding federal drugs laws and issues regarding legalization in some states. The National Farmers Union (NFU) updated its 2013 farm policy regarding hemp to urge the President, Attorney General, and Congress to direct DEA to \"reclassify industrial hemp as a non-controlled substance and adopt policy to allow American farmers to grow industrial hemp under state law without affecting eligibility for USDA benefits.\" Previously NFU's policy advocated that DEA \"differentiate between industrial hemp and marijuana and adopt policy to allow American farmers to grow industrial hemp under state law without requiring DEA licenses.\" In 2010, NASDA stated it \"supports revisions to the federal rules and regulations authorizing commercial production of industrial hemp\" and has urged USDA, DEA, and the Office of National Drug Control Policy to \"collaboratively develop and adopt an official definition of industrial hemp that comports with definitions currently used by countries producing hemp.\" NASDA also \"urges Congress to statutorily distinguish between industrial hemp and marijuana and to direct DEA to revise its policies to allow USDA to establish a regulatory program that allows the development of domestic industrial hemp production by American farmers and manufacturers.\" NASDA first adopted a policy on industrial hemp in 2002. In 2014, the American Farm Bureau Federation, from efforts led by the Indiana Farm Bureau, endorsed a policy to support the \"production, processing, commercialization, and utilization of industrial hemp\" and reportedly also passed a policy resolution to oppose the \"classification of industrial hemp as a controlled substance.\" Previously, in 1995, the Farm Bureau had passed a resolution supporting \"research into the viability and economic potential of industrial hemp production in the United States ... [and] further recommend that such research includes planting test plots in the United States using modern agricultural techniques.\" Regional farmers' organizations also have policies regarding hemp. For example, the North Dakota Farmers Union, as part of its federal agricultural policy recommendations, has urged \"Congress to legalize the production of industrial hemp.\" The Rocky Mountain Farmers Union has urged \"Congress and the USDA to re-commit and fully fund research into alternative crops and uses for crops\" including industrial hemp. Also, they \"support the decoupling of industrial hemp from the definition of marijuana\" under the CSA and \"demand the President and the Attorney General direct the U.S. Drug Enforcement Agency (DEA) to differentiate between industrial hemp and marijuana and adopt a policy to allow American farmers to grow industrial hemp under state law without requiring DEA licenses\" to \"legalize the production of industrial hemp as an alternative crop for agricultural producers.\" The National Grange voted in 2009 to support \"research, production, processing and marketing of industrial hemp as a viable agricultural activity.\" In California, ongoing efforts to revise the definition of marijuana to exclude \"industrial hemp\" (SB 566) are supported by the state's sheriffs' association. The county farm bureau and two sheriffs' offices supported previous efforts in 2011 to establish a pilot program to grow industrial hemp in selected counties (although the state's governor later vetoed the bill, SB 676). North American Industrial Hemp Council—a coalition of farmers, state legislators, former officials, scientists, merchants, entrepreneurs, and environmentalists—filed a petition in June 2016 asking DEA to \"remove industrial hemp from the federal drug schedules.\"\nDespite support by some, other groups continue to oppose policy changes regarding cannabis. For example, the National Alliance for Health and Safety, as part of Drug Watch International, claims that proposals to reintroduce hemp as an agricultural crop are merely a strategy by \"the international pro-drug lobby to legalize cannabis and other illicit substances.\" The California Narcotic Officers' Association claims that allowing for industrial hemp production would undermine state and federal enforcement efforts to regulate marijuana production, since, they claim, the two crops are not distinguishable through ground or aerial surveillance but would require costly and time-consuming lab work to be conducted. This group also claims that these similarities would create an incentive to use hemp crops to mask illicit marijuana production, since marijuana is such a lucrative cash crop. Concerns about the potential linkages to the growing and use of illegal drugs are also expressed by some parent and community organizations, such as the Drug Free America Foundation and PRIDE.\nGiven DEA's current policy positions and perceived DEA opposition to changing its current policies because of concerns over how to allow for hemp production without undermining the agency's drug enforcement efforts and regulation of the production and distribution of marijuana, hemp proponents say that further policy changes regarding industrial hemp are likely not forthcoming absent congressional legislative action.", "Hemp production in the United States faces a number of obstacles in the foreseeable future, such as U.S. government drug policies and DEA concerns about the ramifications of U.S. commercial hemp production. These concerns are that commercial cultivation could increase the likelihood of covert production of high-THC marijuana, significantly complicating DEA's surveillance and enforcement activities and sending the wrong message to the American public concerning the government's position on drugs. DEA officials and a variety of other observers also express the concern that efforts to legalize hemp—as well as those to legalize medical marijuana—are a front for individuals and organizations whose real aim is to see marijuana decriminalized.\nHemp production in the United States also faces competition from other global suppliers. The world market for hemp products remains relatively small, and China, as the world's largest hemp fiber and seed producer, has had and likely will continue to have major influence on market prices and thus on the year-to-year profits of producers and processors in other countries. Canada's lead start in the North American market for hemp seed and oil would also likely affect the profitability of a start-up industry in the United States.\nNevertheless, the U.S. market for hemp-based products has a highly dedicated and growing demand base, as indicated by recent U.S. market and import data for hemp products and ingredients, as well as market trends for some natural foods and body care products. Given the existence of these small-scale, but profitable, niche markets for a wide array of industrial and consumer products, commercial hemp industry in the United States could provide opportunities as an economically viable alternative crop for some U.S. growers.\nAppendix A. Listing of Selected Hemp Studies\nA Review of Hemp as a Sustainable Agricultural Commodity , Task Force Report by the University of Washington's Henry M. Jackson School of International Studies, 2018. J. H. Cherney and E. Small, \"Industrial Hemp in North America: Production, Politics, and Potential,\" Agronomy , vol. 6, no. 56 (2016). L. Lane et al., Industrial Hemp: Legal, Political/Social and Economic Issues Raised Over Time , University of Arkansas, 2016. University of Kentucky, Economic Considerations for Growing Industrial Hemp: Implications for Kentucky's Farmers and Agricultural Economy , July 2013. C. A. Kolosov, \"Regulation of Industrial Hemp Under the Controlled Substances Act\" UCLA Law Review, vol. 57, no. 237 (October 2009). Manitoba Agriculture, National Industrial Hemp Strategy , March 2008 (prepared for Food and Rural Initiative Agriculture and Agri-Food Canada) . Reason Foundation, \"Illegally Green: Environmental Costs of Hemp Prohibition,\" Policy Study 367, March 2008, http://www.reason.org/ps367.pdf . Agriculture and Agri-Food Canada, Canada's Industrial Hemp Industry , March 2007, http://www.agr.gc.ca/misb/spcrops/sc-cs_e.php?page+hemp-chanvre . Maine Agricultural Center, An Assessment of Industrial Hemp Production in Maine , January 2007. N. Cherrett et al., \"Ecological Footprint and Water Analysis of Cotton, Hemp and Polyester,\" Stockholm Environment Institute, 2005. T. R. Fortenbery and M. Bennett, \"Opportunities for Commercial Hemp Production,\" Applied Economics Perspectives and Policy , vol. 26, no. 1 (2004). E. Small and D. Marcus, \"Hemp: A New Crop with New Uses for North America,\" Trends in New Crops and New Uses , 2002. T. R. Fortenbery and M. Bennett, \"Is Industrial Hemp Worth Further Study in the U.S.? A Survey of the Literature,\" Staff Paper No. 443, July 2001. J. Bowyer, \"Industrial Hemp ( Cannabis sativa L.) as a Papermaking Raw Material in Minnesota: Technical, Economic and Environmental Considerations,\" Department of Wood and Paper Science Report Series, May 2001. K. Hill, N. Boshard-Blackey, and J. Simson, \"Legislative Research Shop: Hemp,\" University of Vermont, April 2000 . USDA, Economic Research Service, Industrial Hemp in the United States: Status and Market Potential , AGES001E, January 2000. M. J. Cochran, T. E. Windham, and B. Moore, \"Feasibility of Industrial Hemp Production in Arkansas,\" University of Arkansas, SP102000, May 2000. D. G. Kraenzel et al., \"Industrial Hemp as an Alternative Crop in North Dakota,\" North Dakota State University, AER 402, July 1998. E. C. Thompson et al., Economic Impact of Industrial Hemp in Kentucky , University of Kentucky, July 1998. D. T. Ehrensing, Feasibility of Industrial Hemp Production in the United States Pacific Northwest , Oregon State University, SB 681, May 1998 .\nAppendix B. Joint DEA/USDA/FDA \"Statement of Principles on Industrial Hemp\"\nAs noted in the joint DEA/USDA/FDA \"Statement of Principles on Industrial Hemp,\" published August 12, 2016, which is excerpted below:\nUSDA, having consulted with and received concurrence from the U.S. Drug Enforcement Administration (DEA) and the U.S. Food and Drug Administration (FDA), therefore, is issuing this statement of principles to inform the public regarding how Federal law applies to activities involving industrial hemp so that individuals, institutions, and States that wish to participate in industrial hemp agricultural pilot programs can do so in accordance with Federal law.\nThe growth and cultivation of industrial hemp may only take place in accordance with an agricultural pilot program to study the growth, cultivation, or marketing of industrial hemp established by a State department of agriculture or State agency responsible for agriculture in a State where the production of industrial hemp is otherwise legal under State law.\nThe State agricultural pilot program must provide for State registration and certification of sites used for growing or cultivating industrial hemp. Although registration and certification is not further defined, it is recommended that such registration should include the name of the authorized manufacturer, the period of licensure or other time period during which such person is authorized by the State to manufacture industrial hemp, and the location, including Global Positioning System coordinates, where such person is authorized to manufacture industrial hemp.\nOnly State departments of agriculture, and persons licensed, registered, or otherwise authorized by them to conduct research under an agricultural pilot program in accordance with section 7606, and institutions of higher education (as defined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)), or persons employed by or under a production contract or lease with them to conduct such research, may grow or cultivate industrial hemp as part of the agricultural pilot program.\nThe term \"industrial hemp\" includes the plant Cannabis sativa L. and any part or derivative of such plant, including seeds of such plant, whether growing or not, that is used exclusively for industrial purposes (fiber and seed) with a tetrahydrocannabinols concentration of not more than 0.3 percent on a dry weight basis. The term \"tetrahydrocannabinols\" includes all isomers, acids, salts, and salts of isomers of tetrahydrocannabinols.\nFor purposes of marketing research by institutions of higher education or State departments of agriculture (including distribution of marketing materials), but not for the purpose of general commercial activity, industrial hemp products may be sold in a State with an agricultural pilot program or among States with agricultural pilot programs but may not be sold in States where such sale is prohibited. Industrial hemp plants and seeds may not be transported across State lines.\nSection 7606 specifically authorized certain entities to \"grow or cultivate\" industrial hemp but did not eliminate the requirement under the Controlled Substances Import and Export Act that the importation of viable cannabis seeds must be carried out by persons registered with the DEA to do so. In addition, any USDA phytosanitary requirements that normally would apply to the importation of plant material will apply to the importation of industrial hemp seed.\nSection 7606 did not amend the Federal Food, Drug, and Cosmetic Act. For example, section 7606 did not alter the approval process for new drug applications, the requirements for the conduct of clinical or nonclinical research, the oversight of marketing claims, or any other authorities of the FDA as they are set forth in that Act.\nThe Federal Government does not construe section 7606 to alter the requirements of the Controlled Substances Act (CSA) that apply to the manufacture, distribution, and dispensing of drug products containing controlled substances. Manufacturers, distributors, dispensers of drug products derived from cannabis plants, as well as those conducting research with such drug products, must continue to adhere to the CSA requirements.\nInstitutions of higher education and other participants authorized to carry out agricultural pilot programs under section 7606 may be able to participate in USDA research or other programs to the extent otherwise eligible for participation in those programs." ], "depth": [ 0, 1, 2, 2, 2, 2, 1, 2, 3, 3, 2, 1, 2, 2, 2, 1, 1, 2, 2, 2, 2, 2, 2, 2, 1, 2, 3, 3, 2, 2, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h2_full h1_full", "h0_full", "h0_full", "", "", "", "", "", "", "", "h2_title h1_title", "", "h2_full h1_full", "h1_full", "h1_full", "h1_title", "", "", "", "h1_full", "", "", "", "h3_title", "h3_full", "", "h3_full", "", "", "", "", "", "h0_full" ] }	{ "question": [ "What is industrial hemp?", "How can hemp be grown?", "Why is the hemp industry largely dependent on imports?", "How did the interest in hemp change in the 1990s?", "What did this prompt the government to do?", "What did the bill entail?", "What is delta-9 tetrahydrocannabinol?", "How has the DEA's role in controlling hemp changed?", "How is industrial hemp restricted?", "What restrictions has the DEA instituted?", "What other guidance is given for industrial hemp?", "How does other guidance support the DEA?", "What legislation has Congress introduced regarding industrial hemp?", "What does the legislation aim to do?", "What recent bills and legislation have been introduced—and in some cases, passed?" ], "summary": [ "Industrial hemp is an agricultural commodity that is cultivated for use in the production of a wide range of products, including foods and beverages, cosmetics and personal care products, nutritional supplements, fabrics and textiles, yarns and spun fibers, paper, construction and insulation materials, and other manufactured goods.", "Hemp can be grown as a fiber, seed, or other dual-purpose crop.", "However, hemp is also from the same species of plant, Cannabis sativa, as marijuana. As a result, production in the United States is restricted due to hemp's association with marijuana, and the U.S. market is largely dependent on imports, both as finished hemp-containing products and as ingredients for use in further processing (mostly from Canada and China).", "In the early 1990s there was a sustained resurgence of interest to allow for commercial hemp cultivation in the United States.", "Several states conducted economic or market studies and initiated or enacted legislation to expand state-level resources and production. Congress made significant changes to federal policies regarding hemp in the 2014 farm bill (Agricultural Act of 2014 (P.L. 113-79, §7606).", "The 2014 farm bill provided that certain research institutions and state departments of agriculture may grow hemp under an agricultural pilot program. The bill further established a statutory definition for industrial hemp as \"the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.\"", "Delta-9 tetrahydrocannabinol is the dominant psychotrophic ingredient in Cannabis sativa.", "In subsequent omnibus appropriations, Congress has blocked the U.S. Drug Enforcement Administration (DEA) and federal law enforcement authorities from interfering with state agencies, hemp growers, and agricultural research. Appropriators have also blocked the U.S. Department of Agriculture (USDA) from prohibiting the transportation, processing, sale, or use of industrial hemp that is grown or cultivated in accordance with the 2014 farm bill provision.", "Despite these efforts, industrial hemp continues to be subject to U.S. drug laws, and growing industrial hemp is restricted. Under current U.S. drug policy, all cannabis varieties—including industrial hemp—are considered Schedule I controlled substances under the Controlled Substances Act (CSA, 21 U.S.C. §§801 et seq.).", "Although hemp production is generally allowed following requirements under the 2014 farm bill, some aspects of production remain subject to DEA oversight, including the importation of viable seeds, which still requires DEA registration according to the Controlled Substances Import and Export Act (21 U.S.C. §§951-971).", "Other guidance from DEA, USDA, and the Food and Drug Administration provides additional clarification regarding federal authorities' position on hemp and its future policies regarding its cultivation and marketing.", "This guidance supports DEA's contention that the commercial sale or interstate transfer of industrial hemp continues to be restricted.", "Congress has continued to introduce legislation to further advance industrial hemp and address these types of concerns in the next farm bill.", "Introduced legislation as part of the Industrial Hemp Farming Act—first introduced in the 109th Congress and greatly expanded over the past few years—seeks to further facilitate hemp production in the United States but would also amend the CSA to specify that the term marijuana does not include industrial hemp.", "An expanded version of this bill was introduced in the 115th Congress in both the House and Senate (H.R. 5485; S. 2667). Many of the provisions in these bills are included in the Senate-passed 2018 farm bill (H.R. 2) that is now being debated in Congress. Similar provisions are not part of the House version of the 2018 farm bill (H.R. 2). Myriad other bills introduced in both the House and the Senate would further amend the CSA and other federal laws to address industrial hemp." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 1, 2, -1, -1, 0, 1, 2, -1, 0, 1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3 ] }
GAO_GAO-14-516	{ "title": [ "Background", "FAA’s Internal Implementation of SMS Continues, While Aviation Industry Segments Are in Various Stages of Voluntary Implementation", "FAA Organizations Continue SMS Implementation", "Although Not Currently Required, Some Aviation Stakeholders Are Voluntarily Implementing SMS", "Commercial Air Carriers", "Design and Manufacturing Firms", "FAA and Stakeholders Cited Rulemaking, Data Issues, and Stakeholder Uncertainty as Key Challenges to Implementing SMS", "FAA Cited Challenges in Completing SMS Rulemaking", "Aviation Stakeholders Cited Uncertainty over FAA Oversight, Implementation Costs, Data Protection Issues, and Final Rule Requirements among Their Key Challenges", "Uncertainty about FAA’s SMS Oversight Plans", "Uncertainty about SMS Implementation Costs", "Concerns about Collecting and Sharing SMS Data", "Uncertainty about Final Rule Requirements", "Safety Risk Management Challenge", "Stakeholders Identified Additional Actions FAA Could Take to Improve SMS Effectiveness and Address Implementation Challenges", "SMS Training for Industry", "SMS Guidance", "Collaboration and Communication", "Conclusions", "Recommendation for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "When fully implemented, SMS provides a continuous approach to managing safety risk, which FAA expects will improve aviation safety. SMS is not an additional safety program that is distinct from existing activities that accomplish an entity’s safety mission, such as quality management, quality assurance, or similar activities. Rather, SMS provides a set of decision-making processes and procedures to plan, organize, direct, and control business activities in a manner that enhances safety and ensures compliance with regulatory standards. According to FAA, the overarching goal of SMS is to improve safety by helping ensure that the outcomes of any management or system activity incorporate informed, risk-based decision making.\nSMS consists of four key components: (1) safety policy, (2) safety risk management, (3) safety assurance, and (4) safety promotion. (See fig.1.) Together, these four components are intended to provide a systematic approach to achieving acceptable risk levels. FAA provides its personnel with guidance on the principles underpinning these components in its official orders and other internal FAA guidance. To the industry, FAA currently provides SMS guidance via advisory circulars, an SMS newsletter, focus groups, and a dedicated page for the SMS program office on the FAA website.\nFAA is undertaking the transition to SMS in coordination with the international aviation community, working with ICAO to adopt applicable global standards for safety management. ICAO first mandated SMS worldwide for air traffic service providers in 2001. ICAO later specified that member states should mandate SMS implementation for airports, air carriers, and others by 2009. FAA began SMS implementation in 2005, but FAA officials informed ICAO that the agency and industry would not be able to meet the 2009 deadline. The United States filed a “difference” with ICAO—indicating that it does not yet completely comply with the standard—with the understanding that implementation is under way and that FAA is in the midst of a rulemaking to require SMS for commercial air carriers and certificated airports. There have been other actions within the United States to encourage SMS implementation. For instance, in 2007, NTSB recommended that FAA require all commercial air carriers to establish an SMS and in 2011 added SMS for all modes of transportation to its Most Wanted List. NTSB identified SMS as one of the most critical changes needed to reduce the number of accidents and save lives.\nFAA’s implementation of SMS will affect how the agency oversees the aviation industry. Historically, FAA oversight of airlines, airports, and other regulated entities has involved oversight of such things as operations and maintenance. Once SMS requirements for industry are in place, FAA will continue this oversight, but will also apply SMS principles to its processes for oversight. Specifically, the agency will provide oversight of the safety management systems of service providers, such as commercial air carriers and certificated airports, to help ensure that they are managing safety within their operations through SMS.\nInternally, FAA has directed the Air Traffic Organization, Airports Organization, Aviation Safety Organization (Aviation Safety), the Office of Commercial Space Transportation, the Next Generation Air Transportation System (NextGen) Office, and the Office of Security and Hazardous Materials Safety to implement SMS. Within Aviation Safety, the Aircraft Certification Service (Aircraft Certification), and the Flight Standards Service (Flight Standards), among others, are also implementing SMS.\nOversight of the aviation industry’s implementation of SMS will be conducted by FAA’s inspector workforce, some of whom have been involved in SMS pilot programs. The inspector workforce includes approximately 4,000 Flight Standards aviation safety inspectors around the country who oversee certificate holders, including commercial air carriers and repair stations, among others. Approximately 950 aircraft certification engineers and inspectors are responsible for overseeing firms that design and manufacture aircraft, aircraft engines, propellers, and other parts and equipment. The nation’s certificated airports are overseen by approximately 40 airport certification inspectors assigned to regional offices.\nIn 2009, FAA issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit comments on establishing a regulatory framework to require SMS for various sectors of the aviation industry, including commercial air carriers, repair stations, and design and manufacturing firms. FAA received public comments on the ANPRM but withdrew it following a 2010 congressional mandate for FAA to issue a rule requiring air carriers to implement SMS. FAA subsequently issued a Notice of Proposed Rulemaking (NPRM) in November 2010 that would require SMS for commercial air carriers. FAA simultaneously developed a proposed rule for certificated airports and issued an NPRM in October 2010 that would also require SMS at those facilities. The status of rulemaking efforts for repair stations and design and manufacturing firms are discussed below.", "", "Five FAA organizations are proceeding with SMS implementation. A sixth organization, Air Traffic, completed implementation in 2010. Figure 2 shows the FAA organizations that are implementing SMS as well as industry segments included in this report that these selected organizations oversee.\nThe Air Traffic Organization completed SMS implementation in 2010 and now uses SMS-based processes to identify hazards, enact mitigations, and assess the extent to which the mitigations are working. Since we last reported on their progress in 2012, the other organizations—Aviation Safety, the Airports Organization, the NextGen Office, and the Office of Commercial Space Transportation—have continued SMS implementation by developing SMS guidance and establishing internal SMS procedures, and an additional organization, the Office of Security and Hazardous Materials Safety has begun SMS implementation.\nAviation Safety—including two of its components, Flight Standards and Aircraft Certification—are developing or updating SMS guidance and plans, according to FAA officials. For example, Flight Standards is developing for an SMS-based oversight system for commercial air carriers.\nThe Airports Organization established procedures for conducting safety risk management for certain airport actions that require FAA approval.\nAt the time of our last report, the NextGen Office and the Office of Commercial Space Transportation were implementing SMS in line with FAA’s strategic goal in its 2009-2013 Flight Plan to implement SMS policy in all appropriate FAA organizations. In May 2013, FAA issued a revised order that directed these two organizations to implement SMS. In addition, an FAA order directed another organization, the Office of Security and Hazardous Materials Safety, to implement SMS. That organization is updating its inspections and investigations manual to be more consistent with SMS principles and is coordinating with other FAA organizations’ SMS efforts to identify hazards in the transport of hazardous materials.", "Voluntary implementation of SMS varies by industry segment, while FAA continues rulemaking to require SMS implementation by commercial air carriers and certificated airports. Beginning in 2007, FAA initiated various pilot projects for commercial air carriers, certificated airports, repair stations, and design and manufacturing firms, among others, to encourage voluntary SMS implementation and to guide rulemaking activities. The pilot projects varied among FAA organizations. The Airports Organization and Aircraft Certification pilot projects were conducted for fixed periods of time, while the Flight Standards pilot project, which began in 2007, is ongoing. Flight Standards officials said that the pilot project for commercial air carriers would end after the final rule is published and that they hope to transition the pilot project for the remaining certificate holders (e.g., repair stations) into a more formal program. Participant selection for the pilots also varied. FAA selected the participants for the Aircraft Certification pilot for design and manufacturing firms, while the Flight Standards and Airports Organization pilot project participants volunteered to participate. The pilot projects are more fully described in forthcoming sections of this report.\nWhile most commercial air carriers—the first industry segment for which SMS implementation will be mandatory—are moving forward with implementation, a small proportion of certificated airports, repair stations, and design and manufacturing firms have begun SMS implementation. For example, less than 1 percent of the more than 4,700 repair stations are currently implementing SMS. These three industry segments, according to FAA officials and industry stakeholders, may be waiting for additional guidance or rules, which may not be finalized for a number of years, if the time frames for finalizing the air carrier and airport SMS rules are any indication.", "Seventy-seven of the 83 U.S. commercial air carriers are at varying levels of SMS implementation as FAA nears completion of the final SMS rule. Flight Standards developed four SMS implementation levels to benchmark the progress of commercial air carriers (see table 1 below for additional details on the Flight Standards SMS implementation levels). In general, Flight Standards officials work with commercial air carriers to determine their SMS implementation level. Flight Standards reports the SMS level for each participating stakeholder in its monthly SMS newsletter. According to the March 2014 SMS newsletter, of the 77 commercial air carriers implementing SMS, the vast majority of them (58) were at SMS level one or two, 10 were at level three, and 9 were at the final continuous improvement level.\nThe Airline Safety and Federal Aviation Administration Extension Act of 2010 stipulated that FAA issue a final SMS rule for commercial air carriers. In November of 2010, FAA published an NPRM that would require all commercial air carriers to implement an SMS that meets the requirements of the new regulation and is acceptable to FAA within 3 years of the effective date of the final rule. According to FAA, it did not meet the statutory deadline of August 1, 2012, to issue the final rule due to the lengthy internal DOT review process and complexity of the required benefit-cost analysis. The DOT Significant Rulemaking Report for June 2014 indicated that FAA anticipates publishing the final rule in September 2014. (See fig. 3.) Commercial air carriers that have already begun to implement SMS must ensure that their efforts comply with the requirements of the final rule.\nWhile FAA’s rulemaking to require SMS at all 545 certificated airports has been delayed, FAA officials estimated that 9 of the nation’s largest certificated airports were voluntarily implementing SMS as of April 2014. Between 2008 and 2012, the Airports Organization conducted three voluntary SMS pilot studies to provide airports opportunities to gain knowledge about SMS and provide feedback to FAA in its rulemaking efforts. The pilot studies also allowed certificated airports to share their SMS implementation practices with other airports. Thirty-one certificated airports of various sizes participated in at least one of the pilot studies. Twenty-one of the 22 airports in the first pilot study and 1 airport that did not participate in any of the pilot studies received a grant to develop an SMS plan. To further encourage SMS implementation, in August 2013, the Airports Organization published guidance that provides some certificated airports access to federal funds for certain SMS activities, including making SMS management software eligible for funding through the Airport Improvement Program. FAA officials indicated that another goal of the guidance was to ensure that airports would be aware of the basic elements required for SMS implementation plans and manuals.\nFAA began the SMS rulemaking process for certificated airports in July 2008 and in October 2010 published an NPRM to require that all certificated airports develop and maintain an SMS that is approved by FAA. According to FAA officials, the nature of the comments received on the NPRM led them to significantly modify the proposed rule, and provide another period for public comment. As a result, in December 2012, FAA announced that it would amend the next scheduled step in the rulemaking process and issue a supplemental notice of proposed rulemaking (SNPRM), which was originally scheduled for publication in December 2013, rather than publish a final rule. FAA is considering changes in the proposed rule’s applicability and to some proposed requirements, including SMS implementation options for various sizes of certificated airports. FAA has not yet issued the SNPRM, but in June 2014 FAA estimated that the SNPRM would be published for public comment in October 2014. With FAA’s decision to issue an SNPRM, it is likely that required SMS implementation for certificated airports will not occur for some time. Figure 4 summarizes key dates related to SMS rulemaking for certificated airports, as indicated in the DOT Significant Rulemaking Report for June 2014.\nFew repair stations are currently implementing SMS, and FAA has not yet determined if it will conduct rulemaking to require SMS at repair stations. As of March 2014, just 15 repair stations (of more than 4,700) were implementing SMS through the Flight Standards SMS pilot project, according to an FAA newsletter. As it does with air carriers, Flight Standards uses the four SMS implementation levels to benchmark and determine the progress of repair station SMS implementation. Thirteen were at SMS level one or two. Our interviews with 5 repair stations that participated in the pilot program suggested that there may be fewer than 14 repair stations currently implementing SMS because representatives we interviewed from 4 of the repair stations indicated that they had either ceased or never actually initiated their SMS efforts. Among the reasons these repair station representatives cited for not moving forward included a lack of FAA support. For example, representatives from one repair station told us that FAA did not respond to their questions on SMS policy changes and did not provide feedback on the gap analysis they performed. FAA officials indicated that there are reasons that more repair stations may want to implement SMS. Flight Standards officials said that once the commercial air carrier SMS rule is finalized, repair stations might want to implement their own SMS so that it could be recognized by the commercial air carriers they may contract with. A senior FAA official noted that because the commercial air carrier SMS rule will include identifying risks posed by repair stations, it would have an impact on repair station operations. Additionally, as other countries complete SMS rulemaking, some repair stations may want to implement SMS for international business reasons.", "Several design and manufacturing firms were implementing SMS as of April 2014, while an FAA rulemaking committee studies SMS incorporation into the design and manufacturing environment of approximately 3,000 firms. Aircraft Certification conducted an SMS pilot project for design and manufacturing firms from 2010 to 2012 with 11 participants. The participants were selected to represent the diversity of the industry in terms of size and types of products designed and/or manufactured. According to an FAA official, approximately 6 pilot project participants were continuing SMS implementation as of April 2014. In our discussions with several design and manufacturing firms that participated in the pilot, we found that 2—Honeywell and Boeing—were planning to complete SMS implementation in 2015. Honeywell representatives indicated that they expect to complete SMS implementation by mid-2015. Boeing representatives said their company was implementing an SMS as defined to ICAO standards and also expect to complete SMS implementation by mid-2015.\nIn October 2012, FAA chartered a 2-year aviation rulemaking committee (ARC) to, among other things, study SMS incorporation into the design and manufacturing firm environment. According to a January 2014 FAA plan, once the committee has completed its work, FAA will begin a rulemaking process that will result in a change to the current rule for certificating design and manufacturing firms. The plan anticipates the release of an NPRM by January 2016 and publication of a revised final rule by June 2017 to require, among other things, design and manufacturing firms to implement SMS. However, an FAA official stated in April 2014 that FAA had not yet determined when an SMS requirement might be proposed for design and manufacturing firms.", "", "FAA officials stated that a primary challenge in developing SMS rules for commercial air carriers and certificated airports is developing the benefit- cost analyses. FAA officials explained that estimating the expected benefits for SMS rules for air carriers and airports relies on analysis of the economic cost of past accidents that might not have occurred had SMS been in place. However, determining which past accidents might not have occurred based on SMS implementation either by air carriers or airports or both is complex and somewhat subjective, and this determination can be affected by other safety improvements that have occurred in recent years or that are being proposed. For example, if subsequent to a particular accident, some other safety improvements have been implemented that would have reduced its likelihood, only a portion of the value of the damage and harm related to that accident can be included in the current benefit calculation for future SMS since the likelihood of the same accident occurring has already been somewhat mitigated. Additionally, an airport industry trade organization expressed concerns in its public comments on the airport NPRM that the proposed rule incorrectly assumed that certain accidents would be mitigated by an airport SMS because those occurrences happened on airport grounds but in areas controlled by air carriers. The trade organization reviewed 53 of the 89 accidents included in the FAA analysis. In the trade organization’s view, 37 of these 53 accidents had little or limited connection to safety actions that an airport might take within its SMS. The likelihood of the accident or incident occurring could therefore be mitigated by the air carrier’s SMS implementation. Some accidents might also be avoided based on joint implementation of SMS systems by both the air carriers and airports. In such cases, expected benefits have to be apportioned across the benefit-cost analyses of the two separate SMS systems—that is, the SMS for air carriers and the SMS for airports—otherwise expected benefits would be double counted. In addition, a number of comments on the proposed rules for both the air carrier and airports questioned the estimated costs imposed on aviation stakeholders related to the implementation of the SMS systems. FAA, as part of its rulemaking process, revisited the benefit-cost analysis after reviewing public comments on the proposed rules.\nAnother challenge FAA faces in implementing SMS rules is planning for how data collected for proactive safety efforts will be used. Over the years, we have identified numerous challenges related to FAA data and made a number of recommendations, some of which FAA has addressed, to improve the use of data that FAA collects. One recommendation of particular significance to SMS implementation, however, has yet to be fully implemented. In 2010, we recommended that FAA develop a comprehensive plan that addresses how data fits into FAA’s implementation of a proactive approach to safety oversight. We indicated that the plan should fully describe the relevant data challenges, analytical approaches to be used, staffing requirements, and the efforts to address them. Because SMS relies on data for maximum benefit, we concluded that a comprehensive data plan by FAA would help expand its capability to improve aviation oversight. DOT concurred with this recommendation, and although FAA has taken actions such as implementing data quality controls consistent with our standards for data quality, it has not yet completed the recommended plan. For example, it has not outlined how it will analyze or use data gathered under SMS, assessed the staffing requirements it will need to conduct the data analysis, and indicated a timeline to complete a plan. GAO believes this recommendation remains valid.", "SMS implementation challenges have been identified during FAA’s SMS pilot projects and the rulemaking processes for commercial air carriers and certificated airports. We also identified some of these challenges in our prior SMS work. We selected five frequently cited challenges to discuss with aviation stakeholders: data sharing and protection, resource constraints, implementation costs, FAA oversight, and collaboration with other aviation stakeholders. Our discussions with 20 selected aviation stakeholders that participated in at least one FAA SMS pilot project confirmed that these challenges still exist for some stakeholders. Based on these discussions, we found that a majority of the selected stakeholders identified uncertainties about FAA’s oversight plans (17 stakeholders); uncertainties about SMS implementation costs (14 stakeholders); and data protection (16 stakeholders) as challenges. In addition, we found that uncertainty about the FAA’s final rule requirements raised some additional concerns with the stakeholders we interviewed, and half of the stakeholders said that of the four SMS components, the safety risk management is the most challenging to implement because of the time and analyses required to identify and mitigate risks.", "Seventeen stakeholders identified their uncertainty about FAA’s plans and preparation for oversight of industry’s SMS implementation as a challenge, with 12 identifying it as a great or very great challenge. Specifically, they reported a lack of information about FAA’s intended oversight plans, training for FAA inspectors responsible for oversight, and the potential for inconsistent regulatory interpretation because FAA has not shared that information with stakeholders. Just as the move to SMS will change how stakeholders manage risk, FAA’s oversight approach will also need to undergo some changes. (See table 2.) According to FAA, while its inspectors will continue to check for compliance with safety regulations and retain enforcement authority, oversight will also include reviewing the SMS guidance and records and ensuring that processes for identifying and mitigating risks are being carried out.\nInternal control standards, an FAA rulemaking committee, and the ICAO Safety Management Manual all state the need to establish plans to ensure that goals and objectives are met. Additionally, we have previously found that communicating internal control efforts on a timely basis to internal and external stakeholders, such as FAA inspectors and aviation industry stakeholders, helps ensure that effective oversight can take place. A 2009 SMS aviation rulemaking committee recommended that FAA ensure that sufficient planning, policy and guidance, and workforce training are in place prior to SMS implementation to accommodate efficient, timely, objective and consistent oversight. Internal control standards also state that personnel should be provided with the right training and tools to perform their duties, and the ICAO Safety Management Manual notes the significance of training to successful SMS implementation and indicates that priority for training must be given to personnel involved in implementation or oversight of SMS. While acknowledging that its oversight role will be changing, FAA has not yet completed plans for overseeing industry’s implementation of SMS, including plans to develop guidance and train inspectors about their SMS oversight functions and responsibilities. Nine of the aviation industry stakeholders and three industry trade groups we interviewed expressed concerns that FAA inspectors will not be prepared to oversee industry implementation of SMS. These concerns related primarily to a lack of SMS training for FAA inspectors. FAA officials told us that they plan to finalize SMS rules before addressing oversight issues.\nBased on the NPRM, commercial air carriers would have 3 years after the effective date of the final rule to comply with SMS implementation requirements. When the final rule for commercial air carriers becomes effective, FAA inspectors will assume oversight responsibility to ensure that commercial air carriers comply with the final rule. Included with this responsibility is approving commercial air carriers’ SMS plans. According to Flight Standards data, as of November 2013, over 2,700 of approximately 3,900 of their inspectors had completed initial training in SMS activities. This includes inspectors who oversee commercial air carriers. However, even though the publication of the final SMS rule for air carriers is expected before the end of the year—currently planned for September 2014—Flight Standards has not yet established guidance for inspectors for overseeing commercial air carriers’ implementation of SMS or updated its inspector training program to incorporate such guidance. In addition, even though a large number of inspectors have received initial SMS training, stakeholders remain concerned about inspectors’ knowledge of SMS as well as the potential for inconsistent interpretation of SMS requirements.\nAt the same time, the 77 commercial air carriers that have been voluntarily implementing SMS will need to review their SMS to ensure compliance with the final rule and may request FAA guidance during that process to determine whether and what modifications need to be made. Given that most commercial air carriers already have started implementing SMS, the demand for inspector guidance or assistance may come quickly. For example, inspectors might be asked to review a commercial air carrier’s SMS to ensure that all required components are included. Without taking proactive preparations for oversight before requiring SMS, FAA could find itself with oversight responsibilities for which it is not fully prepared. Consequently, the intended benefits of implementing this proactive approach to managing risk could be limited.\nFor other industry segments, notably airports and design and manufacturing firms, that are likely to be next to face an SMS requirement, FAA has taken initial steps to train inspectors working in those areas. In 2008, the Airports Organization provided 3 days of basic SMS instruction to airport safety inspectors during the organization’s annual recurrent training. Officials in the Airports Organization acknowledged that, should FAA finalize an SMS rule for certificated airports, up-to-date training will need to be developed and delivered to the approximately 40 airport safety inspectors, including training in detailed inspection procedures for oversight of an airport’s SMS. Likewise, Aircraft Certification plans for some of its staff to review the Flight Standards initial SMS training course to determine what type of SMS training is necessary for some of its estimated 950 aircraft certification engineers and inspectors.\nIn addition to training, six aviation stakeholders we interviewed expressed concerns about potentially inconsistent regulatory and other interpretations by FAA inspectors. This concern was identified by smaller stakeholders we interviewed as well as those that hold multiple certificates overseen by different FAA organizations. For example, one stakeholder we interviewed indicated that the company holds certificates for multiple facilities in multiple FAA districts, and is concerned that inspectors from different districts may have different interpretations of the SMS rules once they are implemented. We found in 2010 that ensuring consistency in regulatory interpretations has been a long-standing issue for FAA. This was also identified in the SMS ARC final report as an issue that FAA should address prior to SMS implementation. In 2012, FAA formed another aviation rulemaking committee to address consistency in regulatory interpretation by Flight Standards and Aircraft Certification. The committee made six recommendations to improve the consistency of regulatory interpretation and improve communication with industry. In July 2013, FAA provided a preliminary implementation plan to address the recommendations and indicated a detailed implementation plan with milestones would be developed, but provided no time frames for when that detailed plan would be released.\nSimilarly, two stakeholders that operate both domestically and overseas expressed concerns about whether FAA’s SMS regulations will be consistent with the ICAO framework that the regulations are designed to meet and harmonized with the SMS requirements of other countries. These stakeholders are concerned that potential inconsistencies could pose problems if different standards exist in different countries. For example, one repair station with overseas operations we spoke to said that any SMS they may be required to implement to meet FAA regulations must also comply with the SMS requirements in other countries where this repair station operates. The need for international acceptance of a service provider’s SMS was also identified as an issue for FAA to address in the SMS ARC’s final report in 2010.", "Aviation stakeholders we interviewed largely had not conducted cost assessments of their SMS efforts (only 5 of 20 had done so), and the difficulty in assessing these costs could present a challenge to those considering voluntary implementation of SMS. Fourteen of the 20 stakeholders told us that identifying and assessing SMS costs was a challenge. Further complicating cost estimates, three stakeholders indicated that implementation costs are spread throughout the organization and that isolating those specifically related to SMS would be difficult. For example, one stakeholder indicated that because the computer systems it purchased to support SMS also support other operational objectives, it has not attempted to separate out SMS costs. In addition, seven stakeholders said that the absence of a final rule specifying SMS requirements made assessing costs difficult.\nThough stakeholders we spoke with were generally unable to determine the cost of implementing SMS, they were able to identify some types of related expenditures. We asked each of them about specific costs related to SMS implementation, and they reported incurring the following types of costs:\n14 trained employees on SMS or SMS concepts,\n10 incurred recordkeeping costs,\n10 purchased computer systems, and\n7 hired new employees.\nOther costs identified by stakeholders included those related to safety promotion and mitigating hazards identified through SMS implementation.", "Industry stakeholders we spoke with had concerns about sharing and protecting their safety data; 16 of the 20 stakeholders we interviewed identified this as a challenge, with 7 identifying this challenge as great or very great. In March 2010, the SMS ARC final report identified this as an issue and recommended that prior to the promulgation of an SMS rule, protections be put in place to ensure that safety information and proprietary data are protected from disclosure and use for other purposes, such as enforcement actions.\nThe 2012 FAA Modernization and Reform Act (the 2012 Act) included a provision that placed a limitation on the disclosure of safety information under the federal Freedom of Information Act (FOIA) for information gathered for the purposes of developing and implementing an SMS. However, information provided by or to publicly owned airports is also subject to state FOIA laws, which are not covered under the protections in the 2012 Act. Commercial air carriers, repair stations, and design and manufacturing firms are privately owned and not directly subject to state FOIA laws. However, any data airports collect and any data shared with airports could, according to FAA officials and industry experts, be subject to state FOIA laws, because most certificated airports in the U.S. are owned by a public entity such as a state, city, port, or other local or regional government body. According to officials in the Airports Organization, a federal legislative resolution to override state laws is not a feasible option. These officials reported that in some locations, airports have begun to work with state legislative bodies to address the issue of data protection and disclosure.\nWithout legal protections to prevent data disclosure, stakeholders told us they feel at risk in a variety of potential scenarios related to SMS implementation.\nLitigation for damage (real or perceived) caused by incidents disclosed through SMS—Eight stakeholders we spoke with, as well as the 2010 SMS ARC, indicated that protections are needed not only to prevent the disclosure of safety data through the state FOIA process, but also from disclosure as part of litigation. For example, a certificated airport must meet the regulatory requirements of 14 C.F.R. Part 139. One standard included in Part 139 is that holes in airport pavement must not exceed 3 inches in depth. An airport representative we met with indicated that if a hole less than 3 inches deep is noted through a reporting system implemented under SMS, the airport may postpone that repair until a later time as it is within the maximum depth allowed under the regulations and the risk is acceptable. Additionally, it would not likely negatively impact the operations of a large aircraft on the runway. However, it could pose a hazard for smaller general aviation aircraft. If the airport does not make that repair and the hole factors into an accident involving a general aviation aircraft, the extent of the airport’s responsibility and legal liability is uncertain and may become the subject of a lawsuit. Because the intent of SMS is to correct hazardous conditions before an accident occurs, stakeholders want protections that address their vulnerability to potential litigation.\nMisinterpretation of safety data by a third party—If safety data is released to the public under a state FOIA, the aviation industry is exposed to potential misinterpretation, misuse, and further dissemination of the data by third parties. For example, one stakeholder expressed concern that safety data could be obtained, reviewed, analyzed, or disseminated by a third party without the proper context, including how and why the data were collected and the limitations of their use. Without the proper context, this stakeholder stated that dissemination would lead to misinterpretation, which may then be further disseminated by others such as policy makers or the media.\nEnforcement actions by FAA or other regulatory bodies—As we discussed earlier, the safety risk management component of SMS includes systems that allow individuals to identify potential safety hazards, assess the risks arising from those hazards, and develop mitigation plans to reduce or eliminate those risks. ICAO guidance indicates that in an SMS environment, procedures should be in place to ensure information obtained under SMS will not be used for enforcement actions. However, four stakeholders expressed concern that data about potential hazards could be used beyond SMS. For example, a repair station’s SMS would address identified hazards and, if necessary, develop a mitigation plan to address those hazards. However, if an identified hazard also constitutes a regulatory violation, the company might be subject to FAA enforcement action. The SMS ARC recommended in 2010 that FAA should establish a policy or regulation that provides limits on enforcement actions applicable to information that is identified or produced by SMS. Currently, FAA foregoes civil penalty actions when violations are promptly disclosed to FAA under a voluntary disclosure program, subject to some limitations. FAA believes that the open sharing of apparent violations and a cooperative approach to solving problems will enhance and promote aviation safety. Current FAA policy covers commercial air carriers, repair stations, and design and manufacturing firms, but not certificated airports. It is unclear if FAA will extend this coverage to information provided as part of SMS efforts not currently covered.\nIn 2012, we also found the protection of data to be a concern and recommended that FAA consider strategies to address concerns that may adversely affect data collection and data sharing—essential to realizing the benefits of SMS. FAA began discussions with airports and airport associations in 2013 to determine what type of SMS data should be considered for protection. FAA also received and considered comments from airports and airport organizations about data collection, protection, and sharing in response to the NPRM for airports. We concluded in our September 2012 report that the success of SMS relies heavily on the sharing of safety data and that without appropriate protections, the willingness of the aviation industry to share safety data will likely be jeopardized. Although protections exist for safety data from commercial air carriers, FAA has determined that a similar legislative approach is not feasible for data from certificated airports. However, according to FAA, some airports are working to address data protections under state laws through outreach to state agencies and legislators.", "Four of the stakeholders we spoke with felt that delays in the rulemaking process were detrimental to their implementation of SMS while others were confident that their SMS implementation would meet forthcoming requirements. Representatives from two industry stakeholders we spoke with told us that they did not want to move forward in implementing SMS until rulemaking is complete, largely because they first want to know what the requirements will be. They explained that they were concerned about the time and resources required to rework the SMS should it not meet the final rule requirements.\nFourteen of the stakeholders we interviewed were concerned that the SMS requirement would not be scalable and flexible, that is, one which is sufficient to apply to a broad range of organizations from small operators to large ones with multiple facilities and certifications. Some of the concerns were based on the stakeholders’ views that FAA tends to fashion one-size-fits-all regulations or regulations that focus on one subset of a stakeholder group. For example, stakeholders cited a concern that FAA will establish regulatory requirements that are achievable for larger operators but may require more significant efforts by small operators. The NPRM for the commercial air carrier SMS requirement states that the proposed regulation is designed to be performance-based. FAA explained that because the regulation would be performance-based, it would allow commercial air carriers to comply through a variety of methods (suggesting flexibility) and to accommodate a variety of business sizes and models (suggesting scalability). The NPRM for the SMS requirement at certificated airports states that FAA envisions SMS as an adaptable and scalable system. FAA explained that an SMS could be developed by an organization to meet its unique operating environment. Accordingly, FAA stated in the NPRM that it would prescribe only the general framework for an SMS.\nSeveral stakeholders also expressed concerns about how SMS regulations would affect their current efforts to improve safety. For example, one design and manufacturing firm we spoke with reported that it began using system safety techniques similar to those used in SMS in the 1990s. Although this stakeholder participated in an FAA pilot, the firm has developed an SMS approach in house based on the ICAO model. Fourteen stakeholders reported that prior to implementing SMS they had undertaken their own proactive safety or quality assurance efforts. FAA’s SMS ARC recommended in 2010 that SMS regulations allow for the incorporation of existing safety management efforts already in place in order to prevent duplicative safety efforts. FAA indicated that such programs could be used to build an operational SMS. Other stakeholders expressed concern that the content of the final rule may require them to adopt practices that may not improve safety in their company while imposing additional burdens. For example, one stakeholder hoped it would not be required to document every hazard identified and mitigated, stating that such documentation did not necessarily improve safety.", "We also asked all 20 industry stakeholders which of the four components of SMS would be the most challenging to implement, and more stakeholders (10) cited safety risk management than any other component. As previously discussed, safety risk management is designed to examine a company’s operational functions and operational environment to identify hazards and analyze associated risks. The intent of this process is to focus on the areas of greatest risk from a safety perspective and on mitigation, taking into account such factors as complexity and operational scope. Specifically, stakeholders indicated that conducting a risk analysis can be time consuming. A robust analysis includes identifying a wide range of risks, and determining which would require mitigation—a process that some stakeholders were concerned may keep stakeholder staff away from other duties. A number of stakeholders also noted the difficulty in identifying risks in some cases, including industry changes that may have an impact on risk.", "Although 12 of the 20 aviation stakeholders we interviewed are continuing with their SMS implementation, they identified actions FAA could take to improve SMS effectiveness and help address the challenges of implementation. These suggestions target SMS training, guidance, and collaboration and communication.", "Although we did not ask specifically about any internal training programs developed by the 20 aviation stakeholders we spoke with, four stakeholders cited some difficulties with obtaining needed SMS training for their staff, including allocating time and resources for the training and finding training that was specific to their segment of the industry. Further, a 2012 study by the Transportation Research Board of FAA’s airport pilot studies found that pilot participants identified time restrictions and funding as obstacles to developing an SMS training plan for airport personnel. ICAO recommends that civil aviation authorities, like FAA, facilitate the SMS education or training of its stakeholders where feasible or appropriate. To that end, stakeholders suggested an action that FAA could take to mitigate stakeholder difficulties in this area. Specifically, two stakeholders we interviewed felt that allowing their staffs to attend the same training as FAA personnel could be beneficial in addressing differences in regulatory interpretation and for increasing industry’s understanding of FAA’s definitions and concepts as they relate to SMS. According to FAA officials, they have considered the training needs of industry stakeholders and provided some training through the pilot projects.", "Although, as required by ICAO, FAA has provided, as well as updated, guidance to help stakeholders to implement SMS, some stakeholders saw a need for additional guidance and updates. For example, one stakeholder noted that FAA should create one risk matrix to be used by all organizations. Two stakeholders suggested standardizing SMS definitions across FAA. Another stakeholder suggested that FAA create a single document on the SMS framework. FAA has already responded to these concerns with an April 2012 order designed to establish common language standards for some SMS terminology; the order also provides a single risk matrix for the agency. Stakeholders also suggested that FAA develop additional guidance to aid them in documenting work processes, assessing organizational hazards, and estimating SMS costs. FAA plans to disseminate additional SMS guidance for air carriers and airports when final rules for these industry segments are published. The final rule for air carriers is expected to be published in September 2014.", "Fourteen of the 20 stakeholder representatives we interviewed were pleased with their collaboration and communication with FAA during the pilot projects; six stakeholders, however, noted that FAA could take additional actions to improve collaboration and communication in line with ICAO’s guidance for SMS. This guidance recommends establishing an appropriate communication platform to facilitate SMS implementation, particularly for SMS requirements and guidance material. FAA has used numerous methods to communicate about and encourage collaboration regarding SMS. These methods include the SMS newsletter, SMS focus groups, participation in the Safety Management International Collaboration Group, and the various SMS pilot projects. However, some stakeholders suggested that additional opportunities exist for the agency to share lessons learned. For example, one stakeholder was not aware of any FAA communications on its progress regarding the data protection and sharing issue, and three others thought that FAA needed to encourage the industry to share lessons learned through existing forums. Two stakeholders suggested using the Commercial Aviation Safety Team as an example of, and the Aviation Safety Information Analysis and Sharing system as a potential tool for, improved SMS collaboration between FAA and commercial air carriers. Two stakeholders also recommended broadening current FAA collaboration and communication efforts by opening membership in SMS focus groups and other working groups to additional industry members, such as foreign air carriers; increasing the number of conferences and meetings where information-sharing can take place; and increasing FAA attendance at these forums. The Airports Organization noted that it continually updates its SMS website, and Flight Standards indicated that it is allowing its most significant forum with the aviation industry, InfoShare, to focus more on SMS implementation and management.", "Maintaining a high level of safety in the U.S. aviation industry is a shared responsibility among FAA, air carriers, airports, and other stakeholders. FAA continues to implement SMS internally, in accordance with ICAO requirements, and industry stakeholders such as commercial airlines, certificated airports and others have begun to voluntarily adopt SMS in advance of regulations requiring its implementation. The successful implementation of SMS, with its proactive, risk-based approach to maintaining aviation safety, could help ensure the continued safety of the U.S. aviation system. However, the lack of a comprehensive plan for using data, which we recommended in 2010, may limit the effectiveness of SMS once it is implemented. Although FAA has taken steps to implement data quality controls that meet our standards, it has not disclosed its plans for using data collected or to ensure that it has the requisite staffing to make use of the data to be collected from commercial air carriers, certificated airports, and others. We continue to believe that the success of SMS relies on data for maximum benefit and that such a data plan will strengthen FAA’s capability to improve aviation oversight. In addition, the SMS ARC recommended in March 2010 that, among other things, FAA must ensure sufficient planning, guidance, and workforce training are in place prior to SMS implementation. Without providing the necessary training and guidance to its inspector workforce, FAA may not be adequately prepared to ensure the benefits of SMS as industry sectors are required to implement it. Although FAA continues to encourage voluntary implementation of SMS, it also must be prepared to exercise its oversight functions, once final rules requiring SMS implementation are in place, to ensure that industry is developing and utilizing processes to identify, document, and mitigate safety risks. This includes providing clarification and guidance to air carriers, airports and others as they develop their own SMS’s once final rules for each industry segment are in place.", "To maximize the effectiveness and potential benefits of SMS implementation, we recommend that the Secretary of Transportation direct the FAA Administrator to take the following action:\nDevelop a plan to provide oversight of industry implementation of SMS, a plan that includes providing guidance and training to the relevant FAA inspectors by the time final SMS rules for industry sectors (commercial air carriers, certificated airports, repair stations, design and manufacturing firms) are published.", "We provided DOT with a draft of this report for review and comment. DOT provided technical corrections and clarifications, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Transportation, the FAA Administrator, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or any of your staff members have any questions about this report, please contact me on (202) 512-2834 or at dillinghamg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II.", "Our objective was to review the implementation of safety management systems (SMS) in the U.S. aviation industry and provide an update on SMS implementation within the Federal Aviation Administration (FAA). To do so, we addressed the following questions: 1. What is the status of SMS implementation within FAA and for key segments of the aviation industry, including certificated airports, commercial air carriers, repair stations, and design and manufacturing firms? 2. What are the key challenges FAA and the aviation industry face in implementing SMS? 3. What additional actions do aviation stakeholders believe FAA could take to improve SMS implementation and potential effectiveness?\nTo assess the status of SMS implementation within FAA and for key segments of the aviation industry, we reviewed FAA orders and advisory circulars on SMS and reports on its SMS pilot projects for commercial air carriers, certificated airports, repair stations, and design and manufacturing firms and from the SMS rulemaking projects for certificated airports and commercial air carriers. We also reviewed FAA information on industry SMS implementation status. In addition, we interviewed FAA officials and industry trade group representatives. To update the status of FAA’s implementation of SMS, we reviewed FAA guidance, implementation plans, and other documents published or revised since our 2012 report and interviewed FAA officials and trade group representatives.\nTo determine the key challenges FAA and the aviation industry face in implementing SMS as well as additional actions FAA and other stakeholders may take to improve the implementation and potential effectiveness of SMS, we interviewed officials from FAA, FAA employee, and industry groups. To obtain an international perspective on the challenges and additional actions, we interviewed representatives from foreign aviation authorities, specifically the European Aviation Safety Agency, Transport Canada, and the Civil Aviation Safety Authority of Australia. In addition, we also interviewed two Canadian airlines and one Canadian airport that have implemented SMS. Table 3 lists industry and international interviewees.\nTo obtain the industry stakeholder perspective for each of our objectives, we collected and analyzed information through structured interviews of a total of 20 industry stakeholders—5 airlines, 5 airports, 5 repair stations, and 5 design and manufacturing firms—that participated in FAA’s SMS pilot projects. We selected the certificated airports based on their hub size, geographic location, and whether we interviewed them for our prior study. We did not include certificated airports that we interviewed from that study. We chose the commercial air carriers based on carrier type (mainline or regional; cargo or charter), the level of SMS implementation they had reached by the time of our interview, and whether we interviewed them for the prior study; two of the air carriers we selected were interviewed for our 2012 study. For the repair stations, we choose five firms based on level of SMS implementation and the aircraft category (e.g., transport, commuter, or acrobatic) to which they provide services. We chose this selection factor as a result of research completed by the Center for Aviation Research, which found that SMS compliance for repair stations could be based on aircraft category. For design and manufacturing firms, we chose five firms based on the extent of SMS implementation, recommendations from industry stakeholders, and types of products they design or manufacture, or both. We conducted all stakeholder interviews with a standardized data collection instrument to maintain consistency across the interviews. To ensure that our interview questions were clear and reliable, we conducted two pretests with knowledgeable individuals and refined the interview questions based on those results. Because these 20 stakeholders comprise a non- representative sample, the results from these interviews cannot be projected to the universe of these industry segments. Table 4 lists these selected industry stakeholders.\nWe conducted this performance audit from May 2013 to June 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions, based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "In addition to the contact named above, Heather MacLeod (Assistant Director), Amy Abramowitz, James Geibel, David Hooper, Christopher Jones, Delwen Jones, Brooke Leary, Josh Ormond, Pamela Vines, and Elizabeth Wood made key contributions to this report.", "Aviation: Status of DOT’s Actions to Address the Future of Aviation Advisory Committee’s Recommendations. GAO-13-657. Washington, D.C.: July 25, 2013.\nAviation Safety: Status of Recommendations to Improve FAA’s Certification and Approval Processes. GAO-14-142T. Washington, D.C.: October 30, 2013.\nDepartment of Transportation: Key Issues and Management Challenges, 2013. GAO-13-402T. Washington, D.C.: March 14, 2013.\nGeneral Aviation Safety: Additional FAA Efforts Could Help Identify and Mitigate Safety Risk. GAO-13-36. Washington, D.C.: October 4, 2012.\nAviation Safety: Additional FAA Efforts Could Enhance Safety Risk Management. GAO-12-898. Washington, D.C.: September 12, 2012.\nAviation Safety: FAA Is Taking Steps to Improve Data, but Challenges for Managing Safety Risks Remain. GAO-12-660T. Washington, D.C.: April 25, 2012.\nAviation Safety: Enhanced Oversight and Improved Availability of Risk- Based Data Could Further Improve Safety. GAO-12-24. Washington, D.C.: October 5, 2011.\nAviation Safety: Certification and Approval Processes Are Generally Viewed as Working Well, but Better Evaluative Information Needed to Improve Efficiency. GAO-11-14. Washington, D.C.: October 7, 2010.\nAviation Safety: Improved Data Quality and Analysis Capabilities Are Needed as FAA Plans a Risk-Based Approach to Safety Oversight. GAO-10-414. Washington, D.C.: May 6, 2010." ], "depth": [ 1, 1, 2, 2, 3, 3, 1, 2, 2, 3, 3, 3, 3, 3, 1, 2, 2, 2, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full", "h0_title h1_title", "h0_full", "h0_full h1_title", "h0_full h1_full", "", "h0_title h1_title h3_title", "h3_full h1_full", "h0_title h1_full", "h1_full", "", "h0_full", "", "", "h0_title h2_full", "h2_full", "h0_full", "h2_full", "", "", "", "h3_full h2_full", "", "", "", "" ] }	{ "question": [ "What is the SMS?", "What organization completed SMS implementation in 2010?", "What is the FAA implementing?", "What is the status of implementing SMS guidance, specifically among commercial air carriers and airports?", "How will FAA require SMS implementation?", "What is a challenge of completing rulemaking for commercial air carriers?", "What delays have been faced?", "What concerns are there for FAA inspectors?", "What concern is there for the FAA to not have oversight of inspectors?", "How do stakeholders feel about the FAA's process of implementing SMS?", "What suggestions did the stakeholders have?", "How has the FAA responding to certain requests from stakeholders?", "What was the stakeholders’ reaction to FAA’s collaboration and communication?", "What does the FAA's website reflect about their focus?", "What was the GAO asked to review?", "What did the report address?", "How did the GAO complete this report?", "What limitations does the study have?" ], "summary": [ "SMS is an approach to collect and analyze safety data to identify hazards, manage risks, and take corrective action before an accident occurs.", "The Federal Aviation Administration's (FAA) Air Traffic Organization completed Safety Management System (SMS) implementation in 2010, and five other FAA organizations are implementing it now.", "FAA's implementation activities include developing internal SMS guidance and procedures and using them to, among other things, identify hazards in the aviation system and provide oversight of the aviation industry.", "Although SMS is not yet required for commercial air carriers, airports, or any other industry segment, some are voluntarily implementing SMS as part of several FAA pilot projects. Of the 83 commercial air carriers, 77 are in the process of implementing SMS. FAA anticipates publishing a final rule in September 2014 requiring commercial air carriers to implement SMS. To a lesser extent, other industry segments are voluntarily implementing SMS. For example, according to FAA, 9 of the nation's largest airports are implementing SMS.", "FAA issued a proposed rule for airport SMS implementation, but development of a final rule has been delayed, and FAA has not yet determined if it will propose rules for other industry segments.", "According to FAA officials, completing the rulemaking processes for commercial air carriers and airports has been a primary challenge to industry SMS implementation.", "Officials stated that one reason for delay has been difficulty in developing the benefit-cost analyses required for significant regulatory action.", "Although some inspector training has been provided, representatives from 9 of the 20 stakeholders GAO interviewed cited concerns that FAA inspectors may not be adequately trained to oversee industry SMS activities, and 6 expressed concerns that inspectors throughout FAA may not consistently interpret SMS regulations.", "Without adequate planning of oversight and training of inspectors, FAA could find itself unprepared to meet its oversight responsibilities when final SMS rules are published.", "Twelve of the 20 aviation stakeholders GAO spoke with identified additional FAA actions that could improve their SMS implementation efforts.", "For example, 4 stakeholders stated that providing SMS training to their employees was a challenge, and 2 suggested that FAA could assist by providing them access to FAA's SMS training.", "FAA indicated that it is considering industry stakeholder training needs and provided training through the pilot projects.", "Fourteen stakeholders were pleased with FAA's collaboration and communication, but 6 of them stated that this effort could be broadened.", "FAA updates its SMS website information, and FAA's most significant industry SMS forum is focusing more on SMS implementation.", "GAO was asked to review SMS implementation in the aviation industry.", "This report addresses (1) the status of SMS implementation at FAA and in the aviation industry; (2) key challenges that FAA and industry face in implementing SMS; and (3) actions aviation stakeholders believe FAA could take to improve SMS implementation.", "GAO reviewed FAA documents and interviewed FAA officials. GAO also interviewed representatives from 20 selected aviation stakeholders, including commercial air carriers, certificated airports, repair stations, and design and manufacturing firms.", "Because the stakeholders were non-statistically selected based on their size, SMS implementation, and the industry segment represented, their views cannot be generalized to the industry or any industry segment." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 0, -1, -1, -1, 0, 1, 2, -1, -1, 0, 1, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4, 4, 1, 1, 1, 1 ] }
CRS_R45183	{ "title": [ "", "Introduction", "Federal Approaches to Teen Pregnancy Prevention", "Shift Toward Evidence-Based Models", "Additional Research", "Teen Pregnancy Prevention (TPP) Program", "Tier 1 Grants", "Tier 2 Grants", "Evaluation Activities", "Personal Responsibility Education Program (PREP)", "State PREP and Competitive PREP", "Tribal PREP", "Personal Responsibility Education Innovative Strategies (PREIS)", "Evaluation Activities", "Title V Sexual Risk Avoidance Education Program", "Evaluation Activities", "Sexual Risk Avoidance Education Program", "Evaluation Activities" ], "paragraphs": [ "", "The Centers for Disease Control and Prevention (CDC), the federal government's lead public health agency, has identified teen pregnancy as a major public health issue because of its high cost for families of teenage parents and society more broadly. In addition, teen pregnancy disproportionately affects certain minority communities and selected states and territories. The teen birth rate has been in decline; however, given the consequences associated with teen births, Congress has continued to authorize, and the executive branch has administered, programs to delay sexual activity and prevent pregnancies among teenagers.\nFour current programs have an exclusive focus on teenage pregnancy prevention education:\nthe Teen Pregnancy Prevention (TPP) program, which is authorized under appropriations law; the Personal Responsibility Education Program (PREP), which is authorized under Title V of the Social Security Act; the Sexual Risk Avoidance Education program, which is authorized under Title V of the Social Security Act (and formerly known as the Title V Abstinence Education Grant program); and the Sexual Risk Avoidance Education program, which is authorized under appropriations law.\nThis report will refer to the latter two programs as the Title V Sexual Risk Avoidance Education program and the Sexual Risk Avoidance Education program, respectively, to avoid confusion. The four programs are administered by the U.S. Department of Health and Human Services (HHS).\nThis report begins with a brief discussion of recent developments in funding for the four teen pregnancy prevention programs. It then provides background on the role of Congress and the executive branch in preventing teen pregnancy. The remainder of the report focuses on the four programs, examining the types of grants they provide as well as related funding, requirements, and research activities. Table A-1 in Appendix A summarizes key programmatic information and allows for comparisons across the programs. Table A-2 in Appendix A describes the changes made by the Bipartisan Budget Act of 2018 (BBA of 2018, P.L. 115-123 ), enacted on February 9, 2018, to Section 510 of the Social Security Act. The BBA of 2018 renamed the Title V Abstinence Education Grant program as the Title V Sexual Risk Avoidance Education program and made other programmatic changes, retroactively effective October 1, 2017. Appendix B includes a table that indicates whether the states and territories, or entities within those jurisdictions, receive funding under each of the four programs.\nThis report accompanies CRS Report R45184, Teen Birth Trends: In Brief .", "The federal government has long played a role in educating teens and the public generally about preventing pregnancy and sexually transmitted infections (STIs). This has involved public awareness campaigns; providing public health services, including information and access to contraceptives; publishing materials about STIs; and funding organizations to provide sexual education. The federal approach to teen pregnancy prevention has often reflected prevailing public views about sexuality and the role that the federal government should play in the private lives of its citizens.\nSince the early 1980s, the federal government has supported programs that have an exclusive focus on preventing teen pregnancy. Discussion about these programs has often focused on the type of approaches to pregnancy prevention they should take. Some policymakers and other stakeholders in the teen pregnancy prevention field have contended that teens should not engage in sex before marriage to avoid unplanned pregnancies and protect against STIs. Further, they support the idea that teenagers need to hear a single, unambiguous message that sex outside of marriage is harmful to their physical and emotional health. This approach is sometimes referred to as \"abstinence-only,\" and more recently as \"sexual risk avoidance.\"\nOther stakeholders have prioritized an approach that provides broad information to teenagers to help them make informed decisions about whether to engage in sex, and about using contraceptives if they do. They contend that such an approach allows young people to make choices regarding abstinence, gives them the information they need to set relationship limits and resist peer pressure, and provides them with information on the use of contraceptives and the prevention of STIs.\nCongress has authorized and provided funding for programs that take one or both of these approaches to preventing teen pregnancy. Of the current programs, the Title V Sexual Risk Avoidance Education and the Sexual Risk Avoidance Education programs focus exclusively on abstaining from premarital sex. The PREP program requires most grantees to place \"substantial emphasis on both abstinence and contraception for the prevention of pregnancy among youth and sexually transmitted infections.\" The TPP program does not necessarily focus on any one approach, and some grantees use multiple program models to meet the various needs of youth. For example, a TPP program grantee in South Carolina uses an evidence-based model that provides abstinence-only education and other evidence-based models that have broader approaches.\nThe general public appears to support educating teenagers about both abstinence and contraception. A nationally representative telephone survey conducted in 2017 for Power to Decide, an organization focused on preventing unplanned pregnancy, found that about 8 out of 10 adults believe teens should receive more information about abstinence and birth control and protection from sexually transmitted infections.", "Two of the current teen pregnancy programs, TPP and PREP, reflect government-wide efforts beginning in the George W. Bush Administration and extending into the Obama Administration to expand social programs that work and eliminate those that do not. The two programs use a \"tiered evidence\" approach: some grantees employ teen pregnancy prevention models that are effective based on rigorous evaluation while other grantees develop and rigorously evaluate new or innovative approaches to reducing teen pregnancy.\nHHS has identified which teen pregnancy prevention program models meet selected criteria for being considered \"evidence-based.\" Multiple HHS offices worked together to establish the Teen Pregnancy Prevention (TPP) Evidence Review process following enactment of the FY2010 omnibus appropriations law ( P.L. 111-117 ). P.L. 111-117 also authorized the TPP program and required it to use models that are proven effective through rigorous evaluation in reducing teen pregnancy and related outcomes. Despite the connection to the TPP program, the review is intended to more broadly inform the teen pregnancy prevention field.\nThe TPP Evidence Review seeks to identify which teen pregnancy prevention models have been shown to be effective based on studies from the past 20 years. The review team prioritizes studies of programs based on whether they include youth ages 19 and younger and are intended to address teen pregnancy outcomes through some combination of educational, skill-building, or psycho-social interventions. The first review covered research released from 1989 through January 2010. Subsequent reviews have since been conducted on an annual or biannual basis to incorporate new research, including newly available evidence for programs that were previously reviewed.\nThese studies must have one statistically significant impact on at least one of five areas: (1) sexual activity, (2) number of sexual partners, (3) contraceptive use, (4) STIs or HIV, and (5) pregnancies. In addition, the studies must examine impacts of programs using randomized controlled trials (RCTs) and quasi-experimental impact study designs. For the studies that meet these initial criteria, reviewers assign each one a rating of high, moderate, or low quality based on whether it uses RCTs and quasi-experimental design, has relatively low attrition, controls for differences between the treatment and comparison groups, and meets certain other criteria.\nAfter its latest round of studies, the TPP Evidence Review includes 41 evidence-based program models. Evidence-based teen pregnancy prevention programs are varied and approach the problem from different frameworks. HHS categorizes the evidence-based models based on certain key features. For example, three of the models use an abstinence-only approach and some of the models incorporate information about abstinence. Other models focus on sexual health education, youth development, clinic-based services, and/or youth with certain histories (e.g., youth who are incarcerated). Programs differ based on their outcomes, settings (e.g., schools, clinics, homes, afterschool programs), session length and duration over time, and target population (e.g., males, females, African American youth, Hispanic youth, low-income youth, rural youth).", "HHS has taken additional steps to develop research on teen pregnancy prevention interventions. These efforts have been funded through annual appropriations of approximately $4.5 million to $6.8 million in each of FY2011 through FY2018 for Section 241 of the Public Health Services Act (PHSA). Section 241 provides authority for HHS to conduct evaluations of the implementation and effectiveness of public health programs. The funding has been used to support federal evaluations on teen pregnancy, including evaluation of TPP grantees; technical assistance about using rigorous program evaluation for TPP program grantees and unrelated grantees funded through the CDC; the TPP Evidence Review; and measuring performance data for the TPP program and Pregnancy Assistance Fund (PAF) grantees. The PAF provides competitive funding to state and tribal agencies to support pregnant and parenting teens and adults in school-based and community-based settings.", "The Consolidated Appropriations Act, FY2010 ( P.L. 111-117 ) established and provided annual funding for the Teen Pregnancy Prevention (TPP) program. The TPP program has been funded via the appropriations process in subsequent years, including through FY2018. Funding has ranged from approximately $98 million to $110 million annually. The program primarily provides funds to public and private entities for evidence-based or promising programs that reduce teen pregnancy, including those that focus on sexual risk avoidance and/or use of contraceptives. However, HHS is in the process of discontinuing funding for the current cohort of TPP program grantees. See \"Recent Developments\" at the beginning of this report for further detail about the status of current funding.\nGenerally, the appropriations laws have specified that no more than 10% of TPP funding is for training and technical assistance, outreach, and other program support. Of the remaining amount, the appropriations laws have further stated the following:\n75% is for grants to replicate programs that have been proven through rigorous evaluation to be effective in reducing teenage pregnancy, behavioral factors underlying teen pregnancy, or other related risk factors. HHS refers to these as \"Tier 1\" grants. 25% is for research and demonstration grants to develop, replicate, and refine additional models and innovative strategies for reducing teenage pregnancy. HHS refers to these as \"Tier 2\" grants.\nAppropriation laws generally have not included additional guidance on how the program is to be administered. HHS has established eligibility and other requirements via funding announcements and other publications. Funding recipients must ensure they provide \"age appropriate\" and \"medically accurate\" information to their teen clients, as these terms have been defined in program funding announcements. The HHS Office of Adolescent Health (OAH), which administers the program, must approve the materials used by grantees for this purpose.\nA range of public and private entities have been eligible to apply for TPP funding. Such entities include nonprofit and for-profit organizations, universities and colleges, faith- and community-based organizations, hospitals, and research institutions, among other entities.", "The TPP grants have supported two cohorts of Tier 1 grantees. This first cohort, from FY2010-FY2014, included 75 grantees in 37 states and the District of Columbia. The current round of Tier 1 funding began with FY2015, and is in the process of being discontinued. The second cohort includes 58 grantees in 28 states, the District of Columbia, and the Marshall Islands.\nThe second round of funds has been used to support two types of grants. Tier 1A grantees are intermediary organizations that are providing capacity-building assistance (CBA) to youth-serving organizations to replicate evidence-based teen pregnancy prevention programs in areas with higher-than-average teen birth rates. CBA refers to the \"transmission of knowledge and building of skills to enhance the ability of organizations to implement, evaluate, and sustain evidence-based TPP programs.\" Tier 1B grantees are entities that are replicating evidence-based programs to scale in communities with populations in the greatest need. Grantees are expected to develop and implement a plan to prevent teen pregnancy, engage in planning and piloting the programs, and then implement the programs.\nIn general, HHS requires Tier 1 grantees to use evidence-based approaches that the department has determined to be effective as part of its TPP Evidence Review. Grantees must implement their models consistent with the original evidence-based model and have minimal adaptations (e.g., changing names or details in a role play). In addition, HHS has emphasized the importance of Tier 1 grantees in the second cohort replicating programs that have the strongest evidence and that evaluations have shown to be effective in multiple sites, in different settings, and with different populations.", "As with Tier 1 grantees, HHS has funded two cohorts of Tier 2 grants from FY2010-FY2014 and FY2015-FY2019. The first cohort included 18 grantees in 10 states and the District of Columbia, and the second cohort includes 26 grantees in 11 states, the District of Columbia, and the Marshall Islands. HHS is currently (FY2015-FY2019) funding three types of Tier 2 grants in the second cohort, though as noted, these grants are in the process of being discontinued. The grants include the following:\nSupporting and enabling early innovation to advance adolescent health and prevent teen pregnancy (Tier 2A grants): these grants are intended to establish independent intermediaries that select, fund, and support a portfolio of innovators across the country to design, test, and refine interventions for advancing adolescent health and preventing teen pregnancy.\nRigorous evaluation of new or innovative approaches to prevent teen pregnancy (Tier 2B grants): these grants are intended to increase the number of evidence-based teen pregnancy prevention interventions by rigorously evaluating new or innovative approaches for preventing teen pregnancy and related risk behaviors.\nEffectiveness of teen pregnancy prevention programs designed specifically for young m ales (Tier 2C grants ) : these grants are intended to rigorously evaluate innovative interventions designed for young men ages 15 to 24 to reduce their risk of fathering a teen pregnancy. These interventions are to be feasibly implemented in target settings such as clinics and schools. This grant is administered by the CDC, in partnership with the OAH.", "HHS supported 41 program evaluations of the first cohort of TPP grants (FY2010-FY2015). This included 19 Tier 1 evaluations of 10 evidence-based models identified as part of the TPP Evidence Review. The evaluations also included 22 studies of Tier 2 grantees, which were expected to implement new or innovative models to improve teen pregnancy-related outcomes.\nHHS provided detailed findings from these evaluations in a special supplement of the American Journal of Public Health in September 2016. Of the 41 evaluations, 12 showed a positive impact in at least one teen pregnancy-related outcome. Another 16 had no impacts (one of these also had a negative impact), and 13 had inconclusive results. Some of the evaluations were inconclusive because of high attrition, of weak contrasts between the treatment and control groups, or they did not meet HHS's research standards, or for other reasons.", "PREP is a broad approach to teen pregnancy prevention that seeks to educate adolescents ages 10 through 19 and pregnant and parenting youth under age 21 on both abstinence and contraceptives to prevent pregnancy and STIs. The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 ) established PREP, appropriating $75 million annually in mandatory spending for FY2010 through FY2014. PREP authorization has been extended three times ( P.L. 113-93 , P.L. 114-10 , and P.L. 115-123 ) with mandatory funding of $75 million for each of FY2015 through FY2019.\nPREP funds states and other entities to carry out sexual education programs that places \"substantial emphasis on both abstinence and contraception.\" Recipients of PREP funds must fulfill requirements outlined in the law, including that they must implement programs that\nprovide youth with information on at least three of six specified adulthood preparation subjects (healthy relationships, adolescent development, financial literacy, parent-child communication, educational and career success, and healthy life skills); are \"medically-accurate and complete\"; include activities to educate youth who are sexually active regarding responsible sexual behavior with respect to both abstinence and the use of contraception; and provide age-appropriate information and activities, while ensuring these are delivered in the most appropriate cultural context for the individuals served in the program.\nAs with the TPP program, PREP uses a tier-evidence approach. Some grantees replicate evidence-based effective programs that have been proven to delay sexual activity, increase condom or contraceptive use for sexually active youth, or reduce pregnancy among youth. Other grantees substantially incorporate elements of effective programs that have been proven to change behavior.\nPREP includes four types of grants: (1) State PREP grants, (2) Competitive PREP grants, (3) Tribal PREP, and (4) Personal Responsibility Education Innovative Strategies (PREIS). Most of the PREP appropriation is allocated to states and territories via the State PREP grant. Funding for states and territories that did not apply for this grant is available to local entities under Competitive PREP grants. The law specifies certain levels of funding for the other components, including $10 million for the PREIS grants. After this set-aside, HHS must reserve 5% for grants to Indian tribes and tribal organizations (Tribal PREP) and 10% for training, technical assistance, and evaluation. Total FY2017 funding for the four grants was $63.7 million (the most recent information available). Of this amount, $40.5 million was for State PREP, $10.3 million was for Competitive PREP, $3.3 million was for Tribal PREP, and $9.6 million was for PREIS.", "The 50 states, District of Columbia, and territories are eligible for State PREP funding. Funds are allocated by a formula that is based on the proportion of youth ages 10 through 19 in each jurisdiction relative to other jurisdictions. State PREP funds do not require a match. A total of 50 jurisdictions applied for and received FY2017 PREP funding. This included 44 states, the District of Columbia, Guam, Puerto Rico, the Republic of Palau, the Virgin Islands, and the Federated States of Micronesia. States and territories can administer the project directly or through sub-awards to public or private entities.\nIf a state or territory did not submit an application for formula funding in FY2010 or later years, it is ineligible to apply for funding for each of FY2010 through FY2019. Organizations in such a state or territory are eligible to apply competitively for funding, which is to be awarded as a three-year grant. In practice, Competitive PREP applicants can include county or city governments, public institutions of higher education, and for-profit and nonprofit organizations, among other entities.\nTen states and territories did not apply for State PREP funding: Florida, Indiana, Kansas, North Dakota, Texas, Virginia, American Samoa, Northern Mariana Islands, Marshall Islands, and Palau. HHS awarded Competitive PREP funding for FY2012 through FY2014 to organizations in states that did not apply for funding in FY2010 or FY2011, and awarded Competitive PREP funding for FY2015 through FY2017 to organizations in states that did not apply for funding in FY2016 and FY2017. For each of FY2015 through FY2017, Competitive PREP funded 21 grantees. These grantees are in the states that did not receive PREP funds, except Kansas. Entities in Kansas did not apply for Competitive PREP funds. The Bipartisan Budget Act ( P.L. 115-123 ), the law that most recently reauthorized the PREP program, specified that the Competitive grants that were awarded for any of FY2015 through FY2017 are to be extended for an additional two years, through FY2019.\nEach State PREP and Competitive PREP applicant must include a description of its plan for using the allotment to achieve its goals related to reducing pregnancy rates and birth rates for youth populations. Applicants are required to specify the populations they will serve, and such populations must be the most high-risk or vulnerable for pregnancies or otherwise have special circumstances. As specified in the law, this includes youth who are ages 10 to 20 and in foster care, are homeless, live with HIV/AIDS, or reside in areas with high birth rates for youth, among other populations; pregnant youth who are under age 21; and mothers who are under age 21.\nStates, territories, and entities that apply for State PREP or Competitive PREP funds must replicate evidence-based teen pregnancy prevention programs or substantially incorporate elements of effective programs. Grantees are referred to the TPP Evidence Review, though they are not required to adopt the models identified in the review. A 2014 review of PREP grantees in 44 states and the District of Columbia, found that more than 90% of them expected to implement such evidence-based models.", "Tribal PREP grants are intended to support projects that educate American Indian and Alaska Native youth ages 10 to 20 and pregnant and parenting youth under age 21 on abstinence and contraception for the prevention of pregnancy, STIs, and HIV/AIDS. Specifically, grantees must support the design, implementation, and sustainability of culturally and linguistically appropriate teen pregnancy programs. Such programs must replicate evidence-based models, sustainably incorporate elements of effective models, or include promising practices within tribal communities. Although Tribal PREP grantees are referred to HHS's TPP Evidence Review, the review has not identified teen pregnancy prevention programs specifically for tribal youth. Indian tribes and tribal organizations, as these terms are defined in the Indian Health Care Improvement Act, are eligible to apply for Tribal PREP funding. The first cohort of 15 grantees received funding from FY2011 through FY2015. The project period for the second cohort of eight grantees is from FY2016 through FY2020.", "PREIS grants are intended to build evidence for promising teen pregnancy prevention programs serving high-risk youth populations. The grants are awarded on a competitive basis to public and private entities to implement and evaluate innovative youth pregnancy prevention strategies that have not been rigorously evaluated and/or to participate in a federal evaluation of their program strategies if selected. According to the most recent program funding announcement, innovative strategies could include those that are technology-based and/or computer-based, use social media, or are implemented in non-traditional classroom settings. Such strategies must be targeted to high-risk, vulnerable, and culturally under-represented youth populations. The law specifies that this includes youth ages 10 to 20 in or aging out of foster care; homeless youth; youth with HIV/AIDS; pregnant and parenting women who are under age 21 and their partners; young people residing in areas with high birth rates for youth; and victims of human trafficking. HHS also lists selected other youth populations in the program funding announcement: youth who have been trafficked, runaway and homeless youth, and rural youth. PREIS funds are awarded as five-year cooperative agreements. The first cohort of PREIS grantees (FY2011 through FY2015) included 11 organizations. The second cohort of grantees (FY2016 through FY2020) includes 13 organizations in 10 states and the District of Columbia.", "The PREP authorizing law directs HHS to evaluate PREP programs and activities. In fulfilling this requirement, HHS is conducting an evaluation of four State PREP grantees—California, Maine, Pennsylvania, and South Carolina—to learn how PREP-funded programs are implemented and to assess their effectiveness in reducing teen pregnancies, STIs, and sexual risk behaviors. According to an early report on implementation of the program, the four states have developed similar approaches to supporting evidence-based strategies. The impact evaluation is underway, and is expected to be completed in 2018.\nSeparate from these evaluation efforts, PREIS and Tribal PREP direct grantees to carry out evaluation activities. PREIS grantees must contract with independent third-party evaluators to conduct RCT or quasi-experimental research to determine whether grantees' interventions led to reduced pregnancies, births, and STIs. Tribal PREP grantees must partner with a university or other organization not associated with the grantee to conduct an evaluation (known as a \"local evaluation\") that is either descriptive (without treatment and comparison groups) or examines impacts using treatment and comparison groups. State PREP and Competitive PREP grantees may choose to conduct such evaluations.", "The 1996 welfare reform law ( P.L. 104-193 ) established the \"Separate Program for Abstinence Education\" under Section 510 in Title V of the Social Security Act. The program had long been known as the Title V Abstinence Education Grant program. The BBA of 2018 ( P.L. 115-123 ) replaced Section 510, thereby changing the name of the program to the Sexual Risk Avoidance Education program; revising the program purpose areas; and adding new requirements on financial allotments, educational elements, research and data, and evaluation. Table A-2 in Appendix A includes a side-by-side comparison of the statutory changes made by the BBA, which went into effect on October 1, 2017. The overall purpose of the program remains essentially the same, which is to provide youth ages 10 through 19 with education that focuses on refraining from sexual activity before marriage.\nThe Title V Sexual Risk Avoidance Education program is funded through mandatory spending. P.L. 104-193 provided $50 million per year for five years (FY1998-FY2002). The program was subsequently funded through June 30, 2009, by various legislative extensions. The ACA reauthorized the program, providing $50 million for each of FY2010 through FY2014. Three subsequent laws extended the program: The Protecting Access to Medicare Act of 2014 ( P.L. 113-93 ), which provided $50 million in FY2015; the Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ), which provided $75 million per year for FY2016 and FY2017; and the BBA of 2018, which provides $75 million for each of FY2018 and FY2019.\nStates are eligible to request mandatory Title V Sexual Risk Avoidance Education funds for FY2018 and FY2019 if they submit an application for Maternal and Child Health (MCH) Block Grant funds for those same fiscal years. The MCH Block Grant, authorized under Title V of the Social Security Act, is a flexible source of funds that states use to support maternal and child health programs. Title V Sexual Risk Avoidance Education funds are allocated to each jurisdiction based on two factors: (1) the amount provided to the program minus any reservations (up to 20%) made by HHS for administering it, and (2) states' relative proportion of low-income children nationally. The law does not require states to provide a match.\nHHS may competitively award FY2018 and FY2019 funds to one or more entities within a state/territory that had not previously applied for its share of funding. The entity or entities would receive the amount that would have been otherwise allotted to that state. (The law does not define the entities that would be eligible.) The HHS Secretary is required to publish a notice to solicit grant applications for the remaining competitive funds. The solicitation must to be published within 30 days after the deadline for states to apply for MCH Services Block Grant funds. Eligible states are required to apply for the Title V Sexual Risk Avoidance Education funds no later than 120 days after the deadline closed for states to apply for MCH Services Block Grant funds.\nThe 50 states, the District of Columbia, and the territories (Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, Commonwealth of the Northern Mariana Islands, Federated States of Micronesia, the Republic of the Marshall Islands, and Republic of Palau) are eligible to apply. In FY2017, 37 states and two territories (Puerto Rico and the Federated States of Micronesia) applied for and received funding (under the Title V Abstinence Education Grant program).\nStates/territories or other entities are required to implement sexual risk avoidance education that is medically accurate and complete, age-appropriate, and based on adolescent learning and developmental theories for the age group receiving the education. The education must also be culturally appropriate, recognizing the experiences of youth from diverse communities, backgrounds, and situations. As described in the previous text box, sexual risk avoidance education must address six topics. If sexual risk avoidance education includes any information about contraception, such information must be medically accurate and ensure that students understand that contraception reduces physical risk but does not eliminate risk. In addition, sexual risk avoidance education may not include demonstration, simulations, or distribution of such contraceptive devices.\nA state or other entity that receives Title V Sexual Risk Avoidance Education funding must, as specified by the HHS Secretary, collect information on the programs and activities funded through their allotments and submit reports to HHS on the data collected from such programs and activities.\nUnder the Title V Abstinence Education Grant program, HHS has required all jurisdictions to measure the success of their abstinence programs through at least two outcome measures, one of which must be abstinence as a means for preventing teen pregnancy, births, and/or STIs. Additionally, HHS has encouraged jurisdictions to identify programs that have demonstrated effectiveness in delaying the initiation of sexual activity or promoting abstinence from sexual activity. HHS has directed grantees to the TPP Evidence Review, though has not require grantees to use the models identified in the review.", "A state or other entity receiving funding under the Title V Sexual Risk Avoidance Education program may use up to 20% of its allotment to build the evidence base for sexual risk avoidance education by conducting or supporting research. Any such research must be rigorous, evidence-based, and designed and conducted by independent researchers who have experience in conducting and publishing research in peer-reviewed outlets.\nSeparately, HHS is required to conduct one or more rigorous evaluations of the education (and associated data) funded through the Title V Sexual Risk Avoidance Education program. This evaluation is to be conducted in consultation with \"appropriate State and local agencies.\" HHS is to consult with relevant stakeholders and evaluation experts about the evaluation(s). HHS must submit a report to Congress on the results of the evaluation(s). The report must also include a summary of the information collected and reported by states and other entities on their Sexual Risk Avoidance Education programs and activities.\nThe Balanced Budget Act of 1997 ( P.L. 105-133 ) directed HHS to conduct evaluation activities of the prior Title V Abstinence Education Grant program. In response, HHS undertook a multi-year evaluation that included a study of how grantees in four states implemented abstinence education programs and a separate study that rigorously evaluated whether grantees' programs had impacts on teen sexual abstinence and related outcomes. The programs targeted youth in elementary and middle school and engaged them as part of the school setting, including in afterschool programming. Each youth participated for more than 50 hours. The study tracked outcomes for youth four and six years after they were enrolled in it. The impact evaluation found that youth who received abstinence education under the program did not have different outcomes than youth in the control group. They were no more likely than their peers in the study to have abstained from sex.", "As noted, federal funding has supported abstinence-only education through the Community-Based Abstinence Education program (FY2001 through FY2009) and the Competitive Abstinence-Only program (FY2012 through FY2015). In each of FY2016 through FY2018, annual omnibus appropriations laws provided funding to support abstinence-only education through the Sexual Risk Avoidance Education program. Funding was $5 million in FY2016, $15 million in FY2017, and $25 million in FY2018. The appropriations laws have specified that Sexual Risk Avoidance Education grants are to\nbe awarded by HHS on a competitive basis; use medically accurate information; \"implement an evidence-based approach integrating research findings with practical implementation that aligns with the needs and desired outcomes for the intended audience;\" and \"teach the benefits associated with self-regulation, success sequencing for poverty prevention, healthy relationships, goal setting, and resisting sexual coercion, dating violence, and other youth risk behaviors such as underage drinking or illicit drug use without normalizing teen sexual activity.\"\nThe appropriations law provided that up to 10% of the funding for sexual risk avoidance can be made available for technical assistance and administrative costs.\nThrough the grant application process for the Sexual Risk Avoidance Education program, HHS has identified multiple types of entities that are eligible for funding, including states, territories, and localities (county, city, township, special districts); school districts; public and state-controlled institutions of higher education; federally recognized tribal governments; Native American tribal organizations; public and Indian housing authorities; nonprofit organizations other than institutions of higher education; private institutions of higher education; small business; and for-profit organizations other than small businesses. ACF awarded 10 grants in FY2015, 21 grants in FY2016, and 27 grants in FY2017.\nAs specified in the funding announcement, grantees must incorporate an evidence-based program and/or effective strategies that have demonstrated impacts on delaying the initiation of sexual activity. HHS advises Sexual Risk Avoidance Education grantees to review evidence-based program models that are included as part of the TPP Evidence Review. In addition, grantees must link program participants to services with community agencies that support the health, safety, and well-being of participants.", "Appropriations law and program funding announcements do not direct HHS or grantees to carry out evaluation activities. HHS tracks Sexual Risk Avoidance Education grantee performance—related to youth served, fidelity to curriculum, implementation, outcome measures, and community data—for monitoring purposes, not to measure the impacts of the program.\nAppendix A. Federal Teen Pregnancy Prevention Programs\nAppendix B. Grantees Funded Under the Federal Teen Pregnancy Prevention Programs, by State" ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 1, 2 ], "alignment": [ "h5_title h0_title h2_title h4_title h3_title h1_title", "h0_full h4_full h1_full", "h3_full h2_title h0_title", "h2_full", "h0_full", "h2_full", "", "h2_full", "", "h3_full", "", "", "", "", "h5_full h3_full h4_full", "h4_full", "h5_full h1_full", "" ] }	{ "question": [ "Why does Congress want to prevent teen pregnancy?", "How has Congress attempted to combat this issue?", "How does this report assist Congress?", "What information is provided in the report?", "What programs exist for teen pregnancy prevention?", "How do the programs differ?", "How do the programs assist people?", "How was the TPP program established?", "How is most TPP funding used?", "How are smaller amounts of funding used?", ": How has finding evolved overtime for the TPP?", "How was PREP established?", "What does the program do?", "How does the program help individuals?", "How was the Title V Sexual Risk Avoidance Education program authorized?", "What previous program did this evolve from?", "What does the Title V Sexual Risk Avoidance Education program focus on?", "How are funds used?", "What was the funding amount in 2018?", "How was the Sexual Avoidance Education program established?", "How else as this program received funding?", "How does the Sexual Risk Education program limit teen pregnancy?", "What was this program’s funding in 2018?" ], "summary": [ "Congress has an interest in preventing pregnancy among teenagers because of the long-term consequences for the families of teen parents and society more generally.", "Since the 1980s, Congress has authorized—and the U.S. Department of Health and Human Services (HHS) has administered—programs with a focus on teen pregnancy prevention.", "This report intends to assist Congress with tracking developments in four teen pregnancy prevention programs that are currently funded.", "The report provides detailed information about each program and includes a table that can illustrate the ways in which the programs are both similar and different.", "The four current programs are the Teen Pregnancy Prevention (TPP) program, the Personal Responsibility Education Program (PREP), the Title V Sexual Risk Avoidance Education program, and the Sexual Risk Avoidance Education program.", "Despite their similar names and purposes, the latter two programs have different authorizing laws and funding mechanisms.", "Generally, the four programs serve vulnerable young people in schools, afterschool programs, community centers, and other settings. Grantees include states, nonprofits, and other entities.", "The TPP program was established and funded by the FY2010 omnibus appropriations law (P.L. 111-117).", "As required in appropriations law, the majority of TPP program grants (Tier 1) must use evidence-based education models that have been shown to be effective in reducing teen pregnancy and related risk behaviors.", "A smaller share of funds is available for research and demonstration grants (Tier 2) that implement innovative strategies to prevent teenage pregnancy.", "FY2018 funding for the TPP program is $101 million. HHS has taken steps to discontinue the current cohort of grants.", "PREP was established under Section 513 of the Social Security Act by the Patient Protection and Affordable Care Act (ACA, P.L. 111-148) in 2010.", "The program receives mandatory funding and is designed to educate adolescents on both abstinence and contraception for preventing pregnancy and sexually transmitted infections, and on selected adult preparation subjects.", "The PREP authorizing law requires most grantees to replicate evidence-based programs that are proven to change behavior related to teen pregnancy. FY2018 funding for the program is $75 million.", "The Title V Sexual Risk Avoidance Education program is authorized at Section 510 (Title V) of the Social Security Act.", "It was formerly known as the Title V Abstinence Education Grant program, which was authorized by the 1996 welfare reform law (P.L. 104-193). The Bipartisan Budget Act of 2018 (P.L. 115-123) renamed the program and made other changes.", "The program focuses on implementing sexual risk avoidance, meaning voluntarily refraining from sex before marriage.", "Grantees may set aside some of their funding to conduct rigorous and evidence-based research on sexual risk avoidance.", "FY2018 funding for the program is $75 million.", "The Sexual Risk Avoidance Education program (not to be confused with the Title V program of the same name) was established and funded by the FY2016 omnibus appropriations law (P.L. 114-113).", "Other appropriations laws have since provided discretionary funding.", "Grantees are to use funding for education on voluntarily refraining from non-marital sexual activity, and they are encouraged to implement evidence-based approaches that teach the benefits associated with resisting risk behaviors.", "FY2018 funding for the program is $25 million." ], "parent_pair_index": [ -1, 0, -1, 2, -1, 0, 0, -1, -1, 1, -1, -1, 0, 1, -1, 0, -1, -1, 3, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 4, 4, 4, 4, 4, 5, 5, 5, 5 ] }
CRS_RL33743	{ "title": [ "", "Introduction", "A Brief History of TPA", "The U.S. Constitution and Foreign Trade", "The Evolution of the Congressional-Executive Partnership", "Creation of \"Fast Track Trade Negotiating Authority\"", "Subsequent Renewals of Trade Agreements Authority", "The Trade Agreements Act of 1979", "The Trade and Tariff Act of 1984", "Omnibus Trade and Competitiveness Act of 1988 (OTCA)", "A Hiatus", "The Bipartisan Trade Promotion Authority Act (BTPA) of 2002", "The Bipartisan Comprehensive Trade Priorities and Accountability Act of 2015 (BCTPA)", "The Elements of TPA", "Trade Agreements Authority", "Implementation of Trade Agreements", "Expedited Legislative Procedures", "Negotiating Objectives", "Notification and Consultation", "Limiting Trade Agreements Authority", "Sunset Provision", "Extension Disapproval", "Procedural Disapproval", "Consultation and Compliance Resolution (CCR)", "Withdrawal of Expedited Procedures", "Congressional Procedures Outside TPA", "Hearings and \"Mock Markups\"", "Side Agreements and Letters", "Informal Agreements", "Possible Issues for Congress", "The Need for and Timing of TPA", "Definition and Scope of Negotiating Objectives", "Consultation and Notification", "Trade Agreement Enforcement", "Technical Considerations", "Options for Congress", "Current Legislation43" ], "paragraphs": [ "L egislation to reauthorize Trade Promotion Authority (TPA), formerly called fast track, was introduced as the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015) ( H.R. 1890 / S. 995 ) in the Senate and the House on April 16, 2015. The legislation was reported by the Senate Finance Committee on April 22, 2015, and by the House Ways and Means Committee on April 23, 2015. The legislation, as reported by the Senate Finance Committee, was joined with legislation extending Trade Adjustment Assistance into a substitute amendment to H.R. 1314 (an unrelated revenue measure), and the legislation passed on May 22 by a vote of 62-37. In the House of Representatives, the measure was voted on under a procedure known as \"division of the question,\" which requires separate votes on each component, but approval of both to pass. On June 12, TPA (Title I) passed by a vote of 219-211, but TAA (Title II) was defeated 126-302. On June 18, the House again voted on TPA, in an amendment identical to the Senate version attached to H.R. 2146 , an unrelated House bill. This amendment did not include TAA. This legislation passed the House by a vote of 218-206, and, subsequently, by the Senate on June 24. President Obama signed the legislation ( P.L. 114-26 ) on July 2, 2015.\nTPA is the process Congress has made available to the President to enable legislation to approve and implement certain international trade agreements to be considered under expedited legislative procedures for limited periods, provided the President observes certain statutory obligations. Although the President has the authority under the Constitution to negotiate international agreements, typically a reciprocal trade agreement requires an implementing bill and, therefore, congressional action to bring it into force. Many Members of Congress have advocated for renewal of TPA. On July 30, 2013, President Obama first publicly requested that Congress reauthorize TPA. He restated his request for TPA during his January 20, 2015, State of the Union address. Legislation to renew TPA was introduced in the 113 th Congress ( H.R. 3830 ) ( S. 1900 ), but it was not acted upon. The previous grant of TPA authority expired on July 1, 2007.\nThe details of the legislation are likely to be subject to considerable debate, including the specific treatment of any related TAA program reauthorization. This report presents background and analysis on the development of TPA, a summary of the major provisions under the expired authority, and a discussion of the issues that have arisen in the debate over TPA renewal. It also explores some of the policy options available to Congress.", "The 112 th Congress exercised TPA authority and procedures in passing implementing bills for U.S. bilateral free trade agreements (FTAs) with Colombia, Panama, and South Korea on October 12, 2011, concluding action on the last three FTAs signed prior to the expiration of TPA in 2007. Four other trade negotiations in progress that could result in agreements that would likely require TPA to pass implementing legislation include (1) the multilateral Doha Development Round of the World Trade Organization (WTO); (2) the Trans-Pacific Partnership (TPP); (3) the Transatlantic Trade and Investment Partnership (TTIP); and (4) the Trade in Services Agreement (TISA).\nFor more than 40 years, Congress has granted the President TPA/fast track authority, agreeing to consider trade agreement implementing legislation expeditiously and to vote on it without amendment, provided the President meets certain statutory negotiating objectives and consultation requirements, and the implementing bill contains the necessary and limited qualifying provisions. TPA strikes a delicate balance by clarifying how Congress chooses to exercise its constitutional authority over a particular aspect of trade policy, while presumably giving the President additional negotiating leverage by effectively assuring U.S. trade partners that a final agreement will be given timely and unamended consideration by Congress.\nEarlier incarnations of TPA, although controversial, were adopted with substantial bipartisan majorities. Over time, however, trade negotiations have become more complex. Congress also has insisted on tighter oversight and consultation requirements, and the trade debate has become more partisan in nature, making congressional renewal of TPA more controversial. The expiration of TPA raises the central questions of whether, when, and in what form TPA might be renewed.", "TPA is the product of many decades of debate, cooperation, and compromise between Congress and the executive branch. At its foundation lie the respective constitutional powers granted to Congress and the President, as well as the pragmatic realization that a certain cooperative flexibility is needed if the United States is to negotiate reciprocal trade agreements credibly. The evolution of TPA to date shows, among other things, that the congressional-executive partnership on trade policymaking can be strengthened or strained as it adjusts to evolving political and economic conditions, as well as shifting priorities of the two branches.", "The U.S. Constitution assigns express authority over the regulation of foreign trade to Congress. Article I, Section 8, gives Congress the power to \"regulate commerce with foreign nations ... \" and to \" ... lay and collect taxes, duties, imposts, and excises.... \" In contrast, the Constitution assigns no specific responsibility for trade to the President. Under Article II, however, the President has exclusive authority to negotiate treaties and international agreements and exercises broad authority over the conduct of the nation's foreign affairs. Both legislative and executive authorities come into play in the development and execution of U.S. trade agreements.", "For roughly the first 150 years of the United States, Congress exercised its authority over foreign trade by setting tariff rates on all imported products. The tariff was the main trade policy instrument and primary source of federal revenue. Early congressional trade debates pitted Members from northern manufacturing regions, who benefitted from protectionist tariffs, against those from largely southern commodity exporting regions, who advocated low tariffs. During this period, the President's primary role in setting trade policy was to use his foreign affairs authority to negotiate, bring into force, and implement (with the advice and consent of the Senate) general bilateral treaties of friendship, commerce, and navigation. These treaties \"included a U.S. commitment to most-favored-nation (MFN) treatment\" or nondiscrimination in the application of tariffs for all treaty partners.\nTwo legislative events occurred in the 1930s that radically changed the shape and conduct of U.S. trade policy. The first was the \"Smoot-Hawley\" Tariff Act of 1930 (P.L. 71-361), which set prohibitively high tariff rates in response to U.S. producers seeking protection at the outset of the Great Depression. The act led to retaliatory tariffs by major U.S. trade partners, which severely restricted trade and contributed to the deep and prolonged effects of the depression.\nThe damaging effects of Smoot-Hawley prompted the second major trade legislative event in the 1930s. Congress, with the guidance and encouragement of Secretary of State Cordell Hull, himself a former Senator, developed and enacted the Reciprocal Trade Agreements Act of 1934 (RTAA; P.L. 73-316). The RTAA authorized the President to enter into reciprocal trade agreements that reduced tariffs within pre-approved levels. The tariffs were applied on an MFN basis. Under the RTAA, Congress authorized the President to implement the new tariffs by proclamation without additional legislation. The RTAA is important for several reasons:\nFor the first time, Congress expressly delegated to the President an expanded trade agreements authority to reduce tariffs within congressionally predefined ranges. In so doing, some argued, Congress aimed to lessen the political pressure from special interests it often faced. The Smoot-Hawley Tariff Act was the last general tariff legislation passed by Congress. While still on the books, the Smoot-Hawley tariffs are now only applied to imports from those few countries, namely Cuba and North Korea, not receiving MFN status, now referred to as normal trade relations status (NTR) in U.S. trade laws. While delegating tariff-cutting authority, Congress did not surrender broader trade authority and insured legislatively against executive branch overreach by subjecting the trade agreements authority to a limited time period, making such authority subject to periodic review and renewal.\nCongress renewed presidential reciprocal trade agreements authority for tariff reductions 11 times until 1962 through trade agreement extension acts (see Appendix A ). General tariff levels declined and their significance as a trade barrier diminished. In addition, with the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947, the major forum for trade negotiations shifted from bilateral to multilateral negotiations, and trade negotiations were eventually expanded beyond tariffs.\nUnder the Trade Expansion Act of 1962, Congress granted the President authority for five years to enter into agreements that negotiated the reduction or elimination of tariffs. The act also expanded Congress's role in the negotiating process by requiring the President to submit for congressional review a copy of each concluded agreement and a presidential statement explaining why the agreement was necessary. It allowed the President to conclude the GATT Kennedy Round (1963-1967), the last round in which tariff reduction was the primary focus of trade negotiations.\nAlong with a number of tariff reduction agreements, which were covered by the congressional trade agreements authority, the GATT member countries reached agreements in the Kennedy Round in two areas related to nontariff barriers (NTBs), that is, laws and rules other than tariffs that are used to restrict imports. The first was a customs valuation agreement that would have required the United States to eliminate the American Selling Price method of pricing goods at the border. The second was an antidumping agreement that would have required changes in U.S. antidumping practices. Because U.S. adherence to these agreements would have required changes in U.S. law or regulations beyond tariff modifications, many in Congress concluded that the President had exceeded the authority delegated to him. In fact, Congress passed a resolution in 1966 instructing the Johnson Administration against negotiating \"nontariff commitments.\" When he ignored it, Congress declined to implement the NTB changes, setting up the debate that would eventually be resolved with the creation of the fast track authority for trade agreements.", "The results of the Kennedy Round made evident that changes in nontariff barrier rules would increasingly dominate the agenda of future multilateral trade agreements, which would also require changes in U.S. law if the United States were to adhere to them. Concern over presidential encroachment on its legislative authority prompted Congress to seek a legislative remedy.\nThe tariff modification authority in the Trade Expansion Act of 1962 expired on July 1, 1967, but Congress did not renew the authority for seven years as it debated legislative options. The Nixon Administration sought new authority to negotiate the Tokyo Round in the GATT, which Congress granted in the Trade Act of 1974 (P.L. 93-618). As before, the act provided the President with the authority to enter into trade agreements that reduced or eliminated tariffs within certain predefined parameters. To address the critical issue of agreements that required changes in U.S. law beyond tariff modifications, the act stipulated that nontariff barrier agreements entered into under this statute could only enter into force if Congress passed implementing legislation.\nSome in Congress, however, argued that subjecting implementing legislation to ordinary congressional debate and amendment procedures would defeat a major purpose for delegating trade agreements authority to the President in the first place—to reduce the special interest pressures inherent in trade policymaking. Many Members also recognized an important potential problem: that U.S. trading partners would be reluctant to negotiate agreements that would be subject to unlimited congressional debate and amendment. As stated in the Senate Finance Committee report accompanying the Trade Act of 1974:\nThe Committee recognizes ... that such agreements negotiated by the Executive should be given an up-or-down vote by the Congress. Our negotiators cannot be expected to accomplish the negotiating goals ... if there are no reasonable assurances that the negotiated agreements would be voted up-or-down on their merits. Our trading partners have expressed an unwillingness to negotiate without some assurances that the Congress will consider the agreements within a definite time-frame.\nAs a solution, Congress agreed that each chamber would suspend its ordinary legislative procedures and give trade agreements expedited treatment. The relevant committees would be given limited time to consider implementing bills. Once they reached the floor, the implementing bills would be subject to time-limited debate and no amendments. In exchange, Congress required the executive branch to consult with relevant committees during the negotiations and to notify Congress 90 calendar days before signing an agreement. The act also provided for the accreditation of 10 Members of Congress as advisers to the U.S. delegation of negotiators. (The Trade Act of 1962 had provided for five such advisers.) These provisions rounded out what would become commonly known as \"fast track trade negotiating authority.\"\nWith the trade \"negotiating\" authority and the \"fast track\" provisions of the Trade Act of 1974, the United States concluded the Tokyo Round of the GATT (1973-1979). As expected, this round resulted in a number of agreements on NTBs, such as government procurement practices, product standards, customs regulations, and rules for administering antidumping and countervailing duty procedures. The resulting Trade Agreements Act of 1979 (P.L. 96-39) was the first trade implementing bill passed by Congress under the expanded trade agreements authority and expedited procedures.", "The expedited legislative procedures have not changed since first enacted in 1974. These provisions are ensconced in Sections 151-154 of the Trade Act of 1974, as amended, and are not subject to sunset provisions. The ability to use them, however, is subject to time limits, and Congress has revised them over the years. (The next section of this report examines these procedures and trade agreements authority in more detail.) The initial grant of \"fast track trade negotiating authority\" and the authority to enact tariff modifications by proclamation under the Trade Act of 1974 were in effect for five years ending on January 2, 1980. Congress extended a residual presidential authority to proclaim tariff modifications to January 2, 1982.", "Along with implementing the Tokyo Round agreements, the Trade Agreements Act of 1979 extended for eight years, until January 2, 1988, the presidential authority to enter into agreements on nontariff barriers, but made no other changes to the original authority. The act did not extend presidential tariff modification authority.", "This act amended the Trade Act of 1974 by adding trade agreements authority that provided for the \"negotiation\" and implementation of bilateral free trade agreements that both reduced or eliminated tariffs and addressed nontariff barriers. Congress was taking into account the U.S.-Israel and U.S.-Canada FTAs that were under consideration. The legislation waived for the U.S.-Israel FTA the requirement of a 90-day notification to Congress prior to entering the agreement. However, for negotiations with other countries, it required the President to notify the House Ways and Means and Senate Finance Committees of his intention to begin FTA negotiations 60 days prior to entering the negotiations and provided for denial of expedited procedures if either committee disapproved of the negotiation within 60 days after receiving the notification. The act also required that agreements that led to tariff modifications beyond a certain threshold be subject to congressional approval via implementing legislation.", "The OTCA, an extensive trade bill that addressed numerous areas of trade policy, extended the President's authority to enter into trade agreements before June 1, 1993, but extended the application of expedited procedures only for agreements entered into before June 1, 1991. Legislation for agreements entered into after that date, but before June 1, 1993, could be approved under the expedited procedures, if the President requested an extension of such authority and it was not disapproved by either the House or the Senate. (The President requested the extension, which survived proposed House and Senate resolutions of disapproval.) The OTCA also provided that Congress could withhold a trade agreement from fast track consideration by passing a resolution of disapproval, if it determined that the United States Trade Representative (USTR) had failed to consult with Congress adequately during the trade negotiations. Under the OTCA provisions, Congress greatly expanded the trade negotiation objectives and passed implementing legislation for the North American Free Trade Agreement (NAFTA) in 1993 ( P.L. 103-182 ).\nMultilateral negotiations under the Uruguay Round of the GATT, however, did not conclude in time to meet the June 1, 1993, expiration deadline. In response, Congress passed H.R. 1876 , signed by the President on July 2, 1993 ( P.L. 103-49 ), extending the authority and implementing procedures until April 16, 1994, solely for the Uruguay Round. The votes reflected strong congressional support in the House (295-126) and in the Senate (76-16). The law did not change any other aspects of the fast track authority.", "After the trade agreements authority expired on April 16, 1994, Congress did not approve new authority until the Trade Act of 2002 ( H.R. 3009 ; P.L. 107-210 ). The eight-year period was the longest hiatus since fast track was initially approved in 1974. In 1997, both the Senate Finance and the House Ways and Means Committees reported out legislation to renew fast track. House Republican leaders pulled it before a floor vote at the request of the Clinton Administration because it lacked sufficient support in the House. In September 1998, the House voted on fast track authority legislation, but the bill failed to pass (180-243).\nSeveral reasons may explain Congress's decision not to enact new trade agreements authority for the Clinton Administration. For one, although both the Republican congressional leadership and the Clinton Administration supported fast track authority, the two sides could not agree on the negotiating objectives for labor and environmental issues under the proposed renewed authority. In general, Republicans wanted more limited coverage than the Clinton Administration and many Democrats in Congress preferred. In addition, the WTO (successor to the GATT) failed to launch a new round of negotiations at the 1999 WTO Ministerial meeting in Seattle, and therefore, no major trade negotiations were underway that might have made renewal of trade agreements authority a political priority.", "In 2001, President George W. Bush requested a renewal of fast track authority. It was renamed in the legislation as \"trade promotion authority (TPA),\" in part to counter what many viewed as a negative connotation associated with the term fast track. The renewed authority is contained in the Bipartisan Trade Promotion Authority Act (BTPA) of 2002, which was enacted as Title XXI of The Trade Act of 2002 ( P.L. 107-210 ).\nThe structure of TPA was consistent with previous trade agreements authority. It included new language for labor and environmental provisions, defining them as \"principal negotiating objectives.\" TPA did not mandate the inclusion of minimal enforceable labor standards in trade agreements, one reason labor groups and many Members of Congress opposed it. The act also created a new mechanism for congressional consultation, the Congressional Oversight Group (COG), to operate in addition to the congressional trade advisors that were appointed under previous versions. (A more detailed discussion of the notification and consultation requirements appears in the next section.)\nThe original House version of the BPTA ( H.R. 3005 ) passed by one vote (215-214), largely along party lines, with Republicans mostly supporting the bill and Democrats largely opposing it. The legislation was combined in the Senate with renewal of Trade Adjustment Assistance (TAA), the Andean Trade Preference Act (ATPA), and the Generalized System of Preferences (GSP). It passed 66 to 30. The conference report on the final bill, H.R. 3009 , the Trade Act of 2002, was adopted by the House (215-212) and Senate (64-34).\nUnder the 2002 version of TPA, Congress approved implementing legislation for FTA Free Trade Agreement countries Chile, Singapore, Australia, Morocco, the Dominican Republic, the Central American countries, Bahrain, Oman, Peru, Colombia, Panama, and South Korea.", "The proposed BCTPA was introduced on April 16, 2015, by Senators Hatch and Wyden ( S. 995 ) and Representative Ryan ( H.R. 1890 ). The legislation is modeled on the Bipartisan Comprehensive Trade Priorities Act of 2014 ( H.R. 3830 , S. 1900 ) introduced by Representative Camp in the House and Senators Hatch and Baucus, which was introduced but not acted upon. The legislation was reported by the Senate Finance Committee on April 22, 2015, and by the House Ways and Means Committee on April 23, 2015. The legislation, as reported by the Senate Finance Committee, was joined with legislation extending Trade Adjustment Assistance into a substitute amendment to H.R. 1314 (an unrelated revenue measure), and the legislation passed on May 22 by a vote of 62-37.\nTPA-2015 contains several differences from the BTPA of 2002. It contains updated negotiating objectives on trade in goods, services, agriculture (especially in the area of sanitary and phytosanitary standards), intellectual property rights, regulatory practices, and on digital trade in goods and services. The negotiating objectives adopt the May 10, 2007, Understanding provisions on labor and the environment, and they adopt new provisions on currency manipulation, localization, state-owned enterprises, and human rights.\nIf enacted, TPA-2015 will expire on July 1, 2021, provided an extension disapproval resolution is not introduced and passed by either chamber by July 1, 2018 (see below). TPA-2015 may be used to consider potential agreements resulting from several ongoing negotiations, including\nThe Trans-Pacific Partnership (TPP), a regional FTA the United States is negotiating with 11 partner countries in the Asia-Pacific. The Trans-Atlantic Trade and Investment Partnership (T-TIP) being negotiated with the European Union (EU). A Trade in Services Agreement (TISA), a plurilateral trade negotiation to seek expanded commitments in services trade. An Environmental Goods Agreement (EGA), a plurilateral agreement being negotiated at the World Trade Organization (WTO) to reduce or eliminate tariff and nontariff barriers on goods to promote the environment.\nIt may also be used to consider any agreement resulting from the Doha Round of WTO multilateral trade negotiations.", "Through TPA/fast track, in its various iterations, Congress has sought to achieve four major goals in the context of supporting trade negotiations: (1) to define trade policy priorities and to have those priorities reflected in trade agreement negotiating objectives; (2) to ensure that the executive branch adheres to these objectives by requiring periodic notification and consultation with Congress; (3) to define the terms, conditions, and procedures under which the President may enter into trade agreements and under which the respective implementing bills may be approved; and (4) to reaffirm Congress's overall constitutional authority over trade by placing limitations on the trade agreements authority. These four goals, and some important procedural precedents that fall outside the formal legal TPA process, are examined below.", "As discussed above, when the statutory authority to enter into trade agreements was limited to reducing tariffs, the trade agreement was implemented by presidential proclamation and without further congressional action, provided the tariff rate reductions were within legislatively pre-approved limits. This process changed when trade negotiations were expanded to include nontariff barriers (NTBs). These more complex agreements requiring changes to domestic law led Congress to tighten its control over trade agreements negotiation and implementation by establishing \"fast track trade negotiating authority.\" As set out in the Trade Act of 1974, NTB agreements could enter into force for the United States only with passage of implementing legislation.\nAt the heart of what is now called TPA are the expedited procedures for moving trade implementing legislation through Congress (Section 151 of the Trade Act of 1974—see below), which have been used for nearly all reciprocal trade agreements. Under Section 2103 of the Trade Act of 2002, Trade Agreements Authority, Congress makes these expedited procedures available only for a qualifying bill, which is referred to as a trade implementing bill. The bill qualifies only if certain conditions are met. First, the trade agreement entered into must make progress in meeting TPA's negotiating objectives, and the President must satisfy the notification and consultation requirements of the TPA statute (see below). Second, the implementing bill must contain provisions that approve the agreement and the statement of administrative action, and contain only those other provisions changing laws \"necessary or appropriate\" to implement the agreement (\"either repealing or amending existing laws or providing new statutory authority\").\nImportantly, Congress has been explicit that the expedited procedures \"are enacted as an exercise of the rulemaking power of the House and the Senate, with the recognition of the right of either House to change the rules at any time.\" This provision is one, of many, that conveys a congressional priority in controlling the approval and implementation of trade agreements.", "In a trade implementing bill, Congress conveys to the President the authority to provide for the agreement to enter into force by presidential proclamation, after determining that the partner country(ies) has taken measures necessary to comply with the provisions of the agreement. The requirements of this authority are defined in Section 2105 of the Trade Act of 2002 (see Appendix B for TPA timeline) under which an agreement may enter into force \"if and only if\":\n1. at least 90 calendar days prior to signing the agreement, the President notifies Congress of his intention to do so (to provide opportunity for congressional review and possibly provide input before the agreement is signed, at which point it ostensibly can no longer be changed); 2. within 60 calendar days of signing the agreement, the President provides Congress with a list of required changes to U.S. law needed to bring the United States into compliance with the agreement; 3. after entering into the agreement, on a day in which both houses of Congress are in session, the President transmits a copy of the final legal text of the trade agreement, a draft implementing bill, a statement of administrative action proposed to implement the agreement, and supporting statements on how the agreement meets various congressional priorities and objectives, changes existing agreements, and serves the purpose of U.S. commercial interests, and on how the implementing bill meets the statute's requirements for being an implementing bill (see section above); and 4. the implementing bill is enacted into law.", "Should the above requirements be fulfilled to the satisfaction of Congress, it has agreed to follow certain expedited legislative procedures as defined in Sections 151-154 of the Trade Act of 1974, as amended. In effect, these rules require that Congress must act on the bill sent over by the White House, and in other ways represent a significant departure from ordinary legislative procedures. The major rules are listed below (see Appendix C for greater detail):\n1. mandatory introduction of the implementing bill in both houses of Congress and immediate referral to the appropriate committees (House Ways and Means, Senate Finance, and others); 2. automatic discharge from House and Senate Committees after a limited period of time; 3. limited floor debate; and 4. no amendment, meaning that each house must vote either up or down on the bill, which passes with a simple majority.", "Congress exercises its trade policy role, in part, by defining trade negotiation objectives in TPA legislation. Through the negotiating objectives, Congress has made clear that trade is an important aspect of U.S. foreign economic and security policy because it generates broad benefits for the United States and the global economy. To take the fullest advantage of these benefits, Congress, drawing on its constitutional authority and historical precedent, defined the objectives that the President is to pursue in trade negotiations. Although the executive branch has some discretion over implementing these goals, they are definitive statements of U.S. trade policy that the Administration is expected to honor, if it expects trade agreement implementing legislation to be considered under expedited rules. For this reason, trade negotiating objectives stand at the center of the congressional debate on TPA.\nCongress establishes trade negotiating objectives in three categories: (1) overall objectives; (2) principal objectives; and (3) other priorities. These begin with broad goals that encapsulate the \"overall\" direction trade negotiations are expected to take, such as enhancing U.S. and global economies. Principal objectives are more specific and provide detailed goals that Congress expects to be integrated into trade agreements, such as reducing barriers and distortions to trade (e.g., goods, services, agriculture); protecting foreign investment and intellectual property rights; encouraging transparency; establishing fair regulatory practices; combating corruption; ensuring that countries enforce their environmental and labor laws; providing for an effective dispute settlement process; and protecting the U.S. right to enforce its trade remedy laws. Objectives also include an important obligation to consult Congress, discussed in detail below.\nIn the past, language defining trade negotiating objectives has been contested, contributing to the 2002 renewal controversy in which TPA passed largely along partisan lines and by the narrowest of margins in the House. This controversy reflects the importance that TPA negotiating objectives can play as a template for future trade agreements negotiated under these guidelines. For example, if the language of a TPA objective is highly contentious, the same issue may prove controversial when a specific trade agreement is brought before Congress for approval using that same or similar language. The labor provisions, which are emphasized in all three groups of negotiating objectives, provide the best illustration. In particular, the decision not to include minimal enforceable standards in TPA led to contentious debate over both TPA and the FTAs that later adopted the TPA language on labor. This issue was perhaps most evident in the 2005 debate on passage of the implementing bill for the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR).\nBecause the structure of trade agreements mirrors TPA objectives, and disputes over FTAs based on those objectives brought before Congress under TPA have so far survived all challenges from opponents, the vote on renewing TPA/fast track authority is among the most critical trade votes Congress considers.", "The trade agreements authority is extended to the President provided he or his designee consults regularly with Congress. This requirement includes consultation with the Congressional Advisory Groups (CAG) in both chambers, created in TPA-2015, whose members are accredited as official advisors to the trade negotiation delegations. Notification and consultation requirements have been revised in each renewal of authority. The timing of these notifications is detailed in the timeline presented in Appendix B . First, the President must conduct certain notifications and consultations before negotiations begin that include\n1. notifying Congress in writing of his intention to enter into negotiations at least 90 calendar days prior to commencing negotiations; 2. consulting with the House Ways and Means, Senate Finance, other relevant committees, and the CAGs on the nature of the negotiations; and 3. providing special consultations on agriculture, import sensitive agricultural products, fishing and textile industries tariffs, and other issues.\nThe President must also conduct specific notifications and consultations before (and after) agreements are entered into (signed) , to include\n1. notifying Congress in writing of his intention to enter into an agreement at least 90 calendar days prior to doing so; 2. consulting with House Ways and Means, Senate Finance, other relevant committees, and the CAGs with respect to the nature of the agreement, how it achieves the purposes defined in TPA, and any potential effects it may have on existing laws; 3. notifying the revenue committees at least 180 calendar days prior to entering into the agreement of any potential changes to U.S. trade remedy laws that may be required; 4. submitting private sector advisory committee reports to Congress, the President, and the USTR no later than 30 calendar days after notifying Congress of his intention to enter into an agreement; 5. providing the U.S. International Trade Commission (USITC) with trade agreement details at least 90 days before entering into an agreement; 6. presenting to Congress no later than 105 calendar days after the President enters into the agreement, the USITC report on the impact of the agreement on the U.S. economy; and 7. releasing the text of the agreement 60 days prior to entering into an agreement.\nThe congressional consultation process is a long-standing precedent and an integral part of TPA. It reflects Congress's ongoing interest in ensuring that trade policy remains under the purview of the legislative branch by establishing in law opportunities to affect the nature and direction of trade negotiations. The effectiveness of the consultation process, however, has been questioned. The Government Accountability Office (GAO) evaluated this process based on multiple interviews with current and former congressional staff and executive branch employees. It found that from 2002 to 2007, the USTR had conducted \"extensive\" consultations with Members and staff of Congress on all FTAs that were to be presented to Congress for approval under TPA.\nAccording to GAO's findings, however, many congressional staff indicated that despite the high quality of information and frequency of meetings with USTR officials, they often did not allow for sufficient time to provide input into the negotiation process, were often cast more as briefings than consultations (implying an exchange of views), and did not always include last minute changes to draft FTA texts. In short, staff expressed concern that the consultation process did not satisfy many in Congress and may need to be amended to allow for greater and earlier congressional input into the drafting of FTAs. Similar concerns have been raised concerning consultation with the Administration over TPP and other pending trade negotiations.", "Congress adopted TPA procedures on pragmatic grounds as self-limiting conditions to prevent trade implementing bills from being delayed or obstructed by congressional procedures that can either keep a bill from moving out of committee, or delay it on the floor of the House or Senate with extended debate. Trade agreements can also be the product of a fragile consensus between trade partners, and TPA procedures were designed to protect such a consensus from congressional amendments that would change the basic agreement. In crafting TPA, however, Congress did not agree to surrender its constitutional authority over trade matters and wrote into TPA a number of provisions that can limit the use of the expedited procedures.", "Each renewal of the trade agreements authority has provided the use of expedited procedures for trade agreement implementing bills for a limited time, a way to ensure congressional oversight over their use. The 2002 statute made these procedures available for trade agreements entered into before July 1, 2007. TPA-2015 makes the procedures available for agreements entered into before July 1, 2021, provided that an extension disapproval resolution has not been introduced and passed by either chamber by July 1, 2018. Importantly, however, as with previous versions, the act provided no deadline for submitting implementing legislation for an FTA that is entered into before the expiration of the authority. For example, the FTA with Colombia was signed in November 2006 (the 109 th Congress) and FTAs with Panama and South Korea were signed in June 2007 (110 th Congress), but implementing bills were not passed until October 12, 2011 (112 th Congress).", "The TPA legislation has required that the President request an extension of the TPA authority after a certain period of time. The extension was granted unless either House of Congress adopted a disapproval resolution. Such a resolution of disapproval may not be considered unless it is reported out of either the House Ways and Means or Senate Finance Committees. Although such resolutions have been reported out of committee in the past, none has been passed in either House of Congress. This process is a reminder to the executive branch that the availability of expedited legislative procedures is a congressional prerogative that can be denied if Congress becomes dissatisfied with how the President has conducted trade agreement negotiations.", "The requirement that the President fulfill consultation and reporting obligations also helps preserve the congressional role on trade agreements by giving Congress the opportunity to influence the agreement before it is finalized. Should Congress determine that the President has failed to meet these requirements, it may decide that the implementing bill is not eligible to be considered under TPA rules. It would implement this decision by adopting a joint \"procedural disapproval\" resolution in both houses of Congress.", "The CCR procedure, new to TPA-2015, would allow either chamber to withdraw TPA procedures for an implementing bill, solely in that chamber, for failure to notify or consult with Congress on a trade agreement. A CCR is triggered if either committee of jurisdiction reports implementing legislation unfavorably, and different procedures subsequently are followed in each chamber.", "The Trade Act of 1974, as amended, provides that the expedited procedures for consideration of trade implementing bills are enacted as rules of procedures for each house, \"with the full recognition of the constitutional right of either House to change the rules (so far as relating to the procedure of that House) at any time.\" Congress reserves its constitutional right to withdraw or override the expedited procedures for trade implementing bills, which can take effect with a vote by either house of Congress.\nThis summary suggests that in addition to binding rules, the long-term success of TPA rests on a facilitating cooperation and partnership between the legislative and executive branches of government, and by extension, between the two major political parties. Some have noted that the sense of such cooperation was absent under the previous TPA, placing a strain on the trade legislative process in recent years. One could argue that a bipartisan agreement on TPA has been absent since at least 1993, as evident in the eight-year lapse during the Clinton Administration and the largely partisan passage of the 2002 TPA renewal.", "In addition to the expedited procedures defined in TPA, Congress, generally with the effective support and consent of the executive branch, has followed certain procedures during the consideration of trade agreement implementing bills that, although not formally defined in TPA, have been integrated into the process of congressional approval of trade agreements. Three in particular stand out:", "Congress has insisted on reviewing a trade agreement prior to the implementing bill being introduced. This is done first in hearings before the House Ways and Means and Senate Finance Committees, as well as possibly other interested committees. The Ways and Means and Finance Committees typically follow with an \"unofficial\" or \"informal\" markup session, which may be followed by a \"mock conference\" of an informal draft version of the implementing bill, which is sent over by the White House, along with a draft of the final text of the trade agreement.\nThe informal markup is, in effect, a test run of congressional response to the trade agreement implementing bill. Because it is only an informal draft bill, there is no real legislation to \"mark up,\" but the meetings afford committee members an opportunity to raise concerns on the draft trade agreement, as well as the informal draft implementing legislation, and offer amendments that may serve as important signals to the Administration of changes to the actual implementing bill they would like to see made. The two revenue committees may use the \"mock conference\" to reconcile any differences in their informal markups to reinforce congressional positions.\nAlthough a trade agreement at this point has already been concluded, a clarification or \"translation\" of key points that do not alter the basic agreement can and may be made in the final implementing bill. The Administration, however, can exercise discretion in accepting suggested changes from Congress. For example, while the committees offered many changes to the CAFTA-DR agreement that the Bush Administration tried to accommodate, the same Administration declined to include the language of an amendment unanimously supported by the Senate Finance Committee with respect to the U.S.-Oman FTA implementing legislation, citing TPA's own requirement that only legislation \"necessary or appropriate\" to implement the agreement be included. The Oman FTA implementing bill passed, but a new bipartisan call for better consultation prior to the President entering into a trade agreement arose because of dissatisfaction with both the Oman FTA and the TPA process.", "Outside of formal TPA statutory requirements, at times Congress has encouraged or insisted on additions or clarifications to trade agreements, resulting in side agreements or side letters. Side agreements can involve additional obligations accepted by all parties after the original trade agreement has been signed. The most notable examples are the environment and labor side agreements of NAFTA. Their status with respect to being subject to fast track procedures, however, can be less than clear. Side letters, by contrast, generally act as clarifying devices, usually applied to a specific issue and exist for virtually all bilateral FTAs. They can be used to assuage a particular congressional concern. Side letters are typically addressed from and to the top trade negotiating representative (e.g., the USTR, trade minister, or equivalent). Side agreements and letters accompany the agreement, but do not change its text, and both require official signatures of all the negotiating parties to be considered in force, although their enforceability so far has been untested, and so is also unclear.", "Some Members of Congress have relied on informal commitments from the executive branch to address issues raised in mock markups. These often relate to special interests and concerns, and their fulfillment relies on a measure of good will between Congress and the executive branch. In the case of the CAFTA-DR implementing bill, for example, the Bush Administration made accommodations to sugar, textile, and labor interests to secure congressional support.", "TPA expired on July 1, 2007. Historically, it has been common practice, although not formally required, to have the President request that Congress provide renewed TPA (see Appendix A ). Some Members of Congress have criticized President Obama for delaying such a request. The President did ask for TPA renewal in a speech delivered on July 30, 2013, and he reiterated that request at his 2015 State of the Union address. The decision to initiate legislative action on TPA may also be influenced by Congress's desire to revamp parts of the 2002 law, which some view as outdated and which may not reflect all key elements of the emerging debate. Some of the broader policy issues and technical changes that may be contemplated are summarized below.", "From one perspective, it could be argued that TPA has not always operated smoothly and may not be needed if consensus can be built on passage of an FTA. When such a consensus exists, it is common to achieve at least a 60-vote majority in the Senate, and the House need not rely on TPA to adopt a special rule covering expedited legislative procedures. While a technically appealing point, TPA involves more than the exercise of expedited legislative procedures. It can (1) help build a consensus on trade policy between the executive and legislative branches; (2) be a signal to would-be FTA partners of congressional support for an FTA; and (3) ensure Congress of its role in the trade policy agenda by defining negotiating objectives and insisting on specific consultation and notification, among other requirements.\nThe timing of TPA renewal is another important question. Some have suggested that the President should put off requesting TPA renewal until negotiations for a specific FTA are near completion, which would provide a compelling rationale and motivation for congressional action. Others argue that Congress would be better served if TPA were addressed early in the negotiation process. Early action would allow Congress to weigh in prior to the end of negotiations on the critical matters of negotiation objectives and consultation discussed above. Congress may wish to consider these and other aspects of TPA in determining whether and how to proceed with a renewed authority.", "The scope and content of U.S. trade negotiating objectives have expanded as the structure of trade has changed and the issues have become much more complex, rendering many of the negotiating objectives under prior grants of TPA out of date. Several negotiating objectives in TPA-2015 include topics addressed in a so-called \"21 st century trade agreement,\" which reflect objectives not foreseen in previous TPA renewals. Current TPP negotiations, for example, emphasize new or more nuanced issues such as the treatment of state-owned enterprises (SOEs), new regulatory cooperation and coherence, effects of trade on small- and medium-sized businesses (SMEs), and the implications of FTAs on global supply chains, which have come to redefine the nature of global trade. Congress may wish to consider these and other possible new negotiating objectives.\nThe treatment of negotiating objectives in trade agreements is a primary example and remains perhaps among the most controversial areas for TPA renewal. Many Democrats were dissatisfied with the outcome in the Trade Act of 2002, leading to a largely partisan vote on passage, particularly in the House. Because the issue remained unresolved for many Members, they withheld approval of FTAs at least until after a bipartisan agreement was struck by congressional leadership and the Bush Administration on May 10, 2007. The so-called \"May 10 th Agreement\" incorporated significant changes in labor, environment, and intellectual property rights (IPR) commitments for reciprocal trade agreements already negotiated with Peru, Colombia, Panama, and South Korea, including key elements proposed by House Democrats during the 2002 renewal debate.\nThese changes have been accepted as a baseline for future trade agreements by many, but not all, Republicans and Democrats. Congress may wish to consider including some or all of the May 10 th Understanding commitments as part of the formal trade negotiating objectives in TPA. Some Democrats have raised the issue of whether further improvements might be made to these provisions. Alternatively, some Republicans have responded that they still have serious misgivings with the May 10 th Understanding, and that it should not be construed as reflecting \"an agreement on a new trade policy.\" However, TPA-2015 contains the key provisions of the May 10 th Understanding regarding labor and environmental provisions, although it is less clear to what extent TPA-2015 reflects the IPR provisions.", "Some Members of Congress have expressed dissatisfaction with executive branch execution of the trade negotiation consultation process required under TPA. The issue is a recurring one, and has gained new life with the TPP negotiations, for which some Members are dissatisfied with the quality of consultation. Key issues include defining procedures that ensure Congress can influence the substance of FTAs early in the negotiation process, and that it is afforded appropriate access to draft texts of agreements as they are being negotiated. Given the evolving nature of this section of TPA, it is possible that Congress may seek to clarify negotiation and consultation procedures. Some staff and Members have argued that they have less access to draft text than representatives of business and nongovernment organizations (NGOs). Members, particularly those sitting on committees with jurisdiction over trade, have repeatedly expressed the importance of being kept current on trade agreement negotiations so as to influence the text of the agreement, and later \"to participate meaningfully in the drafting of the implementing bill.\"", "There is bipartisan interest in ensuring that the United States makes every effort to enforce commitments of its trade partners defined in trade agreements. Separate legislative efforts have addressed the trade enforcement issue, and President Obama has created the Interagency Trade Enforcement Center. Congress, however, may also wish to consider language on trade agreement enforcement in TPA as well.", "The most recent use of the TPA expedited procedures in the 112 th Congress raised a number of technical issues that Congress may wish to reevaluate. A non-exhaustive list might include\n1. Necessary or appropriate: Congress has repeatedly emphasized the importance of taking a strict interpretation of using TPA only for those provisions in an implementing bill that are \"necessary or appropriate to implement the agreement.\" TPA-2015 takes this provision a step further by requiring that provisions in implementing legislation be \"strictly necessary or appropriate.\" Yet, at times, there have been attempts to introduce provisions that some have viewed as challenging such a \"strict\" interpretation. Some Members may wish to define the \"necessary or appropriate\" language more precisely. Others may argue that each Congress is better served by having flexibility to apply this standard as it chooses. 2. Time limitation on introduction of an FTA implementing bill: legislation implementing the FTAs with Colombia, Panama, Peru, and South Korea was not introduced until 3-4 years after the FTAs were signed. In part the delay reflected congressional leveraging of an FTA to press for policy changes in trade partner countries that fell outside the purview of the FTA. This tactic raises the issue of whether Congress might consider a time limit for introduction of an implementing bill after negotiations conclude. 3. Changing FTA text: some argue that text changes in the U.S.-South Korea FTA after the negotiations had concluded were contrary to TPA and so opened up the possibility that approval of the FTA could have been denied on technical grounds. Congress may wish to consider whether TPA renewal should address this issue.", "As noted by two long-time observers of the congressional trade policy process, \"The real power of fast track (TPA) is the underlying political compact between Congress and the President rather than its statutory guarantees, which are technically quite fragile.\" There is an implied extension of \"political compact\" to relationships within Congress as well. Congress repeatedly seeks to develop the needed consensus on trade policy, with varying degrees of success, but generally with an understanding that a minimal degree of bipartisan understanding is needed to pass trade legislation. TPA has been a key element of this process. In consideration of the current TPA authorization legislation, Congress has a number of options with respect to its possible renewal. Four that span the spectrum are\nRenew and Revise TPA Authority . Under this option, Congress could grant the President new authority with revisions to its structure, and without restricting it to specific agreement negotiations. The TPA-2015 legislation follows this option. Extend a Targeted TPA . Congress could extend TPA to complete a specific agreement, such as the TPP. Representative Levin sought to introduce a modified grant of TPA covering only the TPP negotiations as a substitute amendment during the House Ways and Means Committee markup of TPA-2015. Grant Permanent TPA Authority . Congress could grant the President a form of permanent fast track/TPA in a two-tier procedure. For example, one expert suggested that (1) Congress could enact into law permanent fast track procedures; and (2) before specific negotiations could begin, both houses of Congress would have to pass a resolution approving the negotiations and objectives designed for the specific set of negotiations. No TPA Renewal . The lack of TPA could delay action on future reciprocal trade agreements, but trade policy can move ahead in its absence, including consideration of Trade and Investment Framework Agreements (TIFAs), unilateral preference arrangements (e.g., the African Growth and Opportunity Act—AGOA), and trade enforcement measures, among others. The United States has also conducted trade negotiations prior to having TPA authority in place. In addition, some Members do not support TPA because they view the expedited procedures as giving up too much congressional authority.", "In the 114 th Congress, legislation to renew TPA—the Bipartisan Congressional Trade Priorities Act of 2015—was signed by the President on June 29, 2015. The legislation would reauthorize TPA for four years with the possibility of a three-year extension. The legislation largely reflects the basic structure of previous TPA/fast-track authorizing legislation. However, it makes some changes, such as expanding executive branch requirements to consult with Congress and private sector advisers.\nAs with previous TPA/fast-track statutes, the two bills also included sets of \"overall trade negotiating objectives\" and \"principal trade negotiating objectives.\" Included in the latter category were topics that were included in previous TPA statutes, albeit revised in some cases, including trade in goods, trade in services, foreign investment, intellectual property, transparency, regulatory practices, dispute settlement and enforcement, trade in agriculture, labor, environment, border taxes, trade remedy laws, and textile negotiations. The bills include new objectives reflecting new trade policy issues that are the subject of current negotiations, including digital trade in goods and services and cross-border data flows, state-owned and state-controlled enterprises, and localization barriers to trade. The bills included new provisions on currency and human rights as \"principal trade negotiating objectives.\" Currency was previously included in the \"promotion of certain priorities\" category in the 2002 act. The two bills also included a category of trade negotiating objectives called \"capacity building and other priorities.\"\nCongressional Trade Agreements Authority Requested by and Granted to Presidents Since 1934\nCongressional Timeline under TPA\nA Short Guide to the Expedited Legislative Procedures for Passage of Trade Implementing Bills Under TPA\nI. Before the formal TPA expedited procedures come into play, the House Ways and Means and Senate Finance Committees typically hold \"mock markups\" on informal drafts of the implementing legislation, voting to approve or disapprove. The vote and any amendments to the draft legislation, however, are not binding on the Administration. These meetings provide an important opportunity for Congress to register specific concerns and/or viewpoints with the Administration before it sends final implementing legislation to Congress, which initiates the expedited procedures.\nII. The President sends a final legal draft text of the trade agreement and a draft implementing bill (with supporting materials) to Congress on a day that it is in session. The draft bill may, or may not, reflect some or all of amendments adopted by committees in the mock markup.\nIII. Identical bills are subject to mandatory introduction in each house of Congress on the day received. The bills are referred to the House Ways and Means and Senate Finance Committees jointly, with others if jurisdiction warrants.\nIV. Each committee has 45 in session days to report the bill or it is automatically discharged and the bill is placed on the appropriate calendar. An implementing bill subject to TPA procedures is likely to be a revenue bill, in which case the Constitution requires that the Senate ultimately act on the House bill. Under these conditions, the Senate Finance Committee has until the later of the 45 th day of session after the Senate bill is introduced or the 15 th day of session after the Senate receives the House bill.\nV. In each house, after the implementing bill is reported or discharged, any Member may offer a non-debatable motion to consider it. Debate is limited to 20 hours evenly divided between those for and against. The measure cannot be amended, and a motion or unanimous-consent request to suspend this restriction is not in order. If the chamber has not completed floor action by the 15 th day after the bill is reported or discharged, any Member may bring it to a vote.\nVI. A bill passes by simple majority under the statute. Whichever House acts second (typically the Senate assuming the bill is a revenue bill) considers and debates its own bill, but takes its final vote on the bill received from the other House (typically the House of Representatives). This procedure ensures that both houses will ultimately act on the same measure, thereby clearing it to be presented to the President (without the need for conference). After the implementing bill is signed, under its terms, the agreement enters into force for the United States when the President implements it by proclamation. This typically occurs after the USTR has assured the President that the partner country(ies) has made the legislative and regulatory changes necessary to meet all obligations under the trade agreement, and the President exchanges notes with the trading partner government providing for the agreement's entry into force on or after a specific date." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 1, 2, 2, 2, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h2_full h1_full", "h0_full h2_title", "", "", "h2_full", "h0_full", "", "", "", "", "", "", "h0_title h1_title", "h1_full", "", "", "h1_full", "h0_full", "", "", "", "", "", "h0_full", "", "", "", "", "h0_title h2_title h1_title", "", "h0_full", "", "", "h2_full h1_full", "", "" ] }	{ "question": [ "What is the history of the TPA in codified law?", "Although the procedures have remained unchanged, how has the TPA continued to change in recent years?", "How have newer versions of TPA been received differently than earlier versions?", "What will future debates on the TPA in Congress center around?", "How do current trade negotiations change the priority of TPA renewal?", "Why is TPA renewal important for Congress in these trade negotiations?", "What signal could Congress possibly give by renewing the TPA?", "What points are then important in future Congress debates over TPA renewal?", "What details will prompt considerable debate in the TPA's renewal?", "What details does this report offer?", "How does this report help find solutions for Congress?" ], "summary": [ "TPA reflects decades of debate, cooperation, and compromise between Congress and the executive branch in finding a pragmatic accommodation to the exercise of each branch's respective authorities over trade policy. The expedited legislative procedures have not changed since first codified in the Trade Act of 1974 (P.L. 93-618).", "Congress, however, has required that the authority to use TPA be periodically reauthorized, and at times has chosen to revise trade negotiation objectives, the consultative mechanism, and presidential notification requirements.", "While early versions of fast track/TPA received bipartisan support, later renewal efforts have been more controversial, culminating in a more partisan vote on the 2002 TPA renewal.", "Future debates on TPA renewal may center on trade negotiation objectives, congressional oversight of trade negotiations, trade agreement enforcement, and clarifying the congressional authority over approval of reciprocal trade agreements and trade policy more generally, among others.", "TPA renewal may become a more pressing issue in the 114th Congress because current trade negotiations on the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TISA) are in progress.", "Technically, TPA is not necessary to begin or even conclude trade negotiations, but it is widely understood to be a key element of defining congressional authority, and of passing trade agreement implementing legislation.", "Therefore, its renewal can be construed as signaling serious congressional support for moving ahead with trade negotiations.", "Addressing congressional concerns over the definition and operation of TPA may be a central part of the debate.", "Although there appears to be support for renewal of TPA in Congress, the details of the legislation are likely to be subject to considerable debate, including the specific treatment of any related TAA program reauthorization.", "This report presents background and analysis on the development of TPA, a summary of the major provisions under the expired authority, and a discussion of the issues that have arisen in the debate over TPA renewal.", "It also explores some of the policy options available to Congress." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, 0, 0, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-18-277T	{ "title": [ "Background", "Status of NASA’s Major Telescope Projects", "Lessons Learned from NASA Acquisitions", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "NASA’s mission is to drive advances in science, technology, aeronautics, and space exploration, and contribute to education, innovation, our country’s economic vitality, and the stewardship of the Earth. To accomplish this mission, NASA establishes programs and projects that rely on complex instruments and spacecraft. NASA’s portfolio of major projects ranges from space satellites equipped with advanced sensors to study the Earth to a telescope intended to explore the universe to spacecraft to transport humans and cargo to and beyond low-Earth orbit. Some of NASA’s projects are expected to incorporate new and sophisticated technologies that must operate in harsh, distant environments.\nThe life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. Figure 1 depicts NASA’s life cycle for space flight projects.\nFormulation culminates in a review at key decision point C, known as project confirmation, where cost and schedule baselines are established and documented in a decision memorandum. To inform those baselines, each project with a life-cycle cost estimated to be greater than $250 million must also develop a joint cost and schedule confidence level (JCL). The JCL initiative, adopted in January 2009, is a point-in-time estimate that, among other things, includes all cost and schedule elements, incorporates and quantifies known risks, assesses the impacts of cost and schedule to date, and addresses available annual resources. NASA policy requires that projects be baselined and budgeted at the 70 percent confidence level.\nThe agency baseline commitment established at key decision point C includes cost and schedule reserves held at the project—those within the project manager’s control—and NASA headquarters level. Cost reserves are for costs that are expected to be incurred—for instance, to address project risks—but are not yet allocated to a specific part of the project. Schedule reserves are extra time in project schedules that can be allocated to specific activities, elements, and major subsystems to mitigate delays or address unforeseen risks.", "NASA’s current portfolio of major space telescopes includes three projects—WFIRST, TESS, and JWST—that vary in cost, complexity, and phase of the acquisition life cycle. WFIRST, a project that entered the concept and technology development phase and established preliminary cost and schedule estimates in February 2016, is in the earliest stages of the acquisition life cycle. With preliminary cost estimates ranging from $3.2 billion to $3.8 billion, this project is an observatory designed to perform wide-field imaging and survey of the sky at near-infrared wavelengths to answer questions about the structure and evolution of the universe and to expand our knowledge of planets beyond our solar system. The current design includes a 2.4 meter telescope that was built and qualified for another federal agency over 10 years ago; the project is evaluating which components to reuse and which to modify, refurbish, or build new. TESS—a smaller project whose latest cost estimate is approximately $337 million—is targeted to launch in March 2018 and will be used to conduct the first extensive survey of the sky from space for transiting exoplanets.\nAnd finally, JWST, with a life-cycle cost estimate of $8.835 billion, is one of NASA’s most complex projects and top priorities. The telescope is designed to help understand the origin and destiny of the universe, the creation and evolution of the first stars and galaxies, and the formation of stars and planetary systems. With a 6.5-meter primary mirror, JWST is expected to operate at about 100 times the sensitivity of the Hubble Space Telescope. JWST’s science instruments are to detect very faint infrared sources and, as such, are required to operate at extremely cold temperatures. To help keep these instruments cold, a multi-layered tennis-court-sized sunshield is being developed to protect the mirrors and instruments from the sun’s heat.\nWe have reported for several years on the JWST project, which has experienced significant cost increases and schedule delays. Prior to being approved for development, cost estimates for JWST ranged from $1 billion to $3.5 billion, with expected launch dates ranging from 2007 to 2011. Before 2011, early technical and management challenges, contractor performance issues, low levels of cost reserves, and poorly phased funding levels caused JWST to delay work after confirmation, which contributed to significant cost and schedule overruns, including launch delays. The Chair of the Senate Subcommittee on Commerce, Justice, Science, and Related Agencies requested from NASA an independent review of JWST in June 2010. In response, NASA commissioned the Independent Comprehensive Review Panel, which issued its report in October 2010. The panel concluded that JWST was executing well from a technical standpoint, but that the baseline cost estimate did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project.\nFollowing this review, Congress in November 2011 placed an $8 billion cap on the formulation and development costs for the project and NASA rebaselined JWST with a life-cycle cost estimate of $8.835 billion that included additional money for operations and a planned launch in October 2018. The new baseline represented a 78 percent increase to the project’s life-cycle cost from the original baseline and a launch date in October 2018, a delay of 52 months. The revised life-cycle cost estimate included a total of 13 months of funded schedule reserve.\nOur ongoing work indicates that these three projects are each making progress in line with their phase of the acquisition cycle, but also face challenges in execution. Some of these challenges are unique to the projects themselves and some are common among the projects in NASA’s portfolio. For example, when projects enter the integration and test phase, unforeseen challenges can arise and affect the cost and schedule for the project. Table 1 provides more details about the current acquisition phase, cost, and schedule status of NASA’s major space telescope projects based on our ongoing work.\nWFIRST. NASA’s preliminary cost and schedule estimates for the WFIRST project are currently under review as the project responds to findings in the WFIRST Independent External Technical/Management/Cost Review. This independent review was conducted to ensure the mission’s scope and required resources are well understood and executable. NASA initiated this review in April 2017 to address the National Academies’ concerns that WFIRST cost growth could endanger the balance of NASA’s astrophysics program and negatively affect other scientific priorities. The review found that the mission scope is understood, but not aligned with the resources provided and concluded that the mission is not executable without adjustments and/or additional resources. For example, the study team found that NASA’s current forecasted funding profile for the WFIRST project would require the project to slow down activities starting in fiscal year 2020, which would result in an increase in development cost and schedule. NASA agreed with the study team’s results and directed the project to reduce the cost and complexity of the design in order to maintain costs within the $3.2 billion cost target.\nThe project is currently identifying potential ways to reduce the scope of planned activities (called “descopes”), assessing the science impact of those descopes, and then developing recommendations for the Astrophysics Division leadership. An example of a descope that may be considered is the requirement for WFIRST to be “star-shade ready,” which means the design must be compatible with a star-shade device that is positioned between it and the star being observed to block out starlight while allowing the light emitted by the planet through.\nTESS. The TESS project is currently holding cost and schedule reserves consistent with NASA center requirements, but there are no longer headquarters-held cost reserves to cover a delay if the project cannot launch as planned in March 2018. According to a project official, the project is holding 16 days of schedule reserve to its target March 2018 launch readiness date, which includes 6 days for the completion of integration and test, and 10 days for launch operations. The project previously used schedule reserves to accommodate the delayed delivery of its Ka-band transmitter, which is essential for TESS as it transmits the mission data back to Earth, due to continued performance and manufacturing issues. The two main risks to the March 2018 launch date are if: 1) SpaceX requires additional time past December 2017 for NASA’s Launch Services Program to certify that TESS can fly on its upgraded launch vehicle—certification is necessary because it will be the first time that NASA will use this version of the vehicle—and 2) any issues are identified during the remainder of environmental testing.\nThe project is also conducting additional testing on its spare camera at temperatures seen in space to better understand expected camera performance on orbit. TESS will use four identical, wide field-of-view cameras to conduct the first extensive survey of the sky from space for transiting exoplanets. However, during thermal testing, the project found that the substance attaching the lenses to the camera barrel places pressure on the lenses and causes the cameras to be slightly out of focus. In June 2017, NASA directed the project to proceed with integrating the cameras—as they are expected to meet TESS’s top level science requirements even with the anomaly. At its most recent key decision review in August 2017, NASA reallocated $15 million of TESS’s headquarters-held reserves to the WFIRST project. While this had the effect of decreasing life cycle costs for TESS, it also increased risk as the project no longer has any additional headquarters-held cost reserves to cover a launch delay past March 2018.\nJWST. The JWST project continues to make progress towards launch, but the program is encountering technical challenges that require both time and money to fix and may lead to additional delays, beyond a delay recently announced. While the project has made much progress on hardware integration and testing over the past several months, it also used all of its remaining schedule reserves to address various technical issues, particularly on the spacecraft element. In September 2017, the JWST project requested from the European Space Agency—who will contribute the Ariane V launch vehicle—a launch window from March to June 2019, or 5 to 8 months later than the planned October 2018 launch readiness date, established in 2011. The project based this request on the results of a schedule risk assessment that incorporated inputs from the contractor on expected durations of ongoing spacecraft element integration work and other challenges that were expected to increase schedule.\nWith the later launch window to June 2019, the project expected to have up to 4 months of new schedule reserves. However, shortly after requesting the revised launch window, the project learned from its contractor that up to another 3 months of schedule reserve use is likely, due to lessons learned from conducting deployment exercises of the sunshield, such as reach and access limitations on the flight hardware. As a result, and pending further examination of the schedule, the project now has approximately one month of schedule reserve to complete environmental testing of the spacecraft element and the final integration phase. The final integration phase is where the instruments and telescope will be integrated with the spacecraft and sunshield to form the completed observatory. As I previously noted, our work has shown the integration and test is the riskiest phase of development, where problems are most likely to be found and schedules slip. Given the risks associated with the integration and test work ahead, coupled with a level of schedule reserves that is currently well below the level stated in the procedural requirements issued by the NASA center responsible for managing JWST, additional delays to the project’s revised launch readiness date of June 2019 are likely. As a result, the funding available under the Congressional cost cap of $8 billion may be inadequate as the contractor will need to continue to retain higher workforce levels for longer than expected to prepare the mission for a delayed launch.", "As Congress, NASA, and the science community consider future telescope efforts, it will be exceedingly important to shape and manage new programs in a manner that minimizes cost overruns and schedule delays. This is particularly important for the largest programs as even small cost increases can have reverberating effects. NASA’s telescope and other science projects will always have inherent technical, design, and integration risks because they are complex, specialized, and often push the state of the art in space technology. But too often, our reports find that management and oversight problems—which can include poor planning, optimistic cost estimating, funding gaps, lax oversight, and poor contractor performance, among other issues—are the real drivers behind cost and schedule growth.\nTo its credit, NASA has taken significant steps, partly in response to our past recommendations, to reduce acquisition risk from both a technical and management standpoint, including actions to enhance cost and schedule estimating, provide adequate levels of reserves to projects, establish better processes and metrics to monitor projects, and expand the use of earned value management to better monitor contractor performance. For example, in November 2012, we found that NASA employee skill sets available to analyze and implement earned value management vary widely from center to center, and we recommended that NASA conduct an earned value management skills gap analysis to identify areas requiring augmented capability across the agency, and, based on the results of the assessment, develop a workforce training plan to address any deficiencies. NASA concurred with this recommendation and developed an earned value management training plan in 2014 based on the results of an earned value management skills gap analysis that was conducted in 2013. Moreover, in recent years, we have found that many of the projects within the agency’s major project portfolio have improved their cost and schedule performance. Nevertheless, the extent to which NASA has adopted some of the following lessons learned within its portfolio of major projects is mixed, and NASA has an opportunity to strengthen its program management of major acquisitions, including its space telescopes, by doing so.\nManage Cost and Schedule Performance for Large Projects to Limit Implications for Entire Portfolio. In 2013, following JWST’s cost increases and schedule growth, we found that though cost and schedule growth can occur on any project, increases associated with NASA’s most costly and complex missions can have cascading effects on the rest of the portfolio. For example, we found that the JWST cost growth would have reverberating effects on the portfolio for years to come and required the agency to identify $1.4 billion in additional resources over fiscal years 2012 through 2017, according to Science Mission Directorate officials. NASA identified approximately half of this required funding from the four science divisions within the Science Mission Directorate account. The majority of the cuts were related to future high priority missions, missions in the operations and sustainment phase, and research and analysis.\nIn essence, NASA had to mortgage future high priority missions and research to address JWST’s additional resource needs. Similarly, the National Academy of Sciences has concluded in the past that it is important for NASA to have a clearly articulated and consistently applied method for prioritizing why and how its scarce fiscal resources are apportioned with respect to the science program in general and on a more granular level among component scientific disciplines. The academy noted that failure to do so could result in a loss of capacity, capability, and human resources in a number of scientific disciplines and technological areas that may take a generation or more to reconstitute once eliminated. NASA’s establishment of the WFIRST Independent External Technical/Management/Cost Review that I previously discussed is a step in the right direction to help ensure the Astrophysics Division incorporates this lesson learned.\nEstablish Adequate Cost and Schedule Reserves to Address Risks. Twice in the history of the JWST program, independent reviewers found that the program’s planned cost reserves were inadequate. First, in April 2006, an Independent Review Team confirmed that the project’s technical content was complete and sound, but expressed concern over the project’s reserve funding, reporting that it was too low and phased in too late in the development lifecycle. The review team reported that for a project as complex as JWST, 25 to 30 percent total reserve funding was appropriate. The team cautioned that low reserve funding compromised the project’s ability to resolve issues, address risk areas, and accommodate unknown problems. As I previously mentioned, following additional cost increases and schedule threats, NASA commissioned the Independent Comprehensive Review Panel. In 2010, the panel again concluded JWST was executing well from a technical standpoint, but that the baseline cost estimate did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project.\nNASA heeded these lessons when it established a new baseline for JWST in 2011. For example, the revised schedule included more reserves than required by the procedural requirements issued by the NASA center responsible for managing JWST. We have found, however, that NASA has not applied this lesson learned to all of its large projects— most notably with its human spaceflight projects, including the Space Launch System, Orion Crew Capsule, and associated ground systems— and similar outcomes to the JWST project have started to emerge with these projects. We previously reported that all three of these programs were operating with limited cost reserves, which limited each program’s ability to address risks and unforeseen technical challenges.\nFor example, we found in July 2016 that the Orion program planned to maintain very low levels of annual cost reserves until 2018. The lack of available cost reserves in the near term led to the program deferring work to address technical issues to stay within budget, and put the program’s future cost reserves at risk of being overwhelmed by deferred work. In April 2017, we also found that all three programs faced development challenges in completing work, and each had little to no schedule reserve remaining to the launch date—meaning they would have to complete all remaining work with minimal delay during the most challenging stage of development. We found that it was unlikely that the programs would achieve the planned launch readiness date and recommended that NASA reassess the date. NASA agreed with this recommendation and stated that it would establish a new launch readiness date. In November 2017, NASA announced that a review of the possible manufacturing and production schedule risks indicated a launch date of June 2020—a delay of 19 months—but the agency will manage to a December 2019 launch date because, according to NASA, they have put in mitigation strategies for those risks. We will follow-up on those mitigation strategies as part of future work on the human space exploration programs.\nRegularly and Consistently Update Project JCLs to Provide Realistic Estimates to Decision Makers. In 2009, NASA began requiring that programs and projects with estimated life-cycle costs greater than $250 million develop a JCL prior to project confirmation. This was a positive step for NASA to help ensure that cost and schedule estimates are realistic and projects are thoroughly planning for anticipated risks. This is because a JCL assigns a confidence level, or likelihood, of a project meeting its cost and schedule estimates. Our cost estimating best practices recommend that cost estimates should be updated to reflect changes to a program or be kept current as a program moves through milestones. As new risks emerge on a project, an updated cost and schedule risk analysis can provide realistic estimates to decision-makers, including the Congress. This is especially true for NASA’s largest projects as updated estimates may require the Congress to consider a variety of actions.\nHowever, there is no requirement for NASA projects to update their JCLs, and our prior work has found that projects—including JWST—do not regularly update cost risk analyses to take into account newly emerged risks. Our ongoing work indicates that of the 16 major projects currently in NASA’s portfolio that have developed JCL estimates, only 2 have reported updating their JCLs (other than required due to a rebaseline). For example, the Interior Exploration using Seismic Investigations, Geodesy, and Heat Transport Project (InSight), a Mars lander, updated its JCL after the project missed its committed launch date. As a result, the project was able to provide additional information to decision makers about the probability that it will meet its revised cost and schedule estimates. As a project reaches the later stages of development, especially integration and testing, the types of risks the project will face may change. An updated project JCL would provide both project and agency management with data on relevant risks that can guide the project decisions. For example, in December 2012, we recommended the JWST project update its JCL. NASA concurred with this recommendation; however, we recently closed the recommendation because NASA had not taken steps to implement it and the amount of time remaining before launch would not have allowed the benefit of implementing the recommendation to be realized. An updated JCL may have portended the current schedule delays, which could have been proactively addressed by the project.\nEnhance Oversight of Contractors to Improve Project Outcomes. In December 2012, we found that the JWST project had taken steps to enhance communications with and oversight of its contractors. According to project officials, the increased communication allowed them to better identify and manage project risks by having more visibility into contractors’ activities. The project reported that a great deal of communication existed across the project prior to the Independent Comprehensive Review Panel; however, additional improvements were made. For example, the project increased its presence at contractor facilities as necessary to provide assistance; this included assigning two engineers on a recurring basis at a Lockheed Martin facility to assist in solving problems with an instrument. The JWST project also assumed full responsibility for the mission system engineering functions from Northrop Grumman in March 2011. NASA and Northrop Grumman officials both said that NASA is better suited to perform these tasks.\nWe continue to see instances in our ongoing work that highlight the importance of implementing this lesson learned from JWST. For example, we found in 2017 that the Space Network Ground Segment Sustainment project—a project that plans to develop and deliver a new ground system for one Space Network site that provides essential communications tracking services to NASA and non-NASA missions—exceeded its original cost baseline by at least $401.7 million and been delayed by 27 months. The project has attributed some of the cost overruns and schedule delays to the contractor’s incomplete understanding of its requirements, which led to poor contractor plans and late design changes. The project also took steps to assign a new NASA project manager, increase physical presence at the contractor facility, and have more staff focused on validation and verification activities.\nIn summary, NASA continues to make progress developing its space telescopes to help understand the universe and our place in it. But much like other major projects that NASA is developing, there continues to be an opportunity for NASA to learn from JWST and other projects that have suffered from cost overruns and schedule delays. Key project management tools and prior GAO recommendations that I have highlighted here today, could help to better position these large, complex, and technically challenging efforts for a successful outcome. We look forward to continuing to work with NASA and this subcommittee in addressing these issues.\nChairman Babin, Ranking Member Bera, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.", "If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Acquisition and Sourcing Management at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; Richard Cederholm, Assistant Director; Carrie Rogers; Lisa Fisher; Laura Greifner; Erin Kennedy; and Jose Ramos.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 1, 1 ], "alignment": [ "h2_full", "h0_full h3_full h2_full h1_full", "h0_full h3_full h2_full h1_full", "" ] }	{ "question": [ "What did the GAO observe about the progress of Space Telescope projects?", "What problems does the James Webb Space Telescope project face in scheduling?", "Why might this project face these problems?", "Why are these delays costly for the project?", "What could NASA learn from GAO’s acquisitions?", "What did independent reviews find regarding the JWST program?", "Why is the failure to learn this lesson from JWST costly for other space telescope projects?", "What repeat issues did the human spaceflight programs face?", "How did poor reserve management affect human spaceflight programs?", "What issues has NASA faced that the GAO is most interested in?", "What are NASA's most important astrophysics projects?", "What is the cost of pursuing these telescope projects?", "What does this statement tell about NASA's ongoing telescope projects?", "What NASA projects does this statement pertain to?", "What is the deadline for the release of this statement?" ], "summary": [ "GAO's ongoing work indicates that these projects are each making progress in line with their phase of the acquisition cycle but also face some challenges.", "For example, the current launch date for the James Webb Space Telescope (JWST) project reflects a 57-60-month delay from the project's original schedule.", "GAO's preliminary observations indicate this project still has significant integration and testing to complete, with very little schedule reserve remaining to account for delays.", "Therefore, additional delays beyond the delay of up to 8 months recently announced are likely, and funding available under the $8 billion Congressional cost cap for formulation and development may be inadequate.", "There are a number of lessons learned from its acquisitions that NASA could consider to increase the likelihood of successful outcomes for its telescope projects, as well as for its larger portfolio of projects, such as its human spaceflight projects.", "For example, twice in the history of the JWST program, independent reviews found that the program was not holding adequate cost and schedule reserves.", "GAO has found that NASA has not applied this lesson learned to all of its large projects, and similar outcomes to JWST have started to emerge. For example, NASA did not incorporate this lesson with its human spaceflight programs.", "In July 2016 and April 2017, GAO found that these programs were holding inadequate levels of cost and schedule reserves to cover unexpected cost increases or delays.", "In April 2017, GAO recommended that NASA reassess the date of the programs' first test flight. NASA concurred and, in November 2017, announced a launch delay of up to 19 months.", "Acquisition management has been a long-standing challenge at NASA, although GAO has reported on improvements the agency has made in recent years.", "Three space telescope projects are the key enablers for NASA to achieve its astrophysics' science goals, which include seeking to understand the universe.", "In its fiscal year 2018 budget request, NASA asked for about $697 million for these three projects, which represents over 50 percent of NASA's budget for its astrophysics' major projects. In total, these projects represent an expected investment of at least $12.4 billion.", "This statement reflects preliminary observations on (1) the current status and cost of NASA's major telescope projects and (2) lessons learned that can be applied to NASA's management of its telescope projects.", "This statement is based on ongoing work on JWST and ongoing work on the status of NASA's major projects. Both reports are planned to be published in Spring 2018. This statement is also based on past GAO reports on JWST and NASA's acquisitions of major projects, and NASA input.", "Both reports are planned to be published in Spring 2018." ], "parent_pair_index": [ -1, 0, 1, 0, -1, -1, 1, 2, 2, -1, -1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 4, 4, 4, 4, 4, 0, 0, 0, 1, 1, 1 ] }
GAO_GAO-16-228T	{ "title": [ "Background", "Department of Education Relies on Information Technology Systems Containing Sensitive Information", "Cyber Threats to Federal Systems Continue to Evolve amid Increasing Numbers of Incidents", "Similar to Other Agencies, Information Security Weaknesses Place Education’s Systems and Sensitive Data at Risk", "Federal Efforts Are Intended to Improve Cybersecurity", "Contact and Acknowledgments", "Attachment I: Related GAO Products" ], "paragraphs": [ "As computer technology has advanced, the federal government has become increasingly dependent on computerized information systems to carry out operations and to process, maintain, and report essential information. Federal agencies rely on computer systems to transmit proprietary and other sensitive information, develop and maintain intellectual capital, conduct operations, process business transactions, transfer funds, and deliver services.\nIneffective protection of these information systems and networks can impair delivery of vital services, and result in loss or theft of computer resources, assets, and funds; inappropriate access to and disclosure, modification, or destruction of sensitive information, such as personally identifiable information; disruption of essential operations supporting critical infrastructure, national defense, or emergency services; undermining of agency missions due to embarrassing incidents that erode the public’s confidence in government; use of computer resources for unauthorized purposes or to launch attacks on other systems; damage to networks and equipment; and high costs for remediation.\nRecognizing the importance of these issues, Congress enacted laws intended to improve the protection of federal information and systems. These laws include the Federal Information Security Modernization Act of 2014 (FISMA 2014), which, among other things, reiterated the 2002 FISMA requirement for the head of each agency to provide information security protections commensurate with the risk and magnitude of the harm resulting from unauthorized access, use, disclosure, disruption, modification, or destruction of the agency’s information or information systems. This includes protections for information collected or maintained on behalf of the agency and information systems used or operated by a contractor of an agency or other organization on behalf of an agency.\nIn addition, the act continues the requirement for federal agencies to develop, document, and implement an agency-wide information security program. The program is to provide security for the information and information systems that support the operations and assets of the agency, including those provided or managed by another agency, contractor, or other organization on behalf of an agency.\nThe act also authorizes the Department of Homeland Security (DHS) to (1) assist the Office of Management and Budget (OMB) with overseeing and monitoring agencies’ implementation of security requirements; (2) operate the federal information security incident center; and (3) provide agencies with operational and technical assistance, such as that for continuously diagnosing and mitigating cyber threats and vulnerabilities.", "The mission of the Department of Education is to serve America’s students and promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access. In carrying out its mission, the department is responsible for four major types of activities: establishing policies relating to federal financial aid for education, administering distribution of those funds, and monitoring their use; collecting data and overseeing research on America’s schools and disseminating this information to Congress, educators, and the general public; identifying the major issues and problems in education and focusing national attention on them; and enforcing federal statutes that prohibit discrimination in programs and activities receiving federal funds and ensuring equal access to education for every individual.\nTo support these activities, the department relies on a variety of information technology (IT) systems and infrastructure. Moreover, the department’s systems contain large volumes of sensitive information such as personnel records, financial information, and personally identifiable information. According to a fiscal year 2015 inspector general report, about 70 million users, which included students and borrowers, utilized the systems supporting the department’s federal student aid program.", "Risks to cyber-based assets can originate from unintentional or intentional threats. Unintentional threats can be caused by, among other things, natural disasters, defective computer or network equipment, software coding errors, and the actions of careless or poorly trained employees. Intentional threats include both targeted and untargeted attacks from a variety of sources, including criminal groups, hackers, disgruntled employees and other organizational insiders, foreign nations engaged in espionage and information warfare, and terrorists.\nThese adversaries vary in terms of their capabilities, willingness to act, and motives, which can include seeking monetary or personal gain or pursuing a political, economic, or military advantage. For example, insiders can pose threats because their position within the organization often allows them to gain unrestricted access and cause damage to the targeted system, steal system data, or disclose sensitive information without authorization. The insider threat includes inappropriate actions by contractors hired by the organization, as well as careless or poorly trained employees.\nAs we reported in February 2015, since fiscal year 2006, the number of information security incidents reported to the U.S. Computer Emergency Readiness Team (US-CERT) affecting systems supporting the federal government has steadily increased each year. Specifically, the number of reported incidents rose from 5,503 in fiscal year 2006 to 67,168 in fiscal year 2014, an increase of 1,121 percent. At Education, the number of reported incidents has fluctuated during the period from fiscal year 2009 to fiscal year 2014, with the department reporting 308 incidents in fiscal year 2014 after reaching a high of 467 in fiscal year 2013.\nFigure 2 shows the different types of incidents reported by Education in fiscal year 2014.\nThe types of incidents reported by Education are generally consistent with those reported by the other 23 major federal agencies, with a few exceptions. For example, at 26 percent, policy violations constituted the highest percentage of incidents reported by Education for fiscal year 2014. Policy violations involve incidents of mishandling data in storage or transit, such as digital PII records. In contrast, only 17 percent of incidents reported by the 24 major federal agencies were policy violations. The second highest percentage of incidents reported by Education was non- cyber incidents, at 25 percent, which was the same percentage reported by federal agencies. Non-cyber incidents are those that include PII spillages or possible mishandling of PII which involve hard copies or printed material as opposed to digital records.\nSuspicious network activity, at 15 percent, and malicious code, at 13 percent, were the third and fourth highest percentages of incidents that Education reported for fiscal year 2014. Suspicious network activity refers to incidents identified through Einstein data analyzed by US-CERT, and malicious code incidents are successful executions or installations of malicious software which are not immediately quarantined and cleaned by preventative measures such as antivirus tools. Suspicious network activity made up 3 percent of the 24 major federal agencies’ reported incidents, and malicious code constituted 11 percent of the incidents federal agencies reported for fiscal year 2014.\nFinally, only 4 percent of the incidents reported by Education were for scans/probes/attempted access, which was the most widely reported type of incident by federal agencies (excluding non-cyber incidents). This type of incident can involve identifying a federal agency computer, open ports, protocols, service, or any combination of these for later exploit.\nFurthermore, the number of reported security incidents involving PII at federal agencies has more than doubled in recent years—from 10,481 incidents in fiscal year 2009 to 27,624 incidents in fiscal year 2014. (See fig 3.)\nThese incidents and others like them can adversely affect national security and lead to inappropriate access to and disclosure, modification, or destruction of sensitive information. Examples at other agencies highlight the impact of such incidents: In June 2015, the Office of Personnel Management (OPM) reported that an intrusion into its systems affected the personnel records of about 4.2 million current and former federal employees. The Director stated that a separate but related incident involved the agency’s background investigation systems and compromised background investigation files for 21.5 million individuals.\nIn June 2015, the Commissioner of the Internal Revenue Service testified that unauthorized third parties had gained access to taxpayer information from its “Get Transcript” application. According to officials, criminals used taxpayer-specific data acquired from non-department sources to gain unauthorized access to information on approximately 100,000 tax accounts. This data included Social Security information, dates of birth, and street addresses. In an August 2015 update, the agency reported this number to be about 114,000 and that an additional 220,000 accounts had been inappropriately accessed, which brings the total to about 330,000 accounts.\nIn April 2015, the Department of Veterans Affairs’ Office of Inspector General reported that two contractors had improperly accessed the agency’s network from foreign countries using personally owned equipment.\nIn February 2015, the Director of National Intelligence stated that unauthorized computer intrusions were detected in 2014 on the networks of the Office of Personnel Management and two of its contractors. The two contractors were involved in processing sensitive PII related to national security clearances for federal employees.\nIn September 2014, a cyber intrusion into the United States Postal Service’s information systems may have compromised PII for more than 800,000 of its employees.\nIn October 2013, a wide-scale cybersecurity breach involving a U.S. Food and Drug Administration system occurred that exposed the PII of 14,000 user accounts.", "Given the risks posed by cyber threats and the increasing number of incidents, it is crucial that federal agencies, such as Education, take appropriate steps to secure their systems and information. We and agency inspectors general have identified numerous weaknesses in protecting federal information systems and information. Agencies, including Education, continue to have shortcomings in assessing risks, developing and implementing security controls, and monitoring results.\nAs we reported in September 2015, for fiscal year 2014 most of the 24 agencies covered by the Chief Financial Officers Act, including Education, had weaknesses in most of the five major categories of information system controls. These control categories are: (1) access controls, which limit or detect access to computer resources (data, programs, equipment, and facilities), thereby protecting them against unauthorized modification, loss, and disclosure; (2) configuration management controls, intended to prevent unauthorized changes to information system resources (for example, software programs and hardware configurations) and assure that software is current and known vulnerabilities are patched; (3) segregation of duties, which prevents a single individual from controlling all critical stages of a process by splitting responsibilities between two or more organizational groups; (4) contingency planning, which helps avoid significant disruptions in computer-dependent operations; and (5) agency-wide security management, which provides a framework for ensuring that risks are understood and that effective controls are selected, implemented, and operating as intended. (See fig. 4.)\nAccess controls: For fiscal year 2014, Education and 21 other agencies had weaknesses in electronic and physical controls to limit, prevent, or detect inappropriate access to computer resources (data, equipment, and facilities), thereby increasing their risk of unauthorized use, modification, disclosure, and loss. Specifically, Education’s inspector general reported weaknesses in several key access control elements, including protecting the boundaries of its information systems and handling incidents. For example, the department did not implement controls to verify the security of non-government furnished equipment connecting to its network via virtual private client programs prior to authentication.\nConfiguration management: For fiscal year 2014, 22 agencies, including Education, had weaknesses reported in controls that are intended to ensure that only authorized and fully tested software is placed in operation, software and hardware is updated, information systems are monitored, patches are applied to these systems to protect against known vulnerabilities, and emergency changes are documented and approved. For example, the department’s configuration management guidance had not been updated since 2005 and its IT security baseline configuration guidance had not been updated since 2009.\nSegregation of duties: Fifteen agencies had weaknesses reported in controls for segregation of duties, although Education was not one of them. These controls are the policies, procedures, and organizational structure that help to ensure that one individual cannot independently control all key aspects of a computer-related operation and thereby take unauthorized actions or gain unauthorized access to assets or records.\nContinuity of operations: Education and 17 other agencies had weaknesses reported in controls for their continuity of operations practices for fiscal year 2014. For example, Education did not consistently document the IT recovery procedures for its systems in accordance with National Institute of Standards and Technology (NIST) guidelines and departmental policies. In addition, the department did not consistently perform and document testing of contingency plans for certain systems.\nSecurity management: For fiscal year 2014, 23 agencies, including Education, had weaknesses reported in security management, which is an underlying cause for information security control deficiencies identified at federal agencies. An agency-wide security program, as required by FISMA, provides a framework for assessing and managing risk, including developing and implementing security policies and procedures, conducting security awareness training, monitoring the adequacy of the entity’s computer-related controls through security tests and evaluations, and implementing remedial actions as appropriate. FISMA also requires agencies to develop and document an inventory of major systems. Regarding Education, the inspector general reported weaknesses in several key elements, including developing, documenting, and updating an inventory of its systems; periodically assessing risks to its systems; ensuring staff receive security awareness training; and remediating information security weaknesses. For example, the department did not implement corrective actions in a timely manner including 15 corrective actions that were completed late without a revised planned completion date.\nIn addition, independent reviews at the 24 agencies continued to highlight deficiencies in their implementation of information security policies and procedures. Specifically, for fiscal year 2014, 19 agencies—including Education—reported that information security control deficiencies were either a material weakness or a significant deficiency in internal controls over their financial reporting. Education was 1 of 12 agencies that reported that such weaknesses constituted a significant deficiency— which is less severe than a material weakness but important enough to merit attention by those charged with governance. Further, 23 of 24 inspectors general for the agencies, including Education, cited information security as a “major management challenge” for their agency.\nIn accordance with their responsibilities under FISMA, inspectors general at the 24 agencies continued to report on their respective agencies’ fiscal year 2014 implementation of information security programs for these 11 program components:\nRisk management: Inspectors general reported that program components for addressing risks at 17 agencies, including Education, were established. However, Education’s inspector general identified exceptions. For example, the department’s risk management program was not fully implemented and the process for system authorization needed improvement.\nConfiguration management: Sixteen agencies, including Education, had established elements of their programs for managing changes to hardware and software. Education’s inspector general noted exceptions in the department’s configuration management policies, procedures, and plans and reported that they did not always comply with NIST and departmental guidance.\nIncident response and reporting: Twenty-one agencies, including Education, had established a program for detecting, reporting, and responding to security incidents. The Education inspector general noted that improvements were needed in the department’s reporting of incidents to the US-CERT and law enforcement agencies. For example, the inspector general reported that 4 of 45 sampled incidents were not reported to the US-CERT, as required.\nSecurity training: Along with 19 other agencies, Education had established a program for providing security training to staff.\nRemedial actions: Education and 18 other agencies had established program components for addressing deficiencies in information security policies, procedures, and practices.\nRemote access: Twenty-one agencies, including Education, had established program components for managing remote access to their networks. However, Education’s inspector general also reported exceptions with this component. For example, the department lacked restrictions for virtual private network client programs on non- government-furnished equipment. In addition, it had not fully implemented two-factor authentication, and improvements were needed in the use of mobile devices when accessing the department’s network.\nIdentity and access management: Education, along with 15 other agencies, established program components for ensuring that users were properly identified and authenticated when accessing agency resources. However, Education’s inspector general reported that the department needed to improve its password authentication process and had not fully implemented logical access controls.\nContinuous monitoring: Nineteen agencies, including Education, had established program components for continuously monitoring the effectiveness of security policies, procedures, and practices.\nContingency planning: Education and 16 other agencies had established program components for ensuring continuity of operations for information systems in the event of a disaster or other unforeseen disruptions. However, Education’s inspector general reported that the department’s contingency plans were not always complete, and the process for testing the plans needed improvements.\nContractor systems: At 17 agencies, including Education, inspectors general reported that program components for monitoring contractor systems had been established.\nSecurity capital planning: Education, along with 18 other agencies, had established program components for capital planning and investment for information security.\nAs we noted in our September 2015 report on federal information security, the annual FISMA reporting guidance that OMB and DHS provided to inspectors general was not complete, resulting in different interpretations among the inspectors general and inconsistent reporting results. As a result, responses from inspectors general may not always be comparable or provide a clear government-wide picture of agencies’ security implementation.\nAccordingly, we recommended that OMB, in consultation with DHS and other stakeholders, enhance the reporting guidance so that ratings would be consistent and comparable across agencies. OMB generally concurred with our recommendation and stated that it would continue to work with DHS and other stakeholders to refine the FISMA reporting metrics and enhance reporting guidance.\nOver the last several years, we and agency inspectors general have made thousands of recommendations to agencies aimed at improving their implementation of information security controls. For example, we have made about 2,000 recommendations over the last 6 years. Agency inspectors general have also made a multitude of recommendations to assist their agencies. Many agencies continue to have weaknesses in implementing these controls in part because many of these recommendations remain unimplemented. For example, agencies have not yet implemented about 42 percent of the recommendations we have made during the last 6 years. Until federal agencies take actions to implement the recommendations made by us and the inspectors general—federal systems and information, as well as sensitive personal information about the public, will be at an increased risk of compromise from cyber-based attacks and other threats.", "Although weaknesses continue to exist, the federal government has initiated or continued several efforts to protect federal information and information systems. The White House, OMB, and federal agencies have launched several government-wide initiatives that are intended to enhance information security at federal agencies. These key efforts include the following.\nCybersecurity Cross-Agency Priority (CAP) Goals. Initiated in 2012, CAP goals are an effort to focus agencies’ cybersecurity activity on the most effective controls. Education reported the following levels of performance with respect to metrics related to the CAP goals:\nTrusted Internet Connections (TIC): Aims to improve the federal government’s security posture through the consolidation of external telecommunication connections by establishing a set of baseline security capabilities through enhanced monitoring and situational awareness of all external network connections. OMB established a 100 percent target for implementing TIC capabilities for fiscal year 2014 and reported that the 24 agencies covered by the Chief Financial Officers Act achieved an overall implementation rate of 92 percent. For fiscal year 2014, Education reported a 95 percent implementation rate.\nContinuous Monitoring of Federal Information Systems: Intended to provide near real-time security status and remediation, increasing visibility into system operations and helping security personnel make risk management decisions based on increased situational awareness. OMB established a fiscal year 2014 target of 95 percent and reported that overall the 24 agencies had achieved 92 percent implementation. Education reported 98 percent continuous monitoring of its assets at the end of fiscal year 2014.\nStrong Authentication: Intended to increase the use of federal smartcard credentials, such as personal identity verification and common access cards that provide multifactor authentication and digital signature and encryption capabilities. Strong authentication can provide a higher level of assurance when authorizing users’ access to federal information systems. For fiscal year 2014, OMB established a 75 percent implementation rate, but indicated that the 24 agencies had implemented strong authentication for a combined 72 percent of their users. Education reported an 85 percent implementation rate at the end of fiscal year 2014.\nThe 30-Day Cybersecurity Sprint. In June 2015, in response to the OPM security breaches and to improve federal cybersecurity and protect systems against evolving threats, the Federal Chief Information Officer launched the 30-day Cybersecurity Sprint and instructed agencies to immediately take a number of steps to further protect federal information and to improve the resilience of federal networks. One step was to accelerate the implementation of multi-factor authentication, such as the use of personal identity verification cards to gain access to federal networks, systems, and data. According to a report by the Executive Office of the President, the percentage of Education’s users who used strong authentication decreased to 57 percent, one of only four agencies to show a decrease following the sprint.\nAgency Spending on Cybersecurity Activities. According to OMB, the 24 agencies covered by the Chief Financial Officers Act reported spending about $12.7 billion on cybersecurity activities in fiscal year 2014. Of this amount, the 23 civilian agencies reportedly spent about $3.75 billion or about 9 percent of the amount the agencies reportedly spent on information technology in fiscal year 2014. For fiscal year 2014, Education reportedly spent about $32 million on cybersecurity, or roughly 5 percent of the amount it reportedly spent on information technology. The agencies reported spending amounts for three major categories of cybersecurity activities: preventing malicious cyber activity; detecting, analyzing, and mitigating intrusions; and shaping the cybersecurity environment. Of the about $32 million it reportedly spent on cybersecurity activities, Education spent 34 percent on preventing malicious activity; 63 percent on detecting, analyzing, and mitigating intrusions; and 3 percent on shaping the cybersecurity environment.\nIn conclusion, the dangers posed by a wide array of cyber threats facing the nation are heightened by weaknesses in the federal government’s approach to protecting its systems and information. While federal agencies, including the Department of Education, have established information security programs, weaknesses in these programs persist, and more needs to be done to fully implement them and to address existing weaknesses. In particular, implementing outstanding inspector general and GAO recommendations will strengthen agencies’ ability to protect their systems and information, reducing the risk of a potentially devastating cyber attack.\nChairman Chaffetz, Ranking Member Cummings, and Members of the Committee, this concludes my statement. I would be happy to answer your questions.", "If you have any questions about this statement, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov. Other staff members who contributed to this statement include Larry Crosland, Assistant Director; Christopher Businsky; Rosanna Guerrero; Fatima Jahan; and Lee McCracken.", "Critical Infrastructure Protection: Cybersecurity of the Nation’s Electricity Grid Requires Continued Attention, GAO-16-174T. Washington, D.C.: October 21, 2015.\nMaritime Critical Infrastructure Protection: DHS Needs to Enhance Efforts to Address Port Cybersecurity, GAO-16-116T. Washington, D.C.: October 8, 2015.\nFederal Information Security: Agencies Need to Correct Weaknesses and Fully Implement Security Programs, GAO-15-714. Washington, D.C.: September 29, 2015.\nInformation Security: Cyber Threats and Data Breaches Illustrate Need for Stronger Controls across Federal Agencies. GAO-15-758T. Washington, D.C.: July 8, 2015.\nCybersecurity: Recent Data Breaches Illustrate Need for Strong Controls across Federal Agencies. GAO-15-725T. Washington, D.C.: June 24, 2015.\nCybersecurity: Actions Needed to Address Challenges Facing Federal Systems. GAO-15-573T. Washington, D.C.: April 22, 2015.\nInformation Security: IRS Needs to Continue Improving Controls over Financial and Taxpayer Data. GAO-15-337. Washington, D.C.: March 19, 2015.\nInformation Security: FAA Needs to Address Weaknesses in Air Traffic Control Systems. GAO-15-221. Washington, D.C.: January 29, 2015.\nInformation Security: Additional Actions Needed to Address Vulnerabilities That Put VA Data at Risk. GAO-15-220T. Washington, D.C.: November 18, 2014.\nInformation Security: VA Needs to Address Identified Vulnerabilities. GAO-15-117. Washington, D.C.: November 13, 2014.\nFederal Facility Cybersecurity: DHS and GSA Should Address Cyber Risk to Building and Access Control Systems. GAO-15-6. Washington, D.C.: December 12, 2014.\nConsumer Financial Protection Bureau: Some Privacy and Security Procedures for Data Collections Should Continue Being Enhanced. GAO-14-758. Washington, D.C.: September 22, 2014.\nHealthcare.Gov: Information Security and Privacy Controls Should Be Enhanced to Address Weaknesses. GAO-14-871T. Washington, D.C.: September 18, 2014.\nHealthcare.Gov: Actions Needed to Address Weaknesses in Information Security and Privacy Controls. GAO-14-730. Washington, D.C.: September 16, 2014.\nInformation Security: Agencies Need to Improve Oversight of Contractor Controls. GAO-14-612. Washington, D.C.: August 8, 2014.\nInformation Security: FDIC Made Progress in Securing Key Financial Systems, but Weaknesses Remain. GAO-14-674. Washington, D.C.: July 17, 2014.\nInformation Security: Additional Oversight Needed to Improve Programs at Small Agencies. GAO-14-344. Washington, D.C.: June 25, 2014.\nMaritime Critical Infrastructure Protection: DHS Needs to Better Address Port Cybersecurity. GAO-14-459. . Washington, D.C.: June 5, 2014.\nInformation Security: Agencies Need to Improve Cyber Incident Response Practices. GAO-14-354. . Washington, D.C.: April 30, 2014.\nInformation Security: SEC Needs to Improve Controls over Financial Systems and Data. GAO-14-419. Washington, D.C.: April 17, 2014.\nInformation Security: IRS Needs to Address Control Weaknesses That Place Financial and Taxpayer Data at Risk. GAO-14-405. Washington, D.C.: April 8, 2014.\nInformation Security: Federal Agencies Need to Enhance Responses to Data Breaches. GAO-14-487T. Washington, D.C.: April 2, 2014.\nCritical Infrastructure Protection: Observations on Key Factors in DHS’s Implementation of Its Partnership Model. GAO-14-464T. Washington, D.C.: March 26, 2014.\nInformation Security: VA Needs to Address Long-Standing Challenges. GAO-14-469T. Washington, D.C.: March 25, 2014.\nCritical Infrastructure Protection: More Comprehensive Planning Would Enhance the Cybersecurity of Public Safety Entities’ Emerging Technology. GAO-14-125. Washington, D.C.: January 28, 2014.\nComputer Matching Act: OMB and Selected Agencies Need to Ensure Consistent Implementation. GAO-14-44. Washington, D.C.: January 13, 2014.\nInformation Security: Agency Responses to Breaches of Personally Identifiable Information Need to Be More Consistent. GAO-14-34. Washington, D.C.: December 9, 2013.\nFederal Information Security: Mixed Progress in Implementing Program Components; Improved Metrics Needed to Measure Effectiveness. GAO-13-776. Washington, D.C.: September 26, 2013.\nCommunications Networks: Outcome-Based Measures Would Assist DHS in Assessing Effectiveness of Cybersecurity Efforts. Washington, D.C.: GAO-13-275. April 10, 2013.\nInformation Security: IRS Has Improved Controls but Needs to Resolve Weaknesses. GAO-13-350. Washington, D.C.: March 15, 2013.\nCybersecurity: A Better Defined and Implemented National Strategy is Needed to Address Persistent Challenges. GAO-13-462T. Washington, D.C.: March 7, 2013.\nCybersecurity: National Strategy, Roles, and Responsibilities Need to Be Better Defined and More Effectively Implemented. GAO-13-187. Washington, D.C.: February 14, 2013.\nInformation Security: Federal Communications Commission Needs to Strengthen Controls over Enhanced Secured Network Project. Washington, D.C.: GAO-13-155. January 25, 2013.\nInformation Security: Actions Needed by Census Bureau to Address Weaknesses. GAO-13-63. Washington, D.C.: January 22, 2013.\nInformation Security: Better Implementation of Controls for Mobile Devices Should Be Encouraged. GAO-12-757. Washington, D.C.: September 18, 2012.\nMobile Device Location Data: Additional Federal Actions Could Help Protect Consumer Privacy. GAO-12-903. Washington, D.C.: September 11, 2012.\nMedical Devices: FDA Should Expand Its Consideration of Information Security for Certain Types of Devices. GAO-12-816. Washington, D.C.: August 31, 2012.\nPrivacy: Federal Law Should Be Updated to Address Changing Technology Landscape. GAO-12-961T. Washington, D.C.: July 31, 2012.\nInformation Security: Environmental Protection Agency Needs to Resolve Weaknesses. GAO-12-696. Washington, D.C.: July 19, 2012.\nCybersecurity: Challenges in Securing the Electricity Grid. GAO-12-926T. Washington, D.C.: July 17, 2012.\nElectronic Warfare: DOD Actions Needed to Strengthen Management and Oversight. GAO-12-479. Washington, D.C.: July 9, 2012.\nInformation Security: Cyber Threats Facilitate Ability to Commit Economic Espionage. GAO-12-876T. Washington, D.C.: June 28, 2012.\nPrescription Drug Data: HHS Has Issued Health Privacy and Security Regulations but Needs to Improve Guidance and Oversight. GAO-12-605. Washington, D.C.: June 22, 2012.\nCybersecurity: Threats Impacting the Nation. GAO-12-666T. Washington, D.C.: April 24, 2012.\nManagement Report: Improvements Needed in SEC’s Internal Control and Accounting Procedure. GAO-12-424R. Washington, D.C.: April 13, 2012.\nIT Supply Chain: National Security-Related Agencies Need to Better Address Risks. GAO-12-361. Washington, D.C.: March 23, 2012.\nInformation Security: IRS Needs to Further Enhance Internal Control over Financial Reporting and Taxpayer Data. GAO-12-393. Washington, D.C.: March 16, 2012.\nCybersecurity: Challenges in Securing the Modernized Electricity Grid. GAO-12-507T. Washington, D.C.: February 28, 2012.\nCritical Infrastructure Protection: Cybersecurity Guidance is Available, but More Can Be Done to Promote Its Use. GAO-12-92. Washington, D.C.: December 9, 2011.\nCybersecurity Human Capital: Initiatives Need Better Planning and Coordination. GAO-12-8. Washington, D.C.: November 29, 2011.\nInformation Security: Additional Guidance Needed to Address Cloud Computing Concerns. GAO-12-130T. Washington, D.C.: October 6, 2011.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 2, 1, 1, 2, 1, 1 ], "alignment": [ "h2_full h3_title", "h3_full", "h0_full", "h3_full h2_full h1_full", "h3_full", "", "h3_full" ] }	{ "question": [ "What are some unintentional sources of cyber-based risks to federal systems?", "What are the dangers of these types of cyber-based risks?", "How have information security incidents changed between fiscal years?", "What federal agency deficiencies did the GAO report about?", "What controls are important to information security controls?", "What does the figure below this passage display?", "What problems did federal agencies report about self-deficiencies?", "How have attempts to solve these information security challenges fared?", "What are the risks of failing to implement these recommendations?", "What issues does the federal government face in information security?", "How is Education specifically affected by this threat?", "How does Education need to meet information security risks?", "What is the history of these federal information security risks?" ], "summary": [ "Cyber-based risks to federal systems and information can come from unintentional threats, such as natural disasters, software coding errors, and poorly trained or careless employees, or intentional threats, such as disgruntled insiders, hackers, or hostile nations.", "These threat sources may exploit vulnerabilities in agencies' systems and networks to steal or disclose sensitive information, among other things.", "Since fiscal year 2006, the number of reported information security incidents affecting federal systems has steadily increased, rising from about 5,500 in fiscal year 2006 to almost 67,200 in fiscal year 2014.", "GAO reported in September 2015, that most of 24 major agencies (including Education) had weaknesses in at least three of five major categories of information security controls for fiscal year 2014.", "These are controls intended to (1) limit unauthorized access to agency systems and information; (2) ensure that software and hardware are authorized, updated, monitored, and securely configured; (3) appropriately divide duties so that no single person can control all aspects of a computer-related operation; (4) establish plans for continuing information system operations in the event of a disaster, and (5) provide a security management framework for understanding risks and ensuring that controls are selected, implemented, and operating as intended.", "The figure below shows the number of agencies with weaknesses in these control categories.", "In addition, 19 agencies—including Education—reported that information security control deficiencies were either a material weakness or a significant deficiency for fiscal year 2014. Further, inspectors general for 23 of 24 agencies, including Education, cited information security as a major management challenge.", "In prior reports, GAO and inspectors general have made thousands of recommendations to agencies to address deficiencies in their information security controls and weaknesses in their programs, but many of these recommendations remain open.", "Until agencies implement these recommendations, sensitive information will remain at risk of unauthorized disclosure, modification, or destruction.", "The federal government faces an evolving array of cyber-based threats to its systems and data, and data breaches at federal agencies have compromised sensitive personal information, affecting millions of people.", "Education, in carrying out its mission of serving America's students, relies extensively on IT systems that collect and process a large amount of sensitive information.", "Accordingly, it is important for federal agencies such as Education to implement information security programs that can help protect systems and networks.", "GAO has identified federal information security as a government-wide high-risk area since 1997, and in February 2015 expanded this to include protecting the privacy of personally identifiable information." ], "parent_pair_index": [ -1, 0, -1, -1, 0, -1, -1, 0, 0, -1, 0, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 3, 3, 3, 4, 4, 4, 0, 0, 0, 0 ] }
CRS_R40755	{ "title": [ "", "Introduction", "Trans-Pacific Strategic Economic Partnership Agreement (TPP)", "Vietnam's Generalized System of Preferences (GSP) Application15", "Compliance with Eligibility Criteria", "Is Vietnam a \"Communist\" Country?", "Workers' Rights", "IPR Protection", "Congressional Implications", "Bilateral Investment Treaty (BIT) Negotiations", "Status of the Negotiations", "The Role of Congress", "U.S. Clothing Imports from Vietnam and the U.S. Monitoring Program", "The Vietnam-U.S. Textile Agreement of 2003", "Vietnam's WTO Accession, Permanent NTR and the Monitoring Program", "Congressional Interest", "Catfish", "2008 Farm Act", "The Antidumping Sunset Review", "Implications for the 111th Congress", "Other Economic Issues", "Workers' Rights", "Non-Market Economy Designation", "IPR Protection", "Vietnam's Exchange Rate Policy", "Key Trends in Bilateral Trade", "Merchandise Trade", "Furniture and Bedding", "Footwear", "Electrical Machinery", "Product Interplay", "Trade in Services", "Foreign Direct Investment" ], "paragraphs": [ "", "For over 20 years, economic and trade relations between the United States and the Socialist Republic of Vietnam (Vietnam) remained virtually frozen, in part a legacy of the extended military conflict of the 1960s and 1970s. On May 2, 1975, after North Vietnam defeated U.S. ally South Vietnam, President Gerald R. Ford extended President Richard M. Nixon's 1964 trade embargo on North Vietnam to cover the reunified nation. Under the Ford embargo, bilateral trade and financial transactions were prohibited.\nEconomic and trade relations between the two nations began to thaw during the Clinton Administration, building on joint efforts during the Reagan and George H. W. Bush Administrations to resolve a sensitive issue in the United States—recovering the remains of U.S. military personnel declared \"missing in action\" (MIA) during the Vietnam War. The shift in U.S. policy also was spurred by Vietnam's withdrawal from Cambodia. President Bill Clinton ordered an end to the U.S. trade embargo on Vietnam on February 3, 1994. In 1997, President Clinton appointed the first U.S. ambassador to Vietnam since the end of the Vietnam War.\nBilateral relations also improved, in part, due to Vietnam's 1986 decision to shift from a Soviet-style central planned economy to a form of market socialism. The new economic policy, known as Doi Moi (\"change and newness\"), ushered in a period of over 20 years of rapid growth in Vietnam. Since 1995, Vietnam's real GDP growth has averaged over 7% per year, second only to China. Much of that growth has been generated by foreign investments in Vietnam's manufacturing sector, particularly its clothing industry.\nThe United States and Vietnam signed a bilateral trade agreement (BTA) on July 13, 2000, which went into force on December 10, 2001. As part of the BTA, the United States extended to Vietnam conditional most favored nation (MFN) trade status, now known as normal trade relations (NTR). Economic and trade relations further improved when the United States granted Vietnam permanent normal trade relations (PNTR) status on December 29, 2006, as part of Vietnam's accession to the World Trade Organization (WTO). Since the signing of the BTA, the United States government has appropriated approximately $4-5 million each year to support Vietnam's economic reforms. In addition, the two nations have set up a ministerial-level Trade and Investment Agreement (TIFA) Council to discuss issues related to the implementation of the BIT and WTO agreements, as well as trade and investment policies in general.\nIn contrast to some other nations (for example, China), official U.S. and Vietnamese trade data are comparatively close and reflect a similar pattern in the growth of bilateral trade (see Table 1 ). For the first few years following the end of the U.S. embargo, trade between the two nations grew slowly, principally because of Vietnam's lack of NTR. However, following the granting of conditional NTR in December 2001, trade flows between the United States and Vietnam grew quickly. Merchandise trade nearly doubled between 2001 and 2002, regardless of which nation's figures one uses. Bilateral trade jumped again in 2007, following the United States granting PNTR status to Vietnam. Total trade declined slightly in 2009 as U.S. imports from Vietnam slid 4.7% because of the economic recession. U.S. exports to Vietnam increased by 11.4% in 2009.\nThe growth in bilateral trade has not been without its accompanying issues and problems. Both nations are negotiating membership in the Trans-Pacific Strategic Economic Partnership Agreement (TPP), a multilateral trade group. For its part, Vietnam has indicated a desire to foster closer trade relations by applying for acceptance into the U.S. General System of Preferences (GSP) program, and participating in negotiations of a bilateral investment treaty (BIT). The growth in trade has also created sources of trade friction. A rapid increase in Vietnam's clothing exports to the United States led to a controversial monitoring program. The growth in Vietnam's export of catfish has also generated tensions between the two nations. Other economic issues have had an indirect effect on bilateral relations, such as claims of poor working conditions in factories in Vietnam, Vietnam's designation as a \"non-market economy,\" allegations of inadequate intellectual property rights (IPR) protection in Vietnam, and Vietnam's exchange rate policy.\nThis report will examine each of these trade issues, discussing their main elements and exploring their implications for the 111 th Congress. This will be followed by an analysis of key trends in bilateral trade to discern any potential sources of trade friction in the future.", "The Bush Administration notified Congress of its intention to enter into negotiations with the members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP) on September 22, 2008. The TPP—previously known as the P4—is a multilateral free trade agreement between Brunei, Chile, New Zealand, and Singapore that came into force in 2006. The U.S. announcement of interest in joining the TPP was quickly followed by similar expressions of interest by Australia, Peru, and Vietnam.\nIn the President's 2009 Annual Report on the U.S. trade agreements program, the Obama Administration stated that U.S. participation in the TPP would strengthen U.S. trade and investment ties in the Asia-Pacific, help U.S. businesses compete in the region, and \"could serve as a vehicle for achieving the long-term Asia-Pacific Economic Cooperation (APEC) objective of a Free Trade Area of the Asia-Pacific.\" Vietnam's Deputy Prime Minister and Foreign Minister Pham Gai Khiem listed negotiations to join the TPP—along with the U.S. BIT talks and Partnership and Cooperative Agreement with the European Union—as among Vietnam's top trade priorities in 2009. During an April 2010 speech in Washington, DC, Prime Minister Dung made particular note of both country's participation in the TPP negotiations.\nThe first meeting of the interested parties was held in Melbourne, Australia, on March 15-19, 2010. The next round of negotiations is scheduled for the week beginning June 14 in the United States. Following the talks in Melbourne, U.S. Trade Representative Ron Kirk stated the negotiations were off to a \"strong start,\" and that \"U.S. negotiators will now seek further input from Congress and U.S. stakeholders on negotiating objectives and approaches to key issues as we prepare for the second round of TPP negotiations in June.\"\nVietnam's participation in the TPP negotiations could complicate U.S. intentions. Whereas the other parties involved in the negotiations are generally viewed as having comparatively open trade policies, Vietnam has made less progress in trade and investment liberalization. Given that the apparent U.S. goal is to create a more open and comprehensive free trade area in the Asia-Pacific, Vietnam's participation in the talks could constrain U.S. efforts to expand the scope and depth of the TPP. Backers of Vietnam's participation in the negotiations maintain that it could accelerate economic reforms, and open its economy to more foreign investment and trade.\nAnother complicating factor is Vietnam's membership in the Association of Southeast Asian Nations (ASEAN) and its support for ASEAN's discussions with other nations to form a pan-Asian trade association that could exclude the United States. Over the last several years, ASEAN has organized meetings with various configurations of Asian nations—such as the ASEAN + 3 (China, Japan, and South Korea), and ASEAN + 6 (Australia, China, India, Japan, New Zealand, and South Korea)—to discuss the formation of a free trade area that would include only Asian nations. However, in an April 2010 meeting with CRS, Vietnamese trade officials indicated that Vietnam would like to see the United States take a more active role in a possible ASEAN + 8 (Australia, China, India, Japan, New Zealand, Russia, South Korea and United States) forming the basis for a larger regional trade association. Since Vietnam is serving as ASEAN chair for 2010, the trade officials indicated that a major symbolic gesture by the United States—such as seeking to formally join the East Asia Summit —would be warmly welcomed by Vietnam.\nThere is one bill pending before the 111 th Congress that, if passed, could have a direct bearing on the TPP negotiations. The Trade Reform, Accountability, Development, and Employment Act of 2009 ( H.R. 3012 and S. 2821 ) would require all nations that are party to the TPP agreement to establish laws protecting \"core labor rights\" and \"adequate and effective protection of intellectual property rights,\" among other conditions.", "In May 2008, Vietnam formally requested to be added to the U.S. Generalized System of Preferences (GSP) program as a \"beneficiary developing country\" (BDC). On June 20, 2008, the office of the U.S. Trade Representative (USTR) announced that it was initiating a formal review of Vietnam's eligibility for GSP benefits and would accept public comments on the application until August 4, 2008. Since then, there has been no formal announcement from USTR regarding the status of Vietnam's GSP application.\nThe U.S. GSP program authorizes the President to grant duty-free treatment for any eligible product from any beneficiary country. Initially created by Title V of the Trade Act of 1974 ( P.L. 93-618 ) for a 10-year period, the GSP program has been repeatedly renewed by Congress, most recently in a one-year extension on December 22, 2009, as part of P.L. 111-124 . The statute also provides the President with specific political and economic criteria to use when designating eligible countries and products.\nInclusion in the U.S. GSP program is a high trade priority for the Vietnamese government. Vietnam has already been accepted into several other GSP programs, including those of Canada, the European Union (EU), and Japan. The status of Vietnam's GSP application was reportedly raised during the meeting of the U.S.-Vietnam Trade and Investment Framework Agreement (TIFA) Council in Washington, DC, from April 15-22, 2009. On December 2, 2009, Vietnam's Foreign Minister Pham Gia Khiem reportedly asked former U.S. Trade Representative Susan Schwab to urge the Obama Administration to add Vietnam to the U.S. GSP program. According to sources in Vietnam's Ministry of Foreign Affairs (MOFA), the Vietnamese government sees its acceptance into the GSP program as another step in the normalization of bilateral relations.", "For the United States, Vietnam's GSP application poses several problems with respect to its compliance with the program's eligibility criteria. In particular, there is a question whether Vietnam is a \"Communist\" country according to the definition specified in U.S. law. Under the provisions of the Trade Act of 1974, a \"Communist\" country is ineligible for the GSP program unless it meets certain additional conditions. Another area of possible non-compliance with the GSP program's eligibility criteria is whether Vietnam has \"taken steps to provide its workers with internationally recognized worker rights.\" There are also indications that Vietnam's IPR protection may not be adequate to satisfy GPS eligibility. Current U.S. law allows the President to waive compliance with the worker rights and IPR protection criteria, but not the \"Communist\" country criterion.", "In its present form, the GSP program excludes \"Communist\" countries unless the President determines three conditions have been met. First, the United States must have conferred NTR status to the country. Second, the country must be a member of both the International Monetary Fund (IMF) and the World Trade Organization (WTO). Third, the country must be \"not dominated or controlled by international communism.\"\nU.S. law does not provide any definition of a \"Communist\" country. Some observers point to Vietnam's official name—the Socialist Republic of Vietnam—and the government's control by the Communist Party of Vietnam (Đảng Cộng sản Việt Nam) as prima facie evidence that Vietnam is a \"Communist\" country. Other observers counter that after over two decades of doi m oi , Vietnam no longer is a \"Communist\" country in terms of its economic system. In addition, even if Vietnam was a \"Communist\" country, according to these observers, it is \"not dominated or controlled by international communism\" because no such entity exists following the collapse of the Soviet Union.", "Among the GSP eligibility criteria, Vietnam's recognition of internationally accepted workers' rights has proven to be the most problematic. Prior to the 1986 advent of doi moi , there were many allegations about substandard working conditions in Vietnam, including \"sweatshop\" working conditions, the use of child labor, and severe restrictions on the right of association and collective bargaining. Since then, the Vietnamese government is generally perceived to have made concerted efforts to comply with many internationally recognized labor standards.\nIn its application for GSP designation, the Vietnamese government focused on its partnership with the International Labor Organization (ILO) and its ratification of several of the ILO's conventions as demonstrating its commitment to comply with international labor rights standards. Despite these efforts by the Vietnamese government, critics still maintain that working conditions remain below international standards. In particular, Vietnam has been criticized for its failure to allow independent labor unions and respect the right of association (see section on \" Workers' Rights \" below).", "Vietnam remained on the U.S. Special 301 Watch List in 2009, with the official report noting a rise in online piracy. The 2010 National Trade Estimate Report on Foreign Trade Barriers (NTE) states that\nWhile recognizing the strides Vietnam has made in IPR protection and enforcement over the past several years, the United States noted that enforcement efforts have not kept pace with rising levels of IP infringement and piracy in the country. Furthermore, administrative enforcement actions and penalties—the most commonly used means of enforcing IPR in Vietnam—have not served as a sufficient deterrent.\nThe NTE report also notes that in 2009 Vietnam revised its IPR Law, as well as IPR-related provisions in the Criminal Code, to provide criminal penalties for IPR infringement conducted on a commercial scale. In addition, the NTE indicated that \"Vietnamese agencies took some initial steps to enforce IP protections on the Internet.\"\nStatements by past U.S. officials indicated that Vietnam's IPR protection was playing a role in the decision on its GSP application. In an interview on March 9, 2009, Jay L. Eizenstat, ex-director for customs affairs for USTR in the Bush Administration, pointed out that \"intellectual property rights violations are easily seen in Vietnam and this is the reason for the unlikelihood of gaining GSP although Vietnam satisfies basic criteria.\" It is unclear to what extent this attitude is held in the Obama Administration.", "Under current U.S. law, Congress has no direct role in the determination if Vietnam will be accepted into the U.S. GSP program; the authority to make that decision has been delegated to the President of the United States. The President is required to notify Congress of his intention.\nThere are, however, several ways by which Congress could indicate its preferences on this issue. In addition to hearings and communications to the Administration from Members, Congress could authorize or instruct the President to designate—or not to designate—Vietnam as a beneficiary developing country (BDC), either as part of the legislation to extend the GSP program or in separate legislation. Alternatively, Congress could pass legislation—separately or as part of the renewal of the GSP program—stipulating additional eligibility criteria for the President to consider when deciding to confer BDC status to Vietnam. In addition, both versions of the Vietnam Human Rights Act ( H.R. 1969 and S. 1159 ) would prohibit the inclusion of Vietnam in the GSP program unless the President determines and certifies that Vietnam has met certain specified workers' rights criteria. Each chamber of Congress could also pass a resolution calling on the President to approve or deny Vietnam's application for inclusion in the U.S. GSP program.", "During their June 2008 meeting, President Bush and Prime Minister Dung announced the launch of talks to establish a bilateral investment treaty (BIT). BITs are designed to improve the climate for foreign investors by establishing dispute settlement procedures and by protecting foreign investors from performance requirements, restrictions on transferring funds, and arbitrary expropriation. The United States has signed 47 BITs, with 40 currently in force. Vietnam has signed over 50 BITs.", "The first round of BIT negotiations was held in Washington, DC, from December 15-18, 2008. The Vietnamese delegation included representatives from the Ministry of Planning and Investment, the Ministry of Industry and Trade, the Ministry of Finance, the Ministry of Justice, and the State Bank of Vietnam. The U.S. delegation included representatives of the U.S. Trade Representative's Office, the Department of State, the Department of Commerce, and the Treasury Department. Since then, two more rounds of talks have been held—one on June 1-2, 2009, in Hanoi, and another on November 17-19, 2009, in Washington, DC. A proposed fourth round of talks was to be held in early 2010, but no date for the negotiations has been announced.\nThe Vietnamese government appears interested in concluding a BIT with the United States, both because it could foster greater inward FDI from the United States and because it could serve as a stepping-stone to a possible free trade agreement (FTA) with the United States. The U.S. government's interest in BIT negotiations appears primarily focused on providing better protection and access for U.S. investors in Vietnam, while avoiding compromising domestic economic priorities and needlessly relinquishing national sovereignty. Representatives of the business communities in both the United States and Vietnam have expressed interest in the successful conclusion of the BIT negotiations.\nThe United States has generally based its past BIT negotiations on a model BIT. In 2004, the Bush Administration revised the model BIT, partially in response to provisions in the Trade Act of 2002 ( P.L. 107-210 ). In the Trade Act of 2002, Congress mandated several negotiating objectives to narrow the scope of investment protection. The act stated that the principal U.S. negotiating objective on foreign investment is to reduce or eliminate barriers to investment, \"while ensuring that foreign investors in the United States are not accorded greater substantive rights with respect to investment protections than United States investors in the United States, and to secure for investors important rights comparable to those that would be available under United States legal principles and practice.\" The Obama administration is reportedly reviewing the current model BIT, and may be deferring progress with Vietnam until the review is completed.\nIn addition, the existing 2001 Bilateral Trade Agreement (BTA) between the United States and Vietnam included provisions in Chapter 4 governing investment and the future negotiation of a bilateral investment treaty. Article 2 commits both nations to providing national and MFN (NTR) treatment to investments. Article 4 provides for a dispute settlement system for bilateral investments. Article 5 requires both nations to ensure that the laws, regulations, and administrative procedures governing investments are promptly published and publicly available. Article 11 pertains to compliance with the provisions of WTO Agreement on Trade-related Investment Measures (TRIMs). Article 13 states that both nations \"will endeavor to negotiate a bilateral investment treaty in good faith within a reasonable period of time.\"", "If the United States and Vietnam successfully complete the negotiations of a BIT during the 111 th Congress, the treaty will be subject to Senate ratification. Action on the part of Congress as a whole may be required if the terms of the BIT require changes in U.S. law.", "Vietnam's clothing exports to the United States were among the greatest beneficiaries of the U.S. decision to grant Vietnam conditional NTR status in December 2001 (see Figure 1 ). Up until 2002, U.S. imports of clothing from Vietnam were small both in value (below $50 million) and as a share of total imports from Vietnam (below 10%). Following the U.S. extension of conditional NTR to Vietnam, U.S. clothing imports from Vietnam shot up in value and share. As a share of total imports, clothing peaked in 2003 at 51.4%. The value of U.S. clothing imports from Vietnam has continued to rise every year until 2009, with the largest year-on-year increases occurring in 2003 and 2007—the first full years after the U.S. granted Vietnam conditional and permanent NTR status, respectively. Vietnam has become a major source of U.S. clothing imports, second only to China.\nThe two spikes in clothing imports gave rise to efforts to restrict clothing trade with Vietnam, first in the form of a separate bilateral textile agreement and later in the form of a unilateral monitoring program that expired in January 2009. In both cases, Vietnam initially protested U.S. efforts to restrict clothing trade, but in the end complied with the U.S. policies. Several Members of Congress, and in particular Members with significant clothing and textile manufacturing in their districts or states, voiced concern that a \"surge\" in Vietnamese clothing exports to the United States could cause damage to U.S. clothing and textile companies and workers. However, major U.S. retailers and importers maintained that these two programs would restrict trade from Vietnam, causing harm to U.S. companies and consumers.", "During the congressional debate over the bilateral trade agreement (BTA) with Vietnam, many Members of Congress urged President Bush to negotiate a separate bilateral textile agreement with Vietnam. Because Vietnam was not a WTO member at the time, its clothing exports were not covered by the Agreement on Textiles and Clothing (ATC), and therefore there were no quotas on Vietnam's clothing exports to the United States. In the Members' opinion, it was important that the United States conclude a bilateral textile agreement with Vietnam that ensured fair competition and/or restricted the growth of Vietnamese clothing exports to the United States.\nNegotiations of a separate bilateral textile agreement began soon after the bilateral trade agreement went into effect. On April 25, 2003, the two nations agreed to the terms of a bilateral textile agreement that placed quantity quotas on 38 categories of clothing imports from Vietnam from May 1, 2003, until December 31, 2006. The quotas automatically rolled over in subsequent years—with the inclusion of annual quantity increases of 2% for wool products and 7% for all other products. The agreement also lowered Vietnam's tariffs on U.S. clothing and textiles exports to 7% for yarn, 12% for fabric, and 20% for clothing.", "Congressional interest in U.S. clothing imports from Vietnam reemerged during the negotiations over the terms of Vietnam's WTO accession. U.S. textiles and clothing manufacturers sought to extend the import quotas on Vietnamese clothing products as part of Vietnam's accession agreement, or to include in the agreement safeguard measures similar to those included in China's WTO accession agreement. However, neither provision was included in Vietnam's WTO accession agreement. In response to a \"hold\" placed on the PNTR bill, the Bush Administration put in place a monitoring program from January 2007 to January 2009.", "According to the Department of Commerce (DOC), the monitoring program officially ended on January 19, 2009. However, some Members of Congress were concerned that the termination of the monitoring program—as well as the end of the special safeguards on Chinese clothing imports on December 31, 2008—would result in a surge of clothing imports from China and Vietnam. At their request, language was included in the House Committee on Appropriations' Committee Print on H.R. 1105 , the Omnibus Appropriations Act of 2009 ( P.L. 111-8 ), stating, \"ITA is expected to undertake apparel import monitoring, focusing on prices of imports from China and Vietnam and whether their state-run industries are illegally pricing products and dumping in the U.S. market.\" The appropriation bill for the Department of Commerce for fiscal year 2010 did not include the monitoring language. However, some Members of Congress and U.S. textile companies remain troubled by the rapid rise in Vietnamese clothing imports\nIf the 111 th Congress would like monitoring to occur, it would require specific congressional action. Such action could range from legislation requiring the monitoring of Vietnamese clothing imports to a congressional committee requesting information from the executive branch on Vietnamese clothing imports to effectively reconstitute the monitoring program. On October 9, 2008, Charles Rangel, then chairman of the House Ways and Means Committee, formally requested the International Trade Commission (ITC) to initiate an investigation to monitor certain U.S. clothing and textile imports from China beginning in 2009. Some have suggested that a similar letter covering Vietnamese imports be sent to the ITC.", "Catfish have been a constant source of trade friction between the United States and Vietnam for the past decade. Vietnam is a major exporter of frozen fish fillets using certain varieties of fish—known as basa and tra in Vietnamese—that are commonly referred to as catfish in the global fish market. Since 1999, Vietnamese exports of basa and tra frozen fish fillets have secured a growing share of the U.S. market, despite the objections of the U.S. catfish industry and the actions of the U.S. government. In 2009, Vietnam reportedly exported 47,000 tons of basa and tra, worth $134 million to the United States.\nOver the last 10 years, the United States has taken several actions that were designed to have an impact on the import of Vietnamese basa and tra. In 2002, Congress passed legislation that prohibited the labeling of basa and tra as \"catfish.\" In August 2003, the U.S. government imposed antidumping duties on \"certain frozen fish fillets from Vietnam,\" including basa and tra. Despite these measures, Vietnam's exports of basa and tra continued to rise.\nIn the eyes of the Vietnamese government, the U.S. response to the growth of Vietnam's basa and tra exports constitutes a case of trade protectionism designed to shelter U.S. catfish producers from legitimate competition. Supporters of U.S. trade policies against Vietnam's exports of basa and tra say the measures are designed to defend U.S. consumers and businesses from the unsafe products and unfair business practices of Vietnam.\nThe ongoing tensions around catfish trade were heightened by two fairly recent events. The first was the passage of the 2008 Farm Bill ( P.L. 110-246 ) by the 110 th Congress on May 22, 2008. The second event was the ITC's determination on June 15, 2009, to keep in place the antidumping duties on certain frozen fish fillet imports from Vietnam \"for the foreseeable future.\"", "The legal status of Vietnam's basa and tra exports to the United States was brought into question by the provisions of section 11016 of the 2008 Farm Act ( P.L. 110-246 ), enacted on June 18, 2008. The section, entitled \"Inspection and Grading,\" established a voluntary fee-based grading program for \"catfish (as defined by the Secretary).\" The law also stipulated specific aspects of the examination and inspection of catfish, including the conditions under which the fish were raised and transported. By these provisions, the 2008 Farm Act effectively transferred the regulation of imported catfish from the Food and Drug Administration (FDA) to the USDA, which is generally viewed as maintaining stricter inspection standards than the FDA.\nThe possibility that the Secretary of Agriculture may redefine catfish to include basa and tra, thereby making them subject to the stricter USDA inspection standards, has brought forth objections from Vietnam's Ambassador to the United States, its Minister of Agriculture and Rural Development, and Vietnam's catfish industry (including their trade association, the Vietnam Association of Seafood Exporters and Processors, or VASEP). Ambassador Le Cong Phung sent a letter to nearly 140 Members of Congress, suggesting that a reclassification of basa and tra as catfish would call into question the U.S. commitment to the WTO and endanger the jobs of more than 1 million Vietnamese farmers and workers. In addition, an opinion article in the Wall Street Journal referred to the possible reclassification of basa and tra as catfish as \"protectionism at its worst.\" Supporters of the provisions of the 2008 Farm Act state that it provides greater protection to U.S. consumers.\nDraft regulations for catfish food safety inspection were delivered to the Office of Management and Budget (OMB) by the USDA on November 13, 2009. On February 16, 2010, OMB reportedly decided to extend its review of proposed regulations for an undisclosed period of time. A copy of the draft regulations obtained by the Washington Post indicated that Vietnam's basa and tra would be subject to the new safety inspections. During his testimony to the Subcommittee on Agriculture, Rural Development, the Food and Drug Administration and Related Agencies of the Senate Committee on Appropriations on March 2, 2010, Secretary of Agriculture Tom Vilsack stated that three criteria were considered in developing the regulations: (1) consumer safety; (2) scientific evidence; and (3) trade relations. Following the hearing, Senator Thad Cochran reportedly asked Secretary Vilsack about a proposed cut in the USDA Catfish Inspection Program in the fiscal year 2011 budget. On that same day, Senator Scott Brown, Senator John Kerry, and Representative Barney Frank sent a joint letter to OMB Director Peter Orzsag asking for an explanation for the delay in completing the review of the draft regulations and urging that OMB bring the review to a conclusion.\nAs a possible preparation for heightened U.S. inspection requirements, Vietnam's Ministry of Agriculture and Rural Development (MOARD) has tightened export hygiene standards for basa and tra. Effective April 12, 2010, all basa and tra exported from Vietnam will need certificates for hygiene and food safety issued by the National Agro-Forestry-Fisheries Quality Assurance Department. In addition, MOARD and the Ministry of Industry and Trade have contracted U.S.-based Mazzetta Company to train Vietnamese fish breeders how to comply with U.S. standards.", "While the USDA prepared the new catfish regulations, the ITC issued on June 15, 2009, a final determination in its five-year (sunset) review of the existing antidumping duties on \"certain frozen fish fillets from Vietnam.\" In a unanimous decision, the six ITC commissioners voted to continue the antidumping duties \"for the foreseeable future.\" The Vietnamese government and the Vietnam Fishery Association expressed their opposition to the ITC's decision. Vietnam's deputy minister of trade and industry, Nguyen Thanh Bien, was quoted as saying, \"in this economic context, this decision shows the heavy protectionism of the U.S. judicial and executive agencies.\"", "Two of the last four Congresses have passed legislation containing provisions that critics assert are designed to restrict or prevent the import of basa and tra from Vietnam and protect the U.S. catfish industry from foreign competition. Given that the 110 th Congress chose to take action with respect to the definition and regulation of catfish, the 111 th Congress may be disinclined to alter or reverse a process already underway. However, there are aspects of the issue that the 111 th Congress might take up, such as reclaiming the authority to define catfish or stipulating specific examination and inspection requirements for imported catfish, or fish and fish products in general. Congress might also press OMB to complete its review of the proposed regulations or provide a more complete explanation for the delay.", "The preceding issues are topics where there has been or continues to be direct bilateral interaction. In addition, there are several economic issues that indirectly influence relations between the United States and Vietnam. Of these, the most prominent issues for the 111 th Congress include workers' rights, the designation of Vietnam as a non-market economy, IPR protection, and Vietnam's exchange rate policy.", "The U.S. government and a number of non-governmental organizations (NGOs) such as Human Rights Watch have been critical of Vietnam's protection of workers' rights. There is a general recognition that Vietnam has made significant improvements in its labor laws, but that local government enforcement and business compliance remain an ongoing problem. The State Department's 2009 human rights report on Vietnam singled out problems with suppression of independent labor unions, failure to enforce laws governing the right to organize, child labor in rural areas, and inadequate safety conditions (especially in small- and medium-sized enterprises).\nWorkers in Vietnam have the legal right to collective bargaining. At present, all labor unions in Vietnam must be a member of the Vietnam General Confederation of Labor (VGCL). The VGCL is supposed to organize a union within six months of the establishment of any new business, regardless of its ownership—state, foreign, or private. According to the State Department's 200 9 Country Report on Human Rights Practices , \"in actuality only 85% of state-owned enterprises, 60% of foreign-invested enterprises, and 30% of private enterprises were unionized.\" Human Rights Watch has also raised concern about the ability of Vietnamese workers to call an official strike, especially at state-owned enterprises (SOEs).\nEfforts to organize independent unions in Vietnam reportedly have been thwarted by government suppression, including the arrest and imprisonment of union leaders. Other observers, however, counter that since the launch of doi moi , worker rights have made progress despite the restrictions on their independent right to organize. These observers point out that hundreds of unaffiliated (and therefore unofficial) \"labor associations\" have sprouted without significant repression, that the VGCL has evolved into a more aggressive advocate for workers, and in many recent cases, Vietnamese workers have gone on strike reportedly because they felt that they were not well-represented by the official union.\nThe Vietnamese government appears to tacitly accept that it has problems with the enforcement of its labor laws. Vietnam's official news agencies— Thanhnien News , Vietnam Net, and Voice of Vietnam News—ran a series of reports in 2008 and 2009 describing problems with Vietnam's protection of worker's rights, the flaws of the VGCL, and efforts to improve working conditions in Vietnam. The humanitarian aid agency of the Australian Council of Trade Unions, which has worked closely with the VGCL on workers' education, wrote in a letter to Human Rights Watch, \"Our experience in workers' education in Vietnam also leads us to believe that the government, far from trying to lower workers' conditions or repress workers, is sensitive to the needs of women and men workers.\"\nThe Vietnamese government is working with various international organizations to improve its labor laws, regulations and enforcement. Vietnam's Ministry of Labour, Invalids, and Social Affairs (MOLISA) is currently working with the International Labor Organization (ILO) to finalize a new Labour Code and Trade Union Law, to be submitted to Vietnam's National Assembly for consideration in October 2010. The ILO and MOLISA are also working with Spain's Agency for International Development Cooperation on a program to eliminate child labor in Vietnam. In addition, the United Nations is providing $2 million for a program to help the VGCL improve its grassroots relations.", "For over 20 years, Vietnam has been transitioning from a centrally planned economy to a market economy. Under its d oi m oi policy, Vietnam has allowed the development and growth of private enterprise and competitive market allocation of most goods and services. Many of Vietnam's state-owned enterprises have been converted into quasi-private corporations through a process known as \"equitization,\" in which some shares are sold to the public on Vietnam's stock exchange, but most of the shares remain owned by the Vietnamese government. Although most prices have been deregulated, the Vietnamese government still retains some formal and informal mechanisms to direct or manage the economy.\nThe Vietnamese government maintains that its economy is as much a market economy as many other nations around the world, and has actively sought formal recognition as a market economy from its major trading partners. A number of trading partners—including ASEAN, Australia, the European Union, India, Japan, and New Zealand—have designated Vietnam a market economy for purposes of international trade. Under the terms of its WTO accession agreement with the United States, Vietnam is to remain a non-market economy for up to 12 years after its accession or until it meets U.S. criteria for a \"market economy\" designation.\nUnder U.S. trade law (19 U.S.C. 1677), the term \"nonmarket economy country\" means \"any foreign country that the administering authority determines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise.\" In making such a determination, the administrating authority of the executive branch is to consider such criteria as the convertibility of the nation's currency, the extent of state ownership of the means of production, and government control of prices and wages.\nDesignation as a market economy has both symbolic and practical value for Vietnam. The Vietnamese government views market economy designation as part of the normalization of trade relations with the United States. In addition, Vietnam's designation as an NME generally makes it more likely that antidumping and countervailing duty cases will result in adverse rulings against Vietnamese companies. In theory, the 111 th Congress could consider legislation weighing in on the designation of Vietnam as a market or non-market economy by amending or superseding existing U.S. law.", "The U.S. government remains critical of Vietnam's record on intellectual property rights (IPR) protection. Vietnam was included in the \"Watch List\" in the U.S. Trade Representative's 20 10 Special 301 Report , an annual review of the global state of IPR protection and enforcement. Vietnam remained on the Watch List because of its continuing problems with IPR piracy and trademark infringement. The report does state that \"the United States is encouraged by recent steps that the government has taken to improve IPR protection and enforcement, including recent amendments to the IP Law, an increase in administrative fines for copyright infringement, and a continuation of efforts to address Internet piracy.... However, overall enforcement efforts remain insufficient to address rampant piracy and counterfeiting.\" The report also noted that the U.S. government had funded IPR enforcement training in Vietnam in 2009.\nThe perceived continuing problems with Vietnam's IPR protection may play a role in any consideration of its GSP application, as well as the bilateral BIT negotiations. The Trade Reform, Accountability, Development, and Employment (TRADE) Act of 2009 ( H.R. 3012 and S. 2821 ) would require that any future trade agreement that contains IPR provisions \"promote adequate and effective protection of intellectual property rights.\" These provisions are to be consistent with the WTO's Declaration on the TRIPS Agreement and Public Health, and the Convention on Biological Diversity. Enactment of H.R. 3012 or S. 2821 could have implications for the ongoing BIT negotiations.\nThe Foreign Relations Authorization Act, Fiscal Years 2010 and 2011 ( H.R. 2410 ) and the Foreign Relations Authorization and Reform Act, Fiscal Years 2010 and 2011 ( H.R. 2475 ) would establish 10 additional \"intellectual property attaches to serve in United States embassies or other diplomatic missions.\" Assignment priority would be given to countries identified in the USTR's Special 301 Report , which could imply the assignment of one of the attaches to Vietnam. H.R. 2410 was passed by the House on June 10, 2009, and referred to the Senate on June 22, 2009.", "One aspect of Vietnam's economic system that has not been changed by doi moi is its exchange rate policy. Vietnam continues to maintain a government-managed exchange rate relative to the U.S. dollar. The State Bank of Vietnam (SBVN) sets a range in which the value of the Vietnamese dong can fluctuate relative to the U.S. dollar. Since March 2009, the SBVN has widened the band to ±5% from the official exchange rate, and devalued the dong three times. The last devaluation occurred on February 10, 2010—just before Tet, Vietnam's major national holiday—lowering the official interbank exchange rate to 18,544 dong = $1.\nSeveral bills have been introduced in the 111 th Congress that would identify countries with intentionally \"misaligned\" exchange rates and provide recourse for the United States to rectify the alleged economic harm caused to the U.S. economy. Vietnam's current exchange rate policy might subject it to the proposed economic sanctions contained in these bills. In addition, Vietnam's managed exchange rate may be one factor in its continued designation as a non-market economy by U.S. government agencies.", "The preceding sections of the report have focused on current and past issues in U.S.-Vietnam trade relations. The final section of the report attempts to identify potential sources of future trade friction by examining trends in bilateral trade figures. The focus will be on three aspects of recent trade relations—merchandise trade, trade in services, and foreign direct investment (FDI).", "Only a few years have passed since trade relations between the United States and Vietnam have opened. As previously mentioned, the rapid growth in Vietnam's export of two types of products—clothing and catfish—quickly made them sources of trade tension between the two nations. However, there are other commodities that contribute more to U.S.-Vietnam trade flows that could also become touch points for trouble in bilateral trade relations.\nAccording to U.S. trade statistics, the top U.S. imports from Vietnam in 2009, besides clothing and fish, were (in order) furniture and bedding; footwear; electrical machinery; mineral fuel and oil; machinery; spices, coffee, and tea; and edible fruits and nuts (see Table 2 ). The top U.S. exports to Vietnam included (in order) non-railway vehicles, machinery, iron and steel, meat, cotton, plastic and plastic articles, food waste and animal feed, electrical machinery, optical and medical equipment, and wood and wooden articles. The juxtaposition of these two lists reveals product categories that may warrant watching, as well as a connection between some of the top trade commodities.", "Over the last 10 years, Vietnam has risen from being the 62 nd -largest source for furniture and bedding imports for the United States to being the fourth-largest source—surpassing past leaders such as Italy, Malaysia, and Taiwan. Furniture and bedding provided over 11% of total U.S. imports from Vietnam in 2009, and it was the second-fastest growth category of imports from Vietnam (after electrical machinery) since 1998.", "While most of the focus has been on clothing imports from Vietnam, footwear imports from Vietnam were over 10% of total imports in 2009. Vietnam was the second-largest source of footwear imports for the United States in 2009, exceeding Italy, Malaysia, and Taiwan.", "Vietnam's electrical machinery exports to the United States grew more than 1,000-fold over the last 10 years, reaching over $630 million in 2009 and over 5% of total U.S. imports from Vietnam. According to interviews with foreign investors in Vietnam, there is great potential for growth in this sector because of Vietnam's inexpensive, skilled workers.", "There is also a discernable interplay between Vietnam's top exports to the United States and the top U.S. exports to Vietnam. Vietnam imports substantial amounts of cotton from the United States, which is then used to manufacture clothing to be exported to the United States. Similarly, Vietnam imports wood from the United States that may end up in the furniture that is imported by the United States from Vietnam. There is also a significant amount of cross-trade in electrical machinery—a top-10 export item for both countries—as parts and components are shipped back and forth across the Pacific Ocean. The implication is that efforts to curtail the growth of certain top exports of Vietnam to the United States could result in a decline in U.S. exports to Vietnam and possible job losses in the United States.", "The United States perceives a trade advantage in several of the services sectors, especially financial services. In the latest U.S. National Trade Estimate (NTE), the Office of the U.S. Trade Representative indicated that as part of the implementation of the BTA, Vietnam has committed to greater liberalization of a broad array of its services sectors, including financial services, telecommunications, express delivery, distribution services, and certain professions. Vietnam has already committed to allowing 100% foreign ownership of securities firms and express delivery service providers by 2012. It is likely that the United States will press Vietnam for more access during the BTA talks, as well as during the BIT negotiations.", "In 2008, Vietnam received $60 billion in foreign direct investments (FDI) despite the global economic crisis. The leading source of FDI in 2008 was Malaysia, largely due to a nearly $10 billion steel complex project financed by the Lion Group. The second- and third-largest sources of FDI in 2008 were Taiwan and Japan, respectively. The United States is the seventh-largest source of FDI in Vietnam over the last 10 years.\nHowever, Matthew Daley, former president of the U.S.-ASEAN Business Council, recently told an audience in Hanoi that he expects the United States to become the largest foreign direct investor in Vietnam in the next two to three years. According to Daley, during the first quarter of 2009, nearly two-thirds of the FDI registered in Vietnam was from the United States.\nGrowing U.S. interest in investment opportunities in Vietnam could have an impact on the BIT negotiations and, by implication, have an effect on the 111 th Congress if the negotiations are completed in 2010. In addition, as more U.S. companies invest in Vietnam, there is the possibility of more business-to-business disagreements between U.S. and Vietnamese companies, and more constituent pressure on Congress to address perceived shortcomings in Vietnam's treatment of foreign-owned enterprises." ], "depth": [ 0, 1, 1, 1, 2, 3, 3, 3, 2, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 3, 3, 3, 3, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full h1_full", "h0_full h3_full", "h3_full h1_full", "", "", "", "", "", "", "", "", "h2_full h3_title", "", "h3_full", "", "h2_full", "h2_full", "", "", "h2_title h1_title h3_title", "h2_full", "h3_full h1_full", "", "", "h2_title", "h2_full", "", "", "", "", "", "" ] }	{ "question": [ "How could the US and Vietnam grow their bilateral trade?", "What is the US vision for the TPP?", "How does Vietnam plan to secure bilateral trade, even without US support?", "What has accompanied growth in bilateral trade?", "For what did Vietnam apply?", "How did the Bush and Obama Administrations respond to Vietnam’s requests?", "What is Vietnam's motive to try and secure BIT?", "What is a recent trade issue between the US and Vietnam?", "What problems have Vietnam had with imports to the US market?", "How did Vietnam respond to these issues?", "What further issues are on the horizon for Vietnam's imports?", "What global problems will Vietnam face in its economic development?", "How might the 111th Congress play a pivotal role in US-Vietnam economic and trade relations?", "What additional influences does the 111th Congress have over Vietnam's trade future?", "How will this report on trade relations respond to future circumstances?" ], "summary": [ "Bilateral trade may increase if both nations become members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP).", "The Obama Administration envisions an expanded TPP as a \"21st Century free trade agreement\" that will become the cornerstone for a trans-Pacific regional trade association.", "Vietnam is also a party to negotiations to form a larger pan-Asian regional trade association based on the Association of Southeast Asian Nations (ASEAN) that could exclude the United States and could prove to be an alternative to the TPP and the U.S. vision for regional economic integration in Asia.", "The growth in bilateral trade has not been without its accompanying issues and problems.", "Vietnam has applied for acceptance into the U.S. Generalized System of Preferences (GSP) program and is participating in negotiations of a Bilateral Investment Treaty (BIT) with the United States.", "Both the Bush and the Obama Administrations have shown some hesitance in accepting Vietnam as a GSP beneficiary country and in concluding a BIT with Vietnam.", "Vietnam would like to have the United States officially recognize it as a market economy.", "There have also been problems with U.S. imports of specific products from Vietnam.", "In 2003, the United States began collecting antidumping duties on certain fish imports from Vietnam. From 2007 to 2009, the United States implemented a controversial monitoring program for selected clothing imports from Vietnam. In 2008, the 110th Congress passed legislation that transferred the regulation of catfish from the Food and Drug Administration to the U.S. Department of Agriculture.", "The Vietnamese government strongly protested these actions as largely protectionist measures.", "An examination of recent trends in bilateral trade reveals that other product categories—such as footwear, furniture, and electrical machinery—could generate future tension between the United States and Vietnam.", "Observers of Vietnam's economic development have also been critical of Vietnam's protection of workers' rights, its enforcement of intellectual property rights laws and regulations, and the country's exchange rate policies.", "The 111th Congress may play an important role in one or more of these issues, as have past Congresses. The GSP program is scheduled to expire on December 31, 2010, and if Congress should take up GSP renewal, it may also consider Vietnam's pending application.", "The 111th Congress may also weigh in on clothing and fish imports from Vietnam, or its designation as a market or non-market economy. Finally, if current growth trends continue, Congress may be asked to act on the rising amount of footwear, furniture, and/or electrical machinery being imported from Vietnam.", "This report will be updated as circumstances require." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 1, 1, -1, 0, 0, 0, -1, -1, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-15-164	{ "title": [ "Background", "Charitable Organizations Comprise a Major Part of Our Economy and Vary Considerably in Size and Purpose", "Although Charitable Organizations Vary in Size and Purpose, a Small Number Concentrated in the Health and Education Sectors Control Most Assets", "EO Receives Indications of Noncompliance from a Variety of Sources, but Declining Resources Complicate Efforts to Effectively Oversee Charitable Organizations", "EO Receives Indications of Noncompliance from a Variety of Sources", "Limited Resources Contribute to Fewer Examinations", "The Impact of EO Compliance Efforts on Charitable Organizations Is Unknown, Due to Lack of Key Performance Measures and Goals and Lack of Complete Data", "Lack of Quantitative, Results-Oriented Goals and Measures for Improving Compliance Limits Ability to Assess Effectiveness of EO Oversight", "New Streamlined Application and Review Process Raises Questions about Whether IRS Will Collect Adequate Information to Indentify Noncompliance among Smaller-Sized Organizations", "Lack of Timely and Complete Data Limits IRS Ability to Provide Adequate Oversight of Charitable Organizations and to Provide for the Transparency of the Tax- Exempt Sector", "Uncertainty about How Taxpayer Data Can Be Shared and Used Limits Collaboration between IRS and State Charity Regulators", "Conclusions", "Matter for Congressional Consideration", "Recommendations", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Tax Benefits and Requirements for Different Types of Tax Exempt Organizations", "Types of Tax Exempt Organizations Listed in Section 501", "Appendix III: Additional Tables", "Appendix IV: Comments from the Internal Revenue Service", "Appendix V: GAO Contact and Staff Acknowledgments", "Contact", "Staff Acknowledgements" ], "paragraphs": [ "Section 501 of the Internal Revenue Code (IRC) provides for tax exemption for certain corporations, trusts, and other organizations. Section 501(c) establishes 29 categories of tax-exempt organizations, ranging from cemeteries to professional football leagues—see appendix II for complete list of different types of tax-exempt-organizations, as well as more detailed information on the tax treatment for these organizations. The largest number of such organizations falls under section 501(c)(3), which recognizes charitable organizations. Generally, while charitable organizations pay no income taxes on contributions received, these entities can be taxed on income generated from business activities that are unrelated to their charitable purposes. These charitable organizations and related parties may be subject to several additional IRS penalties and fines for certain actions, such as not filing a required tax return. Generally, taxpayers who itemize their deductions may deduct the amount of any contribution to charitable organizations from their taxable income.\nThe IRC requires that an organization adhere to certain accepted charitable, religious, educational, scientific, or literary purposes to qualify for 501(c)(3) tax-exempt status. The IRC also prohibits charitable organizations from undertaking certain activities: no earnings of the organization may benefit individual or private shareholders, no substantial attempt may be made to spread propaganda or influence legislation, and no effort may be made to campaign for or against a candidate for public office. In order to receive 501(c)(3) tax-exempt status, an organization must submit a Form 1023 or Form 1023-EZ and organizing documents to IRS to describe its charitable purpose and financial data. The organizing documents can include articles of incorporation or by-laws governing the activities and charitable purpose of the entity. Submitting an application is one of the first interactions a tax-exempt organization will have with IRS. The organization will then receive a determination letter from IRS which informs the organization whether its application for tax-exempt status has been approved or denied. Alternatively, the organization may be told the IRS is in need of additional information in order to make a determination.\nIf an organization is successful in receiving tax-exempt status, it will continue to interact with IRS on an annual basis by submitting an information return or an electronic notice. The form contains information on the organization’s mission, programs, finances and governance structure which helps IRS to determine whether the organization is meeting its charitable purpose and therefore is eligible for tax-exempt status. Certain organizations that have gross receipts of $50,000 per year or less may submit the Form 990-N—an abbreviated electronic version of the Form 990 return, often called the e-Postcard. The Form 990-EZ is less abbreviated, though still more streamlined than the Form 990, and may be used by certain entities with gross receipts under $200,000 and assets under $500,000. Private foundations complete the 990-PF.\nIRS oversees charitable organizations through its Exempt Organizations (EO) Business Division (a part of IRS’s Tax Exempt and Government Entities Division). EO’s oversight relies primarily on two sets of activities: a front-end review of applications and a back-end review of a relatively small number of information and tax returns. At the front end, the EO Rulings and Agreements office reviews all applications for tax-exempt status. At the back end, EO Examinations analyzes the operations and finances of a small percentage of exempt organizations through examinations (audits). Exam agents propose tax assessments or changes to exempt status when necessary, as well as advise organizations about how to comply with the law in the future. Through these activities, IRS tries to ensure that charities merit the recognition of a tax-exempt status as well as the retention of it.\nIRS and state charity regulators both play a key role providing oversight of charitable organizations. IRS’s oversight interests are in ensuring that tax-exempt organizations comply with federal tax law. State charity regulators have a broader oversight interest which includes the application of state trust, non-profit corporation, consumer protection, and charitable solicitation laws. Although these federal and state regulators have distinct oversight interests, these interests are closely related and at times, overlapping. Both IRS and state charity regulators seek to prevent excess compensation, private inurement, conflicts of interest, and other abusive practices by charitable organizations. IRS also collaborates with U.S. Attorneys at the DOJ to identify and prosecute criminal tax violations. Although EO does not collaborate directly with DOJ, criminal investigations may be initiated within IRS at the recommendation of an IRS revenue agent who has detected potential criminal activity. Investigations may also be initiated at the advice of a U.S. Attorney’s office, a law enforcement agency, or the public. IRS criminal investigations are led by an IRS special agent. If substantial evidence is found for a criminal case, then—after multiple rounds of supervisory review—the investigation may be referred to the DOJ Tax Division or the relevant U.S. Attorney’s office. If DOJ or the U.S. Attorney accepts the investigation for prosecution, the case is then handled by the prosecutors.", "Charitable organizations comprise a significant part of our economy in terms of their share of the gross domestic product (GDP) and their importance in services vital to the well being of citizens. Available estimates indicate that tax-exempt organizations serving households generate about 5 percent of U.S. GDP. The federal government increasingly relies on these organizations to deliver critical services: in 2012, government agencies paid an estimated $137 billion to nonprofit organizations in grants and contracts for services. Also, for fiscal year 2013, the Department of the Treasury (Treasury) estimated the tax expenditure for deductions for contributions to charitable organizations totaled over $48 billion.\nAs shown in figure 1, the total population of nonprofit organizations can be broken down by tax-exempt status and by the requirement to file returns. In 2012, an estimated 2.3 million nonprofit organizations operated in the United States, including organizations that have not applied for tax-exempt status with IRS. Of nonprofits in 2011, 1.63 million had been recognized as tax-exempt by IRS and 1.08 million of them were 501(c)(3) charitable organizations. An estimated 274,000 of these charitable organizations filed returns—around 189,000 filed Form 990 and 85,000 filed Form 990-EZ.\nAs shown in figure 2, the number of charitable organizations that were recognized as tax-exempt by IRS increased from more than 960,000 in 2003 to more than 1.28 million in 2010 (a 33 percent increase) but declined to 1.05 million in 2013 (a 18 percent decrease from 2010). After 2010, this decline was primarily due to the Pension Protection Act of 2006 (PPA), which mandated that any organization—large or small—that failed to file a required return or notice for three consecutive years would automatically lose its federal tax exemption. Since PPA’s passage, more than 570,000 organizations have lost their tax-exempt status through the automatic revocation process. The net effect on the number of charitable organizations (when new applicants and reinstated revocations are included) is an average decline of about 200,000 from the peak in 2010.", "Charitable organizations, excluding private foundations, represent a diverse array of mission areas and range greatly in asset size, the amount of revenue they raise, and their expenses. As shown in figure 3, the largest number of charitable organizations filing Forms 990 and 990- EZ were in the human services sector. However, the health and education sectors had the largest amount of assets.\nThe human services sector represents 38 percent of the total population of charitable organizations that file Form 990 or 990-EZ returns, followed by the education sector at 18 percent and the health sector at 13 percent. For more information by mission category, see appendix III. All three sectors cover a diverse range of programs and serve different segments of the population. The human services sector includes activities related to employment, housing and shelter, and youth development. Education includes elementary, secondary, vocational, and technical schools and universities. Health includes hospitals, mental health and crisis intervention, and medical research.\nThe assets of charitable organizations that file Forms 990 or 990-EZ returns are concentrated in the health and education sectors, which held about 75 percent of the total assets—more than $2 trillion—while the human services sector held almost $324 billion (or about 11 percent) of the total. In addition to being concentrated in a few sectors, a large proportion of total assets were controlled by a relatively small number of charitable organizations. Of the charitable organizations that file a Form 990 or Form 990-EZ, less than 3 percent held more than 80 percent of the assets, as shown in figure 4. These organizations were primarily from the health and education sectors. Over 59 percent of charitable organizations that file Forms 990 or 990-EZ returns (with less than $500,000 in assets) held less than 1 percent of all assets.\nMost of the expenses of charitable organizations that filed Form 990 were for program services, which are mainly activities that further the organization’s tax-exempt purposes. Total expenses of charitable organizations are broken down on the Form 990 into program service expenses, management and general expenses, and fundraising expenses. About eighty-seven percent of Form 990 charitable organization expenses in 2011 were for program services, about 12 percent for general management, and about 1 percent for fundraising. As we noted in our 2002 report, charitable organizations have discretion in determining how to charge and allocate expenses for program services, general management, and fundraising. The differences in methods can result in charities with similar activities allocating expenses differently among expense categories. This complicates interpretation of these data. For more information on expenses, see appendix III.", "", "Through its examinations, IRS can analyze the operations and finances of tax-exempt organizations and propose tax assessments or changes to exempt status when necessary. In general, IRS attempts to select entities that it believes are likely to have violated requirements, such as unauthorized use of an organization’s assets, or engaging in political activity. On the basis of these examinations, IRS can accept the Form 990 as filed or can change the status of the entity, impose excise taxes for certain types of violations, or revoke the tax-exempt status if the violations are serious enough. It can also assess taxes if an entity has not fully paid employment taxes or taxes on unrelated business income. IRS can also advise organizations on complying with the law in the future. This can include sending written advisories to organizations advising them of specific issues that need to be addressed.\nIRS receives indications of noncompliance from a variety of sources that can lead to examinations, as shown in figure 5.\nEO initiated 8,413 exams of tax-exempt organization returns in 2013 and 4,495 of these (or about 53 percent) were exams of charitable organizations. As shown in table 2, the largest source for these exams (41 percent) was the category that includes the IRS National Research Program project. EO participated in an IRS National Research Program project on employment taxes in 2013, which contributed to an unusually high number of exams during that year.\nThe next largest source (22 percent) was Form 990 data analytics. In 2008, IRS redesigned the Form 990 for the purposes of promoting compliance and increasing transparency. The redesigned form requires filing organizations to supply more in-depth information than previous versions. For example, the form includes new questions on governance, compensation, activities, relationships with related organizations, international activities, fundraising, non-cash contributions, and other compliance areas. A team of EO specialists developed data-mining queries (based on the redesigned form) to identify suspected inaccuracies or anomalies. For example, with the new Form 990, EO can search for whether an organization reports that it has a mortgage and receives rental income—suggesting that it has unrelated business income. If the organization does not file a Form 990-T, Exempt Organization Business Income Tax Return to report any unrelated business income, IRS is more likely to select the organization for examination. As of April 2014, EO had developed a list of over 150 condition codes based on return line entries to identify potential noncompliance issues.\nOf the charitable organization examinations initiated in fiscal year 2013, 632 (or 14 percent) were the result of referrals (including news items)— communication EO receives from internal and external sources alleging potential noncompliance with the tax law. EO managers told us referrals are prioritized so that those involving a serious breach of public trust or abuse—such as financial investigations or allegations of terrorism—are to be examined right away. On the other hand, high profile referrals— referrals resulting from a media exposé or involving a well-known organization—are not necessarily high priority, and may not be examined right away. The two most common sources of referrals for all tax-exempt organizations in 2013 were the general public, with about 81 percent of the 6,940 total referrals, and other IRS functional areas, with about 12 percent of the total. The specific potential violations most commonly alleged were that income or assets were being used for private benefit, the organization was involved in a political campaign; or the organization failed to report employment, income, or excise tax liability properly.", "With IRS budget cuts, the number of EO FTEs has declined over the past several years, leading to a steady decrease in the number of organizations examined. The total number of FTEs in the EO division decreased from 889 to 842 (about 5 percent) and the number of FTEs doing examinations declined from 529 to 493 (about 7 percent) between fiscal years 2010 and 2013, as shown in table 3.\nIRS examines only a small percentage of charitable organizations that file returns, including private foundations, as shown in table 4. EO examination rates were lower, relative to other IRS divisions. For charitable organizations, the examination rate was about 0.7 percent in 2013, while for individual and corporate tax returns it was 1 percent and 1.4 percent, respectively. A comparison of tables 3 and 4 also shows that the number of employees performing exams has declined while the number of returns filed has increased. From fiscal year 2011 to 2013, the exam rate decreased from .81 percent to .71 percent (by about 12 percent).\nAs shown in table 5, examinations may result in no change to the amount of taxes owed or the tax-exempt status, the assessment of taxes or penalties, or the revocation of tax-exempt status. The no-change rate over the past three years has been between 30 and 34 percent. According to EO officials, IRS uses change and no-change rates as one indicator of how well it is targeting exams. Therefore higher no-change rates indicate that IRS is spending resources examining compliant entities. The 30 percent no-change rate for charitable organizations is relatively high when compared to the rate for some other filers. For example, in 2013, the no-change rate for all examinations of individual tax returns ranged from 9 to 12 percent, depending on the type of exam that was conducted.\nAn organization may be subject to a tax assessment or penalty charges for filing a late return, for failure to provide required document, or for late payment of taxes. IRS can also revoke tax-exempt status when charitable organizations (or individuals responsible for the organization) violate certain rules. The organization would have to reapply as a tax-exempt organization and start the process over. Revocations may result when an organization is found to be engaging in non-exempt activities, operating in a commercial manner, or allowing inurement of net earnings or assets of the organization to benefit an officer, director, or a key employee who has a personal or private interest in the activities of the organization. This type of enforcement action happens infrequently.\nAn exam may also identify issues—such as a proposed expansion of an unrelated business income producing activity, or a failure to properly report required information, such as special fundraising activities or officer compensation. If enlarged, these issues could jeopardize the tax-exempt status of the organization. However, there is no change in the tax-exempt status of the organization. Instead, the examiner will issue a closing letter with a written advisory addendum to the organization identifying the non- compliance issues found during the examination which, if corrected, would bring the organization into compliance.\nAs figure 6 shows, the number of charitable organization returns with revocations declined from 2011 to 2013. Generally, the most often-cited reason for the revocation was that the charitable organization was not operating for a charitable purpose. The exception was in 2011, where the failure to file returns and other records was slightly higher. Operating for the benefit of private interests was another reason for a revocation.", "The EO Business Division has faced challenges over the past several years from declining budgets and staffing and from the complexity and the sensitivity of their workload, which includes regulating the political activity of tax-exempt organizations. EO’s ability to address these challenges has been hindered by a lack of performance measures that EO management could use to fully assess and communicate how effective their efforts have been. EO managers have introduced some timeliness measures that may lead to efficiency gains by helping them track their inventory of applications, referrals, and exam cases and identify bottlenecks as they occur. However, EO managers lack compliance goals and measures for assessing their progress in ensuring that charitable organizations are conforming to their charitable purpose and other aspects of the tax law. EO is developing a new approach to identify and select organizations for examination. EO also introduced a streamlined application form for smaller organizations seeking tax-exempt status that may reduce administrative burden. However, the limited amount of information that will be available about these organizations raises questions about how IRS will identify noncompliance issues for this particular segment of charitable organizations. In addition, a lack of timely, accurate digitized data from the Form 990 further complicates oversight efforts.", "EO has developed measures and goals to track its output of application reviews and examinations, but these do not measure impact on compliance. EO managers develop an annual work plan, which lists the research projects and exams they plan to initiate over the course of the year. The work plan includes goals for the number of cases they plan to start and close within the year, and the estimated number of staff days for each project. EO management uses a quarterly dashboard to track their progress against the workload goals, as set forth in their annual work plan. However, these performance goals and measures do not show the impact of EO efforts on compliance. These are measures that are useful for monitoring processes within EO, but they do not measure outcomes— such as improvements in the compliance rate for the charitable organization sector. Developing outcome-oriented goals and establishing measures to assess the actual results of EO activities (compared to their intended purpose) can help EO improve performance and determine whether programs have produced desired results.\nEO Examinations managers use the examination change rate as a measure of compliance. The change rate is measured as the percentage of exams that result in a written advisory, a change in the amount of taxes, penalties, or fines an organization owes, or a change in the organization’s tax-exempt status. This change rate that EO reports from exams may be a useful indicator of how accurately EO is selecting charitable organizations for exam but it has limitations as a compliance measure. EO does not use a random sample of organizations to estimate the change rate for the charitable sector as a whole and—except in the case of certain projects described below—it does not estimate the rate by type of charitable organization or by compliance issue. Change rates based on nonrandom exam selection procedures cannot be used to enhance compliance by focusing enforcement efforts on areas with the highest risk of noncompliance. In addition, EO’s change rate is ambiguous as a measure of compliance because while it includes the number of written advisories that EO managers send following an exam, EO managers do not track the percentage of organizations that received a written advisory in the past and continued to be noncompliant.\nIn addition to lacking some key compliance measures, EO managers do not set specific, measurable goals related to improving the compliance levels of tax-exempt organizations, either as a whole or for charitable organizations in particular. One reason it is difficult to set compliance goals, according to IRS and EO officials, is that IRS has not completed a study for charitable organizations that establishes a compliance baseline. In order to track progress toward a compliance goal, generally-accepted evaluation standards require establishing a baseline for compliance measures and recording how these measures change over time.\nA possible source for such a baseline is IRS’s National Research Program (NRP) but the cost of establishing a baseline may be large. The NRP examines a sample of tax returns to estimate rates of noncompliance for all taxpayers and for different types of taxpayers and tax issues. According to IRS and Exempt Organizations officials, it would be useful to have a research program like the NRP identify compliance baselines for EO. More compliance data on the EO sector would allow EO examiners to better select organizations for exam and would potentially reduce the no-change rate. However, these officials also point out that such a project requires a considerable investment of resources. They also say undertaking such a large-scale long-term project may not be feasible, given the resource constraints faced by IRS.\nAnother possible source of baseline data is the projects initiated by the EO Examinations Unit. EO Examinations sponsors new research projects each year to help identify non-compliance (which can include estimating a change rate) by types of operations, by segments of the charitable sector, or around a particular issue or item from the Form 990. A project can begin when EO decides that potential for noncompliance exists for a certain issue based on data analytic queries, referrals, or some other source (as described above). A random sample of organizations in that segment is selected for review. EO managers said they generally judge a project to be successful if it achieves a change rate of 80 percent or higher. For example, if 80 percent or more of the returns examined as part of the review result in a change in the amount of taxes, penalties, or fines the organization owes, a change in the organization’s tax-exempt status, or a significant change in the organization’s operations, EO managers may then decide to incorporate the original query as part of their regular examination selection criteria.\nHowever, EO does not use the results of the projects as baselines to assess whether the strategies adopted as a result of the projects have improved compliance among the segments of the tax-exempt sector that were studied in the projects. EO managers see these projects as a way to gather information they can use to develop strategies to address emerging issues, measure overall levels of compliance, and address areas of known non-compliance. But the impact on compliance remains unclear, because EO does not consistently follow up to measure the project impact in subsequent years or policy changes made as a result of the project. Even when a full research project using a representative sample is not justified given EO’s resource limitations, other approaches may still provide useful information about compliance. For example, tracking the frequency in exams of issues that were identified in the project, while not an adequate compliance measure due to the nonrandom exam selection procedures, could provide insight into whether the issues are still a reason for concern.\nAn example of how establishing a baseline could have helped EO measure the effect on compliance of policy changes is EO’s project that reviewed charitable organizations providing consumer credit counseling. The project examined over 200 organizations and IRS revoked, terminated, or proposed revoking the exemptions of around 60 percent of these organizations for abuses such as failure to provide education, operating as a commercial business, or serving the private interest of directors, officers, and related entities. According to the 2011 Exempt Organizations Annual Report, this project helped to stimulate legislative changes in 2006, including new tax rules governing exempt credit counseling organizations.\nHowever, IRS has not evaluated the effect of changes in the law that came about as a result of the project on subsequent compliance by charitable organizations that provide credit counseling. Because the project examined over 200 of the credit counseling organizations, including the 63 largest, it may have had sufficient coverage of this part of the charitable sector to provide a baseline for assessing the effect of the legislative changes on compliance. According to EO officials, they decided not to open a large volume of new credit counseling cases after the initial project was completed because the initial project still had cases in the appeals process and the relevant sections of the 2006 legislation had phase-in provisions under which the provision took full effect for tax years after January 1, 2011. However, EO currently has no plans to undertake such a study in the future.\nEO officials told us that they intend to change their source-based approach to selecting and conducting exams starting in 2015, in order to make better use of limited resources. They said they intend to rely more on data mining queries based on the redesigned Form 990 to detect high- risk areas of noncompliance and to prioritize enforcement efforts. This approach may also better conform to strategies IRS lays out in their strategic plan for 2014-2017, which calls for IRS to develop improved research-driven methods and tools to detect and combat noncompliance and improve resource allocation. As an example, EO officials also report they will prioritize case selection according to criteria that give more weight to more consequential outcomes. A data mining query generating a lot of revocations would take priority over a query that may only generate written advisories. They hope their new approach will allow them to better select cases for exam and to measure their effectiveness. However, this new approach is still in early stages of development and they are starting to implement it in FY 2015. Also, without compliance goals, related performance measures, and more complete indicators of compliance, it will be difficult to assess the effectiveness of the new strategy.\nDeveloping measures of compliance and determining the impact of projects and exams on compliance is challenging. As we’ve discussed in past reports, IRS researchers have found it difficult to determine the extent to which its enforcement actions deter noncompliance or its services improve compliance among taxpayers who want to comply. The challenges to determining impact include collecting reliable compliance data, developing reasonable assumptions about taxpayer behavior, and accounting for factors outside of IRS’s actions that can affect taxpayer compliance, such as changes in the tax law. Nevertheless, even if IRS (or in this case, EO) is unable to empirically estimate the extent to which its actions directly affected compliance rates, periodic measurements of compliance levels can indicate the extent to which compliance is improving or declining and can provide a basis for reexamining existing programs and triggering corrective actions, if necessary.\nBest practices indicate that establishing results-oriented goals can help agency officials demonstrate they have thought through how the activities and initiatives they are undertaking are likely to lead to meaningful results in line with programmatic goals. An example of a results-oriented goal for EO would be a specific, measurable increase in compliance rates for particular types of organizations (such as for the credit counseling organizations described above) or for certain issues that have been problematic in the past (such as failure to pay employment taxes). We have also previously reported that setting results-oriented goals, establishing performance measures and related performance indicators with targets in meeting such goals, and reporting on progress against those goals are the hallmarks of effective management. The absence of results-oriented goals and related performance measures for compliance does not allow EO officials to compare the success of different initiatives against one another, determine whether their compliance strategy is working as intended, or allocate resources to those activities that have the most impact on compliance levels.", "In May 2013, Treasury Inspector General for Tax Administration (TIGTA) found that applicants for tax-exempt status experienced significant delays in the review of their applications. Specifically, it reported that as of December 2012, many organizations had not received an approval or denial letter—more than two years after they submitted their applications. TIGTA also reported that the EO Rulings & Agreements function did not have specific timeliness goals for processing applications, such as potential political cases, that require significant follow-up with the organizations. The Taxpayer Advocate also reviewed EO operations and concluded that EO management did not have meaningful performance measures required for effective management oversight of the application process such as how long it takes, on average, to process applications that cannot be disposed of during initial screening and what percentage of inventory had not been reviewed in nine months or more.\nThe lack of meaningful performance measures compounded other challenges faced by EO management. As discussed earlier, the number of charitable organizations recognized as tax-exempt by IRS increased over the past decade, as the number of employees has declined along with budget cuts. In addition, the auto-revocation process that began in 2011 (following changes to legislation in 2006) inadvertently led to an increase in the number of applications. By revoking the status of organizations that had not filed in three years, the process revoked the status of hundreds of thousands of organizations that no longer existed as intended, but also purged thousands of organizations that still merited tax-exempt status, but may have been unaware of their filing requirements. Once their status was automatically revoked, many applied for reinstatement, leading to a spike in applications. According to IRS senior officials, other challenges faced by EO management included outdated information technology records management systems, making it difficult for managers to understand and manage the size of the application backlog.\nEO managers introduced performance measures and goals to help address these challenges and the concerns about applications inventory raised by TIGTA and the Taxpayer Advocate. For fiscal years 2013 and 2014, EO managers set a goal to eliminate the backlog of applications waiting for review for 270 days or more. To assess their progress in managing the inventory of applications, EO managers focused on performance measures such as number of applications received and closed, average age of applications inventory, and number of cases still pending after 270 days. They anticipate that these measures will allow them (for the first time) to track their progress, to more readily identify choke points and the reasons why slowdowns are occurring, and to react accordingly. Managers can now access this information through a weekly dashboard to monitor the inventory and communicate to senior EO management on a quarterly basis. As of September 2014, IRS Exempt Organizations officials reported they had closed over 117,000 cases in FY 2014, an increase of 121 percent over the prior year’s closings. They also reported that the end of year inventory was 22,759, as compared to 65,718 at the end of FY 2013.\nEO managers also introduced a streamlined application review process to reduce their inventory of aged cases. Initially, application reviewers relied more heavily on attestation statements made under penalty of perjury, rather than with substantiating documents. For example, if an organization failed to include a narrative statement describing its activities as required by the application Form 1023, IRS would ask the organization to attest that it met the operational test for tax-exempt status, rather than hold the case open until the organization submitted the appropriate paperwork. Similarly, applicants that failed to submit organizing documents—which are important because they describe how the organization’s purpose and assets comply with tax-exempt purposes set forth in section 501(c)(3)—would need to attest that they had the appropriate organizing documents and that they met statutory and regulatory requirements, rather than provide actual documents. EO officials said attestation statements allowed applicants to indicate that they were fully aware of the application requirements, but they were not used in isolation. For example, if an application indicated the possibility of private inurnment, the reviewer was supposed to ask the applicant about this issue and would not rely solely on attestation. In the spring of 2014, EO managers determined the interim guidance for application reviewers was unclear, and they told reviewers there must be a narrative and organizing documents, although the IRM has not yet been updated to reflect this change. The new, streamlined procedures initially applied only to cases in the applications inventory that were more than a year old, but were extended in May, 2014 to all existing inventory. EO officials told us these streamlined review procedures are temporary and they are commissioning a study to evaluate their effectiveness and efficiency.\nIn addition, in July 2014, EO managers introduced a new application form for relatively small organizations. This application adopts the same approach of substituting attestation for documentation as used initially in the streamlined inventory procedure. The new application (Form 1023- EZ) can be used by certain organizations with annual gross receipts of $50,000 or less and assets of $250,000 or less seeking tax-exempt status. This form is considerably shorter than Form 1023 (3 pages compared to 12 pages), asks fewer questions, and the questions are primarily yes/no questions or checking a box for attestation. Form 1023- EZ does not require detailed information, such as organization documents, financial statements, or explanations, descriptions, or narratives about activities, as is required on Form 1023. EO managers anticipate that the majority of new applicants will use the streamlined Form 1023-EZ.\nSeveral organizations, including the National Council of Nonprofits and National Association of State Charity Officials (NASCO) have raised concerns about the impact of the shorter application Form 1023-EZ on compliance. These concerns include decreasing the quality of information the IRS needs to make informed decisions about granting tax-exempt status, making it easier for “scam” charities to obtain tax-exempt status, and shifting IRS oversight obligations onto the public, the funding community, and state charity regulators. Likewise, the Taxpayer Advocate also raised concerns about the streamlined 1023-EZ form, including a lack of empirical data demonstrating that organizations anticipating less than $50,000 in gross annual receipts pose low risks to compliance, a failure to conduct a comprehensive evaluation of downstream consequences of the streamlined application, and a post-implementation evaluation plan that relies on the limited effect of a small number of audits to correct potential compliance problems. EO officials told us they disagreed with the Taxpayer Advocate’s findings.\nEO officials said that they conducted a risk assessment of their new streamlined application process. As part of the risk assessment, IRS identified several compliance-related risks, including the possibility of an increase in fraudulent applications and consequent potential loss of revenue, due to tax deductible contributions to organizations that were not eligible for exemption. To address these compliance risks, the IRS risk assessment cited the need for a more robust back-end review of newly-exempt organizations that had received their status through the streamlined process. This would include increased use of quality control checks, audits, and other reviews, and an enhanced EO Examination process to identify ineligible organizations.\nEO managers intend to review a sample of organizations that used the Form 1023-EZ to apply for tax exempt status to learn about the population of organizations applying for exemption using the new, shorter form, including their eligibility to use the form. This phase started in July 2014 (when the new form was introduced to the public), and occurs after an organization submits an application and before IRS makes a determination on tax-exempt status. IRS plans to review a random sample of 3 percent—an estimated 1,260—of applications submitted using the new streamlined 1023-EZ form. According to EO officials, this sample size was based on a reliability factor and was then adjusted based on staffing resource capacity. As part of determining eligibility to use the shorter form, the reviewers are supposed to request from the filers in the sample such items as a detailed description of past, present, and future activities, and revenues and expenses for the most recently completed year.\nThe EO Examinations function will also conduct post-determination (i.e. after tax exempt status has been determined) compliance reviews of organizations that applied for and received their tax-exempt status through the streamlined application review as well as organizations that applied for and received their tax-exempt status using the shorter Form- 1023-EZ. The compliance reviews of the first group—organizations that received their tax-exempt status through the streamlined review process—will begin during FY 2015. For this review, EO plans to select a random sample of exempt organizations reviewed under the streamlined process to provide information about the subsequent compliance characteristics of organizations that received their status in this way. EO recently approved guidance for reviewing these returns, which lists potential areas of noncompliance, such as legislative or overseas activities, compensation issues, and unrelated business activity.\nAccording to Tax-Exempt and Government Entities Division and EO officials, post-determination compliance reviews of organizations that used the Form 1023-EZ to apply for tax-exempt status will begin in late FY 2015 or early FY 2016. For this review, EO plans to take a random sample of exempt organizations that filed the Form 1023-EZ to provide information about the subsequent compliance characteristics of organizations that filed the shorter form. They anticipate they will use the same review procedures for the Form 1023-EZ exams as they use for the streamlined review process. However, they also report some modifications will be necessary due to the limited information on the EZ application itself as well as the fact that eligible organizations would typically be filing the Form 990-N as opposed to the more detailed Form 990 or even Form 990-EZ. The limited amount of information that will be available about these organizations because of the shorter application form and information return raises questions about how IRS will identify noncompliance issues for this particular segment of charitable organizations.", "The e-filing rate for tax-exempt organizations is significantly lower than for other taxpayers and organizations. In 2013, 38 percent of Forms 990, 990-EZ, and 990-PF were filed electronically, while in 2011, 64 percent of partnerships and 66 percent of S Corporations filed electronically. The lower rate is due in large part to current law, requiring only very small and very large tax-exempt organizations to file electronically. Larger tax- exempt organizations (those that that file at least 250 returns during the calendar year) are required to file electronically and smaller organizations (those that are excused from filing Form 990 or Form 990-EZ, generally because their gross receipts are normally less than $50,000 annually), must file an annual notice (Form 990-N) in electronic format. Medium- sized organizations—those too big to file the Form 990-N, but not big enough to file 250 returns—are not required to file electronically.\nThis lower rate means that there is less digitized data available for data mining and analytics and that IRS will have higher labor costs. IRS officials said that having more return information available electronically might improve examination selection. For instance, when IRS examination specialists suggested filters for an EO project to use in identifying potentially noncompliant issues, the lack of available electronic data prevented EO from using all of the filters. Further, IRS officials estimate that mandated electronic filing would save EO more than an estimated $1 million in labor costs over a three year period, although a complete study has not been performed.\nIn the FY 2015 Budget proposal, the administration proposed that Congress expand e-filing for tax-exempt organizations. Expanded e- filing may result in more accurate and complete data becoming available in a timelier manner, which in turn, would allow IRS to more easily identify areas of noncompliance. In our 2014 report on partnerships and S corporations, we recommended that Congress consider expanding the mandate for partnerships and corporations to electronically file their tax returns in order to cover a greater share of filed returns. We concluded that increased e-filing would increase the amount of digitized data available to IRS, which examiners could then use to identify which partnership and S corporation tax returns could be most productive to examine. Since many charitable organizations are organized as not-for- profit corporations, the same mandate could also cover 501(c)(3) charitable organizations.\nAny option for an e-filing mandate would impose some burden on some tax return filers if (for example) they do not already possess the e-filing technology and they need to get access to it. However, expanded e-filing could also reduce taxpayer burden, since greater accuracy would reduce false-positives, allowing IRS to identify “bad actors” rather than organizations who made mistakes on their returns. In addition, the burden could be mitigated. The 2015 budget proposal would allow transition relief for up to three additional years after the date of enactment to begin electronic filing, for smaller organizations and organizations for which electronic filing would be an undue hardship without additional transition time.\nAccording to IRS, electronic filing also increases transparency for the tax- exempt community because more searchable data becomes publicly available faster than paper-filed returns, which must first be converted to machine readable format. Once publicly available, the Form 990 data may be used by donors to make more informed contribution decisions and by researchers, analysts, and entrepreneurs to understand the tax- exempt sector better and to create information tools and services to meet the needs of the sector. Having Form 990 series return data faster would also be useful to state and local regulators, charity watch-dog groups, charitable beneficiaries, and the press. In addition, e-filing would allow the IRS to process returns more quickly and at a lower cost than when paper returns are filed. Representatives from across the nonprofit and law enforcement community with whom we spoke support this reform as a strategy for improving transparency and accountability.", "To oversee charitable organizations, IRS collaborates with different federal and state entities, including DOJ and state charity regulators. IRS and DOJ officials identified no obstacles that prevent their collaboration for the enforcement of tax laws. IRS refers cases involving possible criminal matters to the DOJ Tax Division for investigation and possible prosecution. According to DOJ officials, the review and referral process is designed to maintain a separation between IRS and DOJ decision making to avoid the appearance of (or actual) abuse of executive power. As such, DOJ attorneys have little involvement with the IRS review and referral process. Once a case is referred to DOJ, prosecutors have access to the taxpayer information under IRC section 6103(h)(2). DOJ Tax Division attorneys said they are familiar with the information-sharing framework under this IRC provision. This framework allows prosecutors access to the information they need to build a case.\nHowever, state regulators and other subject matter specialists said statutory requirements for safeguarding taxpayer information and uncertainty about how these safeguards must be implemented limit state regulators’ ability to use relevant information shared by IRS. They add that this may reduce regulators’ ability to use that information to build cases against charitable organizations engaged in fraudulent or other criminal activity.\nBarriers to information sharing between IRS and state charity regulators have been a long-standing challenge. Before legislation passed in 2006, IRS was only permitted to disclose to state charity regulators information concerning final denials of applications for tax-exempt status, revocations of tax-exempt status, and final notices of deficiencies. In 2002 and 2005, we reported that this limited data sharing hampered state charity officials’ efforts to identify charities which are defrauding the public or otherwise operating improperly. At the time, state charity regulators told us that the lack of details impeded their efforts to track individuals who tried to re-establish similar, suspicious operations in other states. We recommended IRS propose revised legislation that would allow IRS to share more data—such as information about ongoing and closed examinations of charities—as a way to help IRS and states better use limited resources and to allow the states to more quickly respond to noncompliance.\nIn 2006, the PPA was enacted with provisions to facilitate information- sharing between IRS and state charity regulators. The PPA expanded the type of information state charity regulators can receive to include sensitive, confidential information, such as revenue agents’ reports regarding proposed revocations and notices of deficiencies. IRS can now share information about certain proposed revocations and proposed denials before an administrative appeal is made and a final revocation or denial issued. In addition to the information IRS is now allowed to share with state charity regulators, IRS also makes revocations publicly available: IRS lists revocations in the Internal Revenue Bulletin, although the reason for revocations resulting from exam are not given or made public.\nWhile the PPA expanded the types of information IRS could share with state charity regulators, the law also placed safeguards on that information. For the first time, the PPA subjected state charity regulators to the same criminal penalty provisions of the Internal Revenue Code that all other recipients of tax information are subject to, making it a criminal offense for any state official to willfully disclose information shared by the IRS under Section 6104(c) in a manner unauthorized by the Internal Revenue Code. To have access to the increased types of information now available, state charity regulators must sign a disclosure agreement with IRS in which they agree to certain safeguarding procedures for receiving and handling taxpayer data.\nState charity regulators and other subject matter specialists we spoke with believe these safeguard requirements are unclear and difficult to implement. Although these requirements are the same as those that IRS and any state tax agencies receiving federal tax data must follow, most states do not have the resources, capacity, or infrastructure within their charitable oversight function to fulfill the requirements, according to subject matter experts with whom we spoke. For example, all disclosures provided by IRS must be reviewed by a state charity official, logged to record the receipt of the information, and stored behind at least two secured barriers, such as locked doors or cabinets. State charity regulators are also prohibited from entering the IRS shared data in a word processing program on a networked computer, unless lengthy security requirements are met.\nSince the passage of the PPA, charity regulators in three states— California, New York, and Hawaii—signed a memorandum of understanding (MOU) with IRS to share information. However, despite the MOU, these state charity regulators still report challenges in storing and receiving data from IRS. A lack of clarity surrounding how they can use the data from IRS to build their own cases, and the criminal penalties attached to improper disclosure of the data, have prevented state charity regulators from incorporating IRS data into their investigations. For example, state charity regulators said when they learn that IRS is examining a charity located in their state for violating federal tax law, they must first contact the charity and request the documents it has already turned over to IRS. However, if the charity refuses or denies it has the requested documents, the state charity regulators do not believe they can enforce their request by citing the information provided to them by IRS. As a result, they seek to independently verify the information from the IRS (to the extent they are available) through other sources (such as the internet or the state registration database) before contacting the charity.\nAlso, according to subject matter experts, IRS interpretation of these rules has been inconsistent. As a result, regulators are unsure whether they are in violation of the safeguards requirements. According to state charity regulators, other states have not entered into information-sharing agreements with IRS because they view the safeguard requirements as overly burdensome, given their limited resources.\nNASCO and the National Association of Attorneys General (NAAG) representatives credit IRS with trying to educate state regulators about the PPA requirements. IRS staff has given presentations at joint NAAG and NASCO conferences. According to the ACT 2013 report on exempt organizations, the IRS’s designated EO federal/state liaison has worked to educate participating state agencies in the mechanics of PPA participation, has assisted with the safeguard procedure, and has linked state officials with appropriate IRS officials conversant in necessary information technology and security issues. The report also credited IRS with initiating discussions with state charity regulators through a task force to develop a pragmatic approach for taking advantage of what is presently available under the PPA. IRS officials are also working on a new MOU that will clarify how state charity regulators can communicate to charities to let them know they have received information about them from IRS. In addition, to facilitate information sharing between IRS and state charity regulators, Treasury officials are in the process of reviewing the PPA and Congress’s intent in drafting this legislation to determine whether additional flexibilities exist.\nDespite these education and outreach efforts, state charity regulators are still unclear about how they are permitted to use IRS information to identify organizations violating state law and to build cases against them. The types of information PPA makes available would bolster state oversight efforts in a variety of ways. For example, according to the ACT report, state receipt of the names of organizations applying for exempt status would help states monitor startup entities that cease operations before the IRS responds to their for 1023 applications. EO officials told us that there are efforts underway to reduce processing times that should address this particular concern. Also according to the ACT report, state receipt of information about tax-exempt organizations receiving a proposed revocation of exemption would raise immediate questions about whether those organizations’ assets are being properly applied to charitable purposes as required by state law.\nThe challenges to information sharing between IRS and state charity regulators are related to uncertainty about what is permissible under the PPA. With limited access to IRS information, state charity regulators do not always know why a charity has had its tax-exempt status revoked, if it is under examination, or if it has been fined, but maintains its tax-exempt status. The lack of information impedes state charity regulators’ ability to identify and prosecute bad actors for violating state laws and hinders states’ ability to inform donors of scam charities.", "EO oversight of charitable organizations helps ensure that these entities abide by the purposes that justify their tax exemption and protects the sector from potential abuses and loss of confidence by the donor community. Over the past several years, reviewers have found that various units within the EO division could not fully assess or communicate their effectiveness because they lacked meaningful performance measures. EO managers have taken actions to address this deficiency by adding performance measures to help them track their inventory of applications, referrals, and exam cases and to ensure a level of quality assurance. EO has also developed its data analytics capacity to assist in selecting organizations for exam with greater audit potential. It has used these techniques and other information sources to select returns for examination and in some cases, has used the results of these exams to more systematically review certain tax issues. However, these actions have not addressed measuring the outcomes of EO activities (such as the effect of EO’s actions on the compliance rate for the charitable sector as a whole), for specific segments of the sector (such as universities and hospitals), or for particular aspects of noncompliance (such as personal inurement or political activity). EO does not have the compliance measures or the quantitative, results-oriented compliance goals needed to assess its effect on the compliance of charitable organizations in any of these areas. Because EO does not measure the current level of compliance, it cannot set goals for increasing compliance or know to what extent its actions are affecting compliance.\nThe Exempt Organizations Business Division is grappling with several other challenges that complicate oversight efforts. The e-filing rate for tax- exempt organizations is significantly lower than for other taxpayers. This lower rate means that there is less digitized data available for data mining and analytics and higher labor costs for IRS. Expanded e-filing may result in more accurate and complete data becoming available in a timelier manner; in turn this would allow IRS to more easily identify areas of noncompliance. This legislative reform would also be useful to state and local regulators, charity watch-dog groups, charitable beneficiaries, and the press as a strategy for improving transparency and accountability.\nA lack of clarity about how state charity regulators can use IRS data to build cases against suspect charitable organizations impedes regulators’ ability to leverage IRS’s examination work. IRS and Treasury officials are reviewing the statutory protections of taxpayer data and whether there is flexibility in regard to how state regulators must protect and can use federal tax data. IRS officials are also working on a new MOU that will clarify how state charity regulators can communicate to charities about information they have received from IRS. Once completed, these actions have the potential to enable greater collaboration between IRS and state charity regulators.\nIRS budget and staffing levels have declined significantly over recent years. Officials and stakeholders we spoke to noted that IRS resources dedicated to EO oversight have not kept pace with growth in the sector and with the complexity of issues related to tax-exempt organizations. IRS faces difficult decisions about how to allocate resources dedicated to tax-exempt sector oversight and about what specific compliance issues to audit. IRS has already made trade-offs—such as examining fewer organizations and streamlining the application process for organizations seeking tax-exempt status—which may lead to some efficiencies, but will also result in less available information about these organizations. If IRS does not collect and use performance data to make sound decisions— especially given the likelihood of constrained budgets for the foreseeable future—the agency risks missing noncompliance, burdening tax-exempt organizations, and wasting scarce resources. Furthermore, it will be difficult for IRS to communicate agency progress to Congress and the public and thus, be held accountable.", "Congress should consider expanding the mandate for 501(c)(3) organizations to electronically file their tax returns to cover a greater share of filed returns.", "To improve oversight of charitable organizations, we recommend that the Commissioner of Internal Revenue take the following steps: 1. Direct EO to develop quantitative, results-oriented compliance goals and additional performance measures and indicators that can be used to assess impact of exams and other enforcement activities on compliance. 2. Continue to work with Treasury officials to do the following: review the flexibility afforded under PPA consistent with statutory protections of taxpayer data, clarify what flexibility state regulators have in how they protect and use federal tax data, make modifications to guidance, policies, or regulations as warranted, and clearly communicate this information with state charity regulators.", "We sent a draft of this report to the Commissioner of Internal Revenue and Assistant Attorney General for Administration, Department of Justice for comment. DOJ had no comments on our report. We received written comments from IRS’s Deputy Commissioner for Services and Enforcement on December 4, 2014 (for the full text of the comments, see appendix IV).\nIn its comments, IRS concurred with our recommendations and described ongoing and planned steps to 1) improve the application process for organizations seeking tax-exempt status and reduce the backlog of applications that had accrued in recent years, 2) refine its strategy and approach to better determine the effect of enforcement actions on compliance by tax-exempt organizations, including charitable organizations, and 3) improve the efficiency with which taxpayer information may be shared with state charity regulators through education efforts and outreach.\nIRS also noted in its written comments that IRS’s National Research Program (NRP) may not be well-suited for the tax-exempt sector, given the diversity that exists across the sector in regard to characteristics and compliance issues. Although we made no specific recommendation that EO be part of an NRP study, we note that the NRP has helped other IRS divisions determine compliance baselines and rates for types of taxpayers, such as corporations, where considerable diversity exits. While an NRP study could be a source for baseline data, we acknowledge that because of the high cost of such a study, it may not be practical at this time. Whatever approach to measuring compliance EO adopts, it should be consistent with our recommendation that EO develop quantitative, results-oriented compliance goals and additional performance measures that can be used to assess the impact of its activities on compliance.\nWe also received technical comments from IRS, which we incorporated into the final report where appropriate.\nWe plan to send copies of this report to the Secretary of the Treasury, the Commissioner of Internal Revenue, the Assistant Attorney General for Administration, DOJ, and other interested parties. The report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff has any questions about this report, please contact us at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff members who made major contributions to this report are listed in appendix V.", "This report (1) describes what is known about the number, type, size, and other characteristics of 501(c)(3) charitable organizations; (2) describes IRS oversight activities for charitable organizations; (3) determines how IRS assesses its oversight efforts of charitable organizations to ensure they are meeting their charitable purposes; and (4) determines how IRS collaborates with state charity regulators and U.S. Attorneys to identify and prosecute organizations suspected of engaging in fraudulent or other criminal activity.\nTo address the first objective, we reviewed Internal Revenue Service (IRS) forms and publications. We also analyzed data from the IRS’s Statistics of Income (SOI) files for Form 990, Return of Organization Exempt from Income Tax and Form 990-EZ Short Form, Return of Organization Exempt from Income Tax for tax year 2011 (the most recent year available). Although private foundations are considered charitable organizations, we did not analyze data from Form 990-PF, Return of Private Foundation or Form 990-N, e-Postcard because the data for these organizations is less complete and has other limitations. These limitations included total expenses not broken out into program service, management and general, and fundraising expenses; and private foundations not identified by mission category. In addition, our data excludes certain religious organizations, which qualify as 501(c)(3) organizations, but are not required to file a return. We also did not report data from prior years for the Form 990 and 990-EZ filers since the reporting threshold for organizations filing these returns varied from year to year, which makes year-to-year comparisons of the data difficult. These SOI samples were based on returns as filed, and did not reflect IRS audit results. Using SOI sampling weights, we estimated sampling errors for our estimates, which are reported in appendix III. Statements of difference are statistically significant.\nSOI is a data set widely used for research purposes. SOI data on tax- exempt organizations are available to the public on the IRS website (http://www.irs.gov). IRS performs a number of quality control steps to verify the internal consistency of SOI sample data. For example, it performs computerized tests to verify the relationships between values on the returns selected as part of the SOI sample, and manually edits data items to correct for problems, such as missing items. We conducted several reliability tests to ensure that the data excerpts we used for this report were complete and accurate. For example, we electronically tested the data and used published data as a comparison to ensure that the data set was complete. To ensure accuracy, we reviewed related documentation and electronically tested for obvious errors. We concluded that the data were sufficiently reliable for the purposes of this report.\nFor the second objective, we reviewed IRS documentation and interviewed Exempt Organization (EO) officials on IRS oversight activities, such as the examination and revocation of charitable organizations. We also obtained data from IRS’s Return Inventory Classification System (RICS) on examinations and results for fiscal years 2011 through 2013. Based on our review of documentation and interviews, we determined that this data was reliable for the purposes of this report. We also obtained data from IRS’s Referral database on referrals received on charitable organizations and all tax-exempt organizations for fiscal years 2011 through 2013. Although we received referral data on charitable organizations, we did not use the data because we found it was not reliable for the purposes of this report. According to EO officials, reviewers were encouraged but not required to enter the organization’s subsection category (i.e. that it was a 501(c)(3) charitable organization) into the referrals data base .The EO officials said that if the referral was found to have “no issue” by the reviewer, it may not have been assigned a subcategory because the subcategory was not required and it would be viewed (in this case) as not useful. Therefore, data on the number of referrals received, the source of referrals, and the type of referral violations that we received could have been undercounted if the data had been used. Although we did not use charitable organization referral data, we did use referral data on all tax-exempt organizations, as we found that data was reliable for the purposes of this report.\nFor the third objective, we reviewed relevant strategic and performance documents such as the annual reports and work plans, quarterly performance reports, and project summary reports. We interviewed IRS planning officials and division managers to determine the extent to which managers overseeing the tax-exempt sector set performance goals; develop measures to monitor their progress toward meeting goals; and use data to identify challenges, the cause of those challenges, and develop strategies to address those challenges. We reviewed past recommendations made by the Treasury Inspector General for Tax Administration (TIGTA) and National Taxpayer Advocate related to performance management and interviewed IRS managers about how they addressed the issues discussed in those reports. For criteria, we compared IRS information on performance measures and decision- making to Standards for Internal Control in the Federal Government and federal guidance on performance management. We also applied the criteria concerning the administration, compliance burden and transparency that characterize a good tax system, as developed in our guide for evaluating tax reform proposals. We also reviewed IRS plans to streamline the application process through the introduction of Form 1023EZ. We interviewed EO officials on how they plan to assess the impact of the new streamlined process on oversight efforts and reviewed available evaluation plans. We applied criteria from our 2012 guide on designing evaluations.\nTo determine how IRS collaborates with state charity regulators and U.S. Attorneys, we reviewed various IRS documents, such as policy manuals, guidance, and memoranda of understanding. We also interviewed officials from IRS , U.S. Department of Justice (DOJ), and the National Association of State Charity Officials. For criteria, we identified different approaches for sharing information and collaboration based on our audit findings, as well as our past recommendations and recommendations made by the Advisory Committee on Tax Exempt and Government Entities.\nTo provide additional context for all three objectives, we interviewed IRS officials, DOJ officials, state charity regulators, subject matter specialists, and stakeholder groups representing different types of exempt- organizations and private watchdog organizations that oversee charities about the adequacy of IRS oversight of charitable organizations; the challenges IRS faces providing effective oversight; and strategies to address those challenges.", "The federal tax code provides a variety of tax benefits to organizations often referred to as “tax exempt.” The exact nature of those benefits varies depending on the nature of the organization. Section 501 provides an exemption from federal income tax for the broadest range of organizations. In addition to section 501, there are various other scattered provisions which give a full or partial tax exemption to certain specific types of entities and income. This appendix focuses on organizations qualifying for a tax exemption under section 501, which will be referred to as tax exempt organizations. Within section 501, there is a division between charitable organizations, also known as 501(c)(3) organizations (after the subsection in which they are defined), and all other organizations qualifying for an exemption under section 501. The organizations that qualify for an exemption under section 501 but are not charitable organizations have been referred to as mutual benefit organizations or non-charitable nonprofits. Charitable organizations are further divided between those that are private foundations and all other charitable organizations, and private foundations are divided between operating and non-operating foundations. Each of these types of tax exempt organization—(1) mutual benefit organization, (2) charitable organization, (3) operating private foundation, and (4) non-operating private foundation—are subject to different requirements and receive different tax benefits.\nTax exempt organizations of all types are prohibited from engaging in certain transactions with the creator of an organization, a person who made a substantial contribution to the organization, a member of the family of the creator or substantial contributor, or a corporation controlled by a creator or substantial contributor. Additionally, an organization operated for the primary purpose of carrying on a trade or business for profit is not exempt, on the grounds that all of its profits are payable to an exempt organization. These restrictions apply to all types of tax exempt organizations. Certain types of mutual benefit organizations and all charitable organizations are also subject to the restriction that no part of their net earnings inures to the benefit of any private shareholder or individual. Additionally, a tax is imposed on income from any trade or business unrelated to the exercise or performance of the organization’s exempt purpose. “Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided ), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”\nAs stated above, no part of a charitable organization’s net earnings can inure to the benefit of any private shareholder or individual. Additionally they must satisfy two tests: the organizational test and the operational test. To pass the organizational test, an entity must be organized exclusively for one or more exempt purposes, meaning that the governing instrument (such as a trust instrument, articles of incorporation, or association charter) must limit the purposes of the organization to one or more exempt purposes and does not expressly empower the organization to engage in activities not in furtherance of an exempt purpose except to an insubstantial degree. The operational test requires that organizations engage primarily in activities that accomplish one or more of the exempt purposes listed in statute. In general, new organizations seeking charitable organization status must apply for a determination of exempt status. Churches, their integrated auxiliaries, and conventions or associations of churches, as well as organizations with gross receipts of $5,000 or less and that are not private foundations do not need to apply.\nOrganizations which meet all the requirements to be charitable organizations receive tax benefits beyond those available to mutual benefit organizations. Contributions of cash or property to charitable organizations are deductible by individuals and corporations for federal income tax purposes up to certain percentages of adjusted gross income. Such contributions are also exempt for estate and gift tax purposes. Charitable organizations are exempt from the federal unemployment tax and the federal gambling tax on lotteries. Additionally, charitable organizations are exempt from certain requirements related to establishing and maintaining retirement plans for employees.\nWithin the category of charitable organizations are private foundations. When applying for charitable organization status, an applicant is presumed to be a private foundation unless it can demonstrate that it is not a private foundation. A charitable organization is not a private foundation if it is a church or convention or associations of churches, an educational institution, a medical or hospital care provider, medical education or research provider, or a government unit. A charitable organization is also not a private foundation if it is broadly publicly supported, as defined in section 509, or is a supporting organization of a broadly publicly supported organization. Organizations organized and operated exclusively for testing for public safety are also not private foundations. Charitable organizations not meeting one of these definitions are private foundations.\nPrivate foundations are subject to certain tax consequences which do not apply to other charitable organizations. A 2 percent excise tax is imposed on the net investment income of private foundations. A private foundation is also subject to additional taxes if it engages in self-dealing, has excessive business holdings, makes investments which jeopardize its charitable purpose, or makes certain taxable expenditures. Finally, private foundations are subject to additional reporting requirements.\nAdditional taxes and restrictions are imposed on foundations which do not meet the definition of an operating foundation. A private foundation is an operating foundation if is uses at least 85 percent of its income directly for the active conduct of charitable activities rather than for grantmaking and meets either an asset test, endowment test, or support test. Private foundations that are not operating foundations are generally subject to a tax of 30 percent of the amount of undistributed income. The percentage limits on the deductibility of contributions to non-operating private foundations are lower than for other charitable organizations.\nAside from charitable organizations, section 501 lists 28 other types of nonprofits, often referred to as mutual benefit organizations, and which include unions, civic leagues, chambers of commerce, credit unions, and veteran organizations, among many others. For a complete list of the organizations listed in section 501, including charitable organizations, see below. Qualified pension, profit-sharing, and stock bonus plans are also exempt under section 501. Unlike charitable organizations, gifts to these mutual benefit organizations are not deductible. Mutual benefit organizations are not generally exempt from the federal unemployment tax or the gambling tax, and do not have the additional flexibility in establishing employee retirement plans that is allowed charitable organizations.", "", "The tables in this statistical appendix supplement those in the letter and provide population estimates for Statistics of Income (SOI) data. After each table, notes indicate the sampling errors. We are confident the true estimates would be within these percentage points in 95 out of every 100 samples. The tables are for charitable organizations that filed Forms 990 or 990-EZ. Private foundations that file Form 990-PF, small charitable organizations that file Form 990-N, and charitable organizations that do not file returns have been excluded from this analysis.", "", "", "", "In addition to the contact named above, Kevin Daly, Assistant Director, Jeff Arkin, Sara Daleski, Jillian E. Feirson, Laurie C. King, Lawrence M. Korb, Donna L. Miller, Ed Nannenhorn, Jessica Nierenberg, Karen O’Conor, Dae Park, Amy Radovich, Cynthia Saunders, Albert Sim, Stewart Small, Andrew J. Stephens, Lindsay W. Swenson, Meredith Trauner Moles, Sonya Vartivarian, James R. White, and John Zombro made major contributions to this report." ], "depth": [ 1, 1, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_full", "h0_full", "", "", "", "", "", "", "", "", "h1_full", "h3_full", "h3_full", "h3_full", "h2_full", "", "", "", "", "", "", "" ] }	{ "question": [ "What role do charitable organizations play in the US?", "What sector are charitable organizations most heavily concentrated in?", "In what sector is the highest concentration of assets?", "How are assets distributed across these organizations?", "What challenges the EO face in oversight of tax-exempt organizations?", "How does this lack of information affect EO's ability to enforce compliance?", "How did this report come about?", "What was the GAO asked to provide to the IRS?", "What information did this GAO's report provide about compliance and tax-exempt organization?", "What recommendations did the GAO extend to the IRS?", "What recommendations did the GAO extend to Congress in meeting the challenges of tax-exempt organization compliance?", "How did federal agencies respond to this advice?" ], "summary": [ "Charitable organizations play a major role in our economy and provide critical services and resources to families and individuals in need.", "Although charitable organizations vary considerably in size and purpose, in 2011 the largest number of organizations was in the human services sector, providing services such as employment and housing assistance.", "The highest concentration of assets was in the health and education sectors, which include hospitals and universities.", "In addition to being concentrated in a few sectors, a large proportion of all assets were controlled by a relatively small number of charitable organizations—less than 3 percent hold more than 80 percent of the assets.", "EO is grappling with several challenges that complicate oversight efforts. While EO has some compliance information, such as how often exams result in change of tax exempt status, it does not have quantitative measures of compliance for the charitable sector as a whole, for specific segments of the sector (such as universities and hospitals) or for particular aspects of noncompliance (such as personal inurement or political activity).", "Because EO does not have these measures and does not know the current level of compliance, it cannot set quantitative, results-oriented goals for increasing compliance or assess to what extent its actions are affecting compliance.", "GAO was asked to review IRS oversight of charitable organizations. In this report, GAO (1) describes the charitable organization sector, (2) describes IRS oversight activities, (3) determines how IRS assesses its oversight efforts, and (4) determines how IRS collaborates with state charity regulators and U.S. Attorneys to identify and prosecute organizations suspected of engaging in fraudulent (or other criminal) activity.", "GAO was asked to review IRS oversight of charitable organizations.", "In this report, GAO (1) describes the charitable organization sector, (2) describes IRS oversight activities, (3) determines how IRS assesses its oversight efforts, and (4) determines how IRS collaborates with state charity regulators and U.S. Attorneys to identify and prosecute organizations suspected of engaging in fraudulent (or other criminal) activity.", "GAO recommends IRS 1) develop compliance goals and additional performance measures that can be used to assess the impact of enforcement activities on compliance and 2) clearly communicate with state charity regulators how they are allowed to use IRS information related to examinations of charitable organizations.", "GAO also recommends that Congress consider expanding the mandate for 501(c)(3) organizations to electronically file their tax returns to cover a greater share of filed returns.", "In written comments, IRS agreed with GAO's recommendations." ], "parent_pair_index": [ -1, -1, 1, 2, -1, 0, -1, 0, 0, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 5, 5, 1, 1, 1, 8, 8, 8 ] }
GAO_GAO-16-575	{ "title": [ "Background", "FHWA Encourages States to Install Crash-Tested Roadside Safety Hardware, but the Movement to Adopt Improved Standards Has Been Slow", "FHWA Encourages States to Install Appropriately Crash-Tested Roadside Safety Hardware", "Most States Said They Require Crash Testing, though Some Inconsistencies Exist, and Transition to Improved Standards Has Been Slow", "Transition to Improved Standards Has Been Slow", "FHWA Is Currently Reviewing Its Oversight Program", "Crash Testing Is Well Documented and Thorough, but FHWA’s Oversight Process Does Not Address Potential Threats to Independence", "Lab Crash Tests Are Well Documented and Thorough", "Labs Use Professional Judgment in Some Crash- Test Selection and Interpretation of Test Results", "Potential Threats to Lab Independence", "FHWA Does Not Mitigate Potential Threats to Independence", "Other Agencies Have More Oversight of Lab Testing", "Few In-Service Performance Evaluations of Roadside Safety Hardware Have Been Conducted, in Part, Due to a Lack of Data", "Current FHWA Efforts Aim to Improve Data Collection Practices but Do not Fully Address In-Service Performance Evaluation Information Shortfalls", "Conclusions", "Recommendations", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Review of FHWA Eligibility Letter Files", "Appendix III: Comments from the Department of Transportation", "Appendix IV: GAO Contacts and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "If a vehicle leaves the roadway, ideally, the roadside would be clear of all obstructions and be traversable. However, because there are numerous roadside areas that cannot be practically cleared of all fixed objects or that have sharp declines, roadside safety hardware can be used to reduce the consequences of a departure from the roadway. The goal of roadside safety hardware is met when the hardware contains, redirects, or decelerates the vehicle to a safe stop without causing serious injury to the vehicle’s occupants or other people. General categories for roadside safety hardware are: 1) longitudinal barriers, which include items such as guardrails and cable barriers and are intended to reduce the probability of a vehicle’s striking an object or terrain feature off the roadway that is less forgiving than the barrier; 2) bridge barriers, which function as longitudinal barriers but are specific to bridge design; 3) barrier terminals/crash cushions, which include items like guardrail end terminals that are intended to absorb or divert the energy of a crash into the end of a longitudinal barrier; 4) support structures, such as sign supports, which are designed to break or yield when struck by a vehicle; and 5) work zone devices, which include a variety of items used in a work zone that are temporary in nature. See figure 1 below for a depiction of these types of hardware.\nDOT’s primary mission is to ensure the safety of the traveling public. The strategic goals of the FHWA, within DOT, are to provide safe, reliable, effective, and sustainable mobility for users of the nation’s highway system. FHWA distributes about $40 billion to the states each year through the federal-aid highway program (generally providing 80 to 90 percent of projects’ costs on designated federal-aid highways) for highway and bridge infrastructure, a portion of which is spent on safety improvements including roadside safety hardware. FHWA issues regulations and guidelines, and can perform direct oversight for projects that use federal funds, including those on the National Highway System (NHS). The NHS consists of approximately 220,000 miles of the nearly 1- million miles of roadways eligible for federal aid. The NHS includes the 47,000-mile Interstate Highway System as well as other roadways, connectors important to U.S. strategic defense policy, and connectors to major intermodal facilities, such as airports or transit hubs.\nFHWA administers and oversees the federal-aid highway program through FHWA’s division offices located in all 50 states, the District of Columbia and Puerto Rico. As part of FHWA’s risk-based oversight, division offices and state DOTs have “Stewardship and Oversight Agreements” that specify the terms under which states assume oversight responsibility for federally funded projects. Under FHWA’s risk-based stewardship and oversight program, FHWA is responsible for determining projects that have an elevated risk or projects where FHWA involvement can enhance meeting program or project objectives. This involvement may include conducting oversight of the entire project or a specific phase or element of the project. For all projects that FHWA does not categorize as having an elevated risk, responsibility for oversight of design and construction of projects is generally assumed by the states. For each federally funded project, FHWA enters into project agreements with the state in which the state agrees to adhere to all applicable federal laws and regulations.\nSection 109 of Title 23 of the United States Code directs DOT to work in partnership with the state DOTs to develop standards for the NHS and other roadway systems. To fulfill this responsibility, FHWA works in partnership with AASHTO to advance many of its mission areas. AASHTO is an association representing highway and transportation departments in the 50 states, the District of Columbia, and Puerto Rico. AASHTO serves as a liaison between state departments of transportation and the federal government and develops and maintains design standards for roadways, bridges, and highway materials. FHWA incorporates some AASHTO standards into federal regulation, for example, the Policy on Geometric Design of Highways and Streets (Green Book), which lists design criteria across a range of roadway types, from rural roads to freeways. FHWA has an ex-officio, non-voting role on AASHTO committees. In cooperation, AASHTO and FHWA sponsor research on common transportation issues through the Transportation Research Board’s National Cooperative Highway Research Program (NCHRP), including research on roadside safety hardware. NCHRP studies are funded by the states from federal-aid highway program funds apportioned to them.\nRoadside safety hardware is developed by manufacturers, states, and universities and can be crash tested to assess its safety performance. The nine U.S. crash-testing labs that are accredited and recognized by FHWA can conduct full-scale crash testing where roadside safety hardware is hit by a vehicle to determine whether it meets AASHTO- accepted standards for roadside safety hardware. Of the nine labs, three labs are independently operated; two are owned by companies that also develop roadside safety hardware; three labs are affiliated with universities; and the final lab is operated by a state department of transportation. Representatives from roadside safety hardware developers, crash test labs, academia, and state and federal transportation departments participate in Task Force 13, a committee whose mission is to develop specifications for new materials and technologies identified for use in highway construction projects. As part of this mission, Task Force 13 develops, recommends, and promotes standards and specifications for roadside safety hardware.\nThe two ways of assessing this performance are lab crash testing and in- service performance evaluations. Crash tests can quantify performance for specific conditions that represent the “worst practical conditions” in terms of the speed and angle of the vehicle hitting the hardware. The performance of hardware is evaluated in terms of risk to the vehicle occupants and structural adequacy of the hardware, among other items. AASHTO currently has two sets of crash-testing standards that it endorses for installing roadside safety hardware: NCHRP Report 350 standards adopted in 1993, which are being phased out, and the Manual for Assessing Safety Hardware (MASH) adopted in 2009. AASHTO developed the MASH standards as an update to NCHRP Report 350, and these standards contain revised criteria for crash tests of roadside safety hardware. Updates in MASH include: increases in the size and weight of several test vehicles to better match the current vehicle fleet, changes to the number of tests and impact conditions, and more objective evaluation criteria.\nAASHTO has also sponsored research on how to assess the performance of roadside safety hardware once it has been installed, an assessment that is referred to as in-service performance evaluation (ISPE). In 2003, NCHRP Report 490: In-Service Performance of Traffic Barriers, published findings of research and suggested practical procedures for conducting ISPEs. In-service performance evaluations are a way of assessing roadside safety hardware’s performance in “real- world” scenarios not captured in a crash-test setting. For example, performance may be affected by installation factors, such as slope and grade of roadway and soil type, and maintenance conditions, including whether the hardware has degraded over time from weather or accidents, none of which are captured in crash-testing.", "FHWA oversees and promotes the installation of crash-tested roadside safety hardware through guidance and policy directives to the states and by issuing letters to roadside safety hardware developers that submit crash-test results for review by FHWA. We found that states generally require crash testing; however, some inconsistencies across state policies and practices exist, and a movement to adopt the improved MASH standards has been slow. In 2016, FHWA and AASHTO released a new Joint Implementation Plan stating that states should transition to installing only MASH-standard-tested roadside safety hardware in phases by 2019. However, some concerns have been raised, and FHWA has not developed a plan to track progress of the states and industry in meeting the new dates. FHWA has contracted for a full examination of its roadside safety hardware oversight processes and expects a report with recommendations for potential changes to these processes in the summer of 2016.", "In line with its overall safety mission as well as that of DOT, FHWA encourages states to install appropriately crash-tested roadside safety hardware. By law, FHWA is required to ensure that highway projects designed and constructed with federal funds are safe. FHWA’s Office of Safety’s specific mission includes advancing the use of scientific methods and data-driven decisions. Also, according to FHWA’s Office of Safety website, roadway departure is one of its focus areas. FHWA has issued policy that roadside safety hardware should demonstrate acceptable crashworthy performance in order to be used on the NHS and receive federal-aid reimbursement. To encourage this outcome, FHWA issues guidance and policy directives to the states and industry. For example, in 2015 FHWA issued a memo that encouraged state agencies to upgrade their existing installations of guardrail end terminals that had been tested to standards issued prior to the NCHRP 350 standards, which were adopted in 1993. Congress directs DOT to work in partnership with the state DOTs to develop standards for the NHS and other systems. FHWA works in cooperation with AASHTO to promote state adherence to crash-testing standards through joint implementation plans. These plans are voted on and must be approved by a majority of AASHTO’s member states. FHWA and AASHTO issued joint implementation plans in 2009 and 2016 that provided guidance for states to follow in transitioning to updated crash test standards.\nIn addition to providing guidance to states, FHWA also issues federal-aid reimbursement eligibility letters to roadside safety hardware developers that submit their product information, crash test results and other supporting documentation for review. Although it is called a federal-aid reimbursement eligibility letter, FHWA’s eligibility letter is not required, and federal-aid reimbursement is not contingent upon receipt of an eligibility letter. FHWA issues these letters as a service to the states to provide states with information on the crashworthiness of roadside safety hardware. FHWA posts the letters on its website creating a central repository of information for states to know which roadside safety hardware has been tested. FHWA officials stated that when they receive a request from a developer for an eligibility letter, the request includes information on the design of the roadside safety hardware device, the crash testing report, pictures and videos of the crash testing, and other information. FHWA officials told us that they follow up with the developer or test lab if they have questions about any of the data or video evidence. FHWA also advises developers that if modifications are made to a roadside safety hardware device that has received an eligibility letter, the developer must resubmit information to FHWA for review.\nThough it is FHWA’s policy that all roadside safety hardware installed on the NHS should be crash tested, crash testing is not a requirement for states to receive federal-aid highway program funds because this policy was never incorporated into regulation or other formal agreements with the states (such as FHWA’s project agreements with states). According to FHWA officials, in the absence of a federal statutory or regulatory requirement for crash testing, FHWA cannot withhold federal funding for federal-aid highway-program projects’ approvals to a state should the state choose to install roadside safety hardware that had not been tested to meet appropriate crash test standards. During our review, we found a widespread misperception among state DOT and FHWA division office officials we spoke with that crash testing of roadside safety hardware to applicable standards and obtaining an FHWA eligibility letter was required in order to receive federal reimbursement. In 1991, Congress instructed DOT to issue a final rule regarding revised standards for acceptable roadside safety hardware. In 1993, FHWA issued a rule that incorporated crash test standards into regulation by reference as guidance. FHWA stated at the time that it lacked sufficient knowledge to be more prescriptive about roadside safety hardware in general and chose not to make crash testing mandatory through regulation. FHWA has not issued a proposed rulemaking to require crash test standards since. FHWA officials told us that they believe encouraging state compliance is more effective than requiring it through a rulemaking because the current partnership with AASHTO garners support from states, and a federal rulemaking can take many years to complete.", "Most states that responded to our survey told us that roadside safety hardware installed on the NHS is required to be crash tested, and many of those states said they had processes in place to limit installation of roadside safety hardware to those that have obtained FHWA eligibility letters. Nearly all, 43 of the 44 states that responded to our survey, told us that crash testing to MASH or NCHRP Report 350 standards is required in their state for major categories of roadside safety hardware. In addition, 38 of 44 states also responded that they maintain lists of “approved” or “qualified” products from which contractors can choose roadside safety hardware for installation. Furthermore, 32 of the 38 states with these lists responded that all roadside safety hardware on their qualified or approved product lists have an FHWA eligibility letter.\nWhile our survey results indicate that FHWA’s guidance has been widely implemented at the state level, they also indicate some inconsistencies in state policies and some misperception about FHWA policy. First, 10 states responded that that they do not have a specific law, regulation, or policy document that establishes crash-testing requirements. In follow-up responses, four of these states told us that they do not have documented requirements because they believe FHWA requires crash-testing of roadside safety hardware and that the FHWA requirement governs roadside safety hardware in their state. If a state’s policy is only to refer to a federal requirement that does not exist, then effectively no requirements govern crash testing in that state. Second, while most states approve installation of only roadside safety hardware that has received an FHWA eligibility letter, not all states do so. For example, 11 states reported that they have conducted their own crash testing in the past 10 years, and 6 of the 11 responded that they do not always submit those roadside safety hardware devices for FHWA review prior to approving devices for installation. Officials from one state told us they only submit results for eligibility letter review when they believe the device is likely to be used by other states.\nFederal standards for internal control highlight the need for agencies to design control activities—policies, procedures, techniques, and mechanisms—to achieve objectives and address related risks. In June 2012, FHWA issued a memo indicating that division offices should encourage states to have written policies that incorporate AASHTO’s guidance on current roadside safety information and operating practices. However, FHWA has not directed its division offices to help ensure that states have policies governing crash testing of roadside safety hardware installed on their roadways as part of this procedural review. Officials in the five FHWA division offices we interviewed told us they have a procedure for reviewing states’ standards and design specifications, which could include states’ standards and requirements for roadside safety hardware. However, officials in FHWA division offices we interviewed said that they generally do not examine roadside safety hardware practices on individual projects as part of FHWA’s risk-based oversight. Officials in one division office noted that topics like pedestrian safety would be a higher priority for the division office because officials said there are more pedestrian deaths than there are deaths from roadside safety hardware. Division office officials stated that they rely on the state to ensure that what is incorporated in the project meets state standards, and officials from four out of five division offices stated that they do not verify that states are installing state-approved products. Furthermore, FHWA’s Office of Safety officials told us that they do not monitor and collect information on state policies with respect to roadside safety hardware. The absence of written requirements at the state level and inconsistencies in state practices could, in some cases, result in the risk of reduced assurance that states are fully implementing appropriate crash-testing standards.", "According to FHWA and AASHTO, MASH crash test standards are an improved set of standards because they better reflect the current vehicle fleet, which has become heavier and taller over the past 25 years. Two studies compared the NCHRP Report 350 standard testing to the MASH test standards. The results of these studies indicated that in some cases MASH test standards provide a more rigorous evaluation for crash testing roadside safety hardware. First, in 2010, NCHRP conducted an evaluation of existing roadside safety hardware devices approved under NCHRP Report 350. Re-testing these devices and evaluating performance using the criteria in MASH revealed that 6 of the 21 tests performed on NCHRP Report 350-compliant roadside safety hardware devices did not pass. Second, in September 2015, a joint AASHTO/FHWA review of guardrail end terminals concluded that the MASH crash test standards incorporate tests relevant for guardrail end terminals that are not included in NCHRP Report 350 test standards. Specifically, the study found that NCHRP Report 350 standards do not fully address performance issues in the areas of side and shallow-angle impacts. The study recommended fully implementing MASH for new installations of guardrail end terminals.\nStates have been slow in transitioning to implement the MASH crash-test standards. In 2009 AASHTO and FHWA issued a Joint Implementation Plan adopting MASH as the updated crash-test standards necessary for an applicant to receive an FHWA eligibility letter for a new roadside safety hardware device. However, this plan said that states could continue to install roadside safety hardware tested to the previous NCHRP Report 350 standards. Therefore, manufacturers could continue to produce, and states could continue to install roadside safety hardware that had already received an eligibility letter without retesting to MASH crash test standards. In January 2016, FHWA and AASHTO released a new Joint Implementation Plan stating that states should transition to installing only MASH-standard-tested roadside safety hardware. According to the plan, FHWA will no longer issue eligibility letters for new or modified roadside safety hardware tested to standards other than the MASH crash-test standards. The 2016 Joint Implementation Plan calls for states to complete the transition to the MASH crash-test standards between December 2017 and December 2019, depending on the type of hardware. (See table 1 below.) If states comply with the 2016 Joint Implementation Plan’s dates for transitioning roadside safety hardware installations to meet the MASH crash-test standards, this transition will be 8 to 10 years after the 2009 Joint Implementation Plan, and states may continue to install non-MASH-tested hardware on the NHS until December 2017 at the earliest. FHWA officials noted that roadside safety hardware often remains on the roads for at least 20 years before being replaced due to aging, so hardware tested to the older NCHRP Report 350 standards could be on the roads for years to come.\nHowever, at this point it is not clear that states will be able to comply with the dates set in the plan. In order to meet the transition dates, industry will have to develop and test products to the MASH standards that have not previously been tested to these standards, and FHWA will have to review applications-for-eligibility letters for developers that request them. States will then have to make changes to either their design and specification policies or approved lists of products to incorporate only MASH-tested roadside safety hardware. Industry, to this point, has been slow to move to develop and test products to the MASH standards. Using eligibility letters as an indicator, as of March 2016, there are currently only two guardrail end terminals with eligibility letters that have been tested using the MASH standards, compared to the13 guardrail end terminals tested to NCHRP Report 350 with eligibility letters. In the category of longitudinal barriers, there were only 17 MASH-compliant eligibility letters among the 348 active eligibility letters. In an open letter to AASHTO, the American Traffic Safety Services Association, an association representing highway safety industries, expressed concern with the ability for industry to have enough hardware that meets the MASH crash-test standards by the transitions dates, as well as the ability of states to approve new hardware and for FHWA to post new eligibility letters in a timely manner.\nFHWA officials told us that states and manufacturers have responded positively to the new deadlines. However, FHWA officials did express some concern as to whether states will be able to fully implement MASH standards by the dates in the 2016 Joint Implementation Plan. Their concerns included the need for the market to react in a timely manner and have enough products available to support competition, and to invest in testing categories of roadside safety hardware that have had little testing to MASH standards to this point. FHWA officials also told us that as industry reacts to the dates, FHWA will likely have an influx of requests to review eligibility letters; FHWA officials told us that they already have a backlog of eligibility letter applications since FHWA stopped issuing eligibility letters for modifications to hardware tested to non-MASH standards at the end of 2015.\nFederal standards for internal control highlight the need for agencies to obtain information needed to achieve their objectives from external parties, including significant matters related to risks. FHWA officials stated they will be in a better position in a year to say whether states are likely to be able to successfully transition to MASH crash-test standards by the dates specified in the January 2016 Joint Implementation Plan. However, FHWA has not developed a plan to track progress of the states and industry in meeting the new dates. Moreover, we found that FHWA and states currently do not collect information that would assist in monitoring the transition to MASH standards. For example, as discussed in the following section, FHWA can interact with developers and crash test labs during the test process, but FHWA does not collect information from developers and labs to be informed when hardware that was previously tested to older standards is re-tested to MASH and fails. Without this information on test failures, FHWA and states may be unaware of setbacks to the transition. Also, if states do not have this information, it may result in the states unknowingly installing failed hardware during the transition period. In addition, 12 states responded to our survey that they currently do not require developers to notify them of modifications made to an approved device. While FHWA requests such notification, 3 of the 12 states do not have eligibility letters for all approved devices and could be unaware of design changes. Federal standards for internal control also highlight the need for agencies to provide quality information to external parties, including the general public to help achieve agency objectives. Monitoring and reporting industry and state progress to the goal dates set in the 2016 Joint Implementation Plan would allow FHWA to keep decision makers in both DOT and Congress aware of progress. Such monitoring and reporting of progress would also position FHWA to take corrective actions as needed to better assure that states and industry are successfully moving to meeting improved standards.", "FHWA contracted in May 2015 with DOT’s Volpe National Transportation Systems Center to conduct a full review of its roadside safety hardware oversight process and expects a report with recommendations for potential changes to its oversight program in summer 2016. Officials stated the review will include a full examination of the process by which roadside safety hardware is developed, evaluated, funded, and assessed, as well as recommendations for any improvements needed. Specifically, the report will include: documentation of existing laws, regulations, policies, standards, and guidelines associated with the roadside safety hardware process; documentation and review of all the steps in FHWA’s current crash- testing evaluation process; and findings and recommendations to FHWA to improve its oversight.\nFHWA officials told us that there may be ways to improve the agency’s oversight of roadside safety hardware and that everything in the process, from the partnership relationship with AASHTO to the eligibility letter process, will be included in the review. During the course of our review, FHWA implemented some changes to its program, such as clarifying the need for any modifications to hardware with eligibility letters to be reevaluated, but FHWA officials stated they were holding off on major changes to the current oversight program until the Volpe National Transportation Systems Center’s review is complete.", "At all nine U.S. labs accredited to conduct crash testing of roadside safety hardware for FHWA review, laboratory crash testing was well documented and thorough in terms of consistency in documentation and test procedures across labs. As part of the crash-testing process, labs and test sponsors have discretion in making testing decisions in several important areas. In addition, there is an inherent potential threat to independence in the testing process because employees in some labs can test devices that were developed within their parent organization. The independence requirement in the standards used to accredit labs is general, and we found varying interpretations and differences in approaches for mitigating threats to independence across the labs. FHWA does not require third party verification of crash testing and does not make its own pass/fail determinations or provide for independent pass/fail determinations for test results. FHWA also does not provide additional guidance to labs and accrediting bodies on independence mitigation measures for crash testing roadside safety hardware. We found that some other federal agencies with similar testing programs have more measures than FHWA has to mitigate potential risks to independence.", "FHWA requires that crash test labs conducting testing for the purposes of FHWA eligibility letters be accredited to International Organization for Standardization (ISO) 17025 standards, which contain management and technical requirements for labs to be deemed competent to run laboratory testing. There are nine crash test labs in the United States that are accredited to these standards and conduct crash testing for the purposes of FHWA eligibility letters. Our review of the nine accredited U.S. labs found that individual crash tests were well documented and thorough because test reports contained documentation that would allow a third party to understand how the lab conducted the test and how the test results were interpreted. To evaluate the thoroughness and documentation for labs’ crash testing, we created both interview questions and a document request list for all the labs based on international accreditation requirements as well as the crash-testing guidelines in MASH. All nine example test reports we reviewed clearly identified the test standard and the test level the lab used to test the roadside safety hardware device. The pass/fail criteria being used to evaluate the roadside safety hardware device was clearly identified, and all reports described the test results against each of the evaluation criteria. In addition, all reports described the setup of the device and pre- test procedures, which could include verifying the integrity of the soil, when applicable, and structural integrity of the test vehicle. Each report also included between 20 and approximately 100 pictures of the testing process, along with a description of the results. For more information on the documents we requested and reviewed, see appendix I.\nLabs generally described using requirements specified in test or accreditation standards as the basis for their procedures. Labs described sending equipment out to a qualified calibration laboratory, or obtaining additional expertise and certification to calibrate their own equipment. Several labs also stated that they keep the test objects on site for a period of time, in case follow-ups were needed. Specifically, five labs told us that they kept test documentation on file for at least 2 years, and in three of these cases, kept records indefinitely. Labs also described going beyond what standards require in certain instances. For example, five of the nine labs described using additional cameras or data recording devices to better capture data that would be useful to industry research or to the customer.\nAccrediting bodies are expected to use the ISO 17025 standards, along with test standards specific to the industry, such as the MASH crash-test standards in this case, as the basis for accrediting crash test labs. Officials from three labs said they had developed documentation practices specifically in reference to the accreditation process. Each accreditation body said that it conducts routine audits each year as part of its accreditation cycle, where accreditation bodies told us they evaluate such aspects of the testing process as setup, equipment calibration, competence of personnel, documentation, and record keeping. One lab reported that its accrediting body assisted it with improved lab procedures by setting up calibration procedures; two labs reported that accreditation requirements guide their policies on document retention. In addition, accreditation standards require labs to collaborate and compare results in inter-laboratory collaborations, a procedure that labs do via Task Force 13, in order to work toward greater consistency in test procedures and results interpretation.", "Although individual crash tests are well documented, full-scale crash testing to evaluate the performance of an individual piece of hardware is a complex process that requires labs to use professional judgment when deciding which tests need to be run, and how to interpret the results. Both NCHRP Report 350 and MASH have a suite of tests in order to cover a range of crash speeds, angles, and size and weight of vehicles to assess the performance of the roadside safety hardware device. A majority of labs (five of nine) reported that they usually recommend to test sponsors that they run the full suite of tests outlined in the test standard. However, for modified devices that have previously been tested, there is some discretion on which tests to run. Because an individual full-scale crash test can cost about $55,000 (according to a crash test lab we spoke with) it is advantageous to only run what test sponsors think are the most critical tests for a given device. For example, in one of the testing scenarios we reviewed, the lab engineers determined based on prior testing with a larger vehicle that the MASH test for small cars would not be necessary for the tested device. Although this decision is documented in the test report, the reasoning is not detailed, and so it is hard for a reviewer to evaluate this decision. Of the nine labs we interviewed, four told us that they frequently consult with FHWA in the test-planning process, and that these labs generally run the tests in agreement with FHWA. The other labs told us they either rarely or never consult with FHWA; these labs encourage test sponsors to communicate directly with FHWA if they plan to seek an eligibility letter, and in these cases the lab runs the tests the sponsor requests. As part of the eligibility letter process, labs can, but are not required to, consult with FHWA for advice on which tests to run.\nLabs have some discretion in interpreting the test results against the pass/fail criteria of the crash test standard. According to MASH crash test standards, some interpretation will be necessary for the criteria due to the “very complex nature of vehicular collisions and the dynamic responses of an occupant to the collision, as well as human tolerances to impact.” Eight of the nine labs reported that engineering judgment was necessary to make a pass/fail decision in at least a small minority of tests, although one lab reported that up to 30 percent of all NCHRP Report 350 or MASH crash tests require professional judgement. One lab noted that MASH has more specific criteria than NCHRP Report 350, but leaves room for interpretation when it comes to defining failure limits for penetration, occupant intrusion, and deformation limits, which are all part of the occupant risk criteria. For example, six of the labs reported that occupant intrusion standards were the main subjective parameter, because characteristics such as the amount, type, and location of the intrusion were important in determining whether the occupant could be harmed. Lab officials told us that MASH standards, which specify maximum allowable levels of occupant intrusion, do not always address applied testing scenarios. For example, officials in one lab described a test on a post that sliced and made holes in the floor pan of the test vehicle. The lab officials said they interpreted this to be a failure, although lab officials suggested that MASH crash test standards do not specify whether holes in the floor of the vehicle mean the test fails.", "In the roadside safety hardware-testing community there is an inherent potential threat to lab independence because there is often not a formal separation between design and testing roles within a lab’s parent organization. Specifically, six of the nine crash test labs we reviewed can test products that were developed by employees of the same parent organization. Two manufacturer-owned labs can test products created by another division of the same company; three university-run labs can test university employees’ designed products; and a state-based facility tests products designed by the state department of transportation. In order to be an accredited lab, the ISO requires labs to identify any conflicts of interest and have policies to ensure labs are free from undue pressure. The three accrediting bodies we interviewed told us that the ISO requirements are usually met by documented conflict-of-interest policies and by having an organizational structure in which lab employees do not have conflicting lines of reporting to their parent organization. However, documentation we obtained and interviews we conducted with labs and accreditation bodies revealed varying interpretations of the level of involvement of the device designer in the crash-testing process, and of the level of involvement of the lab in providing design feedback based on crash test results, that is appropriate to ensure independence. For instance, while four labs told us they would offer advice on how to re- design the device if it failed a crash test, the other five labs said they did not make such recommendations, and one specifically said it interprets ISO standards to mean that labs should not be involved in making design recommendations after testing. The ISO standards are intended to broadly cover testing and calibration laboratories across many industries to ensure technical competence. Varying interpretations suggest a lack of specificity in ISO requirements to ensure independence in the testing of roadside safety hardware.\nOf the six labs that test devices developed within their parent organization, two labs told us they have policies that formally separate the role of the designer and the tester, although only one had this policy documented. One of the two labs designates an independent approving authority to make the final determination of whether the hardware passed or failed each test and specifies that this person could not have been part of the design or development of the hardware. The other told us that if a member of the lab was involved in the design of a device, that person would not be allowed to make the pass/fail determination. However, the other four labs do not have a separation that is this clear. Two of these labs provided us with the general conflict of interest policies of their parent organizations, and two labs pointed us to conflict-of-interest policies in their quality manuals, which did not have information about separating design and testing. The Committee of Sponsoring Organizations of the Treadway Commission (COSO), a joint initiative of multiple private-sector-accounting organizations, publishes the Internal Control-Integrated Framework to help organizations design internal controls to achieve their objectives. This framework highlights the importance of the separation of duties within an organization, to reduce the risk of inappropriate conduct in the pursuit of objectives. The standard states that when selecting and developing control activities, management should consider whether duties are divided or segregated among different people to reduce the risk of error or inappropriate or fraudulent actions. Labs that do not have this formal separation between design and testing functions could have threats to the independence of their test analyses.\nOne of the three accrediting bodies told us that independence can be difficult to assess because it is not clear what labs that are affiliated with manufacturers, for instance, must do to mitigate any conflicts of interest. Officials from two accrediting bodies told us that other federal agencies provide them with additional guidance on independence and technical expertise, respectively, and one accrediting body told us that it is preferable when an agency provides guidance so that the accrediting body can better apply standards when accrediting labs in a specific industry. For example, officials from this accrediting body provided an example of a federal agency that has developed more specific ethics and integrity requirements than the ISO. Accrediting body officials told us that this agency requires the accrediting body to assess the labs to these more specific requirements.", "Federal standards for internal controls state that agencies should establish policies and procedures to respond to risks as part of their internal control system. However, apart from the accreditation requirement, FHWA does not have other mitigation measures in place with regard to lab independence. FHWA does not provide guidance to crash test labs or accrediting bodies on mitigating the risks posed by threats to independence. Providing such guidance could provide greater assurance that crash-testing is being performed in an independent, unbiased fashion.\nFHWA reviews crash test results as part of its eligibility letter process; however, FHWA does not have a process for formally verifying the testing outcomes and making or providing for an independent pass/fail determination. FHWA relies heavily on the labs to determine whether the crash test outcome results in a pass or fail determination for roadside safety hardware. According to ISO standards for accreditation, when a lab states whether a product complies with requirements, it is offering an opinion, and it must be marked as such. Officials from one accrediting body said it would be preferable for labs to provide only the crash-test result data and have a third party apply criteria in MASH crash test standards and make the pass/fail determinations. Officials at one lab we spoke to added that they prefer not to make pass/fail determinations, but they do so for each test. In the eligibility letter process, FHWA requires that lab personnel apply the results to relevant crash-test standards and make a pass/fail determination of the test results. FHWA officials explained that as part of their eligibility letter-review process, they examine the crash test lab report, including pictures, videos, and the test data summary sheets. If FHWA officials have questions, they will contact the lab or developer. However, eligibility letters state that FHWA is relying on the assessment of the lab. Moreover, we reviewed 10 case files for eligibility letters issued between 2005 and 2015 and found that documentation was not sufficient to determine the rationale behind FHWA’s decision to issue these letters. For more information on our review of FHWA’s eligibility letter process, see appendix II.\nFHWA officials acknowledged that lab employees’ testing devices that were developed within their greater parent organization poses the appearance of an independence threat. In May 2015, FHWA issued a memo directing the developer and test labs to submit financial conflict-of- interest information in order for a developer to receive an eligibility letter. FHWA officials told us that this information will not influence a device’s ability to receive an eligibility letter, but that the information could be published along with the final eligibility letter for the public to review, in an effort to increase transparency. FHWA officials also told us that this was an immediate change they could make but that they are awaiting the results of the Volpe National Transportation Systems Center’s review before deciding whether to take additional steps in this area.", "According to federal internal control standards, agencies should ensure that they communicate quality information to external parties so they can help the agency achieve its objectives and address related risks. However, as explained above, there is a potential threat to independence in the lab crash-testing environment for roadside safety hardware. In other test settings we found that federal agencies require third party verification of test results or independent entities to make pass/fail determinations.\nWe found that both the Environmental Protection Agency (EPA)—in its ENERGY STAR Program—and the National Highway Traffic Safety Administration (NHTSA)—in its testing for Federal Motor Vehicle Safety Standards and the New Car Assessment Program—have stricter oversight over the lab-testing process and require third party certification and/or verification testing. EPA’s ENERGY STAR Program is a voluntary program to identify and promote energy-efficient products and buildings. Lab testing of products is conducted to determine whether a product meets program specifications for efficiency. As we’ve previously found, the testing requirements for EPA’s ENERGY STAR program have evolved in response to weaknesses identified in the program by us in 2007 and EPA’s Office of Inspector General in 2008, including a lack of assurance that tested products met the qualification criteria. In response to these findings, EPA and the Department of Energy signed a memorandum of understanding in 2009 to propose several program enhancements. As part of a review of this program, before these changes had been implemented, GAO submitted fictitious products for certification and found that the program was vulnerable to fraud and abuse because manufacturers could self-certify that their devices met energy standards without third-party verification. In 2011, we found that EPA had made considerable progress in addressing these issues by including verification testing and third party certification in the approval process.\nCurrently, in order to earn an ENERGY STAR label, products must be tested by EPA-recognized laboratories, and a subset of products is verified annually by third-party certification entities. EPA standards require labs, their accrediting bodies, and third-party certification body laboratories that verify test results to abide by respective sets of conditions and criteria in order to be recognized by the ENERGY STAR Program. EPA also has an application process for all three types of entities to receive ENERGY STAR Program recognition. Under this process, EPA requires that labs test products for review by third-party certification bodies, which determine if the devices meet the program standards for a product to carry an ENERGY STAR label. EPA’s standards for ENERGY STAR recognition also require certification bodies to verify lab test data and make a pass/fail determination, and EPA officials added that the labs themselves are not supposed to make this decision. In addition, certification bodies are to conduct verification testing for a sampling of devices, including off-the-shelf devices, across multiple categories each year. EPA officials told us they closely oversee the certification bodies through frequent communication and periodic audits.\nWe also interviewed officials at NHTSA regarding two forms of vehicle crash testing that they oversee. First, NHTSA issues federal motor vehicle safety standards (FMVSSs), with which vehicle manufacturers must comply, and manufacturers must self-certify that their products meet these standards. NHTSA then sponsors verification testing of some vehicle models, where they purchase vehicles from dealer lots and subject them to crash testing to confirm the manufacturer’s certification. The verification testing is conducted by labs selected by NHTSA. NHTSA officials told us that they would not select a lab that has the potential conflict of interest of being a part of a manufacturer business. Once the testing is conducted, the raw data is sent to NHTSA and NHTSA officials make the determination as to whether the vehicle has met the FMVSSs.\nTesting for NHTSA’s New Car Assessment Program is similar to that of the FMVSSs in design, but rather than checking whether vehicles meet minimum safety standards, NHTSA awards vehicle models with up to 5 stars for their safety performance in crash testing to standards that, according to NHTSA officials, typically exceed those in the FMVSSs. Officials stated that because these standards are not federal requirements, vehicle manufacturers do not have to comply or self-certify compliance. Officials noted, however, that because the New Car Assessment Program provides safety ratings information to consumers the manufacturers have an incentive to receive the highest safety rating possible. Similar to testing under the FMVSSs, officials said that NHTSA purchases vehicles from dealer lots and then tests them at selected labs. The crash-test data is then sent to NHTSA where NHTSA officials determine the star rating for each test vehicle.\nIn contrast to these programs, FHWA does not require either third party certification or verification of crash testing; nor does FHWA provide additional guidance on independence mitigation measures for crash testing roadside safety hardware. Establishing a process for third-party verification of crash test results could provide greater assurance that threats to independence are fully addressed. FHWA officials told us that they would favor considering some form of third party review over crash test results. These officials added that having FHWA conduct the third party review could be challenging and that FHWA would need to assess the resources, technical capacity, and legal capacity to perform that role.", "According to FHWA and AASHTO-sponsored research, in-service performance evaluations (ISPE) are recommended for effective roadside safety hardware oversight because real-world crash conditions, such as vehicle characteristics, as well as the terrain of the roadway, may vary widely from those experienced in crash testing. Moreover, crash testing cannot fully replicate the effects of installation conditions over time on roadside safety hardware’s performance. In establishing a methodology for conducting ISPEs, NCHRP Report 490 states that collecting crash data over multiple years and examining crash sites in real-time can enable researchers to report more information on roadside safety hardware’s installation and maintenance issues, the costs associated with making repairs to damaged hardware, and the severity of injuries resulting from crashes that involve roadside safety hardware. This can better equip states to make cost-benefit determinations regarding roadside safety hardware replacement or new product development. ISPEs can also inform whether crash-testing standards are appropriately suited to assessing the effectiveness of roadside safety hardware.\nBased on our review of studies published since 1993, when FHWA recognized NCHRP Report 350 testing standards, few formal ISPEs of roadside safety hardware have been conducted to fully assess the performance of roadside safety hardware in actual conditions. After reviewing government, industry, and academic sources, we found 14 formal ISPEs that were published since 1993. While other studies included elements of an in-service performance evaluation, 14 studies in our review combined crash data analysis with real-time visits to crash sites to document and assess the damage, which is a key characteristic of a formal ISPE as defined by NCHRP Report 490. Additionally, these ISPEs tended to focus on longitudinal barriers, such as guardrails and cable barriers, and barrier terminals, such as guardrail end terminals, while other types of roadside safety hardware were generally not the subject of ISPEs.\nA key challenge to states conducting ISPEs appears to be the lack of fully-developed data. As NCHRP Report 490 indicates, having inventory data on the number of roadside safety hardware devices being studied and their location is critical to calculating rates of collision with roadside safety hardware within the study area. In our survey of state DOTs, we asked officials to describe their data and inventory efforts, and states reported a general lack of established inventory data. As table 2 shows, a majority of states indicated that they have inventory data-collection efforts for barrier terminals/crash cushions, for example, but many of these efforts are new or are ongoing and therefore are not fully established. For instance, of the 29 states that reported in response to our survey that they have inventory data-collection efforts for barrier terminals/crash cushions, 18 said that their efforts are ongoing, and 12 of these said that they had only been collecting data since 2014. State DOT officials we interviewed in four states also told us that inventory data they collect may not include information on condition or location of roadside safety hardware, which as NCHRP Report 490 notes is necessary for a full understanding of performance. The other key piece of data is crash data. The current state of crash data reporting may not facilitate conducting ISPEs of roadside safety hardware. According to NCHRP Report 490, police will likely not comment as part of their crash records on factors like soil conditions, which could influence how guardrail posts, for instance, function in a crash. Police crash records also do not capture any unreported collisions and may not consistently document the type of roadside safety hardware involved in an accident.\nAccording to our survey, only 6 of 44 states that responded said that they had conducted any formal ISPEs in the last 10 years. State officials we interviewed also described less formal efforts to evaluate roadside safety hardware’s performance. For instance, officials in one state told us that they perform a trial run for any new proprietary roadside safety hardware device in a sampling of locations and monitor on-site the in-service performance for 12–18 months prior to approving the device to be used by contractors across the state. However, state officials told us this effort is not published in a report. Without published results that document a methodology that others can repeat, however, such results do not ultimately add to the broader knowledge base of ISPEs.\nOfficials in four of the five states we interviewed indicated that they have cost and/or data constraints related to collecting the necessary data to conduct formal ISPEs. Officials from the fifth state we interviewed described a software application they developed to inventory all of the guardrail end terminals in their state. According to state officials, local maintenance crews in the state use a custom web application on a mobile device to record the total number, along with data on the type and location, of guardrail end terminals in their state. This data is then uploaded to a central database. State officials said they were planning to make this a long-term project and apply it to other types of roadside safety hardware. Officials noted that they are still in the process of adding the capability for keeping the data up to date. These officials also told us that the application was relatively inexpensive to develop, and FHWA officials noted that at least one state was interested in learning more about the application. State officials told us that as of yet, however, this technology has not been shared across states.", "FHWA has ongoing research to identify best practices for the collection of data on roadside safety hardware. However, this research is limited to guardrail end terminals, and the planned scope of work may not be sufficient to fill the gaps created by the lack of ISPE literature at the state level. FHWA officials told us that in the summer of 2015, FHWA began a pilot study on the collection of data on guardrail end terminals’ performance. According to FHWA officials, the first phase of this pilot study is expected to last through the end of 2016. Officials plan to identify current challenges to conducting ISPEs as well as recommend best practices for: 1) the collection of real-time data on crashes involving roadside safety hardware; 2) interagency communication at the state level regarding crash reporting; and 3) data management regarding hardware maintenance and location. FHWA is currently collecting inventory and crash data in four states (Missouri, Pennsylvania, Massachusetts, and California) that have agreed to participate in this pilot. FHWA officials stated that within a selected area of each state, data will be collected by examining crash sites for six different models of guardrail end terminals. This data could produce information needed to assess the performance of the devices with respect to the risk of severe occupant injury if the study were to be continued. According to FHWA officials, crash specialists from NHTSA, the agency that collects and reports data on fatal crashes for DOT, will conduct detailed on-site investigations for fatal and serious injury crashes, generally within 24 hours of receiving notification of the crash. Data on crashes resulting in property damage only and other minor crashes will also be collected. Officials told us that they plan to continue collecting data through 2016 for this phase of the project.\nAccording to FHWA officials, however, publishing findings on the effectiveness of guardrail end terminals’ performance is not part of their current efforts because they first want to provide guidance to states on best practices for performance data collection. Officials noted that the time frame for the current phase of the pilot would be insufficient to collect enough data for statistically significant findings. FHWA officials told us that they will not determine whether to include performance findings as part of future phases of the pilot study until this phase is complete at the end of 2016.\nAs noted previously, FHWA’s Office of Safety includes in its mission the need to advance the use of scientific methods and data-driven decisions in highway policy. The current lack of in-service performance findings and established inventory data for roadside safety hardware poses challenges to states making data-driven decisions about highway maintenance. FHWA officials told us they currently have no plans to include additional ISPEs for other types of roadside safety hardware as part of their broader highway-safety research portfolio. Officials cited cost concerns with gathering data and explained that ISPEs would take on greater relevance in the future as more MASH-compliant devices are installed on roadways. However, continuing this study and reporting on the performance of guardrail end terminals, or planning to make ISPEs part of other future research, could add to the limited body of knowledge regarding the in- service performance of roadside safety hardware. FHWA officials also noted that hardware that was installed could still be on the roadways for 20–30 years. ISPEs on current devices can therefore still provide states with critical information regarding how they might prioritize maintenance tasks—such as replacing older devices—to best ensure safety for their motorists. Without robust, ongoing in-service performance evaluations, less safe hardware may remain in use longer than is necessary.", "FHWA’s cooperation with AASHTO and state DOTs has resulted in states having policies to install crash-tested roadside safety hardware on the NHS. However, challenges exist for states, industry and FHWA as the improved MASH crash-testing standards are phased in over the next few years. These changes will require cooperation and action from industry, the states, and FHWA. FHWA has the opportunity to exercise more robust oversight to ensure greater consistency in the implementation of improved crash test standards. First, FHWA, through its division offices’ oversight of states’ standards and design specifications, can help ensure that states have written policies in place that fully reflect the terms of the 2016 state-approved Joint Implementation Plan to address inconsistent practices across states. Second, monitoring and reporting the states’ and industry’s progress transitioning to the MASH crash test standards, as federal standards for internal controls suggest, and making this information available to Congress and the public would facilitate transparency and position FHWA to consider midcourse corrections if required.\nFHWA can also take steps to strengthen its role in the assessment of roadside safety hardware performance—both in the test lab and once installed on the roadways. Because FHWA’s current oversight process does not include verification of lab crash-test results and no specific mitigation measures are in place to address potential threats to independence, the risks to ensuring the integrity of the crash-testing process remain unaddressed. Other agencies have introduced policies or processes into the testing process that mitigate these types of issues; FHWA could take similar actions. In addition, other agency practices provide a model for FHWA of closer cooperation with the labs and accreditation bodies to address the independence issues unique to roadside safety hardware’s testing. FHWA also has the opportunity to advance its mission in the scientific evaluation of roadside safety hardware. FHWA has a pilot project underway that is examining data collection practices for in-service performance evaluations but currently has no plans to report on performance findings from either this study or other research in its portfolio. Continuing this study or planning to make ISPEs part of future research could add to what is currently a limited body of knowledge regarding the in-service performance of roadside safety hardware. FHWA is poised to consider changes to its approach to roadside safety hardware through a full programmatic review to be completed in the summer of 2016. Opportunities exist to address all these issues and to provide states, industry, and the traveling public greater assurance that FHWA is fulfilling its safety mission and advancing roadside safety.", "To promote the transition to improved crash test standards, to strengthen FHWA’s oversight of the roadside safety hardware’s crash-testing process, and to make more information available to states and industry on how roadside safety hardware performs in actual conditions, we recommend that the Secretary of Transportation direct the Administrator of FHWA to take the following five actions: 1. Direct FHWA’s division offices to help ensure, through their oversight of states’ standards and design specifications, that states have written policies in place to require the installation of appropriately crash- tested roadside safety hardware on the NHS to address inconsistent practices across states. 2. Monitor and periodically report to Congress (or report through the agency’s publicly available website) progress states and the industry are making in transitioning to the MASH crash-testing standards for roadside safety hardware. 3. Provide additional guidance to crash test labs and accreditation bodies to ensure that labs have a clear separation between device development and testing in cases where lab employees test devices that were developed within their parent organization. 4. Develop a process for third-party verification of results from crash-test labs. 5. Support additional research and disseminate results on roadside safety hardware’s in-service performance, either as part of future phases of FHWA’s current pilot study on guardrail end terminals’ performance or as part of FHWA’s broader research portfolio.", "We provided a copy of a draft of this report to the Department of Transportation for review and comment. In written comments, reproduced in appendix III, DOT concurred with GAO’s recommendations. FHWA also provided technical comments which we incorporated, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees and the Secretary of Transportation. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or Flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "This report addresses: (1) how FHWA performs oversight of state policies and practices related to roadside safety hardware; (2) the thoroughness of the crash-testing process and FHWA’s oversight of this process; and (3) the extent to which information is available on roadside safety hardware performance once installed.\nTo assess FHWA’s role in the oversight of roadside safety hardware and related state policies, we reviewed FHWA documentation including: internal memos on roadside safety and implementation of the current eligibility letter process; guidance memos to the broader roadside safety hardware community; and policy documents such as the template for stewardship and oversight agreements agreed to with states. We also reviewed relevant laws and regulations governing FHWA’s oversight of roadside safety hardware. We interviewed FHWA officials in headquarters to understand how policies and practices are carried out. We also applied federal internal control standards for monitoring, designing control activities and communication with external stakeholders when reporting on the agency’s policies and practices for conducting oversight of roadside safety hardware.\nTo better understand FHWA’s process in reviewing crash test information and issuing eligibility letters, we requested and received the FHWA files for 10 eligibility letters. Two case files were selected by FHWA as example files; we accepted these files and then selected eight more files from the roughly 1,000 available. To make our selection, we first limited the pool to only applications that came to FHWA since 2005. Then we wanted variation in terms of the following variables: age of application (variation across those 10 years); new device versus modification to existing device; type of device; type of standard tested to (MASH or NCHRP Report 350); and proprietary versus generic. Once the files were received we reviewed each file to determine whether it had the information we would expect in order for a third party to understand how FHWA officials came to the conclusion to issue an eligibility letter.\nTo better understand states’ roles in the oversight of roadside safety hardware, we developed and distributed a survey to all 50 states, plus the District of Columbia and Puerto Rico. Survey questions addressed topics including policies on crash testing of roadside safety hardware, procedures for ensuring that only crash-tested hardware is installed on the national highway system, efforts to collect inventory data on roadside safety hardware, and what, if any, research states had conducted in the last 10 years to evaluate the in-service performance of roadside safety hardware after it is installed. After developing the survey, we conducted four pre-test interviews with selected states to ensure that the questions were clear and appropriate for our research objectives. We adjusted the survey questions as needed in response to feedback prior to survey distribution.\nIn October 2015 we distributed the survey to state departments of transportation representatives from all 50 states, plus the District of Columbia and Puerto Rico. We followed up and collected responses until January 2016, at which point we had received responses from 44 out of 52 states and territories. In instances where states did not supply complete responses to individual questions the answers to those questions were not included in the survey results, and those states were removed from the denominator for purposes of summary analysis. For selected questions, we conducted brief follow-up interviews and solicited written responses, when appropriate, in order to seek clarification or elaboration of states’ responses.\nTo get more information on how states oversee roadside safety hardware, we selected five states—Maryland, Virginia, Ohio, Texas, and California—with which to conduct interviews with state departments of transportation officials and the FHWA’s division offices that oversee the state departments of transportation. We selected these states based on the presence of an accredited crash-testing facility in the state and recommendations from stakeholders regarding the quality of performance-data collection efforts in those states. In the cases of Virginia, Ohio, and Texas, interviews with state officials were conducted on site, and we also conducted interviews with crash-testing lab personnel and roadside safety hardware developers in the cases of Ohio and Texas.\nTo gain information on the thoroughness and independence of the crash- testing process and the extent to which FHWA oversight helps ensure this, we interviewed the nine domestic crash labs that are accredited, as required by FHWA, to international crash test lab standards to test roadside safety hardware for FHWA eligibility letters. To describe how labs are evaluated against international-testing standards, we reviewed the international-test lab accreditation standards in ISO 17025 and interviewed the three accrediting bodies that accredit the nine domestic crash-testing labs. To evaluate the thoroughness and documentation for lab crash testing, we reviewed the accreditation requirements in ISO 17025 as well as the crash-testing guidelines in MASH, and analyzed these documents to create both interview questions and a document request list for all the labs, in consultation with our technologist. The questions addressed how labs ensure the quality of the testing environment, how they interpret test results, how they document each test, how they comply with conflict of interest requirements in the ISO, and how communicate with FHWA. We also asked labs to submit their accreditation reports, quality manual, any relevant conflict-of-interest or ethics policies, and a sample test report for us to review. We then asked the nine labs to walk us through a recent example of a product tested for FHWA compliance, in order to describe how policies and requirements are implemented in practice. We reviewed the conflict-of-interest policies to determine the extent to which there was variation in policies across the labs, and to evaluate whether there were mitigation measures for potential threats to independence. We also visited four crash test labs and witnessed two full scale crash tests to gain a better understanding of the crash testing process. To collect information on how other agencies oversee lab testing, we reviewed documentation and interviewed officials from the Environmental Protection Agency’s ENERGY STAR program, as well as the National Highway Traffic Safety Administration regarding their vehicle crash testing. Both agencies were referenced in our discussions with accrediting bodies as examples of other agencies that oversee accredited testing programs.\nTo assess the extent of information available on roadside safety hardware performance once devices are installed, we conducted a literature search for in-service performance evaluations (ISPE) using government, academic, and trade publication sources. We also reviewed studies submitted to us by a highway design and roadside safety hardware engineering expert. For both sources of studies, we used the National Cooperative Highway Research Program (NCHRP) Report 490’s definition of an ISPE to define criteria for determining whether the studies we reviewed constituted ISPEs for the purposes of our report. Specifically, we looked for studies that combined analysis of crash data with real-time site visits. According to NCHRP Report 490, studies that retroactively or contemporaneously examine crash data are known as historical studies and collision studies, respectively, whereas an ISPE adds the element of real-time crash site analysis. NCHRP Report 490 notes that this technique allows researchers to better determine what type of hardware was struck, whether there were installation techniques or other site-specific characteristics that contributed to the crash, and whether the exact device is something a state DOT still uses. We also stipulated that the study in question involve a specific type of roadside safety hardware, which we defined according to FHWA’s categories of hardware for purposes of federal-aid eligibility letters. Moreover, we restricted our ISPE classification to studies published between 1993 and 2015, when NCHRP Report 350 crash-testing standards were published and when FHWA first recognized them. As part of our literature search, we used online search terms that tailored the searches to specific types of roadside safety hardware as well as key methodological components, such as site visits.\nTo inform all of the research questions we also reviewed documentation and interviewed relevant officials from interested stakeholders. We reviewed standards and relevant guidance from the American Association of State Highway and Transportation Officials (AASHTO). To collect information on how crash test standards are developed and are updated, we interviewed the AASHTO Technical Committee on Roadside Safety, as well as officials at the Transportation Research Board’s National Cooperative Highway Research program. To get more detailed perspective on how industry, states, and crash-testing facilities collaborate, we attended a semiannual meeting of Task Force 13, a joint committee of AASHTO, the Associated General Contractors of America, and the American Road and Transportation Builders Association, which develops standards and specifications for bridges and roadside safety hardware. We also interviewed two roadside safety hardware developers.\nWe conducted this performance audit from April 2015 to June 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "We reviewed 10 case files for eligibility letters issued between 2005 and 2015 and found that documentation was not sufficient to determine the rationale behind FHWA’s decision to issue these letters. FHWA officials explained that as part of their eligibility letter review process, they examine the crash test lab report, including pictures, videos, and the test- data summary sheets. If FHWA officials have questions they will contact the lab or developer. However, there is no structured protocol for documenting the steps FHWA reviewers took or the rationale behind the decision to issue an eligibility letter. For example, in two cases where FHWA officials asked questions and received answers from the lab or test sponsor, it was not possible to trace how FHWA made its determination to issue an eligibility letter. We also found three instances in which the full suite of testing was not performed, but no documentation was present explaining why the lack of testing was acceptable.\nWe provided this information to FHWA officials who acknowledged that the basis for those decisions was not documented but stated that in each case FHWA found the information and reasoning provided by the lab or test sponsor satisfactory. FHWA officials also told us they made changes to the eligibility letter review process in 2015 including documenting communications with developers seeking an eligibility letter, a checklist for documenting reviews of eligibility letter requests, and updates to the eligibility letter request form to identify tests that are not critical or not relevant and the reasons why or why not. FHWA officials told us that this checklist provides documentation from the submitter concerning why certain tests were not conducted or why modifications are considered non-significant to better document this information. We did not evaluate the impact of these changes since they were made during the course of our audit work. Officials also characterized these changes as “interim” because the eligibility letter review process is part of the ongoing independent Volpe National Transportation Systems Center review of the program.", "", "", "", "In addition to the contact named above, Steve Cohen (Assistant Director), Melissa Bodeau, Devin Braun, William Egar, Sarah Farkas, Sarah Gilliland, Judy Guilliams-Tapia, David Hooper, Leslie Locke, Madhav Panwar, Malika Rice, Alexandra Squitieri, Jade Winfree, and Elizabeth Wood made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 3, 2, 1, 2, 2, 2, 2, 2, 1, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "h2_title", "", "h2_full", "", "", "h0_full", "", "", "h0_full", "h0_full", "h0_full", "h1_full", "h1_full", "", "", "", "h2_full", "", "", "", "", "" ] }	{ "question": [ "What flaw in crash testing laboratories does the FHWA not address?", "How often are there conflicts of interest in these labs?", "Why is the independence of crash test labs critical?", "How common is this issue among other federal agencies?", "How would the FHWA’s operations change without these crash test labs?", "How might verification outside of the FHWA, through a third party, be beneficial?", "How much is known about the in-service performance of roadside safety hardware?", "According to FHWA, how should in-service performance be reviewed?", "To what extent has FHWA's guidance been followed?", "How is FHWA attempting to review in-service performance?", "To what extent are traffic fatalities caused by vehicles leaving the roadway?", "What hardware is supposed to reduce the risk of a serious crash?", "How well is this hardware performing?", "What aspect of roadside safety is GAO examining?" ], "summary": [ "In general, laboratory crash testing appears to be well documented and thorough; however, FHWA's oversight of the process does not address potential threats to independence.", "GAO found that six of the nine accredited U.S. crash test laboratories evaluate products that were developed by employees of the parent organization—a potential threat to lab independence.", "FHWA reviews crash tests' results and related documentation, if they are submitted for review, but FHWA relies heavily on the labs to make a pass/fail determination.", "We found that some other federal agencies in oversight of similar labs' testing settings require third party verification of test results or independent entities to make pass/fail determinations.", "FHWA does not have a process for formally verifying the testing outcomes and making its own or providing for an independent pass/fail determination.", "Developing a process for third party verification of roadside safety hardware's lab test results could provide greater assurance that potential threats to independence are fully addressed.", "Little is known about the in-service performance of roadside safety hardware because few evaluations of this performance have been done.", "FHWA and AASHTO recommend that states and others perform in-service performance evaluations (ISPE) of installed roadside safety hardware because crash testing cannot fully capture real-world crash conditions.", "However, few ISPEs have been done, in part, because of a lack of inventory and crash data.", "In the summer of 2015 in four states, FHWA began a pilot study that could provide useful information, but according to FWHA officials, the purpose of this phase of the pilot is to determine best practices on data collection rather than assess performance of roadside safety hardware.", "In 2014, 54 percent of traffic fatalities in the United States occurred as a result of a vehicle's leaving the roadway, according to U.S. Department of Transportation's (DOT) data.", "Roadside safety hardware, such as guardrails, is meant to reduce the risk of a serious crash when leaving the roadway.", "But in the last several years, a number of serious injuries and deaths resulted from crashes into roadside safety hardware.", "GAO was asked to review FHWA's oversight framework for roadside safety hardware." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 4, -1, 0, 1, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0 ] }
CRS_RL31032	{ "title": [ "", "Introduction", "The Current Account Balance", "The Forces That Generate Current Account Imbalances", "Conditions Necessary for External Balance", "Conditions Necessary for Internal Balance", "Establishing Causality", "The Adjustment Mechanisms", "Domestic Saving-Investment Imbalances, Interest Rates, and International Capital Flows", "International Capital Flows, the Exchange Rate, and the Current Account Balance", "Why Do Cross-Border Capital Flows Have a Stronger Effect on the Exchange Rate Than Do Goods and Services Flows?", "Other Factors That Can Influence the Size and Direction of International Capital Flows", "Influences on Private Investors", "The Actions of Foreign Central Banks That Affect Capital Flows", "Trends in Saving and Investment in the United States and Abroad", "Why the U.S. Saving Rate Fell", "Recent Saving-Investment Trends in the United States", "The Consequences of Trade Deficits", "A Trade Deficit Can Be Beneficial", "The Trade Deficit Could Be a Symptom of Excessive Consumption Spending", "Can Trade Deficits and External Sources of Finance Cause Instability?", "Do Trade Deficits Cause Unemployment?", "Trade Deficits Can Have Adverse Effects on Particular Sectors", "Policy Responses to Trade Deficits", "Problem with Trade Policy Responses", "Macroeconomic Policy Responses: Domestic and Foreign", "U.S. Economic Policy: Increasing Domestic Saving", "Foreign Economic Policy: Increasing Domestic Spending", "Prospects in Major Trade Surplus Countries", "What if There is No Policy Response to the Trade Deficit?", "Prospects for the U.S. Current Account Deficit", "Forecasts" ], "paragraphs": [ "", "International trade continues to grow in importance for the world economy as well as for the U.S. economy, enhancing economic well-being generally, but also imposing costs on trade sensitive sectors of national economies. The importance of trade has been recognized by Congress, which in recent years has paid close attention to many dimensions of U.S. international trade performance as part of its oversight of economic policy.\nPersistent large U.S. trade deficits raise a number of concerns among the public and in Congress. There are concerns that trade deficits slow economic growth, increase unemployment, generate deindustrialization, and raise the risk of economic and financial instability. To address those concerns, this report examines the trade deficit from the context of mainstream economic analysis. The first part of the report explains the fundamental macroeconomic forces that cause a trade imbalance (deficit or surplus). In light of those fundamental forces, the report then evaluates the most common economic concerns about trade deficits. Finally, the report examines the efficacy of alternative policy responses to trade imbalances and the economic forces that generate them.", "The current account balance is the nation's most comprehensive measure of international transactions. It has three component balances: the goods and services balance, the investment income balance, and net unilateral transfers. Goods are tangible items in the form of raw materials, intermediate products, and final products. Services are intangible output that cannot be stored and are usually produced and consumed at the same time. Income transactions are the payments and receipts on international investments such as dividends and interest. Unilateral transfers are the transfer of a good, service, or asset for which the receiving country does not provide anything of value in return, such as foreign aid, charitable contributions, or the payment of Social Security benefits to a U.S. citizen living abroad. The three types of transactions measured in the current account balance are thought by economists to be closely related to current production, consumption, and income.\nFor the United States, the size of the current account deficit is largely the refection of a similarly sized goods and services deficit (i.e., trade deficit). In 2009, the United States had a current account deficit of $378.4 billion, composed of a goods and services deficit of $374.9 billion, an investment income surplus of $121.4 billion, and a net unilateral transfers deficit of $124.9 billion. Therefore, for the United States, the terms current account deficit and trade deficit can be used interchangeably with little inaccuracy. Such equivalence is not always the case, however. Australia, for example, has a relatively large current account deficit but a relatively small goods and services deficit (trade deficit) because it also has a relatively large investment income deficit (an outflow of retained earnings and interest payments).\nIn talking about trade balances, it is also important to distinguish between multilateral and bilateral balances. A bilateral balance is the balance between any pair of countries, whereas a multilateral balance is the balance between several or all of the country's trading partners. The current account balance is a multilateral balance across all trading partners. It is very likely that even if the United States' current account was in balance it would still have sizable bilateral imbalances (surpluses and deficits) with individual trading partners. Such bilateral imbalances would typically be a reflection of differences between countries in comparative advantage and in the structure of production and trade between economies and not necessarily a matter of economic concern.\nIn all but three years between the end of WWII and 1970, the United States had modest current account surpluses. During the 1970s, modest deficits occurred more frequently. However, in all but three years between 1981 and 2009, current account deficits have occurred and their typical size, both in dollar terms and as a share of GDP, has been rising as well. A necessary corollary of rising U.S. deficits over this period has been rising current account surpluses abroad.\nThe U.S. current account (trade) deficit, decreased to just above $378 billion in 2009, down substantially from $706 billion in 2008, and from a high of $803 billion in 2006. As a percentage of GDP, the 2009 trade deficit stands at 2.7%, down from 4.9% in 2008, and a record high of 6.1% in 2006. The sharp fall of the trade deficit in 2009 is largely the short-term consequence of the recent recession. With economic recovery, more enduring economic forces are likely to determine the size of the trade deficit.\nFrom the end of WWII to 1973, the Bretton Woods international monetary system of fixed exchange rates constrained the United States and other nations to maintain more or less balanced trade. With the collapse of the Bretton Woods system in 1973 that constraint was removed.\nBut that by itself is not sufficient to account for why, from the 1980s to the present, the United States experienced a steady growth of current account deficits, while other nations experienced a steady growth of current account surpluses. Nor is the tendency toward persistent large current account deficits in recent decades the consequence of rising trade barriers abroad, increased foreign dumping of exports, or any inherent inferiority of U.S. goods on the world market.\nRather, trade imbalances occur because of underlying macroeconomic spending and saving behavior at home and abroad. Since the early 1980s, there is a strong tendency in the United States to spend beyond current output, with the excess of demand met by a net inflow of foreign goods and services that manifests itself as the U.S. current account deficit.", "To understand the economic forces generating these persistent current account deficits (and surpluses abroad), it is helpful to have familiarity with basic balance of payments accounting conventions: specifically, two accounting identities (i.e., conditions that must always be true) that the current account must conform with. The first identity defines the necessary condition for the economy's external balance . The second accounting identity is the necessary condition for the economy's internal balance .", "External balance requires that the balance in the current account (CA), whether deficit or surplus, be equal to the negative of the balance in the financial account (FA):\nCA = -FA\nThe current account tallies trade in goods and services, whereas the financial account tallies international trade in assets—the inflows and outflows of various forms of financial capital such as bank accounts, stocks, bonds, and ownership of real property. A financial account surplus means that there has been a net inflow of capital (i.e., borrowing from abroad), and a financial account deficit means that there is a net outflow of capital (i.e., lending to other countries).\nThe external balance identity requires that a country with a current account deficit (i.e., it is buying more goods and services from the rest of the world than it is selling to the rest of the world) also have an equally sized financial account surplus (i.e., a capital inflow because it is selling more assets to the rest of the world than it is purchasing from the rest of the world) . Similarly, a country with a current account surplus (i.e., it is selling more goods and services to the rest of the world than it is buying from the rest of the world) will also have an equally sized financial account deficit (i.e., a capital outflow because it is buying more assets from the rest of the world than it is selling to the rest of the world).\nThe necessary balance between the current account and the financial account is due to imports of goods and assets having to be paid for, and the export of either goods or assets being the only means of making that payment. It becomes then, just a matter of double-entry bookkeeping. If the earnings from goods and services exports are insufficient to pay for goods and services imports, then the earnings from asset exports must exceed the cost of asset imports (i.e., there must be borrowing) in the same amount in order that all imports are paid for .\nThe external balance identity is informative for two reasons. First, it establishes a necessary link between the current account balance (largely transactions in goods and services) and international capital flows (transactions in various types of assets). Second, although the current account balance and the financial account balance are likely determined by different economic factors, in the end they must be reconciled and offset each other.", "The internal balance identity requires that the current account balance always be equal to the difference between a country ' s gross saving and investment . Therefore, if a country has a current account deficit, its gross domestic saving is less than its gross domestic investment; or if a country has a current account surplus then its gross domestic saving is greater than gross domestic investment. The internal balance identity follows directly from the basic identity of the national income and product accounts. Namely, that total domestic output, known as gross domestic product (GDP) equals the sum of consumption (C), government spending (G), investment spending (I), and exports (X) minus imports (M) or:\nGDP = C+ I + G + (X-M)\nThis identity can be rewritten as:\n(X-M) = (GDP – C - G) – I\nBecause exports minus imports (X-M) is equivalent to the current account balance (CA) and because GDP minus spending by consumers (C) and government (G) equals saving (S), the expression can be simplified to the internal balance identity:\nCA = (S – I)\nThat is to say, a current account imbalance is always exactly matched by an imbalance between domestic saving and investment. This is exactly equivalent to saying that deviations of domestic spending above or below domestic output are only possible if there is a balancing net inflow or outflow of output from or to the rest of the world. The internal balance identity is informative because it establishes a linkage between the current account and domestic spending and saving activity. It also suggests that different factors will likely determine the current account balance and the saving-investment balance, but in the end these factors must be reconciled by economic forces that leave the two balances equal. The need to satisfy both identities means that:\nCA=-FA= (S-I)", "While the external and internal balance identities make it clear that the current account balance is linked to both the international trade in assets and to domestic spending and saving behavior, the identities do not establish causality between these elements. These identities are potentially consistent with changes in the current account (i.e., changes in the levels of exports and imports of goods and services), inducing changes in the financial account, that, in turn, cause changes in domestic saving and investment. On the other hand, they could also be consistent with changes in the balance of domestic saving and investment, inducing changes in the financial account, that, in turn, cause changes in the current account balance. The actual direction of causality at any particular time can only be established through an empirically grounded economic model that accounts for the behavior of saving, investment, and trade flows (in goods, services, and assets).\nThe standard model of international macroeconomics argues that the domestic saving-investment balance (S-I) is the cause and that the current account (CA) is the effect , with international financial flows (FA) transmitting the influence of the saving-investment balance to the current account balance. In other words, in today's global economy with large and fluid trade in goods and assets, countries with imbalances between domestic saving and investment will likely experience a compensating inflow or outflow of financial capital (i.e., saving), that will induce a current account deficit or surplus.", "This section looks more closely at the economic forces that cause the two concurrent adjustments necessary for achieving internal and external economic balance. The first adjustment is investment-saving imbalances generating inflows and outflows of capital between economies linked by global asset markets; the second adjustment is cross-border flows of assets generating changes in the current account balance. The flow of capital represents a transfer of purchasing power between countries, while changes in the current account balance represent a reciprocal transfer of goods and services between countries.", "The emergence over the post-WWII period of a relatively open world economy with large and fluid international asset markets makes it possible for national domestic saving-investment imbalances to be reconciled by international capital flows. With a willing lender and a willing borrower, flows of capital from a saving-surplus country to a saving-shortage country can achieve an overall saving-investment balance for both nations. A capital inflow allows a country with a shortfall of domestic saving, in effect, to use foreign savings to help finance domestic investment, and a capital outflow allows a country with an excess of domestic saving to put it to more profitable use financing foreign investment. Therefore, global saving will equal global investment.\nDifferences in the level of real interest rates between economies are the basic equilibrating mechanism that works to induce saving flows between countries as lenders seek out higher rates of return abroad and borrowers get access to foreign sources of finance. A nation with a \"surplus\" of domestic saving over domestic investment opportunities will tend to have relatively low domestic interest rates because the domestic supply of loanable funds (i.e., saving) exceeds the domestic demand for loanable funds (i.e., investment), pushing down interest rates (i.e., the price of loanable funds). As a result, this economy will likely see some portion of domestic saving flow outward, attracted by more profitable investment opportunities abroad.\nConversely, another nation that finds its domestic saving falling short of desired domestic investment will tend to have relatively high domestic interest rates because the domestic demand for loanable funds exceeds the domestic supply of loanable funds. As a result, this economy will likely attract an inflow of foreign saving, attracted by the higher rate of return, and that inflow will help finance domestic investment.\nIf international capital flows did not exist, domestic investment could be no larger or smaller than domestic saving, and the current account would have to be balanced. This was the reason that the U.S. current account was near balance during the 1950s and 1960s. At that time, the extensive controls on international capital flows that were part of the Bretton Woods system of fixed exchange rates effectively constrained the member economies to domestic saving-investment balance and, in turn, to current account balance. One of the reasons the Bretton Woods system collapsed in 1971 was the steady decline in the effectiveness of its control of cross-border capital flows and, in turn, a decline in the ability to maintain fixed exchange rates.", "As established above, the external balance identity dictates that a net capital inflow or outflow (i.e., a financial account surplus or deficit) must occur in conjunction with an equally sized current account deficit or surplus. This adjustment is accomplished by market-induced exchange rate movements. For the United States and other advanced economies, exchange rates are primarily determined on the global market for foreign exchange, where changes in the demand for and supply of national currencies, needed to purchase foreign assets, cause the relative value of currencies to rise or fall. For example, the purchase of a dollar-denominated asset by a foreign investor requires the investor to first exchange the home currency for the dollars needed to buy the asset. That action simultaneously increases the demand for dollars and increases the supply of the foreign currency on the global foreign exchange market, causing the dollar's price in terms of the foreign currency (i.e., the exchange rate) to rise. With a net inflow of capital, the dollar's exchange value rises; the higher exchange rate causes the international price of U.S. exports to increase, dampening foreign sales; and causes the dollar price of imports to decrease, stimulating purchases of foreign goods.\nThe exchange rate will rise by an amount sufficient to induce a net inflow of goods—a current account deficit—equal to the net inflow of capital from the rest of the world. Similarly, the country that has a net outflow of capital will have its exchange rate fall sufficiently to induce a current account surplus, equal to the net outflow of assets.\nTherefore, the standard model of international macroeconomics predicts that a country like the United States, where domestic saving consistently falls short of domestic investment, will run a current account (trade) deficit; whereas a country like Japan, where domestic saving exceeds domestic investment, will run a current account (trade) surplus. Deficits and surpluses are co-determined , because for a country with a shortfall of domestic saving relative to investment to run a current account deficit, there must be at least one other country with an excess of domestic saving relative to investment that runs a current account surplus, and vice versa.", "International asset market transactions and goods and services market transactions both influence the demand and supply of dollars on foreign exchange markets. In most circumstances, however, economists argue that asset market transactions will tend to be dominant and ultimately dictate the exchange rate's actual direction of movement. This dominance is the result of asset market transactions occurring on a scale and at a speed that greatly exceeds what occurs with goods market transactions.\nElectronic exchange makes most asset transfers nearly instantaneous and allows a very large volume of transactions to occur in a very short period of time. In most years since the 1970s, U.S. international asset transactions were two to three times as large as what would be needed simply to finance that year's trade deficit. For example, the balance of payments account for 2007 shows both a $1.2 trillion purchase of foreign assets by U.S. residents (a capital outflow) and a $1.9 trillion purchase of U.S. assets by foreign residents (a capital inflow). Therefore, while the United States could have financed that year's $731 billion trade deficit simply by a $731 billion sale of assets to foreigners, U.S. and foreign investors engaged in more than $2 trillion of additional asset-for-asset transactions.\nA telling sign that asset transactions have been the determining force is that from 1994 to 2002, the dollar appreciated as the trade deficit grew. If goods market transactions were the determining force, the increase of the trade deficit would tend to depreciate the dollar: rising U.S. imports cause more dollars to be exchanged for foreign currency, increasing the supply of dollars on the foreign exchange market, and pushing the dollar down. In general, the exchange rate of countries that receive a net inflow of foreign capital will tend to appreciate, whereas the exchange rate of countries that have a net capital outflow will tend to depreciate.", "", "Although relative levels of interest rates between countries are likely to be a strong and ever-present force directing capital flows among economies, other factors can periodically influence these flows by causing an adjustment in the investors' perception of risk and expected return. For instance, the size of the stock of assets denominated in a particular currency held in the foreign investor's portfolio can cause a change in investor preferences. Prudent investment practice counsels that an investor's portfolio have an appropriate degree of diversification across asset types, including the currency in which assets are denominated.\nDiversification of holdings spreads risk across a wider spectrum of assets and reduces overexposure to any one asset. Therefore, even though dollar assets may still offer a high relative return, if the accumulation of dollar assets already in the investor's portfolios is large, at some point foreign investors, considering both risk and reward, may decide that their portfolio's share of dollar-denominated assets is large enough. To improve the diversity of their portfolios, investors may slow or halt their purchase of such assets. Given that well over $8 trillion in U.S. assets are now in foreign investor portfolios, achieving a sufficient degree of asset diversification may be an important factor governing the behavior of international investors toward dollar assets.\nAnother possible influence on international capital flows is a safe-haven effect. This is really just another manifestation of the balancing of risk and reward by foreign investors. Some investors may be willing to give up a significant amount of return if an economy offers them a particularly low-risk repository for their funds. The United States, with a long history of stable government and steady economic growth, as well as a huge market in low-risk Treasury securities, presents a continually safe investment climate. This motive for holding dollar assets was clearly evident during the recent financial crisis when the international demand for low-risk Treasury securities increased substantially, causing the dollar to appreciate from mid-2008 through early 2009. As global economic and financial conditions stabilized and evidence of recovery emerged in the last half of 2009, the safe-haven motive waned and so did the international demand for Treasury securities, causing the dollar to depreciate over this period.\nAlso affecting the flow of international capital is the size of the asset market. Many foreign investors have a preference for deep and liquid asset markets. Not only do U.S. asset markets offer a great variety of instruments, but their large size also creates very liquid markets, able to handle huge inflows and outflows of funds with only a small impact on the price of the dollar asset of interest. The precise size of these effects is not easy to determine, but the persistence of large capital inflows despite already large foreign holdings of dollar assets and the disproportionate share of essentially no-risk U.S. Treasury securities in foreign holdings suggests that the magnitude of flows attributable to the special status of U.S. asset markets is probably substantial.\nFurther, investors' exchange rate expectations will also influence the relative attractiveness of a foreign asset. A 6% yield on a dollar-denominated asset will have an expected yield of 0.0% if the dollar is expected to depreciate 6% per annum against an investor's home currency over the bond's holding period. Therefore, the prudent investor will include an adjustment for the dollar's expected future path into the calculation of the expected return, in their own currency, of holding dollar-denominated assets. This expected depreciation makes the relative return on dollar assets even lower than what is indicated by the nominal interest rate differential.", "In addition to private investors, governments will, with varying frequency, also buy or sell assets on the international capital market. Such official purchases are seldom motivated primarily by the factors of return and risk that typically influence private investors. Government official purchases can serve two objectives. First, the accumulation of a reserve of foreign exchange denominated in readily exchangeable currencies, such as the dollar, serves as a store of international liquidity that can be used for coping with periodic currency crises arising out of often volatile private capital flows. Large stocks of foreign exchange reserves are often used by developing economies that periodically need to finance short-run balance-of-payments deficits and cannot fully depend on borrowing on international capital markets to offer timely finance of these deficits. The Asian financial crisis in the late 1990s heightened the importance for many developing economies of having very large stocks of international reserves to weather periodic financial crises.\nSecond, official purchases are used to counter the impact of capital flows that would otherwise lead to unwanted exchange rate changes. The United States and most other industrial nations, while most often allowing the value of their currencies to float on the foreign exchange market, have at times undertaken such intervention. This, however, is a common practice for China and other East Asian economies that buy and sell foreign assets to maintain stability of their currencies' exchange rates.\nThe International Monetary Fund (IMF) estimates global foreign exchange reserves to be about $8 trillion in 2009, up sharply from about $1.8 trillion in 2000. Of the $4.5 trillion of reserves for which the currency composition is known, 61% are some type of dollar-denominated asset. The U.S. Treasury reports that official holdings of Treasury securities have reached $2.7 trillion.\nThe large share of dollar assets reflects the dollar's role as the international reserve currency . There are significant advantages for the United States in having the dominant reserve currency. These advantages include reduced exchange rate risk and lower borrowing costs. However, these large accumulations of dollar assets in foreign official holdings also mean that foreign central banks have become important participants in and influences on U.S. financial markets and the wider U.S. economy.\nThe largest holder of foreign exchange reserves is China, with official holdings of about $2.5 trillion. Many other emerging economies, such as Korea, India, Russia, and Brazil, each have sizable official holdings in the $200 billion to $400 billion range. Among the advanced industrial economies, only Japan is a large holder of foreign exchange reserves, with official holdings of about $1 trillion, making it the second-largest holder after China. The United States' official holdings were comparatively small at about $130 billion in 2009.", "A domestic saving-investment imbalance can occur as a result of either investment rising relative to saving or saving falling relative to investment. The United States has always had a low rate of gross saving compared to Western Europe and Japan. In addition, since the 1970s, a pattern of generally falling saving rates has occurred in all three regions. However, investment rates in Western Europe and Japan also fell by a similar amount. So with saving and investment falling in tandem, there was no significant widening of their domestic savings-investment imbalance and, in turn, little change in their current account balances. In contrast, in the United States, as the saving rate decreased, the investment rate remained relatively stable or, as occurred in the late 1990s, increased with an acceleration of U.S. productivity. Therefore, the U.S. saving-investment imbalance increased, leading to steadily larger current account deficits. Enabling larger U.S. current account deficits since the mid-1990s was a complementary increase in global saving outside of the advanced industrial economies that was not being absorbed by domestic investment in the home economies.\nA sizable slowing of economic growth in Europe and Japan since the 1970s is thought to be the primary reason for the tandem fall of saving and investment rates in these regions. In the United States, however, economic growth did not slow and therefore is not the cause of the steady fall of the U.S. saving rate. That fall was, in part, the result of a sharp decline of the household component of the private saving rate, decreasing from near 10% in the 1970s to near zero by 2005.", "Why has the U.S. household saving rate collapsed over the past 25 years? Answering that question has been the object of much economic research, but the reasons for the decline remain to a significant degree problematic. No single theory can fully account for the phenomenon. Three theories have considerable plausibility as partial explanations. First, capital gains on real estate, stocks, and other investments, particularly in the 1990s, greatly increased household wealth. Economic theory predicts that a rise in wealth reduces the need to save and increases the tendency to spend. Second, increased government outlays for Medicare and Social Security transfer income from a relatively high-saving segment of the population to a relatively low-saving segment, tending to decrease the overall saving rate. Third, more streamlined credit market vehicles, such as credit cards and home equity loans, removed constraints on household liquidity and prompted increased spending and reduced saving.\nAlso affecting the national saving rate have been sizable changes in government saving, as tax and expenditure policies over time have moved the federal budget from deficit, to surplus, and back to deficit. Large budget deficits from 1981 to 1986 contributed to a fall of the national saving rate in that period; a swing to sizable budget surpluses from 1997 to 2000 increased the national saving rate in that period; and a return to budget deficits from 2001 to 2007 helped push the national saving rate down in that period.", "Table 2 shows the pattern of U.S. gross saving, gross investment, and net capital inflows since 2000. As discussed earlier in the \" Conditions Necessary for Internal Balance \" section, the net capital inflow is the foreign funds attracted to help finance U.S. gross domestic investment. By the internal balance identity discussed earlier, it is the arithmetic difference between gross saving and gross investment. By the external balance identity, it is also equal to the current account (trade) deficit. (Because of statistical discrepancies, the equality is usually approximate.)\nAs the economy recovered from the recession of 2001, the rate of investment rose strongly, the rate of saving rose hardly at all, and the saving-investment imbalance grew larger along with the current account deficit, reaching a peak in 2006. In 2006, despite strong economic growth and an increased rate of domestic investment, the saving-investment gap stopped rising and the trade deficits also stopped growing. Household saving was still near zero, but in 2006 business saving and government saving increased sufficiently to stabilize the saving-investment imbalance.\nFrom 2007 to 2009, the U.S. rates of saving and investment both decreased as the financial crisis and recession unfolded. But, particularly in 2009, the investment rate fell more than the saving rate, causing a sizable reduction in the saving-investment imbalance and the compensating inflow of foreign capital, and leading to a commensurately sized fall in the current account deficit.", "", "A trade deficit and the capital inflows that cause it can, on balance, be beneficial. It confers economic benefits and carries economic costs, and the former may exceed the latter. Standard economic theory suggests that trade deficits and capital inflows can be a vehicle for extending the gains from trade, where lending and borrowing among nations can lead to a more efficient allocation of saving and a preferred pattern of consumption over time.\nGains from trade can arise from what economists call intertemporal exchanges. These are exchanges of current goods and services for claims on future goods and services, that is, an exchange of goods and services for an asset (i.e., cash in a bank account, stock, or bond). When the United States (or any trading nation) borrows from abroad to import materials for a current investment project, it is undertaking intertemporal trade. In such a transaction, the borrowing nation gains because it can support a higher rate of investment in capital goods (e.g., equipment, factories, and infrastructure) than what current domestic saving alone could finance. The lending nation, in turn, gains an asset yielding a higher rate of return than is available in the home economy.\nBecause of the difference in their preferences for spending over time, the international asset market allows both parties to the transaction to raise their economic well-being. The borrower's economic well-being is raised by being able to spend more in the current period than current income allows. The lender's economic well-being is raised by being able to spend more in some future period. A country that is a net borrower will also run a trade deficit, whereas the country that is a net lender will run a trade surplus. This type of international asset transaction allows a more global utilization of the world's saving, a more efficient allocation of investment spending across nations, and a preferred distribution of spending over time.\nSo long as the external borrowing and the associated debt service costs do not outpace increases in the economy's productive potential, trade deficits could, in principle, be sustained for many years without ill effect.\nThe argument that trade deficits are on balance beneficial is most plausible when the associated inflow of foreign capital is used to finance an increase in domestic investment. A higher rate of investment increases the economy's stock of productive capital. With more capital, workers are more productive, leading to greater output and higher wages. The added output would most likely be large enough to make debt-service payments to foreigners and boost the domestic living standard. The U.S. trade deficits in the 1990s were the consequence of this pattern of saving and investment: during that economic expansion, a rising investment rate outpaced a rising saving rate. (The household saving rate continued to fall in this period, but a significant rise in government saving more than offset that fall.)", "Some economists argue that the current account (trade) deficit and the associated capital inflow are not a problem in themselves but symptoms of a problem—a low national saving rate. The saving-investment imbalance that the U.S. economy has experienced for the last decade is not the result of domestic investment rising relative to the domestic saving rate as occurred in the 1990s; rather, it is the result of the domestic saving rate falling relative to the domestic investment rate. In this view, the inflow of foreign capital is financing increased consumption by households and government.\nThis pattern of expenditure, in light of the nation's impending need to fund the sizable retirement needs of an aging population, may suggest a significant problem of economic short-sightedness by households and government in meeting the country's future obligations. That funding, arguably, will require greater saving and less consumption. If the saving rate is raised, the trade deficit will decrease accordingly. However, if the trade deficit were to decline due to foreign investors becoming less willing to invest in the United States but without an increase in domestic saving, then domestic investment would have to fall. Less investment would tend to slow economic growth, making it more difficult to fund growing internal demands (i.e., from an aging population) and external obligations (i.e., debt service payments to foreign investors).", "Trade deficits often raise concern about the potential instability of external sources of finance. What if foreign investors begin to pull their funds out of the United States, causing interest rates to rise sharply, disrupting domestic capital markets and the wider economy?\nThe \"dollar crash\" scenario is as follows. Growing perceptions of an unsustainable accumulation of foreign debt in the U.S. economy result in a widespread expectation that the dollar will eventually depreciate substantially. It is argued that this expectation raises the prospect of a run on the dollar that leads to a rapid and disorderly depreciation of the dollar that goes far beyond what is needed for the desired economic adjustment. The fear in some minds is that the move out of dollars could become a stampede if investors try to simultaneously sell their dollar assets on a large scale. This leads not only to a sharply falling exchange rate, but also to sharply rising interest rates in U.S. financial markets as lower asset prices translate into higher effective interest rates. Sharply rising interest rates in the United States will dampen spending in interest-sensitive sectors and stress financial markets. There are, of course, positive impulses associated with a falling dollar, such as increased export sales in the United States and stimulus to interest sensitive sectors abroad. In the dollar crash scenario, however, the negative impulses have a more immediate effect.\nA disorderly adjustment is possible, but not probable. There are good reasons to doubt that a sharp destabilizing turnaround in foreign capital flows is likely.\nFirst, why run from the dollar assets if there are no better alternatives? The U.S. economy is still, arguably, the most productive and innovative economy in the world, producing more than one-quarter of world output and an even greater share of quality marketable assets. U.S. assets typically offer higher returns at lower risk on average than those of Europe or Japan, and that return accrues more reliably than higher yielding assets of emerging economies. During the recent financial crisis and recession, foreign demand for dollar assets strengthened. Therefore, despite some prudent investor reshuffling of their portfolios, the demand for dollar assets is likely to remain sufficiently strong for any dollar depreciation to be orderly.\nSecond, a substantial portion of the foreign investment in the United States is typically long-term investment (e.g., direct investment in plant and equipment, long maturity bonds, and stocks). Such capital flows tend to be far more stable than short-term portfolio investment flows because they are based on expectations of long-run return that are less sensitive to adverse short-run changes in economic conditions and, thereby, more resistant to financial crisis.\nThird, China and other emerging economies seem to be strongly tied to an economic development program propelled by export sales, particularly to the American market. To maintain the competitive position of their currencies in this market, they will continue to absorb large stocks of dollar assets, maintaining upward pressure on the dollar and downward pressure on U.S. interest rates. Also, a growing share of Japanese household saving has become more internationally mobile and likely to be looking for investment alternatives to typically low yielding domestic Japanese assets. There is a fear that a major diversification out of their large holdings of dollar assets by the Chinese would initiate a collapse of the dollar, induce a spike in U.S. interest rates, and dampen economic activity. However, China is unlikely to do this in part because any large sell-off of dollar assets would also cause the price of dollar assets on the global market to fall sharply, and erode the value of the dollar assets it continued to hold. The prospect of these sizable losses is a deterrent to undertaking such a diversification. Also, China is likely deterred because a sharp dollar depreciation would send sizable negative reverberations to the global economy that China is now highly interdependent with.\nFourth, the pool of world saving is likely growing, with substantial new inflows from China, India, and oil-exporting countries. Dollar assets will likely be an attractive lure for a large share of this new saving. This new demand for dollar assets will, therefore, tend to offset some of the downward pressure on the dollar exchange rate caused by diversification out of dollar assets by other foreign investors.\nFifth, the dollar is the world economy's reserve currency of choice. The large size and stability of the dollar-asset markets along with the ongoing needs of international investors for liquidity and a store of value undergirds the strong persistent international demand for dollar assets. However, a depreciating dollar over a substantial time period could undermine the dollar's reserve currency status.", "Trade deficits are most often a means of augmenting the level of goods and services available to domestic purchasers, in effect, allowing the nation to spend beyond current domestic output by means of importing foreign output. Both domestic and foreign output are used to meet current domestic demand. With strong demand in an economy operating near or at its productive capacity, and unable to generate a near-term expansion of that productive capacity sufficient to meet that demand, it is possible for domestic industries to be working at full capacity, even as there are also large inflows of similar or related foreign products.\nAnother reason why trade deficits do not lead to a net reduction of domestic output and employment is because a very large share of U.S. trade is intra-industry trade in intermediate products—trade within the same industry due to an internationally fragmented production process. A final product will often be composed of several components, some of domestic origin and some of foreign origin. With this structure of production, an increase in the demand for the final product will increase both domestic output and imported foreign output of necessary components, regardless of the level of capacity utilization.\nFinally, there may simply be no domestic counterpart for some goods because product differentiation has led to specialization across countries in the production of particular goods. (The economic gain from such specialization arises from economies of scale, not comparative advantage, and is common among high-income economies with very similar resource endowments.)\nStandard economic analysis indicates that, outside of periods of recession, a trade deficit does not cause a net loss of output or jobs in the overall economy. Trade and trade deficits will, however, likely change the composition of output and employment. The forces generating the trade deficit will tend to increase the dollar's exchange rate, raising the incentive to substitute some types of foreign output for similar types of domestic output. But this dampening effect on some domestic industries will tend to be offset by the simulative effects of the trade deficit's associated capital inflow on other parts of the economy.\nThe Federal Reserve, using monetary policy, works to set the overall level of spending in the economy to a level consistent with full employment. Although deviations from full employment can occur during periods of recession, a well-run monetary policy will minimize the incidence and duration of such episodes and in an expanding economy keep the total level of employment high in most years with or without trade deficits.\nFor these reasons, to a substantial degree the size of the trade deficit during an economic expansion, as during the 1980s, 1990s, and 2000s, cannot be taken as a one-for-one measure of reduced domestic output and the loss of the associated jobs. Since the end of the recession in 2001 through 2007, the trade deficit increased about $400 billion, whereas the unemployment rate fell from 6% in 2003 to 4.6% in 2007 and total civilian employment climbed from a low of 136 million workers in 2002 to 144 million workers in 2007.", "Although large trade deficits do not necessarily reduce the total level of economic activity, they can alter the composition of domestic output and employment. The rising exchange rate generated by the net inflow of foreign capital increases the incentive to allocate resources away from production of domestic tradable goods, and toward the import of foreign tradable goods. In most circumstances, the market churning associated with U.S. trade deficits can be expected to have a negative effect on the output and employment of the U.S. tradable goods sectors such as manufacturing.\nThis effect on the composition of U.S. output was evident during the period from 2000 to 2007. From 2000 to 2007, the real output for the overall economy increased at a 2.5% average annual rate; however, real output of the manufacturing sector increased at a significantly slower 0.5% average annual rate, indicating that the manufacturing sector was not advancing apace with the wider economy. Also during the 2000-2007 period, manufacturing employment fell from about 17.3 million employees to 13.8 million employees, a fall of about 3.5 million jobs. A sharp fall during the 2001 recession was not unusual, but a failure of manufacturing employment to increase during the subsequent economic expansion was unusual.\nThe slow growth of manufacturing output from 2000 to 2007 was, in part, a reflection of a moderate weakening of economy-wide demand, with GDP growth slowing to a 2.4% annual rate for the 2000-2007 period as compared with a 3.3% rate for the 1990-2000 period. Of greater importance, it appears that in the 2000-2007 period, increased foreign competition substantially dampened the demand for many goods manufactured in the United States. Although real exports of U.S. manufactured goods increased by $216 billion, or at about a 3% average annual rate over the 2000-2007 period, real imports increased by $440 billion, or at about a 5% average annual rate—causing the trade deficit in manufactures to increase by about $230 billion.\nIf the rise in the trade deficit represents a substitution of foreign for domestic manufactured goods, then output and employment in the U.S. manufacturing sector would be lower than it otherwise would be. At the 2007 level of worker productivity in manufacturing, other things equal, an increase in the trade deficit in manufactures of $230 billion would translate into the displacement of about 2 million jobs in U.S. manufacturing of the 3.5 million lost.\nDuring the 1990-2000 time period, the trade deficit in manufactured goods also increased by a similar magnitude, about $240 billion. A critical difference between the two periods is that the 1990-2000 period began with a relatively weak dollar that rose about 21% over the course of the economic expansion but with most of that increase occurring after 1996. This meant that for most of the time period not only was demand strong but the relative price of U.S. manufactured goods to foreign manufactured goods remained low. Given that exchange rate changes typically affect trade flows with a time lag of several years, the adverse effect of the late-in-the-decade rise of the dollar on the output of the U.S. manufacturing sector would not be clearly evident until after 2000.\nThe dollar continued to rise through early 2002, with a total appreciation in trade-weighted terms of about 28% since 1996. This appreciation would mean that the recovery from the 2001 recession would begin with the dollar relatively strong, tending to dampen the demand for U.S. manufactured goods relative to foreign manufactured goods. The dollar fell about 22% through 2007, but given the normal lags the impact of the depreciation would not be evident on trade flows until about 2007. (A more substantial improvement in the trade deficit in manufactures occurred in 2008. But at this point the positive impacts on the sector from trade flows began to be overcome by the negative effects of the deepening recession.)\nAdjustment to such trade effects can be economically painful for workers in these harmed sectors. Many economists argue that it is usually more beneficial to the overall economy to encourage adjustment than it is to protect sectors from the disruptive effects of trade. There are government programs that provide some amount of trade adjustment assistance.", "To the degree that a trade deficit's effects on the economy are on balance beneficial, there may be no reason for a policy response to reduce or eliminate it. In addition, if there is an orderly reduction in foreign investors' demand for dollar assets, the trade deficit could fall without any inducement by policy. However, in this circumstance the adjustment might not be achieved on the best terms for the United States since it would be accomplished by a reduction in domestic investment rather than an increase in domestic saving. If a reduction of the trade deficit is desired, macroeconomic polices are likely to be more effective than traditional trade-policy responses.\nSo long as domestic saving in the United States falls short of domestic investment and so long as an inflow of foreign saving is available to fill all or part of the gap, the United States will run a trade deficit. This suggests that for any policy to be effective in reducing the trade deficit, it must be able to affect the saving-investment imbalances at home and abroad that are its ultimate cause. Trade policy tools to alter the flow of exports or imports, while imposing economic costs on the domestic economy, would not over time significantly change the domestic saving-investment imbalance, and therefore would not change the overall size of the trade deficit. On the other hand, macroeconomic policy tools have the potential to alter the saving-investment balance and therefore alter the trade balance, but the realistic opportunity for their use is in practice often limited. Also, whether macroeconomic policy affects primarily saving or investment could be a matter of concern because of the potential differential effect on long-term growth.", "Trade policy involves actions to directly stimulate or retard the flows of imports and exports such as the introduction or removal of tariffs and subsidies. Such actions will affect the level of trade and economic efficiency, but will not change the balance of trade. In each instance, action aimed at altering one side of the trade equation tends to induce effects via the exchange rate that will cause the other side of the equation to change in the same direction and by an equal amount.\nFor example, using a tariff or quota as a barrier to stem the flow of imports into the United States would also reduce the demand for foreign exchange needed by the United States to purchase imports, appreciate the dollar's exchange rate, and induce an equivalent curtailment of export sales. With this policy, the level of trade has been reduced along with the economic gains from trade and general economic well-being, but the trade deficit would not necessarily change.\nSimilarly, an export subsidy imposed by a deficit country would stimulate export sales but an exchange-rate-induced rise of import sales would also leave the trade balance unchanged. It would also be true that an export subsidy removed by a surplus country would dampen its export sales but an exchange rate depreciation would also induce a fall in import purchases and most likely leave the size of the trade surplus unchanged.\nAlternatively, getting trading partners to remove trade barriers would stimulate export sales, but would increase the demand for dollars by foreigners, appreciate the dollar exchange rate and induce an equivalent increase of imports. In this case, the level of trade is increased along with the gains from trade and economic well-being, but the trade deficit would not necessarily change.", "To efficiently reduce or eliminate the U.S. trade deficit most economists would argue that there needs to be a rebalancing of global spending: the United States would need to reduce domestic spending, and the economies with trade surpluses would need to increase domestic spending. In the framework of the saving-investment relationship, this rebalancing means that the United States faces three alternatives: (1) the rate of domestic investment falls, (2) the level of domestic saving rises (due to reduced consumption spending), or (3) some combination of one and two. In all cases the dollar will have to depreciate (on a real trade-weighted basis) and foreign currencies appreciate to induce the changes in spending at home and abroad. The inducement is caused by the depreciating dollar increasing the relative price of foreign goods in the U.S. market and decreasing the relative price of U.S. goods in foreign markets.", "Macroeconomic policy can induce changes in saving and spending flows. For example, monetary policy, by raising domestic interest rates and slowing economic activity, can lower the rate of domestic investment, reduce the saving-investment gap, and decrease the trade deficit. (At the extreme, a recession could dramatically reduce the trade deficit as seen in 2008 and 2009.) As observed earlier, decreasing the rate of domestic investment will have a negative effect on economic growth and is not generally considered a desirable economic outcome.\nAlternatively, federal government fiscal decisions that alter the levels of government revenue and spending will influence the size of the budget deficit or surplus and, in turn, the level of public saving. As seen in the late 1990s, a rise in the U.S. overall saving rate as a consequence of a rising public saving rate stemmed from the sharp swing of the federal budget from a deficit of $290 billion in 1992 to a surplus of $236 billion in 2000. Since 2000, budget surpluses were erased and budget deficits increased, rising to $1.455 billion in 2009 and projected to remain near this level for some time forward. To eliminate the trade deficit by raising government saving would require the government to run a substantial and sustained budget surplus. However, given the large-scale federal borrowing likely to occur over the medium term, it seems unlikely that the federal budget can any time soon play a major role in raising national saving and reducing the trade deficit.\nCan macroeconomic policy lift the low private saving rate? Proposals have been made to use the tax code to raise incentives for saving by households. Most such proposals nevertheless have uncertain effects on the saving-investment balance, as they tend to raise both saving and investment. Other proposals, such as individual retirement accounts, may just redistribute saving, raising household saving (a little), but lowering public saving by an offsetting amount.\nThe adverse effects of the recent fall in housing prices and the recent recession on household wealth have prompted a higher rate of personal saving, but it remains uncertain how enduring this increase will be, and it is not clear that whatever increase in private saving is forthcoming will be large enough to offset the fall in the public saving rate caused by increased deficit spending, let alone be sufficient to increase the overall saving rate.\nAt the moment, a low saving rate is unlikely to have an adverse effect on the size of the saving-investment imbalance because the rate of domestic investment is also low, not having recovered from the negative effects of the recent recession. As the economic recovery gains momentum, however, the rate of domestic investment is likely to rise, causing the shortfall of saving relative to investment to increase and, other things being equal, cause the trade deficit, generally and in manufactures in particular, to increase also.", "Foreign economic policy can help or hinder efforts by the United States to decrease the size of its trade deficit and remove the associated burden from the U.S. manufacturing sector. As discussed above, the U.S. trade deficit is a two-way affair, reflecting the behavior of borrower and lender alike. On the other side of the U.S. inclination to spend beyond current domestic output is a symmetrical inclination of foreign nations to spend well short of domestic output and export the difference. It seems that American spending is as important to these economies as foreign borrowing is to the United States.\nThe most orderly adjustment to a smaller U.S. trade deficit is likely to occur through mutually supporting policy actions by countries with large trade surpluses—as the United States brings domestic spending down closer to domestic output and foreign economies with large trade surpluses bring domestic spending up closer to their domestic output. In so doing, U.S. efforts to become less dependent on imports are complemented by foreign efforts to become less dependent on exports to the United States. As already noted above, this change would seem to require a substantial appreciation of foreign currencies relative to the dollar. By this theory, economies with trade surpluses that also fix their currencies to the dollar would need to allow their currencies to appreciate relative to the dollar.\nThe less willing foreign economies are to change this current pattern of spending, the more protracted and difficult the shrinking of the U.S. current account deficit could be. If foreign economic policies work to counter U.S. policies attempting to raise domestic saving by reducing their domestic saving, then the dollar depreciation needed to induce a sizable reduction of the U.S. trade deficit would be larger than if foreign policies induce a complementary change in their spending patterns.", "It is likely that effective global rebalancing would involve sizable adjustments in the largest surplus economies—Germany, Japan, and China. However, there are significant potential constraints on how substantially each of these three economies can save less and spend more, perhaps limiting any appreciation of their currencies relative to the dollar. Even if the current account is in balance, the United States would very likely have sizable bilateral imbalances, deficits and surpluses, with individual trading partners. These bilateral imbalances would be a reflection of differences between countries in comparative advantage and of the structure of production and trade between economies and not necessarily a matter of economic concern.\nIn Germany, the inability to move its exchange rate independently from the other euro economies reduces its flexibility of adjustment. In addition, the effects of recession have left limited room for further fiscal expansion and small ability to lower the household saving rate.\nJapan is much the same with little to no room for fiscal expansion and a poor prospect of boosting household spending. Moreover, both Germany and Japan, faced with substantial near-term economic weakness due to the global recession, are unlikely to risk a dampening of net exports that a sizable appreciation of their currencies would cause.\nChina has the largest trade surplus with the United States and therefore has the potential to have a large effect on U.S. export sales and a significant positive impulse on the pace of the U.S. economic recovery. Also, economic growth has remained relatively strong in China through the recent global financial crisis and aggregate demand is expected to remain strong over the medium term. What is uncertain, however, is whether a greater share of this spending will be domestic demand, particularly consumption spending by Chinese households.\nFor more domestic spending to translate into a shift in China's trade balance, China's exchange rate would need to rise relative to the dollar, causing a decrease in the price of foreign goods relative to domestic goods, and exerting downward pressure on China's trade surplus. From July 2005 to February 2009 China relaxed its dollar peg, allowing the renminbi to appreciate by 28% (on a real trade-weighted basis). However, faced with weakening export sales due to the global financial crisis, China re-pegged the renminbi to the dollar. In June of 2010, China indicated that it would again let the renminbi appreciate.\nChina's export-led growth model, relying on a high saving rate (to keep internal demand low) and a low exchange rate pegged to the dollar (to keep external demand high), has been very successful and, despite the possible advantages of reforms to boost domestic demand, it is uncertain whether China would move substantially away from this model.\nAll in all, it seems problematic whether economic policy abroad will be directed toward a rebalancing of domestic spending that would greatly increase the prospect for an orderly, quick, and substantial shrinking of the U.S. current account deficit. Without mutually supporting policies, the dollar might need a larger real depreciation to induce a sizable reduction of the U.S. trade deficit. A large depreciation could be risky for two reasons. First, some would argue that the greater the size of the currency's fall, the greater the chance that it will fall too far, too fast, sending a jolt to world financial markets. Second, the dollar may not fall evenly against other currencies. For example, from 2002 through 2007, the dollar fell by nearly 27% against the euro but only about 12% against the Chinese renminbi. This unbalanced adjustment has occurred in part because China has limited the strengthening of the renminbi relative to the dollar, and in the process has accumulated a large stock of dollar assets. This very uneven depreciation across currencies places more of the burden of adjustment of trade flows on the euro area and other economies whose currencies are free to float relative to the dollar.", "The trade deficit could fall on its own without U.S. policy actions. As noted above, the trade deficit is sustained by a net inflow of foreign capital. If large numbers of foreign investors, with an abundance of dollar assets in their portfolios and seeking a better balance of risk-return, undertake to diversify their portfolios away from dollar assets, the capital inflow and, in turn, the trade deficit will decrease. Such a process began to occur in 2002 as a weakening demand by foreign investors for dollar assets caused the exchange rate to depreciate, which by 2007 caused the U.S. trade deficit (generally and in manufactured goods) to begin to decline. Whether this investor-led adjustment will continue during the ongoing economic expansion is uncertain.\nThe difficulty with this form of adjustment is that if the reduced inflow of capital is not offset by a similarly sized increase in domestic savings, the necessity of maintaining overall balance of saving and investment would force a decrease in domestic investment. As discussed above, it is uncertain that there would be a significant increase in domestic saving for some time forward. A decreased rate of investment would likely dampen domestic demand for manufactured goods and could ultimately cause the rate of long-term economic growth to slow.", "Where is the trade deficit headed in the period just ahead? In the economic framework presented in this report, the answer to that question will hinge on the net direction of capital flows into and out of the American economy. Whether the current capital inflow gets bigger, smaller, or remains the same will most likely be determined by the resolution of two opposing forces: risk and reward. If, on balance, foreign investors see further investment in the United States as a more risky undertaking, other factors equal, the capital inflow will ebb and bring the trade deficit down with it. On the other hand, if the relative rate of return from investment in U.S. assets grows more attractive, the net capital inflow could expand and bring the trade deficit up with it.\nA U.S. recovery will likely include a recovery of investment spending. If increased investment spending is not matched by increased domestic saving, the trade deficit is likely to rise. While the private saving rate is likely to be higher than its pre-recession level, the government saving rate is likely to be lower, making it difficult to judge whether the overall saving rate will be significantly above its pre-recession value.\nPrivate investor behavior is sensitive to the investment alternatives available. The relative attractiveness of global investment alternatives will be influenced by the relative pace of the economic recoveries in the United States and the rest of the world. At this time, the expectation is that Europe and Japan will rebound more slowly than the United States. Also, the recent troubles in Greece and other euro area economies may diminish the attractiveness of the euro area as an investment destination. However, most emerging markets, especially in Asia, are expected to outpace the developed economies, including the United States.\nA risk factor that could exert a medium-term influence on foreign suppliers of capital to the U.S. economy is the adequacy of diversification in their asset holdings, which already contain substantial dollar balances. Diversification would likely manifest itself as a slowing in the rate of accumulation of dollar assets, not as the \"dumping\" of dollar assets already held. Such diversification was a likely reason for a significant weakening of private capital inflows between 2002 and 2007.\nRegarding the behavior of foreign central banks, it is uncertain whether they will continue to increase their already large holdings of dollar assets.", "Given the sizable damage caused by the recent financial crisis and recession, the unprecedented scale of the policy responses to those negative shocks, and the weakened state of the global economy, projections of the U.S. trade deficit's near-term path carry an above-normal degree of uncertainty. Most forecasts have the overall U.S. economy on a path of recovery in 2010 and for several years after that. However, there is some variance in the pace of that recovery among prominent forecasters. Outside of emerging Asia, most foreign economies are projected to recover more slowly than the United States.\nThe IMF is forecasting a modest increase in the U.S. current account deficit for 2010 to $487 billion, from $418 billion in 2009. The critical factor generating this increase is the beginning of the recovery of investment spending in the aftermath of the recession. Saving rises but more slowly than investment. As the recovery gains momentum and investment spending rebounds more strongly than domestic saving, the trade deficit is projected to increase to $638 billion by 2015. However, the increase is moderate, moving at a pace that keeps the trade deficit as a share of GDP stable and well below recent highs, remaining at around 3.5% of GDP. Relatively weaker recovery and more damped investment spending in much of the rest of the world makes the United States an attractive destination for foreign investors and helps to reinforce this pattern of net capital inflows. Although there is no dampening effect on economic activity, the foreign sector is not seen as a significant contributing force to the pace of economic activity.\nGlobal Insight, an economic forecasting company, projects a larger increase in the trade deficit than does the IMF. The current account deficit in their view will rise to $526 billion in 2010 and will continue to increase, reaching $641 billion in 2012, pushing the trade deficit share of GDP to 3.9%. The sharper rise of the trade deficit in this projection as compared with the IMF projection is driven by a faster-paced recovery and stronger domestic investment spending in conjunction with relatively low domestic saving. Also, slower-paced recoveries in other major economies tend to encourage an inflow of foreign capital." ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 1, 2, 2, 2, 2, 3, 3, 1, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 4, 2, 1, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h1_full", "", "", "", "", "h0_title", "h0_full", "h0_full", "", "", "", "", "h0_full", "", "h0_full", "h2_title h1_title", "", "", "h2_full", "h1_full", "", "h2_full h1_title", "h2_full", "h2_title h1_title", "", "h2_full h1_full", "", "", "h1_title", "h1_full" ] }	{ "question": [ "What factors affect the size of the U.S. trade deficit?", "How does U.S. saving compare to U.S. investment?", "How does this compare to other countries?", "How is the difference between saving and investment resolved?", "How would a net capital affect the United States?", "How is the trade deficit beneficial for the United States?", "Historically, how was the added spending used?", "How does the trade deficit negatively affect the U.S.?", "What are the long-term considerations in borrowing during a trade deficit?", "What is the status of policy action to reduce the overall trade deficit?", "Why is policy action problematic?", "What tools work to address the overall trade deficit?", "How do trade deficits act over time?" ], "summary": [ "The size of the U.S. trade deficit is ultimately rooted in macroeconomic conditions at home and abroad.", "U.S. saving falls short of what is sought to finance U.S. investment.", "Many foreign economies are in the opposite circumstances, with domestic saving exceeding domestic opportunities for investment.", "This difference of wants will tend to be reconciled by international capital flows.", "For the United States, a net capital (savings) inflow also leads to a like-sized net inflow of foreign goods—a trade deficit.", "The benefit of the trade deficit is that it allows the United States to spend now beyond current income.", "Since the 1980s, that added spending was largely for investment in real estate, durable goods, and capital equipment. In recent years, the added spending was for consumption.", "The cost of the trade deficit is a deterioration of the U.S. investment-income balance, as the payment on what the United States has borrowed from foreigners grows with rising indebtedness.", "Borrowing from abroad allows the United States to live better today, but the payback may cause some decrement to the rate of advance of U.S. living standards in the future.", "Policy action to reduce the overall trade deficit is problematic.", "Standard trade policy tools (e.g., tariffs, quotas, and subsidies) do not work.", "Macroeconomic policy tools can work, but recent and prospective government budget deficits will reduce domestic saving and most likely tend to increase the trade deficit.", "Most economists believe that, in time, the trade deficit will correct itself, without crisis, under the pressures of normal market forces. But the risk of a more disruptive adjustment cannot be completely discounted." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, 0, -1, -1, -1, 0, 0, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4 ] }
CRS_R40855	{ "title": [ "", "Introduction", "The History of Contracting Programs for ANCs", "Alaska Native Claims Settlement Act and ANCs", "Creation of Alaska Native Corporations", "Definition of ANCs as Tribes", "The Indian Self-Determination and Education Assistance Act of 1975", "8(a) Definition of Tribes", "ANCs Deemed Economically Disadvantaged", "ANCs' Economic Performance", "Loss", "Recovery", "Expansion", "Legal Authorities Governing Contracting with ANCs", "General Contracting Authorities", "General Small Business Authorities", "Section 8(a) of the Small Business Act", "Authorities in Native American Laws", "5% \"Subcontracting Bonus\"", "Credit Toward Prime Contractors' Subcontracting Goals", "Small Disadvantaged Businesses for Purposes of Transportation Contracts", "Appropriations Riders Allowing Direct Conversion of DOD Functions", "Legislative Activity in the 112th Congress", "Regulatory Developments" ], "paragraphs": [ "", "The widely reported increase in federal contract dollars awarded to Alaska Native Corporations (ANCs) and their subsidiaries in recent years has generated congressional and public interest in the legal authorities governing contracting with these entities. Of particular interest are the authorities creating the alleged \"special procurement advantages\" that ANC subsidiaries enjoy in contracting under the Small Business Administration's Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program).\nAccording to some reports, federal contract dollars awarded to ANCs and their subsidiaries increased by 916% between FY2000 and FY2008, going from $508.4 million to $5.2 billion. The dollars awarded to ANC-owned firms through the 8(a) Program, in particular, reportedly tripled between FY2004 ($1.1 billion) and FY2008 ($3.9 billion). Critics are concerned about the impact of these increases on other minority-owned businesses participating in the 8(a) Program, as well as the potential for fraud, waste, and abuse when agencies make sole-source awards to ANCs or their subsidiaries. However, supporters of contracting programs for ANCs point out that, even with the recent increases, contracting with ANCs and their subsidiaries represents a small percentage of federal contract dollars. They also note that profits from federal contracts are vital to improving the economic well-being of Alaska Natives.\nMembers of the 112 th Congress have introduced legislation ( H.R. 598 , S. 236 ) that would generally subject ANC-owned firms participating in the 8(a) Program to the same treatment as individually owned firms. Among other things, this legislation would preclude ANC-owned firms from receiving sole-source awards valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of Section 8(a) of the Small Business Act. Also, in 2011, SBA promulgated regulations that seek to address alleged issues regarding ANCs' participation in the 8(a) Program (e.g., requiring annual reporting on ANCs' benefits to Alaska Natives).", "", "The Small Business Administration's (SBA's) 8(a) minority contracting program slightly predates the creation of Alaska Native Corporations. The 8(a) minority contracting program dates from the late 1960s, when it was created administratively. The SBA considered Indian tribes eligible for the 8(a) minority contracting program, as indicated by a September 1970 SBA pamphlet encouraging Indian tribes and individuals to participate in the 8(a) Program.", "ANCs were created under the authority of the Alaska Native Claims Settlement Act (ANCSA), enacted in 1971 to settle Alaska Natives' aboriginal land claims to most of Alaska. Congress's stated intent in passing ANCSA—shared by Alaska Native organizations and the state of Alaska—was to settle the claims\nwithout establishing any permanent racially defined institutions ... without creating a reservation system or lengthy wardship or trusteeship, and without adding to the categories of property and institutions enjoying special tax privileges.\nTo carry out this intention, Congress authorized Native corporations, not tribes, to receive the lands and monies awarded in the settlement. Unlike Indian trust lands, the corporations' lands would be held in fee simple and could be developed without federal approval.\nCongress intended ANCs to be vehicles for the economic development of Alaska Natives. The conference report on ANCSA stated that\nthe Regional Corporations shall be organized as business for profit corporations…. [T]he investment functions to be carried out by the [state-wide] Alaska Native Investment Corporation [under the Senate version] have been assigned ... to the Regional Corporations.\nThe intended functions of this state-wide Investment Corporation, according to the earlier Senate committee report on its bill, were to:\nconduct business for profit activities and to provide a long-range return through dividends to its Native stockholders. The Investment Corporation thus is intended to act as a prudent businessman would, and to administer the Natives' funds with the object of maximizing the value of their stock and their future unrestricted income.\nANCSA created four types of ANCs, all to be incorporated under state law:\n12 regional corporations, based on the regions of 12 specified Alaska Native associations, covering the entire state (plus a 13 th regional corporation for Alaska Natives permanently residing outside Alaska); village corporations, for Alaska Native communities with populations of 25 or more Natives; group corporations, for Alaska Native communities with populations of fewer than 25 Natives in which Natives constituted a majority; and urban corporations, for urban Alaska Native communities.\nAn Alaska Native could become a voting shareholder in both the local regional corporation and the local village, group, or urban corporation.\nAs compensation for settling the land claims, ANCSA provided for the conveyance of some 40 million acres (including subsurface rights) and $962.5 million to the ANCs, chiefly to the 12 regional corporations and the village corporations. The settlement lands were to be divided among the 12 regional corporations based on the acreage of their regions and among the village corporations based chiefly on their populations. Group and urban corporations were to receive a set number of acres apiece. (Conveyance of title to the ANCs is the responsibility of the Bureau of Land Management, which reported in its FY2013 budget justifications that 59% of the lands to be conveyed had been surveyed and patented to the ANCs.) The settlement funds were to be paid out over a number of years and divided among the regional corporations (including the 13 th corporation) based on their population. Each regional corporation was to distribute at least half of its share of these funds to the village corporations in its region.\nAs noted above, the ANCs were to hold their ANCSA lands in private fee title, not in the trust title usual for Indian lands, and subject to federal, state, and local taxation in specified circumstances. The regional corporations were to operate as for-profit entities, and the village corporations as either for-profit or non-profit entities. Their revenues from investment of their settlement funds were to be subject to taxation.", "", "Congress has taken several steps to assist ANCs. An important step in relation to the 8(a) Program came in 1975, when Congress included regional and village ANCs in the definition of \"Indian tribe\" in a major Indian law, the Indian Self-Determination and Education Assistance Act of 1975:\n\"Indian tribe\" means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688) which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.", "This 1975 definition of \"Indian tribe\" was used in two later amendments to the Small Business Act. First, in 1978, the definition was incorporated by reference in an amendment specifying that small businesses wholly owned by Indian tribes were eligible for the loan program implemented under the authority of Section 7(a) of the act. Second, 1986 amendments to the Small Business Act used the language of the 1975 definition when making \"economically disadvantaged\" Indian tribes and ANCs eligible for the 8(a) Program. These 1978 and 1986 amendments to the Small Business Act were each added after Indian tribes complained about SBA officials' varying opinions as to whether Indian tribes were eligible for the 7(a) and 8(a) Programs.", "The 1986 amendments meant that tribes and ANCs still had to prove they were economically disadvantaged to be eligible for the 8(a) Program. In 1988, ANCSA was amended to specify that \"Native Corporations\" (ANCs) were to be considered \"minority business enterprises\" for all purposes of federal law. Designation as minority business enterprises did not, however, lead the SBA to deem ANCs to be economically as well as socially disadvantaged. According to 1991 testimony of the Alaska Federation of Natives,\n[w]hen the ANCSA amendments of 1987 [P.L. 100-241] were being legislated, the parties involved agreed to include an amendment that would make it clear that Alaska Native corporations were eligible for SBA minority programs. At that time, congressional staff relied on the fact that \"disadvantaged business enterprises\" (called DBE's), were a subset of \"minority business enterprises\" (called MBE's), and would thus be covered by the explicit inclusion of Native corporations and specified affiliates as MBE's.... Since then, we have found that SBA is distinguishing disadvantaged business enterprises from minority business enterprises, saying that a statutory definition as an MBE does not qualify Native corporations as DBE's for purposes of SBA programs.\nIn 1992, Congress further amended ANCSA to clarify that Native Corporations were to be considered \"economically disadvantaged\" for all purposes of federal law. Since 1988, according to Government Accountability Office (GAO) figures, ANCs have consistently increased their involvement in the 8(a) Program, as measured by the number of ANCs owning subsidiaries that participate in the 8(a) Program.", "ANCs were to be ANCSA's vehicles—the \"engines,\" as it were—for the economic development of Alaska Natives. However, the variation among regions and villages in acreage and population meant that ANCs differed widely in their shares of the $962.5 million settlement fund and the 40 million acres to be conveyed. The 12 land-based regional corporations, which together cover the entire state of Alaska, also varied not only in the size of their regions but in their regions' economic resources and activities. Likewise, the village, group, and urban corporations, which are scattered unevenly across the 12 regions, varied in their degree of isolation and the economic activity of their surroundings. Hence, ANCs differed widely in their initial ANCSA funding, the land-based resources they received, and their opportunities for economic development.\nSince 1971, the ANCs have also differed widely in their business success, growth, income, and losses, but an overall pattern of loss, recovery, and gradual expansion has been suggested by several observers.", "In the 1970s, ANCs organized themselves, made their land selections, and received their ANCSA payments. The last major ANCSA payments to regional ANCs were made in 1980. In the 1970s and 1980s, the ANCs invested in a wide variety of business operations, such as hotels, seafood processing, shipping, oilfield services, and construction, as well as in natural resources. Their businesses and investments were chiefly in Alaska. However, as a group, regional ANCs lost substantial amounts of money in the period of 1971-1985, especially in non-resource business operations. \"The [regional] corporations altogether lost money on business operations every year except 1974 and 1985,\" according to economist Steve Colt. The same analyst later stated,\nthe consolidated financial performance of the Alaska Native corporations over their first two decades was surprisingly poor. The twelve regional corporations lost about $380 million—more than three quarters of their original cash endowment—in business operations between 1973 and 1993.\nAt the same time, the ANCs struggled with the significant financial costs of litigation to determine how ANCSA was to be applied and interpreted. There was \"heavy litigation\" over land selections, Native village and group eligibility, individual Natives' enrollment, ANC elections and corporate governance, revenue-sharing among regional ANCs and with village ANCs, and other issues.\nDuring this period, ANCs reportedly had little or no involvement in the SBA's 8(a) Program.", "What allowed the ANCs to recover, apparently, was their brief, unique opportunity to sell net operating losses (NOLs) to other U.S. companies between 1986 and 1988. The ANCs' sale of NOLs provided an estimated $410 million for regional ANCs and $500 million for village ANCs.\nCongress created the ANCs' window of opportunity for NOL sales in 1986 when it added a provision to the Internal Revenue Code that disallowed sales of NOLs by any corporation except ANCs. Two years later Congress repealed the ANC exception.\n\"For the regional corporations as a group, NOL sales proceeds provided a cash infusion equal (in real dollars) to two thirds of the original ANCSA payments.\" ANC income from NOL sales \"essentially recapitalized many of the struggling regional corporations, and put them in position to benefit from the economic boom that began in the early 1990s.\"", "Given the opportunity to start over, ANCs apparently selected investments more wisely and emphasized diversification, especially in businesses outside Alaska, although they also continued \"to do what they do well.\" ANCs became active and made profitable investments in tourism (including hotels), oilfield services, communications, catering, real estate, construction, and other businesses, as well as in natural resources (timber and mining). In addition, by about 1992, litigation costs were diminishing.\nSome ANCs also became active in federal contracting, especially through the SBA's 8(a) Program. As noted above, the first ANC 8(a) contract was awarded in the late 1980s. However, the 8(a) certification process was considered by many ANCs \"arduous\" until the 1992 amendment to ANCSA, discussed above, that deemed ANCs economically disadvantaged for purposes of the SBA's 8(a) Program and other federal programs.\nBy 1992, an Alaska Business article had mentioned two regional ANCs as having 8(a) contracts. By 1997, two regional ANCs, Aleut Corporation and Chugach Alaska Corporation, got the bulk of their revenues and profits from 8(a) contracts. A chart in a 2006 GAO report on contracting with ANCs shows a gradual but consistent increase in the number of ANCs (of all types) with 8(a) subsidiaries and the total number of such subsidiaries in the 8(a) Program, from very low numbers in 1988 to a total of 49 ANCs and 154 subsidiaries in December 2005. According to GAO, as of 2005, 12 of the 13 regional ANCs had 8(a) subsidiaries, as did 33 village ANCs and 4 urban ANCs (out of a total of 182 village, urban, and group ANCs).", "Various authorities presently govern contracting between federal agencies and ANCs or ANC-owned firms. These include (1) the general contracting authorities, (2) the general small business authorities, (3) Section 8(a) of the Small Business Act, (4) authorities pertaining to Native Americans, and (5) various appropriations riders. These authorities address the award of contracts, as well as related issues.", "The Armed Services Procurement Act of 1947 and the Federal Property and Administrative Services Act of 1949, as amended, give defense and civilian agencies, respectively, broad authority to contract for goods and services. So long as they comply with statutory and regulatory requirements governing solicitation of bids or offers, competition in contracting, and similar matters, agencies may generally make awards to any entity that happens to be the lowest qualified responsible bidder or offeror. This includes ANCs and their subsidiaries.\nMoreover, agencies may make sole-source awards to ANCs or ANC-owned firms under the general contracting authorities in the same circumstances in which they can make sole-source awards to other entities. Such circumstances exist when\n1. only one source can supply the goods or services, 2. there are unusual and compelling circumstances, 3. the agency seeks to maintain the industrial base, 4. international agreements require the agency to award the contract to a particular entity, 5. a statute authorizes non-competitive awards or the agency is acquiring brand-name commercial items for resale, 6. considerations of national security keep the agency from advertising its requirements, or 7. a particular award is necessary in the public interest.\nContracting officers must generally justify such sole-source awards in writing and obtain approval of these justifications from their superiors. They must also generally issue a notice of their intent to make a sole-source award prior to awarding the contract.\nThe general contracting authorities may, in fact, be necessary to make awards to ANCs themselves, as opposed to their subsidiaries or ANC-owned firms, given that some ANCs may not qualify as \"small\" under the size standards applicable to contracts awarded under the authority of the Small Business Act. The general contracting authorities also do not require that entities be for-profit to receive an award, unlike the small business authorities. Not all ANCs are for-profit, and small non-profit ANCs could receive awards under the general contracting authorities when they could not receive awards under the small business authorities.", "Contracts could also be awarded to small ANCs or ANC-owned firms under the general small business authorities. Section 15 of the Small Business Act of 1958, in conjunction with Sections 2711 and 2723 of the Competition in Contracting Act of 1984, provides agencies with special authorities for contracting with small businesses. Under these authorities, agencies may \"set aside\" contracts for small businesses—by conducting competitions in which only they can compete—when certain conditions are met. These set-asides can be total or partial, encompassing the entire acquisition or a severable segment of it. Agencies may also make sole-source awards to small businesses when one of the seven circumstances authorizing noncompetitive awards under the general contracting authorities exist, although such awards are made under the general contracting authorities and not the general small business authorities. They are thus subject to the notice, justification, and approval requirements discussed previously.\nOne of the alleged \"special provisions\" governing contracting with ANCs, discussed below, arguably assists ANC-owned firms in qualifying as \"small\" for purposes of contracting under the general small business authorities. While all affiliations between businesses, or relationships allowing one party control or the power of control over another, count when the SBA makes size determinations, certain affiliations with the parent ANC or its subsidiaries are generally excluded when the SBA determines the size of an ANC-owned firm. Although the SBA is authorized to consider these affiliations when not doing so results, or is likely to result, in an ANC-owned firm obtaining a \"substantial unfair competitive advantage within an industry category,\" the SBA and agencies exercising delegated authority on its behalf reportedly seldom exercise this authority.\nIn contrast, ANC-owned firms are not exempt from the requirement that they be \"businesses\" for purposes of the Small Business Act, which means that they must be for-profit to be awarded contracts under the general small business authorities. They also must self-certify that they are \"small,\" as measured by the size standards for the goods or services to be procured, when submitting bids or offers for contracts to be awarded under the general small business authorities. However, while there are potentially severe penalties for misrepresentation of size and other entities may generally protest firms' size, self-certifications are not necessarily closely scrutinized. SBA regulations provide that\nA contracting officer may accept a concern's self-certification as true for the particular procurement involved in the absence of a written protest by other offerors or other credible information which causes the contracting officer or SBA to question the size of the concern.", "Agencies can also contract with ANC-owned firms, although not necessarily ANCs themselves, under the authority of Section 8(a) of the Small Business Act of 1958, as amended. Section 8(a) generally authorizes set-asides and sole-source awards to \"socially and economically disadvantaged small business concerns,\" which include firms at least 51% owned and unconditionally controlled by ANCs, Indian tribes, Native Hawaiian Organizations (NHOs) or Community Development Corporations (CDCs). Contracts whose value is at or below the so-called \"competitive threshold\" ($4 million, $6.5 million for manufacturing contracts) may generally be awarded on a sole-source basis, without the competition among 8(a) firms that would result if the contract were set aside. Contracts whose value exceeds the competitive threshold, in contrast, generally must be set-aside for competitions in which all 8(a) firms may compete unless there is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price. See Figure 1 .\nHowever, agencies also have special authority to make sole-source awards to ANC- or other group-owned firms under Section 8(a) in circumstances when they could not make awards to individually owned 8(a) firms (e.g., when the contract exceeds the \"competitive threshold,\" and there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price). Because this authority does not derive from the Competition in Contracting Act (CICA), such awards were not subject to the same requirements regarding justifications, approvals, and notices as other sole-source awards prior to enactment of the National Defense Authorization Act (NDAA) for FY2010. The NDAA for FY2010 changed this by requiring justifications, approvals, and notices for sole-source contracts in excess of $20 million (base plus all options) awarded under the authority of Section 8(a) similar to those required for sole-source contracts awarded under the general contracting authorities. However, justifications, approvals, and notices are still not required for sole-source contracts valued at between $4 million ($6.5 million for manufacturing contracts) and $20 million awarded under the authority of Section 8(a).\nWhile agency discretion in determining whether to procure particular goods or services under the authority of Section 8 (a) is fairly broad, detailed statutory and regulatory requirements govern firms' eligibility for and participation in the 8(a) Program. The places where the statutory or regulatory requirements pertaining to contracting with ANC-owned firms differ from the general 8(a) requirements have attracted the most scrutiny from those concerned about the alleged \"special procurement advantages\" of ANC-owned firms. These places are briefly summarized in Table 1 , while a separate report explains the general 8(a) requirements in more detail.\nANC-owned firms are, however, subject to other requirements governing eligibility for and participation in the 8(a) Program, including requirements that they (1) be small under the SBA's size standards, (2) be businesses under the SBA's definition, (3) be unconditionally owned and substantially controlled by their owner (i.e., the ANC), (4) possess good character, (5) demonstrate potential for success, and (6) obtain increasing percentages of their income from non-8(a) sources in their final five years of participation in the 8(a) Program. ANC-owned firms must also apply to participate in the 8(a) Program like other firms. This application form is somewhat different from that used by individually owned firms, but requires similarly extensive supporting documentation concerning company personnel, corporate organization, financial status, and company operations. ANC-owned firms must also submit an \"8(a) Annual Update\" like other 8(a) firms. This update requires additional documentation much like that submitted with applications to the 8(a) Program. Careful review of this documentation could potentially disclose some of the alleged problems with ANC-owned 8(a) firms, such as joint ventures to which the ANC-owned firm contributes nothing beyond its eligibility for 8(a) contracts. However, a November 2008 GAO report questioned whether SBA's resources are adequate for thorough reviews of 8(a) firms, and a January 2012 GAO report opined that SBA \"cannot implement\" its new rules (discussed below) intended to strengthen 8(a) firms' role in any joint ventures using currently available information.", "Several authorities governing contracting with ANCs and their subsidiaries are located in statutes and U.S. Code sections pertaining to Native Americans, rather than those pertaining to contracting or small business. These provisions create incentives for agencies to contract with ANCs or their subsidiaries by, for example, allowing contracts with \"large\" ANCs to count toward federal prime contractors' goals for subcontracting with small businesses.", "Federal prime contractors are eligible for so-called \"bonuses\" equal to \"5 percent of the amount paid, or to be paid, to a subcontractor\" when they subcontract with ANCs or ANC-owned firms, among others. Congress authorized such bonuses in 1988, in part, because of concerns that federal prime contractors had less incentive to use Indian-owned subcontractors than other minority-owned subcontractors because of the geographical \"remoteness of [Indian] reservation[s].\" Congress also appropriated funds for the Department of Defense (DOD), in particular, to pay subcontracting bonuses. The amount appropriated remained constant at $8 million per year between FY1989 and FY2006, and was increased to $15 million per year during the 110 th Congress. Other agencies have not received similar appropriations to pay subcontracting bonuses, but have the same statutory authority to pay them that DOD has.\nTo be eligible for a bonus, the prime contractor must\nuse its best efforts to give Indian organizations and Indian-owned economic enterprises … the maximum practicable opportunity to participate in the subcontracts it awards to the fullest extent consistent with efficient performance of its contract.\nContracting officers and contractors may generally rely on subcontractors' representations regarding their eligibility as Indian organizations or Indian-owned economic enterprises unless an interested party challenges their eligibility, or the contracting officer has independent reason to question it. Any challenges are referred to the Bureau of Indian Affairs for eligibility determinations.", "Subcontracts awarded by federal prime contractors to ANCs or their subsidiaries count toward contractors' goals for subcontracting with small businesses and \"small disadvantaged businesses\" even if the ANC or ANC subsidiary is large or not certified as \"disadvantaged\":\nSubcontracts awarded to an ANC or an Indian tribe shall be counted towards the subcontracting goals for small business and small disadvantaged business (SDB) concerns regardless of the size or Small Business Administration certification status of the ANC or Indian tribe.\nSection 8(d) of the Small Business Act, as amended, requires federal agencies to negotiate subcontracting plans with the apparently successful bidder or offeror on eligible prime contracts prior to awarding the contract. These subcontracting plans establish goals for the value of subcontracts that prime contractors should award to small businesses and small disadvantaged businesses, among others. A contractor's failure to comply with its subcontracting plan constitutes a material breach of the contract, potentially allowing the agency to terminate the contractor for default. The contractor could also potentially be required to pay liquidated damages.\nOther firms must qualify as \"small\" under the SBA regulations for subcontracts with them to count toward contractors' goals for subcontracting with small businesses or small disadvantaged businesses (SDBs). Moreover, until October 3, 2008, other firms had to be certified SDBs for subcontracts with them to count toward contractors' goals. All 8(a) firms were deemed to be SDBs, but other firms at least 51% unconditionally owned and controlled by socially and economically disadvantaged individuals or groups could also obtain certification.", "The same statute that allows subcontracts with large or uncertified ANCs or ANC affiliates to count for purposes of contractors' subcontracting goals for small businesses also enables large ANCs or ANC affiliates to qualify as \"small disadvantaged businesses\" for certain contracts funded by the Department of Transportation (DOT), provided that they obtain the necessary certifications. The Transportation Equity Act for the 21 st Century (TEA-21) originally required that\nnot less than 10 percent of the amounts made available for the program under titles I, III, and V of this Act shall be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals.\nHowever, later regulations, promulgated in response to court cases challenging the constitutionality of \"quotas\" for minority firms, construe \"10 percent\" as an \"aspirational goal at the national level,\" which \"does not authorize or require recipients to set overall or contract goals at the 10 percent level, or any other particular level, or to take any special administrative steps if their goals are above or below 10 percent.\"\nAllowing large ANCs and their affiliates to qualify as small disadvantaged businesses for purposes of DOT contracting goals is potentially significant for two reasons. First, \"small business\" arguably has a narrower meaning under TEA-21 than it does under the Small Business Act, which could render some non-ANC-owned firms that might otherwise qualify as \"small\" ineligible for the DOT program. Second, \"small disadvantaged businesses\" under TEA-21 include women-owned firms, which could place the collective interests of women-owned small businesses more directly at odds with those of ANC-owned firms than is the case when individual women-owned firms participate in the 8(a) Program or are designated as small disadvantaged businesses for SBA programs. Women are not among the groups presumed to be socially disadvantaged for purposes of SBA programs, and small businesses owned and controlled by women are eligible for such programs only when individual women owners prove by a preponderance of the evidence that they are socially disadvantaged.", "The Department of Defense (DOD) can contract out functions performed by government employees to ANCs or ANC-owned firms without going through the competitive sourcing process normally required under Office of Management and Budget (OMB) Circular A-76. OMB Circular A-76, along with its four attachments, generally sets forth guidelines and procedures for determining whether an activity should be performed in-house by the agency with government personnel or contracted-out to the private sector. Beginning in the early 1980s, a series of appropriations riders and permanent laws affected DOD's use of the A-76 process. While most of these enactments in some way limited DOD's ability to contract out functions using the A-76 process, one rider attached to every DOD appropriations act since 1989 has permitted DOD to avoid the A-76 process and its restrictions on outsourcing by contracting functions out to firms owned by ANCs, Indian tribes, or NHOs.\nThe original version of this rider generally restricted outsourcing using the A-76 process, but exempted so-called \"direct conversions\" to \"qualified firm[s] under 51 percent Native American ownership,\" among others. Such firms included those owned by ANCs, Indian tribes, or individual Native Americans. The 106 th Congress later made two modifications to this provision. First, it exempted direct conversions to \"qualified firms\" from requirements concerning federal employee comments and congressional notification codified in 10 U.S.C. §2461(b)-(c), as well as from the A-76 process codified in 10 U.S.C. §2461(a). Second, while it maintained the exemption for direct conversion to firms owned by ANCs and Indian tribes, it removed the exemption for direct conversions to firms owned by Native American individuals and replaced it with one for direct conversions to NHO-owned firms. The exemptions for direct conversions remained unchanged since the 106 th Congress.\nHowever, while these appropriations riders allowed DOD to avoid the A-76 process when contracting out functions to ANCs or ANC-owned firms, they did not authorize DOD to make noncompetitive awards to such entities. For this reason, DOD has used the authority to make sole-source awards above the competitive threshold to ANC-owned firms codified in Section 8(a) of the Small Business Act in conjunction with its authority under the appropriations riders.", "Members of the 112 th Congress have introduced legislation ( H.R. 598 , S. 236 ) that would remove all the \"special rules\" for contracting with ANC-owned 8(a) firms described in Table 1 and subject ANC-owned firms to eligibility and other requirements like those to which individually owned 8(a) firms are subject. The proposed legislation would accomplish this, in part, by amending the Alaska Native Claims Settlement Act (ANCSA) so that ANCs are no longer deemed to be socially or economically disadvantaged for purposes of Sections 7(j) and 8(a) of the Small Business Act. It would also amend the definition of \"Indian tribe\" contained in Section 8(a)(13) of the Small Business Act so that ANCs no longer constitute \"Indian tribes\" for purposes of the 8(a) Program. By doing so, H.R. 598 and S. 236 would preclude ANCs from receiving sole source awards in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of the Business Opportunity Development Reform Act (BODRA) of 1988. Section 602(a) of BODRA currently provides that the \"competitive thresholds\" contained in Section 8(a) of the Small Business Act do not apply to entities defined as \"Indian tribes\" in Section 8(a). Excluding ANCs from Section 8(a)'s definition of \"Indian tribe\" would, thus, subject them to the competitive thresholds, as well as require that all affiliations of ANC-owned firms count when the firms' size is determined and that an ANC may participate in the 8(a) Program only one time.\nThe proposed legislation would also amend Section 8(a) to (1) prevent ANC-owned firms from receiving additional sole-source awards when the total amount of competitive and sole-source awards they have received in any year exceeds the total amount of competitive and sole-source awards that individually owned firms may receive (currently, $100 million); (2) prohibit the SBA from exempting ANC-owned firms from any time limitations on participation in the 8(a) Program to which individually owned 8(a) firms are subject; and (3) require ANCs to report annually to the SBA on their total revenue, the amount of this revenue attributable to the 8(a) Program, and the \"total amount of benefits paid to shareholders.\" H.R. 598 and S. 236 would also require the SBA to amend the regulations for the 8(a) Program so as to preclude SBA from waiving the requirement that the management and daily business operations of ANC-owned firms be controlled by one or more socially and economically disadvantaged individuals; prohibit ANCs from conferring eligibility to participate in the 8(a) Program on more than one firm at a time; and preclude ANC-owned 8(a) firms from acquiring ownership interests in other 8(a) firms that exceed the ownership interests that individually owned 8(a) firms may acquire.", "On February 11, 2011, SBA amended its rules to change certain eligibility and other requirements pertaining to the 8(a) Program. Several of these changes apply specifically to ANC-owned firms. Under the new rules, ANC-owned 8(a) firms (1) may not receive a sole-source 8(a) contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by a firm owned by the same ANC; (2) must report annually to the SBA on the benefits provided to Alaska Natives from the ANC's participation in the 8(a) Program; and (3) may be found to have potential for success if the ANC pledges to use its resources to support the firm and to not allow the firm to cease operations. The rule also generally prohibits non-8(a) firms that form joint ventures with 8(a) firms to perform sole-source contracts in excess of $4 million ($6.5 million for manufacturing contracts) from serving as subcontractors (at any tier) on the contract. In addition, the rule indicates that it is the SBA's policy to have ANC-owned firms' applications for the 8(a) Program processed at the San Francisco Division of Program Certification and Eligibility whenever possible. These applications had previously been processed in the Anchorage District Office.\nThese changes generally took effect on March 14, 2011, although the SBA has delayed implementation of the requirement that ANCs report on the benefits provided to Alaska Natives through their participation in the 8(a) Program." ], "depth": [ 0, 1, 1, 2, 3, 2, 3, 3, 2, 3, 3, 3, 3, 1, 2, 2, 2, 2, 3, 3, 3, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full", "", "", "", "", "", "", "", "", "", "", "", "h0_full h2_title h1_title", "h1_full", "h2_full h1_full", "h0_full h2_full h1_full", "h0_full", "", "", "", "", "", "" ] }	{ "question": [ "Why has interest increased regarding ANCs?", "How can the federal government contract with ANCs?", "What determines which agency is used for each scenario?", "What role do ASPA and FPASA play in contracting with ANCs?", "To what extent are contractors regulated compared to the Small Business Act?", "How do contract awards with ANCs differ from the traditional contract process?", "What does the Small Business Act say about ANC contracts?", "What qualifies a business for special contracting under the Small Business Act?", "How does Section 8(a) provide 8(a) firms with special contract opportunities?", "How does Section 8(a) authorize sole-source contract awards?", "To what extent do sole-source contracts need to be justified and approved?" ], "summary": [ "The widely reported increase in federal contract dollars awarded to Alaska Native Corporations (ANCs) and their subsidiaries in recent years has generated congressional and public interest in the legal authorities that govern contracting with these entities.", "Currently, federal agencies may contract with ANCs or their subsidiaries under several different statutory authorities. These include (1) the Armed Services Procurement Act (ASPA) and the Federal Property and Administrative Services Act (FPASA); (2) Section 8(a) of the Small Business Act; and (3) Section 15 of the Small Business Act.", "The identity of the procuring agency and the size of the ANC or ANC-owned firm, in part, determine which authority is used in particular circumstances.", "ASPA and FPASA, for example, generally give defense and civilian agencies, respectively, broad authority to contract with any qualified, responsible source, including ANCs and their subsidiaries.", "Contractors do not need to be \"small\" in size, or for-profit entities, as they generally must be to receive contracts under the Small Business Act.", "ASPA and FPASA also authorize agencies to make sole-source awards in certain circumstances (e.g., unusual and compelling urgency), although such awards must be justified in writing and approved by agency officials.", "Two sections of the Small Business Act also permit contracts with certain ANCs or their subsidiaries.", "Section 8(a) of the act authorizes agencies to contract with small businesses owned and controlled by socially and economically disadvantaged individuals or groups participating in the \"8(a) Program.\"", "Under Section 8(a), agencies may conduct competitions in which only 8(a) firms may compete (i.e., set-asides), as well as make sole-source awards in circumstances where such awards would not be permitted under ASPA or FPASA. 8(a) contracts valued in excess of $4 million ($6.5 million for manufacturing contracts) must generally be competed among 8(a) firms.", "However, Section 8(a) authorizes sole-source awards of such contracts to 8(a) firms if (1) the contracting officer does not reasonably expect that at least two 8(a) firms will submit offers at a fair market price; or (2) the Small Business Administration accepts the requirement on behalf of an 8(a) firm owned by an ANC or other disadvantaged group.", "Sole-source contracts under the authority of Section 8(a) historically did not need to be justified or approved. However, since 2009, agencies have been required to justify and obtain approval for sole-source 8(a) contracts valued in excess of $20 million (base plus options)." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, 0, -1, -1, 3 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 2 ] }
CRS_R43383	{ "title": [ "", "Background", "Providing Security During the Games", "Terrorist Incidents in Past Olympics", "Recent Terrorist Incidents Related to the Games", "Russian Security Preparations for the Games", "Russian Arrangements for International Security Cooperation", "U.S. Government Security Support for the Sochi Games", "Other International Assistance", "Human Rights Issues", "Implications for Russia", "Implications for U.S. Interests", "Concerns About Threats to U.S. Athletes and Visitors and About Bilateral Security Cooperation", "Concerns About Human Rights", "Other Concerns About U.S.-Russia Relations" ], "paragraphs": [ "This report will focus on security and human rights issues. Other issues, such as environmental concerns or those associated with the preparations of the U.S. athletes, are not addressed.", "In July, 2007 the International Olympic Committee (IOC) announced that Sochi, Russia had been selected as the host city for the XXII Olympic Winter Games. The Games, which will be held February 7-23, 2014, are the first to be hosted by Russia as a successor state to the former Soviet Union. It is expected that approximately 2,900 athletes from some 88 countries will participate in 15 Olympic Games disciplines at two main locations: a coastal cluster along the Black Sea and a mountain cluster in the Krasnaya Polyana mountains. (See Figure 1 .) Previously, Moscow had hosted Olympic Summer Games in 1980. Moscow had been a candidate city for the 1976 and 2012 Summer Olympics, but was not selected for either of those games.\nSecurity is one of the evaluation factors in the selection of a city to host either the winter or summer Olympic Games. Stage I of the selection process concludes with the IOC's acceptance of three cities as candidate cities. The three candidate cities for 2014—Pyeongchang, South Korea; Salzburg, Austria; and Sochi, Russia—were required to complete the IOC's candidature questionnaire and obtain the required guarantees. Theme 12 of the questionnaire involved security and included 15 sets of questions; a table for describing the experience of a candidate city (and its region and nation) in organizing security for major international events; and two security guarantees. Under the latter guarantees, \"the highest government authority,\" as well as relevant local officials, pledge \"the safety and the peaceful celebration of the Olympic and Paralympic Winter Games.\"\nThe IOC Evaluation Commission, which is appointed by the President of the IOC, reviewed the candidate cities' completed questionnaires and related materials and issued a report to the IOC. The IOC 2014 Evaluation Commission Report described each candidate city's plans for hosting the 2014 games. Regarding Sochi's bid and the subject of security, the commission noted that the \"Government of the Russian Federation ... guaranteed that it would bear the full responsibility and cost of security for the preparation and staging of the Olympic and Paralympic Games.\" The IOC Evaluation Commission also commented that the Russian police force has \"excellent experience in hosting major international and sports events,\" including in Sochi. The IOC called for Russia to set up an Olympic Security Steering Committee at ministerial level to provide strategic policy and guidance and an Olympic Security Task Force, supported by a \"dedicated multi-agency Olympic Security Coordination Center,\" to be established for security planning and delivery.\nAnother aspect of the IOC's 2014 Candidature Procedure and Questionnaire involves the recommitment of the prospective hosts to the organization's Code of Ethics. The code's preamble states, in part, that the Olympic parties shall uphold the Olympic Charter and in particular its fundamental principles. The Olympic Charter contains seven fundamental principles of the Olympics. Two principles address discrimination. Principle 4 notes that \"[t]he practice of sport is a human right. Every individual must have the possibility of practicing sport, without discrimination of any kind and in the Olympic spirit, which requires mutual understanding with a spirit of friendship, solidarity and fair play.\" Principle 6 reads as follows: \"Any form of discrimination with regard to a country or a person on grounds of race, religion, politics, gender, or otherwise is incompatible with belonging to the Olympic Movement.\"\nIn his personal appeal in early July 2007 for the IOC to permit Russia to host the 2014 Winter Olympics in Sochi, President Putin pledged that Russia would ensure that athletes and visitors have as safe and pleasant a stay as possible. As preparations for the Games were being finalized, President Putin emphasized on January 17, 2014, that the Games would display Russia's \"new face and its possibilities,\" demonstrate that the country can successfully hold such an event, show that it has improved its economic and military power and prowess in sports, and boost its development and international relations. He argued that the major reasons for hosting the Olympics in Sochi included developing the southern area as a resort for foreign visitors and vacationing Russians (so they would not need to travel abroad); building training facilities for Russian athletes to replace those lost after the breakup of the Soviet Union; and encouraging sports and health among Russians.", "", "The threat of terrorism has been an increasing concern at Olympic Games. Three Olympic Games have been the target of terrorist actions, the most deadly of which occurred in1972, at the Summer Games in Munich, when members of the Palestinian group Black September killed two members of the Israeli Olympic team and took nine others hostage. The remaining hostages were subsequently killed during a clash between the terrorists and law enforcement authorities. In 1992, a Basque separatist group threatened an attack on the Barcelona Summer Games, but it never materialized. The Centennial Olympic Park, a venue at the 1996 Atlanta Games, was the site of a bombing that killed one person and injured 100.", "Since the breakup of the Soviet Union and the formation of Russia, ethnic conflict has been most intensive in the North Caucasus area, the site of the Sochi Olympics. Most of this violence has taken place during two active conflicts in Chechnya in 1994-1996 and 1999-2003, although since then low-level insurgency has continued throughout the North Caucasus and occasionally elsewhere in Russia. Krasnoyarsk Kray, where Sochi is located, was not a battleground during the Chechnya conflicts, but has suffered from some terrorist attacks. According to the U.S. government's Open Source Center, there were 5,472 terrorist incidents in Russia over the past five years, averaging about 2-3 per day, with a decline from 1,381 in 2009 to 741 in 2013. Over this period, 1,672 security personnel and civilians were killed, along with 1,921 suspected terrorists. The bulk of these incidents and deaths were in the North Caucasus, and Russia's Dagestan republic has become a locus of incidents and deaths, as well as a source of attacks in other areas of Russia (see below).\nSochi was historically the capital of an area populated by the Circassians (encompassing the Adyghes, Kabardians, Shapsugs, and Cherkess), peoples of the North Caucasus who speak dialects of the Circassian language. Most Circassians are Sunni Muslims of the Hanafi school. In the mid-19 th century, Russia conquered the area and drove out most of the Circassians, killing hundreds of thousands, according to some accounts. According to the 2010 Russia census, there are about 718,000 Circassians, most residing in the North Caucasian Kabardino-Balkaria and Karachay-Cherkess republics and the Adyghe republic, an enclave in southern Krasnodar Kray, near Sochi.\nThe January 10, 2014, U.S. travel alert (updated on January 24) warns that past terrorist incidents have been broad in range and scope over the past fifteen years, taking place at Russian government buildings, airports, hotels, tourist sites, markets, entertainment venues, schools, and residential complexes. There also have been large-scale attacks on public transportation including subways, buses, trains, and scheduled commercial flights. Although the focus here is on possible terrorist threats to U.S. athletes and visitors, the U.S. travel alert points out that besides terrorist threats, organized crime, protests, and other civil disorders may pose threats.\nRussian officials have stated for several years that there are about 500-1,000 terrorists in the North Caucasus area. Many of these are gathered together in several dozen small groups, most of which are linked to some degree to Chechen terrorist Doku Umarov, the head of the self-proclaimed Caucasus Emirate. Concerns about terrorism related to the Olympic Games were heightened in July 2013, when Umarov called for renewed attacks against civilian targets throughout Russia (he ostensibly had called off attacks in February 2012 just before the presidential election in Russia) and for jihad against the Sochi Olympics. In December 2013, another shadowy group threatened cyber warfare against the Olympic Games for defiling the Circassian homeland. It is uncertain to what extent recent terrorist incidents in the North Caucasus are related to Circassian interests; several prominent Circassian organizations have publicly foresworn violence.\nAmong recent terrorist incidents,\nOn May 10, 2012, Russia's National Anti-Terrorism Committee—NAK; an interagency coordinating and advisory body—announced that Russian and Abkhazian security agents had uncovered a plot by Umarov to launch a large-scale attack at the planned 2014 Winter Olympics in Sochi. Several large stashes of grenade launchers, surface to air missiles, mines, and other weaponry were discovered in Abkhazia (a breakaway region of Georgia bordering the North Caucasus, and recognized as independent by Russia). On October 21, 2013, a female suicide bomber blew up a bus in Volgograd, Russia, in the Southern Federal District which includes Sochi, resulting in seven deaths and over three dozen injuries. Volgograd is about 430 miles northeast of Sochi and is a transportation hub between Moscow and southern Russia, leading to added speculation that the attacks were aimed against the Sochi Olympics. Russian media linked the bomber to the Dagestan jamaat (organization or front), linked to the Caucasus Emirate. This was the first operation by the jamaat since a bombing at Moscow's Domodedovo Airport in January 2011. In mid-November 2013, Russian officials reported that police in Dagestan had killed the bomber's husband and others reputedly involved in the bombing. (See Figure 2 .) On December 27, 2013, three people were killed when a car bomb exploded outside a police building in Pyatigorsk, Stavropol Kray, the administrative center of the North Caucasus Federal District. Six of the presumed terrorists were arrested in Kabardino-Balkariya. (See Figure 2 .) On December 29-30, 2013, two suicide bombings occurred in Volgograd, the first at a rail station and the second on a trolley car. Together they resulted in nearly three dozen deaths and over 100 injuries. On January 18, 2014, a video was released that allegedly showed the two suicide bombers as they planned their attacks. They claimed membership in Ansar al-Sunna, a unit of the Dagestan jamaat. They warned that more attacks would be carried out until Russia permits the North Caucasus region to secede, including a bloody \"present\" for participants and visitors to the Olympic Games. (See Figure 2 .) On January 8, 2014, four cars with the bodies of six men were discovered near villages in southern Stavropol Kray, just southeast of Pyatigorsk. Improvised explosive devices had been placed near the cars, apparently to target police and rescue workers, but only one harmlessly detonated. (See Figure 2 .) On January 12, 2014, a website associated with the Caucasus Emirate published a Fatwa justifying the Volgograd attacks. Citing Osama bin Laden, the Fatwa argued that such attacks were \"essential\" since they \"enraged the infidels,\" who were responsible for Muslim deaths in the North Caucasus and Syria (through Russia's support for the Syrian government). On January 15, 2014, three Russian security officers and four alleged terrorists were killed, and five officers wounded, in a shootout in Dagestan. Russia's National Anti-Terrorism Committee stated that one of the alleged terrorists was responsible for the car bomb attack in Pyatigorsk (see above). On January 21, 2014, Russian police warned that a female terrorist bomber—termed a \"black widow\" in media, from a popular conception that such a suicide bomber was taking revenge for the killing of her husband—had infiltrated Sochi. In another incident, the USOC and Olympic committees in other countries reported receiving letters threatening their athletes if they attended the Games; the letter was later deemed a hoax.\nSeveral analysts have suggested various scenarios for possible terrorist incidents before and during the Games, involving either attacks at Olympic venues or attacks elsewhere in Russia, possibly consisting of hostage-taking, suicide and other bombings, or armed violence. Some analysts have warned that Russian embassies and other interests abroad could be targets, or even countries sending athletes to the Games. There are some reports that Russian authorities have ordered a media ban on reports of terrorist incidents during the Games.", "Ensuring the security of the Games has been a paramount consideration since Sochi was chosen in 2007, and such concerns have influenced the layout and design of facilities built for the Games. Under a December 2007 law and an August 2013 presidential decree, a broad \"controlled\" security zone around the Olympics site was established. Extra inspections and restrictions on individuals and transport vehicles entering and leaving this zone, including air traffic, are authorized beginning in early January 2014. The inspection of mail also is mandated. Along with the Olympics facilities, enhanced security measures are put in place at bridges, railway tunnels, power facilities and grids, schools, hospitals, hotels, restaurants and stores. In addition, sales of firearms and dual use chemicals and other items are banned. Vehicles without special registration are not permitted to enter the zone, and local car owners generally are asked not to drive and to take their cars to parking lots 50 miles from Sochi. Even tighter security pertains for screening Olympic visitors and support personnel at Olympic venues.\nAn additional \"prohibited zone\" bans most access to the area inside Russia's border with Georgia's breakaway Abkhazia, to airspace and waters near the Olympics site, and to a national park. The zones stretch approximately 60 miles along the Black Sea coast and up to 24 miles inland. (See Figure 2 .)\nThe inter-agency \"Operational Headquarters\" providing security includes the Federal Security Service (FSB) as the lead agency, the Interior (police) Ministry, the Emergencies Ministry, the Defense Ministry and other bodies. Military personnel in the zone are in combat readiness. According to reports, among the tens of thousands of forces providing security (variously stated by Russian officials to number up to 100,000) are 22,000 military troops using 2,000 vehicles and 72 aircraft, 40,000 police, 8,900 Emergency Ministry personnel with 1,600 vehicles, and an unreported number of FSB personnel. To assist police in providing security, several hundred Cossacks (traditional militia forces) are deployed. According to some estimates, the number of Russian security personnel deployed at the Games is much greater than that provided for the London Summer Olympics.\nThe Operational Headquarters has organized myriad exercises to test security. One exercise in November 2013 included 7,000 military, Interior Ministry, and FSB troops and involved thwarting a hypothetical large-scale hostage incident at a hospital.\nAmong other security measures, special troops are patrolling the mountain areas, speed boats are safeguarding coastal areas, sonar is protecting against underwater threats, and space satellites, unmanned aerial vehicles, and dirigibles are monitoring from the air. Air defense missile batteries also have been deployed. All electronic transmissions reportedly are subject to possible interception, and several thousand cameras are monitoring Olympics sites. The Black Sea Fleet's small missile ship Ivanovets and missile boat Shtil have been redeployed to the coastal area.\nAccording to some reports, the heavy attention to security in the zone around Sochi has contributed to reduced counter-terrorism efforts elsewhere, which Putin aimed to address with his order at the end of 2013, after new bombings in Volgograd, Russia, that security be boosted throughout Russia.", "In November 2013, Russian General Oleg Syromolotov, head of the Operational Headquarters and the Deputy Director of the counter-intelligence branch of the FSB, reported that representatives of the intelligence services of dozens of countries would attend the Games as part of their national delegations. He indicated that the Operational Headquarters had facilitated cooperation with these intelligence organizations since 2011 with the creation of an expert group that had met several times in Sochi, and that cooperation had included exercises at sports facilities in Sochi. President Putin reported in early September 2013 that Russia had agreements with the United States and several European countries on cooperation on Olympic security. On January 17, 2014, he stressed that security personnel from several countries were represented at the Operational Headquarters and thanked \"all our partners from ... the United States, Europe, and Asia who actively cooperate with their Russian law enforcement and special services' counterparts.\"", "The Department of State's Diplomatic Security Bureau (DS) is formally the head of U.S. government security support for the Games (as it has been for prior Olympics and other major international events such as the World Cup, and other events attended by Heads of State). The State Department's responsibility for the protection of Team USA during major international events was formalized through a Memorandum of Understanding with the U.S. Olympic Committee in November 2010.\nWashington-based interagency coordination for the Sochi Games has been channeled through the International Security Events Group (ISEG), the standing Washington-based coordination mechanism for major international events such as the Olympic Games. It consists of some 20 federal law enforcement and security agencies and offices \"responsible for the interagency security and law enforcement community's long range security planning, coordination, and implementation for major events overseas.\" Under the leadership of the Bureau of Diplomatic Security's Major Events Coordination Unit, the ISEG's purview includes coordination and U.S. government liaison, as well as supporting host nation efforts in counterterrorism, security, crisis management planning and intelligence sharing.\nAgencies participating in ISEG include the Departments of State, Homeland Security, Defense, Energy, Justice (including the FBI), and intelligence community representatives (including the National Counter-terrorism Center and the Central Intelligence Agency), among others. Besides the State Department's Bureau of Diplomatic Security, other State Department units also contribute. For example, State's Counterterrorism Bureau chairs two Subcommittees of the ISEG, including one which assesses events with an eye to ensuring adequate preparations are made for potential crisis response by the U.S. government, in particular the potential deployment of the Foreign Emergency Support Team (FEST).\nWhile the ISEG is chaired by State's Bureau of Diplomatic Security, the White House announced on January 23 that Lisa Monaco, the President's Homeland Security and Counterterrorism Advisor and Deputy National Security Advisor, was leading \"a White House and interagency coordination body to ensure that the full resources of the U.S. government are aligned in support of our athletes, delegations, and Americans attending the Olympics.\" It is not clear if the announcement was referring to ISEG specifically, or an additional coordination mechanism.\nAmong the most visible steps taken by the Department of State in advance of the Games was the January 10, 2014 Travel Alert it issued to the public (updated on January 24). The alert recommended that, while \"there is no indication of a specific threat to U.S. institutions or citizens,\" travelers should be aware of their surroundings and exercise prudence. Department officials pledged to immediately communicate information regarding any \"specific and credible threat\" to the public through Embassy Moscow's website and the Department's travel website.\nWhile the State Department and other ISEG member agencies have been engaged in planning for the Sochi games since their first visit there three years ago, Department of State officials emphasize that Russian authorities will maintain responsibility for overall security for the Games and for meeting International Olympic Committee security standards, and that U.S. Diplomatic Security agents will be in Russia in order to liaise with Russian security and law enforcement.\nU.S. plans for Sochi, developed through coordination with Embassy Moscow and Russian officials, include a security concept of operations spanning more than 20 U.S. government agencies. As part of that effort, the DS Bureau designated an Olympic Security Coordinator, who oversees the U.S. government security footprint and has been in Sochi since August 2013; and an Olympic Coordination Officer, whose role is to coordinate with the U.S. Embassy in Moscow and the official U.S. delegations.\nThe State Department has also established an inter-agency Sochi Olympic Coordination Office, which is responsible for coordinating all U.S. Government operations in support of the Games. The Office seeks to ensure the provision of appropriate assistance and protection to \"U.S. athletes, businesses, facilities, citizens, and other U.S. Government interests.\" The office also serves as the primary Sochi-based conduit for information or assistance requests between Russian authorities and the U.S. Government.\nAt least one Diplomatic Security agent will be present at each Olympic venue and all three Olympic villages, and will act in a liaison role between Team USA and Russian security authorities, as agreed with Russian authorities. The DS agents serve in a liaison role with other American citizens in Sochi as well. U.S. personnel will man a Joint Operations Center, which will serve as an information hub, and use the standing Overseas Security Advisory Council (OSAC) to provide information to American businesses and subscribers.\nIn order to serve the needs of the approximately 10,000 U.S. citizens who are expected to attend the games, the Olympic Coordination Office will also include members of the U.S. Embassy's American Citizens Services (ACS) unit during the Olympic and Paralympic Games to provide a range of services (such as assistance to citizens incarcerated abroad, or with lost or stolen passports) to U.S. citizens in need.\nIt appears these efforts are in line with steps taken by the Diplomatic Security Bureau to secure past Olympic games. At the London Summer games in 2012, State reported that DS deployed three Olympic security coordinators and more than 75 DS agents and established a multi-agency Joint Operations Center (JOC) as well as a Threat Integration Center. It also provided six members of its Office of Intelligence and Threat Analysis to assess and disseminate threat information. For the Vancouver Winter games in 2010, State reported that the Bureau oversaw a 150-member interagency team providing security and established and staffed a Joint Operations Center as well as an Olympic Coordination Center. DS special agents were also present at competition venues and athletic villages.\nAmong other agencies reportedly participating in ISEG efforts to ensure the safety of the U.S. Olympic team, the Director of the FBI stated that his agency \"would deploy 'at least a couple dozen people in Moscow and maybe a smaller number but still a dozen or more people of different specialties' in Sochi.\" USA Today reported that the State Department's Bureau of Diplomatic Security held a briefing in early January 2014 for the national governing bodies (NGBs; covering skiing and snowboarding, figure skating, biathlon, bobsled and skeleton racing, curling, hockey, luge, and speedskating) .\nGeneral Martin Dempsey, the Chairman of the Joint Chiefs of Staff, met with Russia's Chief of the General Staff, General Valery Gerasimov, on January 21, 2014 in Brussels, to discuss military-to-military cooperation. The Defense Department reported that General Gerasimov stated that the armed forces were supporting the Olympics by providing air and maritime defense, chemical and biological warfare defense, backup medical support, and management and protection of the electronic spectrum. The Defense Department also reported that Gerasimov had expressed interest in U.S. technology for countering improvised explosive devices (IEDs), and that the United States would share technical information, hopefully in time for the Games.\nOn January 23, 2014, Defense Department Press Secretary John Kirby reported that General Philip Breedlove, Commander of European Command, would be in charge of military contingency operations in case U.S. military assets were requested by the State Department and approved by Russia during the Sochi Olympics. He also verified that the U.S. Navy was moving two ships to the Black Sea as a contingency. Reportedly, some U.S. aircraft in Germany also are being made available for possible evacuations.\nSome private companies may be involved in providing security at Sochi. For example, the company Global Rescue will provide support to the U.S. Ski and Snowboard Association (USSA) at the 2014 games, as it did previously for the USSA at Turin, Italy (2006 Winter Games) and Vancouver, Canada (2010 Winter Games). According to news reports, another NGB, U.S. Figure Skating (USFS), indicated it has not arranged for a private firm to provide security for its team. It is not known whether the remaining six NGBs (U.S. Biathlon, USA Bobsled and Skeleton, USA Curling, USA Hockey, US Luge, and US Speedskating) have entered into agreements with private companies. However, the Deputy Commissioner of the National Hockey League, which is the source of most, if not all, of the hockey players on the men's U.S. ice hockey team, reportedly said that \"'more than a handful' of league security officials would go to Sochi,\" and added that this approach is no different from what the NHL has done for other Olympic Games.", "Many nations and other entities will provide support to the Sochi Olympics to safeguard the athletes and attendees. While Russia has the lead for security of the Games, and the United States is providing significant support (see above), other nations and organizations are also providing resources and expertise. Representative examples of security-related support to the Sochi Olympic Games include the following (information gleaned from open-source reporting):\nGreat Britain has provided ongoing support to the Russians in the form of engineering and technical expertise with the desire to \"ensure security at the Olympic Games.\" Ukraine has reportedly sent 400 Cossack security professionals to Sochi and \"will take part in maintaining security all the way to the end of the Paralympic Games.\" INTERPOL, the international organization that facilitates police cooperation, is reportedly receiving airline passenger information from the Russian authorities and querying its databases for individuals that pose a threat to the Olympic Games. Israeli and Austrian consulting companies have been identified as providing \"security at the Winter Olympics in Russia under contracts totaling 1 billion Euro.\" At a State Department background briefing on January 24, 2014, an Administration official stated that the \"Five Eyes\" intelligence agencies (of the United States, Great Britain, Australia, New Zealand and Canada) were closely coordinating their efforts related to the Sochi Olympics.", "Since the 2007 selection of Sochi as the site of Olympic Games, many observers have raised concerns about the protection of human rights of athletes and visitors to the Games, the residents of Sochi and its environs, workers involved in the construction process, and other groups. Concerns also have been raised about alleged restrictions on media reports about problems in Sochi. Authorities in Russia have maintained that the rights of Sochi's residents and construction workers have been respected in the main, and that the government has moved to investigate and prosecute abuses.\nPossible restrictions at the Olympic Games that may violate the human rights of visitors or even athletes include intrusive electronic surveillance such as the monitoring of cell phone calls and Internet transactions; extensive video surveillance of movement into and out of Olympic sites; the gathering of personal data in order to obtain tickets to events; and restrictions on transportation into and out of the Sochi area. President Putin and other Russian officials have stressed that such restrictions will be at the minimal level that will guarantee reasonable security for the Games. In October 2013, one official of the Federal Security Service (FSB; a successor to the Soviet KGB) rejected suggestions that limiting transportation access amounted to a human rights violation, asserting that Sochi \"will in no way resemble a concentration camp.\" On January 17, 2014, Putin pledged that security measures would not be so intrusive or conspicuous that they would foster anxiety among participants in the Games.\nAt the end of June 2013, Putin signed a law amending a law on the protection of children from harmful information by adding fines for individuals and organizations that propagandize \"non-traditional sexual relations,\" which Russian policymakers said referred to homosexuality. The law prohibits propaganda presenting the \"attractiveness of non-traditional sexual relations, a distorted picture of the social equivalence of traditional and non-traditional sexual relations, or [information] causing interest in such relationships.... \" The law also calls for arresting and deporting foreigners who engage in such propaganda, raising concerns among some LGBT (lesbian, gay, bisexual, or transgender) individuals and organizations that they may be targeted if they travel to Sochi.\nResponding to international concerns over the law, including the possible impact on the Olympics, in early September 2013 President Putin asserted that \"Russia will strictly stick to the Olympic principles which forbid any kind of discrimination [against] people on any basis.\" He claimed that the law only was aimed to block propaganda that might encourage minors to make choices that would result in fewer births in Russia. On January 17, 2014, Putin favorably compared the law to those in other countries that he claimed criminalized homosexuality and even imposed death sentences. He argued that in 1980 the Soviet Union was one of these countries, but Olympic Games nonetheless were held there. He claimed that four U.S. states have such laws, and that many U.S. citizens support criminalization, but that he would not argue against holding international sports events in those states. He claimed that criticism of the law was part of Western efforts to restrain Russia's development and violated the Olympic spirit of building new bridges of interstate relations. He termed such criticism support for pedophilia and appeared to suggest that the law would be applied to those attending the Sochi Games.\nOther human rights problems have included those faced by residents of the Sochi area, in particular the confiscation of property without due process and adequate compensation, the harassment of activists protesting against the construction process and results, and other restrictions on assembly, speech, and movement before and during the Games. Various decrees and laws have limited local rights, including a 2006 federal program for the development of Sochi, a 2007 law granting the president wide control over public safety in Sochi, and provisions in 2007 establishing a state corporation to carry out much of the construction. Some residents of the Sochi area reported that they received inadequate compensation when their homes were demolished. In some alleged cases, individuals who openly protested and refused to relinquish their properties suffered when the properties were forcibly seized and no compensation was given. Local authorities allegedly have attempted to prevent journalists from reporting such cases. In the latter part of 2013, media reported that security services were making efforts to investigate and expel non-residents and other persons deemed undesirable from the Sochi area. In January 2014, civic activists and a defense lawyer in Sochi reported that they were put on a list of individuals \"inclined to extremist activity\" and were required to fill out police forms.\nPresident Putin issued a decree in August 2013 that banned protests and demonstrations in the Sochi area for the duration of the Games and Paralympics. On January 4, 2014, Putin eased the ban by permitting protests and demonstrations not related to the Olympics to be held in a small village about seven miles from the nearest site of the Olympic Games. However, it was required that such actions had to be approved by Sochi city officials and regional offices of the FSB and Interior Ministry. Critics voiced doubts that approvals would be forthcoming.\nAmong other human rights abuses associated with building in Sochi, several observers have alleged that the working and living conditions for many of the tens of thousands of workers employed at Olympic construction sites have not met humane standards. Hundreds of complaints have been reported by labor migrants from Armenia, Kyrgyzstan, Serbia, Tajikistan, Ukraine, and Uzbekistan to the Sochi office of Russia's Memorial human rights organization, including nonpayment or underpayment of wages, failure to provide or abide by labor contracts, and retaliation for complaining.", "Many observers argue that President Putin seeks to demonstrate at the Sochi Olympic Games that Russia is a modern, developed country and that it has control over the restive North Caucasus. They also maintain that Putin's preeminent leadership role in bringing the Games to Sochi makes them a referendum on his rule. A successful Olympics would further bolster Putin's authority in Russia, while a less-successful performance might give impetus to challenges to his rule from his political opposition and counter-elite groups, according to these observers. Some of these observers also suggest that successful Games might encourage Putin to widen civil and human rights while unsuccessful Games might result in a further crackdown. A few observers argue that regardless of the outcome of the Games, the heightened security and attendant human rights restrictions being honed in Sochi and elsewhere during the Games constitute a \"testbed\" for perpetuating restrictions on civil and human rights. They also assert that the Sochi Olympics represents the return of Soviet-type \"mega-projects\" that distort the economy and retard free enterprise.\nThe risks confronting President Putin in holding a successful Olympics include underperforming Russian athletes, technological or logistic failures of the facilities, warm weather, and terrorism that potentially endangers athletes or visitors. Athletes and visitors also might object to heavy security and other burdens that they view as oppressive and punitive. Perhaps to dampen domestic expectations for the Games, Prime Minister Dmitry Medvedev stated in late December 2013, that \"I am not sure that everything will be ideal and smooth [at the Games]. But I do not think that we will have the worst scenario either.\" There are reports that many Russian citizens are either being discouraged or are reluctant to attend Olympic activities, so Russian officials and security forces may constitute the dominant host presence in Sochi.\nPresident Putin's goals for holding the Games in Sochi include bolstering economic development in the North Caucasus, in order to reduce social unrest and inducements to terrorism. In the near-term, however, it appears that bringing the Games to Sochi has been a rallying call for some terrorists and may have increased the terrorist threat faced by Russians (as well as possibly placing Olympic athletes and visitors at risk). Some Russian officials and others have warned that the terrorist threat may be further exacerbated by the return of some Chechens and other Russian citizens from Syria, where they have honed their terrorist combat skills. If terrorists are able to launch attacks during the Games, they may thereafter be able to attract more recruits, funding, and sympathy for their calls for secession of the region from Russia, some observers warn.\nSome critics doubt whether the prestige and putative economic benefits of the Games will bolster regime loyalty in the North Caucasus. They point out that security precautions have inconvenienced residents of the North Caucasus and caution that the opening ceremonies of the Games reportedly emphasize Russian nationalist themes. These critics also argue that while the Sochi area may benefit from plans by the federal government to own and subsidize many facilities after the Games, it is uncertain whether hotels and other infrastructure created for the Games can be sustained by tourism, as Putin suggests. Even if Sochi does prosper after the Games, the federal government's development plan for other areas of the North Caucasus—including for building more sports facilities—does not include similar high levels of investment, some critics argue.\nBesides the issue of whether the Games will boost the regional economy, concerns have been raised about the burden of the Games on the federal budget. Russian authorities have given various estimates of total costs, including expenses for Olympic facilities and costs for regional infrastructure such as power plants and roads. On January 22, 2014, Prime Minister Medvedev reported that total costs amounted to about $50 billion, of which about $6 billion (other officials have specified $6.2 billion) was spent on Olympic facilities and the rest on infrastructure in Sochi and the wider region. Of the amount spent on Olympic facilities, private investment accounts for $3.3 billion, according to Deputy Prime Minister Dmitriy Kozak, but mostly involves loans to entrepreneurs that are guaranteed by the state. He has rejected comparisons of these costs to those incurred by other countries that have held Olympic Games, arguing that most of the expense in Sochi involves building necessary infrastructure that London or Vancouver did not need. However, critics such as oppositionist Aleksey Navalny have alleged that large-scale corruption has inflated costs. In January 2014, President Putin dismissed such allegations, stating that irregularities have been minor and attributable to the vast scale of the construction effort. Russian officials also rejected an alleged comment by an International Olympic Committee member that corruption had inflated costs.\nSince the terrorist bombings at the Boston Marathon in April 2013, the Obama Administration has maintained that U.S.-Russia counter-terrorism cooperation has increased. Some observers, however, suggest that Russian authorities resisted offers from U.S. agencies of substantial counter-terrorism assistance to bolster security at the Games. On January 5, 2014, the state-owned RT ( Russia Times ) network stated that the United States had offered such boosted aid both before and after the terrorist incidents in Volgograd and mentioned statements by FBI Director Comey, Defense Secretary Hagel, and the White House. However, the article reported that \"Moscow insisted that the terrorism threat does not require any additional measures,\" and referred to the statement by the president of the Russian Olympic Committee, Aleksandr Zhukov, that all possible security measures already were in place in Sochi. On January 24, 2014, the Washington Post reported accounts by former FBI agents that Russia had approved only a fraction of the personnel that the FBI had proposed to send to Russia for the Games. On January 22, 2014, Prime Minister Medvedev stated that U.S.-Russia security cooperation for the Games was \"at a good level,\" although perhaps it could have been better, he suggested. Some observers have argued that Russian security services appear unlikely to change their traditional suspicions of U.S. assistance in the days remaining before the Games begin.", "", "In a White House statement after the Volgograd bombings, the Obama administration stated that \"the U.S. government has offered our full support to the Russian government in security preparations for the Sochi Olympic Games, and we would welcome the opportunity for closer cooperation for the safety of the athletes, spectators, and other participants.\" Some observers took this as a subtle suggestion that cooperation with Russian authorities was not as harmonious and comprehensive as it could be. President Obama and President Putin reportedly discussed by phone how best to advance shared U.S.-Russian interests, \"including a safe and secure Sochi Olympics, for which the United States has offered its full assistance,\" according to the White House. On January 24, a senior administration official stressed that \"the full resources of the U.S. Government are aligned in support of our athletes, our delegation, and Americans attending the Olympics\" and that while \"we have seen an uptick in security threats,\" they are \"not unusual for a major international event like this.\" Administration officials have argued that U.S.-Russia security cooperation is adequate for safely holding the Games, but have added that conditions are being monitored and U.S. athletes and the public will be notified if they change.\nSome U.S. athletes, visitors, and others have expressed concerns about the \"uptick\" in terrorism reports. In late January 2014, the USOC recommended that athletes not wear their official clothing outside Olympic venues. U.S. interests at risk could include diplomatic facilities or even the U.S. homeland, according to some observers. Among the U.S. athletes attending the Olympic Games, some have expressed increased worries about terrorist risks. While most athletes and visitors appear confident about the levels of U.S. and Russian security at the Games, some athletes and coaches have stated that they will not take their families to the Games and some visitors reportedly have decided not to attend. If a terrorist incident occurs that endangers U.S. athletes or visitors, some observers have raised questions about whether the quality of liaison between U.S. and Russian officials is sufficient to ensure the evacuation of U.S. citizens. While the Administration has stated that it is closely monitoring conditions and preparing to be ready for contingencies such as evacuation, it could be open to criticism that its travel alert was not more cautious about the safety of athletes and visitors.\nSecurity analysts have expressed a number of other concerns regarding security challenges facing the Sochi games. In Sochi itself, a lack of interconnected roadways could reportedly make emergency response more difficult, as well as creating vulnerable choke points. Regional medical facilities may also be difficult to access by road. Even if the security measures in the immediate area of the games are effective, some analysts warn that the concentration of Russian resources being devoted to the Sochi games may deplete the effectiveness of security efforts elsewhere in Russia, including in major transportation hubs used by U.S. athletes and visitors. Combined with the deterrent effect of the security cordons around Sochi, this may actually make attacks elsewhere in Russia more feasible and therefore more likely. Other concerns include the danger that high levels of corruption may permit terrorists to bribe their way into Olympic venues and the mixed record of Russian security forces in resolving hostage situations or otherwise protecting civilians.\nWhile many security analysts suggest that the addition of security resources from numerous partnering entities could result in a more secure Olympic Games, it is possible that complications could arise in the form of coordinating responses to an actual or perceived event. Security analyst Pavel Baev warns that \"the massive deployment of security personnel of every imaginable kind – from air defense units to Cossack patrols – may inevitably result in dangerous cases of miscommunication, since any minor incident might trigger an entirely disproportionate response.\"\nMembers of Congress have also expressed concerns about these issues. On January 19, Representative Mike Rogers, chairman of the House Intelligence Committee, said that \"[w]e do not seem to be getting all of the information we need to protect our athletes in the Games ... I think this needs to change, and it should change soon.\" Rogers added that Russian officials \"are not giving us the full story about what are the threat streams, who do we need to worry about, are those groups, the terrorist groups who have had some success, are they still plotting?\" In late January, Representative Michael McCaul, chairman of the House Homeland Security Committee, echoed these views, saying \"there are serious concerns, and that we need to do a lot to step up security.\" He warned that even if the \"ring of steel\" around Sochi was effective, attacks could occur \"outside the perimeter—more soft targets, transportation modes.\" He added that while Russia had taken steps to ensure security and was cooperating with the United States on safety measures, such cooperation \"could be a lot better.\" Mr. McCaul visited Sochi on January 20 to discuss security issues with Russian officials.", "In late July 2013, a State Department spokesperson called on Russia to protect the human rights of U.S. citizens attending or participating in the Olympic Games, \"including LGBT persons, and of course, for anyone attending or participating in the Olympics. We are calling on Russia to uphold its international commitments regarding freedom of assembly and association and freedom of expression.\" On December 17, 2013, President Barack Obama announced the names of members of the presidential delegations for the opening and closing ceremonies. Neither delegation includes the President or the Vice President. Janet Napolitano, former Secretary of Homeland Security, will lead the delegation for the opening ceremony, which will also include Michael McFaul, United States Ambassador to Russia; Robert Nabors, Assistant to the President and Deputy Chief of Staff for Policy; Billie Jean King, \"member of the President's Council on Fitness, Sports and Nutrition, member of the International Tennis Hall of Fame, and recipient of the Presidential Medal of Freedom\"; and Brian Boitano, Olympic gold medalist in figure skating. William Burns, Deputy Secretary of State, will head the delegation for the closing ceremonies. He will be joined by McFaul; Bonnie Blair, \"five-time gold medalist and one-time bronze medalist in speed skating\"; Caitlin Cahow, \"Olympic silver medalist and bronze medalist in women's ice hockey\"; and Eric Heiden, \"five-time Olympic gold medalist in speed skating.\" Several members of the presidential delegations to the opening and closing ceremonies are prominent members of the LGBT community.\nWhile stating that scheduling problems had prevented the President or Vice President from attending the Games, the Administration also averred that the selection was not the only means through which the President had underlined that \"he finds it offensive, the anti-LGBT legislation in Russia, for example. And we take very clear and strong stands on that issue, as well as the curtailment of civil society in Russia, as well as the harassment caused to those who protest corruption in Russia.\" The State Department's January 2014 travel alert reflects human rights concerns when it advises U.S. visitors that they should have \"no expectation of privacy,\" and that all means of communication should be \"assumed to be monitored.\" Some security experts allege that Russian security forces may not only monitor cell phones and personal computers but may use them to track individuals' movements and to intrude upon and compromise the use of the devices. The travel alert also states that the Russian government has appeared to interpret the anti-LGBT propaganda law broadly as \"mak[ing] it a crime to promote LGBT equality in public.\" The alert cautions that the law applies to both Russian citizens and foreigners, whom may be fined, jailed, and/or deported.\nSome critics of U.S. policy toward Russia—while supportive of the Obama Administration's decision not to send top-level delegations to Sochi—have called for the Administration to make civil and human rights more central in bilateral relations. Many of these critics have eschewed calling for a boycott of the Olympics, which would deny U.S. athletes the opportunity to compete, but they have urged that Administration concerns over security at the Games not eclipse a focus on the human rights of U.S. athletes and visitors as well as of citizens of Russia. Most observers argue that notable human rights violations against U.S. citizens attending the Games could further exacerbate tensions in U.S.-Russia relations.\nSome human rights activists have been critical of U.S. corporate sponsors who allegedly have altered their behavior at the Games to avoid discussing human rights problems, including in order to forestall possible Russian objections to \"gay propaganda.\"\nMembers of Congress have expressed concerns about Russia's anti-LGBT legislation. In August 2013, a bipartisan group of 87 House Members sent a letter to Secretary Kerry expressing deep concern about the Russian law and calling on the State Department to determine a plan of action to ensure the safety and well-being of LGBT persons and their supporters at the games, and to inform the authors of the letter of the steps being taken in this respect by the United States and other governments. On November 8, 2014, a letter signed by 11 Senators asked IOC President Thomas Bach asking for information that the IOC may receive from the Russian authorities on how it plans to enforce the anti-LGBT law. The Senators also reminded President Bach that the IOC is bound to uphold the Olympic Charter, including its provisions on non-discrimination, which includes LGBT rights.\nOn November 21, 2013, Senator Jeff Merkley introduced S.Res. 311 . The resolution notes that President Putin signed a law in June 2013 barring \"homosexual propaganda,\" which Russian authorities could use to harass, detain, or deport LGBT persons or those supporting their rights at the Sochi Games. The resolution also mentions other Russian government actions against LGBT rights and recent acts of violence against LGBT persons in Russia. Among other provisions, the resolution calls on calls on the International Olympic Committee (IOC) to strongly oppose Russia's discriminatory law and to insist, as a condition of holding the Olympic Games in Sochi, that the Russian government provide unconditional assurance that no person at the games will be harassed, fined, detained, or otherwise have their human rights, including their right to free expression, violated due to their actual or perceived sexual orientation or gender identity or expression of support for LGBT human rights. The resolution also calls on \"the congressionally chartered USOC\" to intervene and assist the IOC in establishing the objectives of the resolution.", "Some observers argue that the Obama Administration's selection of relatively low-level delegations to the open and closing ceremonies is more a reflection than a contributor to strains in U.S.-Russia relations. Others disagree, pointing out that Russian officials and the public have criticized President Obama for not attending. While many leaders also have chosen not to travel to Sochi, others have pledged to do so, including Japanese Prime Minister Shinzo Abe, Chinese President Xi Jinping, and Italian Prime Minister Enrico Letta . Russia and China have hailed Xi Jinping's visit as demonstrating close Russia-China relations.\nRejecting criticism by \"some countries\" of human rights and security related to the Sochi Olympic Games, Russian Presidential Spokesman Dmitry Peskov stated on January 22, 2014, that such attitudes reflected bias and dissatisfaction that Russia is now \"strong, successful, rich, and healthy.\" That same day, Prime Minister Medvedev similarly rejected international concerns that security risks were greater at the Sochi Olympics than at previous Olympics, pointing to \"tragic events\" at U.S. sporting events as examples.\nSome observers argue that although there may be some shortfall in U.S.-Russia counter-terrorism relations, the degree of cooperation that does exist illustrates that the two countries continue to work together on issues of mutual concern. These observers also raise hopes that successful security cooperation during the Games will boost future cooperation and will contribute more broadly to improved U.S.-Russia relations." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 1, 1, 1, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full", "h1_title", "", "h1_full", "", "", "", "", "h3_full h1_full", "", "h2_title h1_title h3_title", "h2_full h1_full", "h3_full h1_full", "h1_full" ] }	{ "question": [ "What details are known about the 2014 Olympics?", "How are these Olympic Games unique for Russia?", "What levels of athlete turnout are expected?", "How will the event locations be distributed?", "Why is the Olympic location a cause for concern?", "What types of violence are typical for the region?", "How have these concerns been expressed?", "What other issues have been raised with the 2014 Olympic location?", "How have Congressional members proposed addressing this issue?", "To what extent will the U.S. government support U.S. athletes and other official delegations?", "How adequate are U.S.-Russia security levels for safely holding the Games?", "How is the U.S. planning for any unexpected scenarios?", "What are common criticisms of how Russia is handling security?", "What other factors affect the Sochi Olympics?", "How has the Russian government suppressed LGBT human rights?", "How did the U.S. government react to these human-rights abuses?", "How has the U.S. government alerted its citizens about the anti-LGBT environment?" ], "summary": [ "The President of the International Olympic Committee (IOC) announced on July 4, 2007, that Sochi, Russia, had been selected as the host city for the Olympic Winter Games and Paralympics.", "The Olympic Games, which will be held February 7-23, 2014, are the first to be hosted by Russia as a successor state to the former Soviet Union.", "Reportedly, some 230 U.S. athletes out of approximately 2,900 from some 88 countries, and about 10,000 U.S. visitors, are expected in Sochi.", "Olympic events will take place at two main locations: a coastal cluster along the Black Sea and a mountain cluster in the Krasnaya Polyana mountains.", "Since the 2007 selection of Sochi as the site of Olympic Games, many observers, including some in Congress, have raised concerns about security and human rights conditions in Sochi and elsewhere in Russia.", "Sochi is in Russia's North Caucasus area, which has experienced ongoing terrorist incidents, including several bombings in recent weeks.", "Through hearings, legislation, oversight, and other action, some Members of Congress have expressed concerns over Russia's hosting of the Sochi Olympic Games and Paralympics, particularly the risks that terrorism and human rights violations might pose to U.S. athletes and visitors.", "Other broader congressional concerns have included whether the United States should participate in the Games in the face of increasing tensions in U.S.-Russia relations and the Russian government's growing restrictions on the civil and human rights of its citizens.", "Some Members of Congress have called for boycotting the Games. Others have cautioned that U.S. citizens should carefully weigh the security risks of attending, and have urged greater U.S.-Russia counter-terrorism cooperation to ameliorate threats to the Games.", "On January 24, 2014, a senior Administration official stressed that the full resources of the U.S. government were being readied to support U.S. athletes, the official delegations, and other citizens attending the Games.", "Administration officials have argued that U.S.-Russia security cooperation is adequate for safely holding the Games, but have added that conditions are being monitored and U.S. athletes and the public will be notified if they change.", "They also have stated that there are contingencies for emergencies, including the possible evacuation of U.S. citizens if necessary.", "Some observers have raised concerns about whether security is adequate and have criticized Russia for not cooperating more with the United States on safeguarding the Games.", "One non-sport-related factor that has added an additional dimension to the Olympics beyond security has been the issue of human rights.", "In 2013 the Russian legislature, at the urging of President Putin, adopted a series of anti-LGBT (lesbian, gay, bisexual, and transgender) laws.", "In reaction, in late July 2013, the State Department called on Russia to protect freedom of assembly and association and freedom of expression of U.S. citizens attending or participating in the Olympic Games, including LGBT persons and others traveling to Sochi. In late December 2013, the Obama Administration announced that the U.S. delegates to the Games would not include top-level officials, but would include several LGBT sports figures.", "The State Department's January 2014 travel alert reflects human rights concerns when it advises U.S. visitors that they should have \"no expectation of privacy,\" and that all means of communication should be assumed to be monitored. The travel alert also cautions that the anti-LGBT propaganda law applies to foreigners, who may be fined, jailed, and/or deported." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, 0, -1, -1, -1, -1, 1, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-16-190	{ "title": [ "Background", "NFIP Overview", "Key Factors for NFIP Premium Rates", "Status of Subsidies under the Biggert-Waters Act and HFIAA", "Mitigation", "Various Options Exist for Targeting Assistance, but Each Involves Challenges That FEMA Would Have to Overcome", "Means-Tested Assistance Targets Those with Financial Need but Presents Data-Related Challenges", "Other Options for Targeting Assistance May Be Simpler to Implement but Would Target Those with Financial Need Less Directly", "Premium Caps", "Cost of Mitigating Risk to a Property", "Many Policyholders Could Be Eligible for Assistance under Various Approaches, but FEMA Lacks Data to Estimate Costs", "Available Data Suggest Many Subsidized Policyholders Could Be Eligible for Assistance Using Various Targeting Options and Thresholds", "Estimation of Eligible Policyholders Based on Individuals’ Financial Need", "Estimation of Eligible Policyholders under the Capped Premium Option", "FEMA Lacks Information Needed to Estimate the Cost of Assistance", "Several Mechanisms Could Be Used to Deliver NFIP Assistance, but Each Involves Public Policy Trade-offs", "All Mechanisms Except Discounted Rates Could Reflect Actual Risk and Encourage Private Market Participation", "Discounted Rates", "Vouchers, Tax Expenditures, and Grants and Loans", "Mechanisms Vary in Whether They Encourage Broad Participation and Limit Administrative Costs", "Discounted Rates", "Vouchers", "Tax Expenditures", "Grants and Loans", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Identifying Targeting Options and Delivery Mechanisms", "Illustration of the Effects of Certain Targeting Options", "Estimation of Eligible Policyholders Based on Individuals’ Financial Need", "Estimation of Eligible Policyholders Based on the Financial Characteristics of a Local Geographic Area", "Estimation of Eligible Policyholders under the Capped Premium Option", "Estimation of Eligible Policyholders Based on the Cost of Mitigation", "Estimating the Cost of Assistance", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "In 1968, Congress created NFIP to address the increasing cost of federal disaster assistance by providing flood insurance to property owners in flood-prone areas, where such insurance was either not available or prohibitively expensive. The 1968 law also authorized premium subsidies to encourage community and property owner participation. To participate in the program, communities must adopt and agree to enforce floodplain management regulations to reduce future flood damage. In exchange, federally backed flood insurance is offered to residents in those communities.\nNFIP was subsequently modified by various amendments to strengthen certain aspects of the program. The Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for properties in SFHAs that are secured by mortgages from federally regulated lenders. This requirement expanded the overall number of insured properties, including those that qualified for subsidized premiums. The National Flood Insurance Reform Act of 1994 expanded the purchase requirement for federally backed mortgages on properties located in an SFHA.", "FEMA bases NFIP premium rates on a property’s flood risk and other factors. A FIRM is the official map of a community on which FEMA has delineated both the risk premium zones applicable to the participating community and SFHAs. FEMA studies and maps flood risks, assigning flood zone designations from high to low depending on the likelihood of flooding. Properties in SFHAs are at high risk, specifically a 1 percent or greater annual chance of flooding, and are designated as zones A, AE, V, or VE. FEMA also bases premium rates on property and policy characteristics. For example, FEMA bases premium rates on occupancy type (single-family or multifamily unit), number of floors, and elevation of the property—that is, the difference between the lowest elevation of the building relative to its base flood elevation—if applicable. Base flood elevation refers to the level relative to mean sea level at which there is a 1 percent or greater chance of flooding in a given year. Additionally, FEMA uses policy characteristics, such as building and content coverage amounts and policy deductible amounts, in setting premium rates.\nNFIP has two basic categories of premium rates: those intended to reflect the full risk of flooding to the group of properties within a rate class (full- risk rates) and those that are not intended to reflect full risk (subsidized rates). Full-risk rate structures are mostly buildings constructed after a community’s FIRM was published and are referred to as post-FIRM. These structures have been built to flood-resistant building codes or have had their flood risks mitigated and generally are at or above base flood elevation. Structures with subsidized rates are mostly buildings constructed before a community joined NFIP and are generally referred to as pre-FIRM because they were built before the potential for flood damages was known and identified on the community’s FIRM. Unlike full- risk rates, subsidized rates do not take elevation of the property into consideration. Property elevation can be obtained through elevation certificates.", "More recent legislation—the Biggert-Waters Act and HFIAA—affected NFIP’s ability to charge subsidized premium rates on certain types of properties and will likely change the number of policies that are subsidized, as well as the size of the subsidy. For example, the Biggert- Waters Act prohibited subsidies from being extended for homes sold to new owners after July 6, 2012, (date of enactment) and removed subsidies if properties lapsed in coverage as a result of the policyholders’ deliberate choice. However, HFIAA reinstated premium subsidies for properties that were purchased after July 6, 2012, and properties not insured by NFIP as of July 6, 2012. Because new policyholders may join NFIP and receive subsidized rates, such as owners of pre-FIRM properties that previously were not insured, the number of subsidized policies could increase over time.\nHowever, provisions under both acts gradually phase out subsidies by requiring FEMA to increase premiums annually until full-risk rates are reached. The Biggert-Waters Act requires FEMA to increase premiums by 25 percent each year until full-risk rates are reached for certain types of properties, including business properties, residential properties that are not a primary residence, properties that have sustained substantial damage or improvement, and severe repetitive loss properties. HFIAA did not affect the phase-out schedule for those properties, and the act also contains provisions requiring FEMA to increase premium rates on other subsidized policies, such as those for primary residences purchased after July 6, 2012, and primary residences not insured by NFIP as of the same date, by at least 5 percent but no more than 15 percent annually.", "FEMA supports a variety of flood mitigation activities that are designed to reduce flood risk and thus NFIP’s financial exposure. These activities, which are implemented at the state and local levels, include hazard mitigation planning; the adoption and enforcement of floodplain management regulations and building codes; and the use of hazard control structures, such as levees, dams, and floodwalls or natural protective features such as wetlands and dunes. Community-level mitigation funding is available through FEMA via grant programs such as the Flood Mitigation Assistance Program. Through these programs, FEMA provides communities cost-sharing opportunities for mitigation activities. At the individual property level, mitigation options include elevating a building to or above the area’s base flood elevation, relocating the building to an area with less flood risk, or purchasing and demolishing the building and turning the property into green space.", "Although any pre-FIRM property located in an SFHA in a participating community is currently generally eligible for a subsidy, according to some stakeholders we interviewed and our analysis of literature we reviewed, options for targeting assistance to subsidized NFIP policyholders who may experience difficulty paying full-risk rates include means testing based on the income level of policyholders or geographic areas, setting premium caps, and basing assistance on the cost of mitigating the risk of damage to a home. These options are not mutually exclusive and could be combined depending on Congress’s policy priorities for NFIP. However, they all involve trade-offs, and implementing any of them would likely be challenging.", "According to some stakeholders we interviewed and our analysis of literature we reviewed, means testing to determine eligibility for NFIP assistance could help directly address affordability concerns by targeting subsidies to those in need. According to a NAS report on NFIP affordability we reviewed, a means-tested program could be designed in various ways, including targeting assistance based on individual policyholders’ financial need or the financial characteristics of a local geographic area. Currently, NFIP subsidies are tied to the property, not the property owner, and any pre-FIRM property located in an SFHA in a participating community is eligible for a subsidy. In contrast, a means- tested program would decouple the subsidy from the property and instead attach it to the policyholder or a group of policyholders on the basis of need, as determined by specified financial requirements and eligibility criteria. In our July 2013 report on subsidized properties, we found that this approach would allow the federal government to provide assistance only to those NFIP policyholders deemed eligible, with the rest paying full- risk rates.\nMeans-tested programs that consider individuals’ financial need are not new to the federal government, and some stakeholders we interviewed suggested that a means-based assistance program for NFIP could be designed similarly to other existing programs. Over the years, Congress has established a number of programs to provide cash and noncash assistance based on the financial need of individuals and families. For example, to be eligible for certain federal housing programs, individual households must meet specific income limits. These limits reflect the financial characteristics of a local area because they are expressed as a percentage of the area median income (AMI) for the county or metropolitan area in which the household is located, and the limits range from 30 percent through 140 percent of AMI. For example, to be eligible for homeowner rehabilitation and homebuyer assistance under HUD’s HOME Investment Partnership Program, households must have incomes at or below 80 percent of AMI. Similarly, under the Federal Home Loan Bank System’s Community Investment Program, the income of a qualifying mortgage borrower may not exceed 115 percent of AMI. Some stakeholders we interviewed suggested that similar AMI limits could be used to determine eligibility for NFIP because these measures reflect local characteristics. An NFIP assistance program based on individuals’ or households’ income would require a similar threshold to be set.\nIn order for FEMA to implement a means-tested option that considers individual policyholders’ financial need, it would need income information at the individual or household level for policyholders who receive a subsidized rate under the current NFIP structure. Because the current NFIP structure attaches the assistance to the property rather than the policyholder, FEMA does not collect income information for policyholders who receive subsidies. As a result, a system to collect this information would need to be designed and implemented. We identified two primary ways FEMA could obtain income data, but gathering such information could be challenging. According to some stakeholders we interviewed, IRS could provide FEMA with income data it collects from tax filers. For example, some stakeholders said that a partnership between FEMA and IRS could be established, similar to the partnership IRS and the Department of Education have for the Free Application for Federal Student Aid (FAFSA) form. The Department of Education began coordinating with IRS in 2010 to provide an option for tax filers to prepopulate the FAFSA using an automatic data transfer from their tax returns.\nHowever, restrictions set forth in the Internal Revenue Code prohibit the disclosure of taxpayer information to other federal agencies without a statutorily specified purpose, and new processes would need to be established if taxpayer data were to be used. Under section 6103 of the Internal Revenue Code, federal tax information must be kept confidential and may not be disclosed, except as otherwise specifically authorized. In December 2011, we developed a guide that Congress could use for screening and assessing proposals to disclose confidential tax information to specific parties for specific purposes. Specifically, the guide consists of key questions that can help in screening a proposal for basic facts and identifying policy factors to consider. Further, according to IRS officials, certain processes would need to be developed to provide federal tax information to another agency, such as FEMA, including entering into required agreements, such as data-sharing agreements. Moreover, IRS officials told us that FEMA would need to develop a system to accept and safeguard the information, and IRS would need to make modifications to its own information technology systems in order to interface with the agency, which they described as a significant effort, and provide oversight of the assistance program. If this approach were used, information on the cost of making these changes to FEMA’s and IRS’s information technology systems would need to be balanced against the costs of the existing subsidy approach.\nAnother way to obtain household income information would be to collect it from individual policyholders, but doing so could be complex and challenging. First, a definition of income for the program would need to be determined (e.g., what sources of income would be considered when determining eligibility), as well as whether and which exclusions and deductions would be allowed. Second, FEMA would then need to develop an infrastructure and new processes to collect the information, which would likely increase the cost of administering the program. In addition, FEMA would need to determine how it would verify the information. For example, HUD’s Housing Choice Voucher (Voucher) program, which provides rental assistance to participating low-income households, is administered by almost 2,300 local public housing authorities (program administrators). These program administrators must obtain and verify comprehensive information on tenants’ household composition, level and sources of income, assets, public assistance, and some types of expenses (e.g., medical and child care expenses) to determine their household adjusted gross incomes, their eligibility for income exclusions and deductions, and their rental payments. We have previously found that complex processes for determining income can lead to compliance issues. For example, in a February 2005 report on rental subsidy improper payments in HUD’s rental programs, we found that HUD’s complex policies for determining rent subsidies have led to improper payments. Similarly, in an August 2013 report on farm and conservation programs, we found that complex income determination and verification processes may have led to improper payments to participants whose incomes exceed statutory limits.\nIn addition to income, a few stakeholders we spoke with said that wealth, such as value of the insured property, could be considered when determining eligibility based on individuals’ financial need. For example, one stakeholder we interviewed said that an assistance program for NFIP could be designed using a two-step process that considers income and other factors as a proxy for wealth, such as property value. Under this process, according to the stakeholder, a policyholder’s eligibility would first be assessed using a means-tested approach, and then property value would be evaluated to help ensure that only those with modest income and wealth receive the assistance. However, other stakeholders we interviewed said that property values may not be an adequate measure to determine a policyholder’s ability to pay the premium. For example, some stakeholders said that the value of a modest home could be high because it is located in an area with a high land value. One stakeholder we interviewed said that a low-income policyholder could have purchased a home at a modest price, but over the years the value of the home could have significantly increased. The stakeholder further suggested that if the policyholder was lower-income and did not have any other assets besides the home, it would be appropriate to exclude the value of the home when determining eligibility.\nAn alternative to using individuals’ income to determine financial need would be to determine eligibility based on the income characteristics of a specific geographic area. For example, a NAS report on the affordability of NFIP suggested that all homeowners in a geographic area, such as a community, could be eligible for assistance if, for instance, the median income of the area was “sufficiently low.” The federal government has established a similar approach for the provision of school lunches. For example, the Healthy, Hunger-Free Kids Act of 2010 includes a community eligibility provision that allows school districts with high poverty rates to provide free breakfast and lunch to all students, regardless of their household income. This provision eliminates the burden of collecting household applications to determine eligibility for school meals, relying instead on information from other means-tested programs such as the Supplemental Nutrition Assistance Program. The NAS affordability report also notes that determining assistance at the community level would help to protect the vitality of an eligible community with a high concentration of currently subsidized policyholders because if the subsidies were not available, the resulting higher flood insurance premiums would likely depress the value of properties. For example, according to information from the National Association of Realtors, the Biggert-Waters Act negatively affected the housing market in certain areas where many buyers walked away from purchasing a home because of the high flood insurance premium increases. However, because this option does not consider individuals’ financial need, some policyholders who do not face an affordability issue with their flood premiums, as defined by a potential assistance program, may continue to receive assistance, while policyholders who have affordability issues but do not live in a community eligible for the assistance would no longer receive a subsidy. In addition, similar to determining eligibility using individuals’ financial need, some policyholders who could be eligible for the assistance under this approach could have high-value homes.\nUnder any means-tested approach, FEMA would need to know the full- risk rate for the properties of those policyholders deemed eligible in order to determine how much assistance to provide. However, FEMA does not collect data needed to calculate the full-risk rate of currently subsidized properties, such as elevation data obtained through an elevation certificate. As a result, these data are not currently available, which would be another challenge to implementing and determining the cost of a means-tested approach to providing NFIP assistance.", "", "Other approaches to targeting assistance with NFIP premiums could be simpler to implement than means-tested approaches or might help reduce risk, but they would target those with financial need less directly. According to our analysis of a NAS report on NFIP affordability, one of these methods would be to provide assistance to those policyholders whose premium exceeds a certain percentage of the amount of coverage purchased. Under this option, policyholders could receive assistance if it were greater than a certain percentage of coverage provided by the policy, and the premium would effectively be capped at that percentage. For example, HFIAA states that FEMA should strive to minimize the number of policies with annual premiums that exceed 1 percent of the total coverage provided by the policy. Using this option would help ensure that the premiums do not go above a certain amount—for example, 1 percent of coverage—which could help lower the premiums of eligible policyholders who live in high-risk areas.\nWhile capping premiums could be simpler to implement than some other options, it would likely involve trade-offs. For example, capping premiums does not consider policyholders’ resources and certain expenses (e.g., household income, assets, and expenditures for housing, food, medical care, or other goods and services) and therefore does not take into account their financial need. As a result, similar to the current subsidy method, this option could provide subsidies to some individuals who may not have a financial need. In addition, this option may discourage mitigation efforts because premiums would not reflect the actual flood risk of a property. As with the means-tested options, an appropriate threshold for the cap would need to be established if premium capping were implemented. Further, FEMA would need to know the full-risk premium rate of a property to determine whether it is above or below the defined cap. As previously discussed, FEMA does not collect the necessary elevation data needed to calculate the full-risk rate of properties subsidized under the current structure, and so these data are not currently available. As discussed later in this report, we have previously recommended that FEMA collect these data.", "According to some stakeholders we interviewed, our prior work, and our analysis of some of the literature we reviewed, another option to target NFIP policyholders would be to provide assistance based on the cost of mitigating flood risk, where policyholders with mitigation costs above a certain level could receive assistance to help mitigate the risk of damage to the property. This option would help policyholders finance mitigation of flood risk to their homes—whether through elevation, relocation, or demolition—which could reduce risk in ways that would likely be reflected in a lower insurance premium. In a November 2008 report on options for addressing the financial impact of subsidized premium rates, we found that mitigation efforts could be used to help reduce or eliminate the long- term risk of flood damage, especially if FEMA targeted the properties that were most costly to the program. We concluded that increasing mitigation efforts could have a number of advantages, including that it could produce savings for policyholders and for federal taxpayers through reduced flood insurance losses and federal disaster assistance, increase the number of property owners paying full-risk rates, and build on FEMA’s existing mitigation programs.\nHowever, we also identified several disadvantages associated with this option, including the following:\nMitigating flood risk to a large number of properties could take a number of years to complete under the current mitigation process, which could require premium subsidies to also be offered.\nIncreasing mitigation efforts would likely be costly and require increased funding, and even if this funding were made available, property owners could still be required to pay a portion of the mitigation expenses.\nBuyouts and relocations, two other types of mitigation, would likely be more costly in certain areas of the country, and in some cases the cost for mitigating the structures’ flood risk might be prohibitive.\nCertain types of mitigation, such as relocation or demolition, might be met with resistance by communities that rely on those properties for tax revenues, such as coastal communities with significant development in areas prone to flooding.\nFurther, not all properties can be modified to mitigate flood risk. For example, according to a 2013 RAND report, some mitigation activities that have been used in other areas of the country would pose challenges in New York City because of the particular characteristics of the city’s building stock. An initial analysis by the New York City Mayor’s Office found that 39 percent of buildings (approximately 26,300) in the high-risk zones of the city’s new floodplain would be difficult to elevate because they are on narrow lots or are attached or semiattached buildings. To help address this challenge, HFIAA requires that FEMA establish guidelines for alternative methods of mitigation (other than building elevation) to reduce potential flood damages to residential buildings that cannot be elevated due to their structural characteristics. As a result, in September 2015, FEMA issued guidance that describes alternative mitigation measures intended for a variety of housing types that cannot feasibly be elevated. According to the report, there are a number of alternative methods of mitigation that may result in flood insurance premium reductions, such as filling a basement located below the base flood elevation to ground level, abandoning or elevating the lowest floor of certain residential buildings, and installing openings in foundation and enclosure walls located below the base flood elevation that allow automatic entry and exit of floodwaters.\nSimilar to the other options previously discussed, implementing mitigation as an option for targeting assistance would also require elevation data that are currently unavailable because these data would be needed to determine the cost of mitigating the risk of damage to a property. Once the mitigation cost was determined, FEMA could compare this amount to the established threshold for mitigation costs to determine eligibility.\nFor all of the options we have discussed, including the means-tested options, administering an assistance program could add to FEMA’s existing management challenges. In our June 2011 report on the administration of NFIP, we found that FEMA faces management challenges in areas that affect NFIP, and we made 10 recommendations to, among other things, improve the effectiveness of FEMA’s planning and oversight efforts for NFIP and increase the usefulness and reliability of NFIP’s flood insurance policy and claims processing system—5 of which FEMA has implemented. Further, FEMA continues to work on implementing required changes under the Biggert-Waters Act, as amended by HFIAA. In a February 2015 report on the status of FEMA’s implementation of the Biggert-Waters Act, as amended, we found that FEMA faces a number of challenges in implementing the new requirements, including resource issues, the complexity of the legislation, and the need to balance NFIP’s financial solvency and affordability goals. As a result, FEMA would likely face challenges in designing and implementing any new assistance program.", "Our analysis of available data suggests that, under several of the options discussed in the previous section, many subsidized policyholders would potentially be eligible for assistance with their NFIP premiums. However, estimating the cost of providing assistance under various targeting options with precision is difficult because FEMA lacks the elevation data needed to calculate full-risk rates for currently subsidized properties. Using the limited data that are available, we estimated that the cost could vary widely, depending on various factors such as which option and threshold are used.", "Our analysis of available FEMA data suggests that many subsidized policyholders would potentially be eligible for assistance under three of the options previously discussed: (1) means testing based on individual policyholders’ financial need, (2) means testing based on income characteristics of a local geographic area, and (3) capping premiums based on a percentage of coverage.", "Our analysis of ACS data showed that, depending on the income threshold used, 47 percent to 74 percent of subsidized policyholders (approximately 285,000 to 451,000) would likely be eligible to receive assistance under a means-tested approach that considers individuals’ financial need. As described previously, to implement this approach, individual or household-level income information is needed; however, these data were publicly unavailable. Instead, using household homeowner data from the 2009 through 2013 5-year ACS at the county level, we estimated that roughly 47 percent of subsidized policyholders have incomes below 80 percent of AMI and, therefore, would likely be eligible to receive assistance if this approach and threshold were implemented. This estimate is based on the assumption that the distribution of household income levels among subsidized policyholders in a given county as of September 30, 2013, was similar to the distribution of household income among all homeowners in the county. We recognize this is a potential limitation of the estimates, and the actual numbers of policyholders likely to receive assistance under this approach would vary depending on how similar the income distribution of subsidized policyholders is to the income distribution of homeowners overall in a county. Further, as figure 1 indicates, adjusting the threshold would affect the estimated percentage of policyholders that would likely be eligible for the assistance. For example, if the eligibility threshold were increased to 140 percent of AMI, we estimated that the percentage of policyholders who would likely be eligible to receive assistance would increase to about 74 percent.\nAs of September 30, 2013, the actual number of subsidized policies was about 609,000. The states with the highest numbers of subsidized policies as of that date were Florida (102,193), Louisiana (60,692), California (50,018), New Jersey (41,259), and Texas (40,805) (see fig. 2).\nUsing household homeowner data from the 2009 through 2013 5-year ACS at the county level, Florida would still have the greatest number of policyholders likely to be eligible to receive assistance if the income limit for this approach were set at 80 percent of AMI, with nearly 48,000 policyholders likely to be eligible, followed by Louisiana and California (see fig. 3).\nThree of the top five states with the most subsidized policies—Florida, Louisiana, and New Jersey—would also be states with the greatest number of policyholders likely to be eligible to receive assistance if the income threshold were set at 115 percent of AMI (see fig. 4).\nIf the threshold were increased to 140 percent of AMI, Florida, Louisiana, and California would have the greatest number of policyholders likely to be eligible to receive assistance (see fig. 5).\nOur analysis of ACS data showed that, depending on the income threshold used, 23 percent to 87 percent of subsidized policyholders (approximately 139,000 to 527,000) would likely be eligible to receive assistance if a means-tested approach that considers the income characteristics of a local geographic area were implemented. Using ACS data at the census-tract level, we estimated that as of September 2013, about 23 percent of subsidized policyholders lived in a census tract that had an estimated median household income below 80 percent of AMI and, therefore, would likely be eligible to receive assistance under this approach. Unlike the previous approach, which is based on individual or household income, this estimate is based on the median income characteristics of an entire local geographic area. As such, all policyholders in a particular local geographic area, such as a census tract, would be eligible for assistance if the median household income of the area were below a selected threshold.\nAs figure 6 indicates, similar to the other means-tested approach, adjusting the threshold would also affect the estimated percentage of policyholders who could be eligible for the assistance. For example, if the eligibility threshold were increased to 140 percent of AMI, we estimated that the percentage of policyholders who would likely be eligible to receive assistance would increase to about 87 percent.\nBecause this approach targets areas with certain geographic characteristics, it could also include policyholders with relatively high incomes or high property values. For example, in one census tract that would potentially be eligible for assistance, where subsidized policyholders comprised approximately 50 percent of the homeowners in the community, an estimated 27 percent of homeowners had an income that exceeded $150,000. In another tract that would potentially be eligible for assistance, where subsidized policyholders comprised about 36 percent of homeowners in the community, the median home value exceeded $1 million. However, we also found that some low-income subsidized policyholders resided in census tracts not eligible for assistance under this approach, including census tracts in Puerto Rico.", "We were unable to estimate the number of subsidized policyholders who would likely be eligible for assistance under the capped premium option because implementing it would require information on the full-risk premium rates of currently subsidized policies, which as previously discussed, FEMA does not calculate. However, our analysis of available data on the subsidized premiums paid on these policies, and their total coverage (building and content) amounts, as of September 30, 2013, showed that, as table 1 indicates, about 23 percent of policyholders who paid subsidized premiums as of September 30, 2013, were paying above 1 percent of their total coverage amounts. Our analysis also showed that almost none of the subsidized policyholders were paying premiums that were more than 2 percent of their total coverage amounts.", "As previously discussed, FEMA does not collect certain flood risk information that would be needed to calculate the full-risk rate for most subsidized policies; as a result, estimating the cost of providing subsidy assistance under various targeting options is difficult. Elevation certificates are needed to determine the full-risk rate for a property. However, because FEMA does not use this information in rating subsidized policies, it does not currently require elevation certificates for subsidized policyholders, although policyholders may obtain an elevation certificate voluntarily. As a result, FEMA cannot accurately determine the actual forgone premiums for subsidized policies—the difference between subsidized premiums paid and the premiums that would be required to cover the expected losses associated with subsidized policies. Likewise, without full-risk rate premiums for these properties, it is difficult to estimate the actual subsidy cost of implementing various options that could be used to target assistance for NFIP. Because it is not possible to calculate the actual amount of assistance each policyholder could be eligible for, estimating the aggregate cost of providing assistance under the various targeting options is not possible with any specificity.\nAlthough we were unable to estimate the subsidy cost of implementing these targeting options with any precision, we have previously estimated forgone premiums for subsidized policies using various statements published by FEMA that describe the size of the subsidies and expenses. In our December 2014 report on forgone premiums for subsidized policies, using available data, we estimated that the cumulative forgone premiums net of expenses ranged roughly from $8 billion to $17 billion over the period from 2002 through 2013. In particular, we estimated that the forgone premiums net of expenses for all policies subsidized in 2013 roughly range from $575 million to $1.8 billion. While the number of policyholders who could be eligible could vary widely depending on the selected targeting option and threshold, only a subset of all subsidized policyholders would likely be eligible to receive assistance. Using the means-tested targeting option and thresholds mentioned earlier in this report, the cost could have ranged from $40 million to $1.7 billion in 2013. For example, the estimated cost for the approach that considers individuals’ financial need could have ranged from $161 million to $1.7 billion in 2013, and the estimated cost for the approach that considers the income characteristics of the local geographic area could have ranged from $40 million to $1.7 billion. We could not calculate a potential cost under the capped premium method because, as noted earlier, determining eligibility for assistance would require information on full-risk rates for currently subsidized properties, which FEMA does not collect.\nIn our July 2013 report on subsidized properties, we found that NFIP lacked the information needed to determine the full-risk rates for subsidized properties. As a result, we recommended that FEMA develop and implement a plan to obtain information needed to determine full-risk rates for subsidized properties. FEMA generally agreed with the recommendation and has taken limited action to implement it. For example, FEMA noted that the agency would evaluate the appropriate approach for obtaining or requiring the submittal of this information. FEMA also said it would explore technological advancements and engage with industry to determine the availability of technology, building information data, readily available elevation data, and current flood hazard data that could be used to implement the recommendation. However, in a subsequent meeting, FEMA officials also said that the agency faced a cost challenge with respect to elevation certificates and that obtaining these certificates could take considerable time and cost several hundred million dollars. They noted that requiring policyholders to incur the cost of obtaining elevation certificates would not be consistent with NFIP’s policy objective to promote affordability. The officials added that the agency encourages subsidized policyholders who seek to ensure the appropriateness of their NFIP rates to voluntarily submit elevation documentation. We acknowledge the difficulty and expense involved in obtaining precise information about flood risk, but we maintain that implementing this recommendation is important. Information about flood risk is needed to correctly charge full-risk rates for an increasing number of policies as FEMA phases out subsidies. Further, such information could help FEMA inform policyholders about their flood risk, as required by HFIAA.", "Based on our analysis of studies, interviews with stakeholders, and prior GAO reviews, FEMA could potentially use a variety of mechanisms to deliver assistance to NFIP policyholders who could be deemed eligible based on the various targeting options previously discussed. These mechanisms include: discounted rates, through which the government charges recipients less than the full cost of the service received; vouchers, through which the government would disburse funds that allow recipients to pay for a restricted set of goods or services; tax expenditures, through which the government would reduce recipients’ tax liability based on eligible expenses; and grants and loans for mitigation, through which the government would disburse funds to recipients under a contract.\nEach mechanism involves trade-offs among affordability and four policy goals for federal involvement in natural catastrophe insurance. We identified these four policy goals, which have not changed, in our 2007 report on the federal role in natural catastrophe insurance: (1) charging premium rates that fully reflect actual risks; (2) encouraging private markets to provide natural catastrophe insurance; (3) encouraging broad participation in natural catastrophe insurance programs; and (4) limiting costs to taxpayers before and after a disaster. For the fourth goal, we focused only on administrative costs because total program costs would be affected by undetermined factors such as eligibility criteria and caps on assistance. As summarized in figure 8, we determined that each mechanism fully supports at least two of the four natural catastrophe insurance policy goals, but none of the mechanisms fully support all four of these policy goals.", "FEMA’s current discounted rate mechanism does not help FEMA charge premiums that reflect actual risks or encourage the private market to provide flood insurance. The other delivery mechanisms we identified— vouchers, tax expenditures, and grants and loans for mitigation—would likely help support these goals.", "NFIP’s current discounted rate mechanism does not support the policy goal of charging premiums that reflect actual risk, according to our prior reports, a study we reviewed, and most stakeholders we interviewed. As we have previously found, NFIP’s discounted rates do not fully reflect actual risks because the premiums are not intended to contribute sufficient revenues to cover potential losses. In addition, the discounted rate mechanism hides actual risk because it builds a subsidy within the rate structure, meaning that policyholders who have discounted rates do not know their full-risk rate or the amount of subsidy they receive. We have previously found that discounted rates for NFIP, as well as for the federal crop insurance program, do not provide all policyholders with accurate price signals about their chances of incurring losses. As a result, some policyholders may perceive their risk of loss to be lower than it really is and may have less financial incentive to mitigate risk of damage to a property or to decide not to purchase a property at higher risk of flooding.\nIn addition, building a subsidy into the rate structure means that the discounted rate mechanism makes it difficult to measure nonadministrative program costs (i.e., subsidy costs). We and the Congressional Budget Office have previously found that FEMA’s discounted rate mechanism disguises actual NFIP costs because the costs were evident only in FEMA’s need to borrow from Treasury.\nFurther, because the discounted rate mechanism builds assistance into the rate structure, it does not encourage the private sector to provide insurance, according to our prior work and a stakeholder we interviewed. We have previously found that discounted rates discourage private participation in the flood insurance market because private insurers cannot compete with NFIP’s highly discounted (subsidized) rates in some geographic areas. For example, one state insurance regulator we interviewed during this review indicated that HFIAA’s reinstatement of discounted rates eliminated by the Biggert-Waters Act inhibited the participation of private insurers who had begun to take a more active role in the state.\nHowever, a discounted rate mechanism used to deliver assistance to policyholders who are deemed eligible could be modified to better address these limitations. Specifically, a full-risk rate could first be determined, and then the discount could be applied outside of the rate structure. Such an approach would better communicate the actual cost of the risk to policyholders and would make subsidy costs more transparent. For example, one stakeholder we interviewed said that billing statements could be modified to show policyholders both their full-risk rate and the assistance they receive. Further, the amount of the subsidy could be explicitly funded through an appropriation.", "The other potential NFIP assistance delivery mechanisms we identified— vouchers, tax expenditures, and grants and loans for mitigation—would likely help promote premiums that reflect the actual risk of losses because they first require determination of a full-risk premium and then provide assistance outside of the rate structure. On the basis of our literature review and interviews with stakeholders, these other mechanisms would deliver assistance in the following ways:\nWith vouchers, policyholders would be charged a full-risk rate premium but would receive a subsidy through a voucher to cover the difference between what they are deemed able to pay and the full-risk rate premium.\nWith tax expenditures, policyholders would be charged a full-risk rate premium before having their tax liability reduced when they file their taxes.\nWith grants and loans, policyholders would receive grants or loans to help mitigate their homes, and then they would be charged a premium rate that reflects their lower risk.\nThese other potential NFIP assistance delivery mechanisms could help make existing NFIP subsidy costs more transparent because they separate assistance from premiums. We and the Congressional Budget Office have found that separating assistance from premiums could help the government and taxpayers understand actual program costs, in part because doing so would make NFIP subsidy costs explicit by requiring Congress to appropriate funds for them. Vouchers and grants and loans for mitigation meet these goals. However, the costs associated with tax expenditures may be somewhat less clear than costs associated with vouchers and grants and loans for mitigation. Tax expenditures would help make subsidy costs somewhat more transparent because they separate assistance from premiums, similar to vouchers and grants and loans for mitigation, but we and the Congressional Budget Office have previously found that tax expenditures can mask subsidy costs because they are not readily identifiable in the budget and are generally not subject to systematic performance measurement, similar to discounted rates.\nIn addition, vouchers, tax expenditures, and grants and loans for mitigation could help encourage the private sector to provide flood insurance, based on our analysis of prior GAO reports, studies we reviewed, and a stakeholder we interviewed. This is generally because these mechanisms would provide assistance outside the rate structure, enabling NFIP to charge rates that more fully reflect risk and are much closer to the rates private insurers would need to charge, which we have previously reported is a key private sector concern. In addition, vouchers and tax expenditures could potentially be designed in a way that would incentivize homeowners to consider private insurance: vouchers could be used with either NFIP or private insurance, and tax expenditures could be based on either NFIP or private insurance expenses. Further, grants and loans for mitigation could increase the number of homes at lower risk of flood damage and create a larger, more diverse risk pool, which would help private insurers be better able to manage their risk exposure—another issue we have previously identified as a key private sector concern about offering flood insurance.", "FEMA’s current discounted rate mechanism helps encourage broad NFIP participation and limits administrative costs. The extent to which the other delivery mechanisms we identified—vouchers, tax expenditures, and grants and loans for mitigation—could encourage broad participation is unclear. In addition, their effect on administrative costs varies.", "The discounted rate mechanism encourages broad participation. As we have previously reported, discounted rates have helped NFIP achieve a program goal of broad participation by providing assistance that lowers the cost of insurance. Further, discounted rates may encourage more participation than other potential delivery mechanisms, such as tax expenditures, because FEMA applies discounted rates that reduce premiums immediately and policyholders do not have to wait to receive their assistance.\nIn addition, continuing to use the discounted rate mechanism would likely help NFIP limit up-front administrative costs because the discounted rate mechanism is already in place and used to issue subsidies, which means that NFIP can avoid some costs that would be associated with creating a new delivery mechanism. Also, some stakeholders we interviewed said that discounted rates may be the most efficient delivery mechanism option for ongoing program administration, citing reasons such as FEMA’s ability to implement the mechanism without coordinating with other federal agencies.", "Vouchers may have some characteristics that support the policy goal of broad NFIP participation and others that do not, according to examples cited in our previous work, studies we reviewed, and stakeholders we interviewed. For example, vouchers could help encourage broad participation in NFIP because they would immediately reduce premium costs and are unrelated to recipients’ tax-filing status. However, some stakeholders we interviewed noted other voucher characteristics that may discourage participation in NFIP. For example, FEMA officials we interviewed said that policyholders may perceive vouchers to have associated stigma, and another stakeholder expressed concern that a potentially burdensome application process could discourage eligible policyholders from applying.\nIn addition, vouchers would likely increase NFIP’s administrative costs to a certain extent, according to examples cited in our previous work, studies we reviewed, and stakeholders we interviewed. Because FEMA does not currently have an NFIP voucher program, it would need to dedicate additional resources to its creation and to its ongoing administration. For example, HUD is one agency with such a voucher program and a 2015 HUD study of costs incurred by the local public housing authorities that administer HUD’s Voucher program found that efficient public housing authorities spent an average of $70 per month to administer a voucher, with costs related to frontline labor representing the largest costs. To help FEMA limit such administrative costs, two studies we reviewed said that flood insurance vouchers could be administered through an existing voucher program, such as the HUD Voucher program. However, according to the 2015 HUD study and HUD officials we interviewed, the local public housing authorities that administer the HUD Voucher program do not receive adequate funding to efficiently and effectively administer the existing program. HUD officials we interviewed also said that there would be additional costs, which could be significant, associated with implementing a new program. As a result, establishing an assistance program for NFIP under HUD’s, or another program’s, infrastructure would likely require additional resources for agencies responsible for implementing the program. Any additional costs would have to be weighed against the costs of the existing program. According to HUD officials, other concerns in addition to costs—such as housing authorities’ lack of familiarity with FEMA and flood insurance—would also have to be addressed before determining the suitability of using an existing HUD program to deliver NFIP assistance.", "Tax expenditures may have some characteristics that support the policy goal of broad NFIP participation and others that do not, according to examples cited in our prior reports, many studies we reviewed, and some stakeholders we interviewed. For example, well-designed tax expenditures can be targeted to reach certain populations and provide incentives for taxpayers to engage in particular activities; do not have the stigma that some individuals may associate with government spending programs; and may be less burdensome than applying for assistance through other spending programs in some ways. However, our prior reports, many studies we reviewed, and some stakeholders we interviewed found that other characteristics of tax expenditures may not encourage broad participation because eligible policyholders may not be aware of the tax expenditure or their eligibility; would face the burden of navigating the complex tax system, which may result in limited take-up or pressure to hire professionals to help to navigate the system; would generally need to pay the full premium before they receive the tax expenditure, which could result in cash flow challenges; and may have lower incomes or may not be required to pay taxes, which means they may not receive as great of a benefit from nonrefundable tax credits, tax deductions, and tax-preferred savings vehicles.\nSimilarly, tax expenditures may have some characteristics that help NFIP limit administrative costs and others that do not, according to examples cited in our prior reports, many studies we reviewed, and some stakeholders we interviewed. We and others have previously stated that, in concept, using tax expenditures could help limit administrative costs to taxpayers for certain activities because much of the administrative infrastructure already exists for the government to collect and remit money to tax filers via the tax system, as compared to setting up separate spending programs. Additionally, one study we reviewed said that, in general, direct IRS access to policyholder income information would help limit administrative costs for the federal government. However, implementing a new tax expenditure would still create some additional burden for IRS in a time of tight budgetary resources. We previously found that IRS has scaled back activities and staff in response to declining appropriations, which could potentially reduce program effectiveness or increase risk to IRS and the federal government. We also previously found that administering complex tax rules can strain IRS’s ability to serve taxpayers because of the resources needed to modify related documents and procedures, develop guidance, clarify instructions, and address noncompliance. Further, there may be some administrative costs and inefficiencies associated with interagency collaboration between FEMA and IRS, according to two stakeholders we interviewed. For example, regarding potential NFIP tax expenditures, Treasury Office of Tax Policy officials said that IRS would have to dedicate resources to administering the program and coordinating with FEMA to set up a data-sharing agreement and verify nonincome-related information submitted by policyholders, such as premiums paid. We have previously found that the complex nature of some tax expenditures, such as the mortgage interest and other real estate deductions, may result in high error rates that create costs for taxpayers due to forgone revenues and IRS resources spent to enforce compliance.\nWe have produced a guide for evaluating tax expenditure performance that could be used if Congress were to decide that tax expenditures are the most appropriate way to deliver assistance to eligible NFIP policyholders. The guide discusses various tax expenditure design issues that should be considered before implementing a tax expenditure, including the tax expenditure’s purpose, how the tax expenditure would relate to other federal programs, consequences for the federal budget, and how the tax expenditure would be evaluated.", "Grants and loans for mitigation may have some characteristics that support the policy goal of broad NFIP participation and others that may not, according to examples cited in prior GAO reports, a few studies we reviewed, and two stakeholders we interviewed. As mentioned previously, grants and loans could encourage policyholders to mitigate flood risk to their properties by helping them afford the significant up-front costs of mitigation, which may otherwise be a barrier. Because mitigation would likely result in significantly lower premiums, which homeowners could be more willing and able to pay, homeowners might be more likely to participate in NFIP. However, some characteristics of grants and loans may discourage broad participation. For example, potentially complex application processes could discourage eligible policyholders from applying; eligible policyholders may not be aware of their eligibility or of the programs; some potentially eligible policyholders may not be able to meet loan qualification criteria related to repayment, a challenge GAO has previously reported for Small Business Administration disaster assistance loans; and loans may not be appealing to some policyholders if rates are too high or policyholders are debt-averse.\nRegarding the policy goal of limiting administrative costs, mitigation grants and loans would likely pose some additional administrative costs for NFIP. Similar to vouchers, FEMA would need to dedicate resources to setting up and administering a new grant or loan program or expanding an existing program to provide the assistance to eligible policyholders. Also, loans pose some other administrative costs, such as servicing outstanding loans and collecting on defaulted loans, among others.\nFinally, it is important to remember that the delivery options discussed in this report are not mutually exclusive and could potentially be used in combination to address Congress’s priorities for NFIP. For example, according to two studies we reviewed, NFIP could offer assistance to policyholders experiencing affordability issues through a combination of mitigation loans and vouchers. The loans would help policyholders afford mitigation efforts, reducing premiums in the long term. The vouchers would help policyholders cover the costs of repaying the loans, and they could also be used to cover part of the remaining premium costs if they were still unaffordable.\nIf Congress were to consider an assistance program to address affordability issues experienced by NFIP policyholders, a number of policy decisions would be involved, each of which involves trade-offs and potentially difficult choices. In particular, decisions would need to be made to determine which policyholders would be eligible to receive the assistance, as well as other factors to consider when determining eligibility—for example, whether the assistance would only be provided to pre-FIRM principal residences located in high-risk areas. Also, the amount of assistance would have to be determined. For example, the assistance could be less than, equal to, or more than the difference between the subsidized premium rate eligible policyholders would pay under the current NFIP structure and the full-risk premium rate of the property. In addition, a decision would need to be made on the type of assistance (i.e., premium subsidy, mitigation assistance, or both). Further, decisions would have to be made on which delivery mechanism is most appropriate for NFIP, how the assistance would be paid for, and by whom.", "We provided a draft of this report to FEMA within the Department of Homeland Security for its review and comment. We also provided a draft of this report to HUD and Treasury for technical comment. FEMA and HUD provided technical comments, which we incorporated as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees and the Secretaries of Homeland Security, Housing and Urban Development, and the Treasury. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Alicia Puente Cackley at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last part of this report. GAO staff who made major contributions to this report are listed in appendix II.", "Our objectives in this report were to describe (1) options to target assistance to National Flood Insurance Program (NFIP) subsidized policyholders who may experience difficulty paying full-risk rates, (2) the number of currently subsidized policyholders who might be eligible for assistance under certain options and the cost of implementing these options, and (3) potential delivery mechanisms for providing assistance to eligible policyholders. For purposes of this report, we made the following assumptions:\nOnly current NFIP policyholders who pay subsidized premium rates established by the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) for their primary residences located in high-risk locations known as Special Flood Hazard Areas (SFHA) would be potentially eligible for assistance.\nThe starting point for premiums, before the provision of any assistance, would be a full-risk premium.\nThe maximum amount of the subsidy provided to those policyholders deemed eligible for assistance under the identified eligibility options would be the difference between the full-risk premium and the subsidized premium charged under the current NFIP structure.", "To identify options for targeting assistance to policyholders who may experience difficulty paying full-risk rates and to identify potential mechanisms for delivering that assistance, we reviewed our prior related reports and analyzed relevant laws. We also conducted a literature review using the Proquest database and Internet searches using search terms such as “flood insurance,” “means test,” “ability to pay,” and “eligibility” for identifying reports that discuss options for targeting federal assistance. We reviewed 53 reports and determined 11 to be relevant by reviewing abstracts of the literature we found. Similarly, we conducted a literature review using the Proquest database using search terms such as “delivery,” “assistance,” “loan,” “voucher,” “grant,” and “discount” for identifying reports that discuss mechanisms used to deliver assistance. We reviewed 70 reports and identified 23 to be relevant by reviewing abstracts of the literature we found. In addition, we interviewed officials from the Federal Emergency Management Agency (FEMA), Department of Housing and Urban Development (HUD), the Department of the Treasury’s (Treasury) Federal Insurance Office (FIO), Florida Office of Insurance Regulation, Louisiana Department of Insurance, and New Jersey Department of Banking and Insurance and representatives from 18 organizations with flood insurance knowledge to obtain input on (1) options that could be used to target assistance for NFIP; (2) different mechanisms that other federal programs have used to deliver assistance and the extent to which they could be used to deliver assistance in NFIP; and (3) to the extent possible, any benefits and challenges of using these options and delivery mechanisms. To select the organizations to interview, we reviewed lists compiled for prior GAO reports on NFIP, identified organizations that have testified before Congress on the affordability of NFIP premiums, identified organizations through our literature review, and obtained recommendations from those we interviewed. We interviewed officials at the following 18 organizations:\nAllstate Insurance Company\nAmerican Academy of Actuaries\nAssociation of State Floodplain Managers, Inc.\nCenter for Economic Justice\nConsumer Federation of America\nNational Academy of Sciences\nNational Association of Insurance Commissioners\nNational Association of Mutual Insurance Companies\nNational Association of Realtors\nProperty Casualty Insurers Association of America\nRAND Corporation\nSmartSafer.org\nUSAA General Indemnity Company\nRisk Management and Decision Processes Center at the Wharton Independent Insurance Agents and Brokers of America Insurance Information Institute Joint Center for Housing Studies of Harvard University School of the University of Pennsylvania\nWright National Flood Insurance Company On the basis of our literature review and interviews, we identified three general options that could potentially be used to target assistance to NFIP policyholders who may experience difficulty paying full-risk rates: means testing based on the income level of policyholders or local geographic areas, setting premium caps based on a percentage of total insurance coverage, and basing assistance on the cost of mitigating the risk of damage to a home. We also identified four types of mechanisms that could potentially be used to deliver assistance: discounted rates, vouchers, tax expenditures, and loans and grants for flood risk mitigation.\nA generally recognized definition of affordability does not currently exist for flood insurance; as a result, we interviewed representatives from HUD, FIO, the Florida Office of Insurance Regulation, Louisiana Department of Insurance, New Jersey Department of Banking and Insurance, Independent Community Bankers of America, and the Mortgage Bankers Association to determine potential ways affordability could be defined as it relates to flood insurance. Further, to obtain information on benefits and challenges of obtaining tax data from the Internal Revenue Service (IRS) and the implications certain delivery mechanisms may have for the tax system, we contacted representatives of Treasury’s Office of Tax Policy and IRS.", "To address our second objective, we used NFIP’s policy data to identify policies for primary residences that would continue to receive subsidized premium rates as set by HFIAA. We analyzed data from NFIP’s policy database as of September 30, 2013. We applied the same algorithm that FEMA used to determine which policies were subsidized before enactment of the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act), and we applied FEMA’s interpretation of the provision in the Biggert-Waters Act that eliminated subsidies and the provisions in HFIAA that restored subsidies. We further narrowed our analysis to subsidized policyholders located in SFHAs because the purchase of flood insurance is mandatory for properties in these areas that are secured by mortgages from federally regulated lenders. We assessed the reliability of the policy data by gathering and analyzing available information about how the data were created and maintained, and we performed electronic tests of required data elements. We determined that the data were sufficiently reliable for the purpose of determining the number of subsidized policies and the associated premiums. We did not use more recent data because in December 2014 we identified a number of discrepancies in NFIP’s fiscal year 2014 data and determined them to be not sufficiently reliable. We had begun our analysis before FEMA addressed those discrepancies. To determine the overall number of policyholders and how many of those are subsidized, we used data as of May 2015, which we deemed sufficiently reliable for our purposes based on gathering and analyzing available information about how the data were created and maintained, and we performed electronic tests of required data elements.\nTo estimate the number of currently subsidized policyholders that might be eligible for assistance under certain means-tested options, we attempted to obtain income information for these policyholders. Because FEMA does not collect income information for its NFIP policyholders, we attempted to obtain income data from IRS for subsidized policyholders as of September 30, 2013. We were unable to obtain access to IRS tax return data, which under section 6103 of the Internal Revenue Code, must be kept confidential and may not be disclosed, except as specifically authorized by law. We also attempted to obtain household income and other related data from a third-party vendor, including wealth, household size, and home value. To do this, we used prior GAO work on information resellers to identify and conduct market research with selected companies. We spoke with officials at three information resellers and gathered documentation on data modeling, coverage, match rate, and other relevant information to assess the accuracy and reliability of their data. We determined the data lacked sufficient precision and therefore found these data not to be reliable for purposes of estimating income and other homeowner and property characteristics of NFIP subsidized policies.\nBecause we were unable to obtain income information at the individual policyholder level, we used income data from the American Community Survey (ACS), a continuous survey of households conducted by the U.S. Census Bureau. Specifically, we used 5-year data from the 2009 through 2013 ACS for the 50 states, the District of Columbia, and Puerto Rico to estimate the number of subsidized policyholders who would likely receive assistance under the means-tested options we identified. We analyzed income levels of households and owner-occupied households (tables B19013 for household median income and table B25118 for owner- occupied household income distribution) obtained from ACS to provide a rough estimate of the income for subsidized policyholders in SFHAs. To examine the reliability of ACS data, we reviewed testing and documentation for a prior GAO report using much of the same data, including information from interviews with Census Bureau officials and experts. We also examined ACS technical documentation and conducted electronic testing and logic checks. As a result of our testing and reviews of related documentation, we determined the data were sufficiently reliable for our analyses.", "To develop possible thresholds for estimating the number of policyholders who might be eligible for assistance under the means-tested approaches, we reviewed documentation on the income limits used for various federal housing programs. These thresholds are expressed as a percentage of the area median income (AMI) for the county or metropolitan area in which an individual lives, and they range from 30 percent through 140 percent of AMI. Because HUD defines low-income households as those with income at or below 80 percent, we used this percentage as the lowest threshold when we conducted our analysis on the effect of implementing the means-tested approaches. We also illustrated the potential effect of using 115 percent and 140 percent of AMI, which are used in other government programs, as thresholds.\nWe used ACS data on the distribution of homeowner income at the county level to generate estimates of how many policyholders might be eligible for subsidies using different thresholds of the HUD AMI. Our estimation of eligible policyholders based on individuals’ financial need is based on the assumption that the distribution of household income among SFHA policyholders is similar to that of the distribution of household income among all homeowners in each county. To conduct the analysis, we used county-level data to generate estimates of the number of subsidized policyholders residing in areas with estimated income below the HUD AMI thresholds. Specifically, based on household income distribution, we estimated the proportion of homeowners with incomes above or below cut points based on the income distribution categories in the ACS data. We then applied the estimated proportion above and below the HUD AMI thresholds to the number of policyholders in our data to generate an estimate of the proportion that would be subsidized using a test of individuals’ financial need.\nWe used two different approaches to illustrate the sensitivity of our estimates. We first followed ACS technical guidance to generate 95 percent confidence intervals around the proportions of residents in each income category, and we tested these bounds against the HUD AMI or threshold. This method produced relatively narrow confidence bounds that depended heavily on the assumption that the distribution of policyholder and homeowner income was similar at the county level. Given that we do not have information on the accuracy of this assumption, we instead present the results from an alternative sensitivity test that allows for less correspondence between the homeowner and policyholder income distributions. This second sensitivity test illustrates the effect of shifting the income distribution within each county up or down a category, and provides a better, if still imperfect, sense of the uncertainty inherent in our estimates given that we lack information on individual policyholders’ incomes. Despite these tests, we cannot be sure that there are not systematic differences in the income distribution of policyholders compared to homeowners in general at the county level that would not be captured by such testing.", "To estimate the number of eligible policyholders based on financial characteristics of a local geographic area, we used the same HUD AMI thresholds as in our estimates based on individuals’ financial need. However, unlike the analysis for the means-tested approach that considers individuals’ financial need, the estimation of eligible policyholders based on the financial characteristics of a local geographic area is based on the median household income of an entire local geographic area, the census tract. As such, it estimates the number of subsidized policyholders likely eligible for assistance using a “community” threshold test, in which the census tract median household income is compared to the HUD AMI. To conduct the analysis, we used tract-level data to test the estimated median income of each census tract against the relevant HUD AMI threshold, and we assumed that all policyholders living in tracts with estimated median incomes below the threshold would receive subsidies. To illustrate uncertainty in our estimates, we also tested the upper and lower bounds of the 95 percent confidence interval for the tract-level estimate of median homeowner income against the HUD AMI or threshold.\nTo illustrate potential consequences of using a community threshold test, we identified tracts where policyholders comprised a relatively large proportion of the estimated number of homeowners in the tract and that would be subsidized using the HUD AMI as the threshold. We use the threshold of 115 percent of HUD AMI to identify tracts eligible for subsidy under the local geographic area approach, as it is the middle of the three thresholds we test in our main analysis. We limited our analysis to tracts with 50 or more policies and with fairly precise estimates of homeowner income. We then identified those tracts where either the estimated home value was relatively high, or the estimate of the proportion of homeowners with high incomes was relatively large. From the tracts we identified, we selected examples that represented extreme values; while these tracts are not typical of tracts that would be subsidized under a community approach, they demonstrate that as a targeting mechanism, the community approach could have unintended consequences.", "We were unable to estimate the number of subsidized policyholders who would likely be eligible for assistance under the capped premium option because implementing it would require information on the full-risk premium rates of currently subsidized policies, which FEMA does not calculate. Instead, we estimated the number of subsidized policyholders that paid less than various thresholds, as of September 30, 2013. To identify a range of thresholds that could be used to develop estimates under the premium capped option, we used 1 percent as the lower threshold because HFIAA states that FEMA should strive to minimize the number of policies with annual premiums that exceed 1 percent of the total coverage. We also assessed the effect of increasing the threshold by 1 percent increments up to 5 percent. We compiled information on the amount of insurance coverage (both building and content coverage) and the premium cost associated with subsidized policies from the NFIP policy database. Specifically, we compared a range of percentages, from 1 percent to 5 percent, of total insurance coverage to the total subsidized premium and determined how many subsidized policyholders paid above and below each percentage limit.", "We were unable to illustrate the effect of targeting assistance based on the cost of mitigating the primary residence of subsidized policyholders because data to determine this cost were not available. To determine the cost of mitigating the risk of damage to a property, information on its elevation—that is, the difference between the lowest elevation of the property relative to its base flood elevation—is needed, but FEMA does not currently collect this information for properties that pay subsidized rates.", "To estimate the potential cost of implementing these options, we attempted to estimate the full-risk rate of subsidized properties by constructing information about flood risk that is not available in NFIP’s database. We attempted to calculate some flood risk information (i.e., elevation information) for subsidized properties located in North Carolina by obtaining two key elements: lowest floor elevation and base flood elevation—that is, the flood level relative to mean sea level at which there is a 1 percent or greater chance of flooding in a given year. We selected North Carolina because it is one of the only states that have collected elevation data in high-risk flood zones, which is necessary to determine the full-risk premium rates. Specifically, we obtained Light Detection and Ranging (LIDAR) data from the North Carolina Floodplain Mapping Program to determine if we could estimate the lowest floor elevation level of subsidized properties in the state. We also analyzed data from FEMA’s National Flood Hazard Layer database to determine if we could estimate the base flood elevation of these subsidized properties. However, both sources lacked the precision needed for purposes of our analysis.\nLIDAR. While NFIP defines elevation difference as the difference between lowest occupied floor elevation and base flood elevation, North Carolina’s LIDAR data measures first floor elevation, which is inconsistent with NFIP’s measure for lowest floor elevation. According to North Carolina officials, its LIDAR does not measure the lowest floor elevation because it is measured from the outside of the structure to the bottom of the front door. Without measuring from the inside of the structure, North Carolina’s LIDAR data do not take into account a precise measurement of the lowest floor. For example, the bottom of the front door may be higher than the bottom of the lowest occupied floor, such as a furnished basement.\nFEMA’s National Flood Hazard Layer. FEMA’s National Flood Hazard Layer data lack precision to correctly align the data to a property. The data are a geospatial file that shows the base flood elevations of areas, among other things. However, it simply shows them as lines on a map, which cannot be used to determine the base flood elevation for a particular building unless the building is intersected by the line. For all other buildings, base flood elevation would have to be estimated using the closest elevation lines. For example, if a building were located halfway between a 100 foot line and a 110 foot line, a base flood elevation of 105 feet could be estimated for the building. However, this estimate is not precise enough for purposes of our analysis.\nDue to the unavailability of accurate estimates for lowest floor elevation and base flood elevation to calculate full-risk rate, we were unable to estimate with any precision the potential cost of implementing certain options we identified for targeting assistance to policyholders who may experience difficulty paying full-risk rates. However, we developed a rough estimate of the cost by multiplying the estimated percentage of subsidized policyholders likely to be eligible for assistance under the various options and thresholds and estimates on forgone premium net of expenses we had previously developed. Specifically, in our December 2014 report on forgone premiums for subsidized policies, we noted several limitations to using these statements to produce our estimates. We presented three separate estimates: (1) FEMA’s statement about the impact of eliminating subsidies on aggregate premiums, (2) the percentage of long-term expected losses covered by subsidized premiums, and (3) the percentage of long-term expected losses covered by subsidized premiums to estimate forgone premiums for only the policies that remained subsidized after HFIAA. The estimated total subsidy cost of implementing certain targeting options is based on the estimated lowest and highest forgone premium net of expenses in 2013 across the three estimates calculated in our 2014 report. We applied the range to the targeting options described earlier in this report. Specifically, we applied the cost range ($575 million to $1.8 billion) to the various targeting options and their ranges of percentage of eligible policyholders.\nThis cost estimate assumes that the difference between what subsidized policyholders would pay if they were charged full-risk rates and the subsidized rates they paid in 2013 are the same for all subsidized policyholders. Also, this estimated subsidy cost does not take into account the cost associated with implementing the selected targeting option. In addition to the limitations on the eligibility estimates discussed in this report, our 2014 report discusses potential constraints on our cost estimates.\nWe conducted this performance audit from July 2014 to February 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "In addition to the contact above, Patrick A. Ward (Assistant Director), Josephine Perez (Analyst-in-Charge), Bethany Benitez, Chloe Brown, Pamela Davidson, Chir-Jen Huang, May Lee, John Mingus, Marc Molino, Anna Maria Ortiz, Jennifer Schwartz, and Jack Wang made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 3, 3, 1, 2, 3, 3, 2, 1, 2, 3, 3, 2, 3, 3, 3, 3, 1, 1, 2, 2, 3, 3, 3, 3, 3, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "h0_title h3_title", "h0_full", "h3_title", "h3_full", "", "h1_full", "h1_title", "h1_full", "", "h1_full", "h2_full h3_title h1_full", "h2_title h3_title", "h3_full", "h2_full", "h2_title", "", "", "h2_full", "h2_full", "", "h3_full h1_title h4_title h0_title", "h0_full h4_full h1_full", "h3_full h1_full", "", "", "", "", "", "", "", "" ] }	{ "question": [ "How can assistance be targeted to those struggling to pay for their NFIP?", "How are NFIP subsidies currently distributed?", "How would this need-based proposal alter the distribution process?", "How would the implementation of need-based assistance be challenging?", "How do the past and proposed distributions compare in regards to the people assisted?", "To what extent would there be overlap between the two approaches?", "How would this overlap change if the eligibility threshold were increased?", "How precisely can the cost of assistance be estimated under the new proposal?", "How did GAO suggest increasing the amount of available data?", "How did FEMA respond to GAO's recommendations?", "How can assistance be delivered to eligible policyholders?", "What are these goals for NFIP?", "How does NFIP currently deliver assistance?", "Why might alternative mechanisms increase administrative costs?", "How many policies has the NFIP subsidized?", "How were the subsidies approved?", "How did the Biggert-Waters Flood Insurance Reform Act strengthen NFIP's financial solvency?", "How did this act affect policyholders?", "How were concerns about the Biggert-Waters Act addressed?", "What issues did GAO analyze?", "How does this report analyze those issues?", "How did GAO source its data for this report?" ], "summary": [ "Options for targeting assistance to subsidized policyholders of primary residences who may experience difficulty paying full-risk rates for their National Flood Insurance Program (NFIP) policies include means testing assistance based on the income level of policyholders or geographic areas, setting premium caps, and basing assistance on the cost of mitigating the risk of damage to their homes.", "Currently, NFIP subsidies are tied to the property.", "Implementing a means-tested approach would decouple the subsidy from the property and instead attach it to the policyholder or a group of policyholders on the basis of financial need.", "All of these options involve trade-offs, and implementing any of them would present challenges because the Federal Emergency Management Agency (FEMA) would have to collect data that it does not currently collect, such as policyholders' income and flood-risk information needed to calculate full-risk rates.", "Although data are limited, they suggest that many policyholders who currently receive a subsidy would likely be eligible for assistance under certain targeting options GAO identified.", "For example, using Census data, under the means-tested approach based on individual policyholders' income and using an eligibility threshold of 80 percent of area median income, about 47 percent of subsidized policyholders, as of September 2013, would likely be eligible to receive assistance.", "If the eligibility threshold were increased to 140 percent of area median income, 74 percent would likely be eligible to receive assistance.", "Under this and other targeting options, however, it is not possible to estimate the cost of providing assistance with precision because FEMA lacks the information needed to calculate full-risk rates for currently subsidized properties.", "GAO recommended in July 2013 that FEMA collect information from all policyholders necessary to determine flood risk.", "FEMA agreed with the recommendation but has taken limited action to implement it, citing the considerable time and cost involved in obtaining the information. FEMA officials stated that they plan to continue to rely on subsidized policyholders to voluntarily obtain this information.", "Several mechanisms are available for delivering assistance to eligible policyholders, but each involves trade-offs among four public policy goals.", "For NFIP, these goals are (1) charging premium rates that fully reflect risk, (2) encouraging private markets to provide flood insurance, (3) encouraging broad program participation, and (4) limiting administrative costs.", "NFIP currently uses discounted rates to deliver subsidies to certain policyholders but could choose from a variety of delivery mechanisms, including vouchers, tax expenditures, and grants and loans, depending on policy priorities.", "Finally, alternative mechanisms could increase administrative costs because FEMA would incur additional costs associated with setting up and administering a new assistance program or tax benefit, among other reasons.", "As of May 30, 2015, FEMA, which administers NFIP, subsidized about 996,000 flood insurance policies.", "The National Flood Insurance Act of 1968 authorized these highly discounted premiums.", "To help strengthen NFIP's financial solvency, the Biggert-Waters Flood Insurance Reform Act of 2012 required FEMA to eliminate or phase out almost all subsidized premiums.", "However, affected policyholders raised concerns about the resulting rate increases.", "The Homeowner Flood Insurance Affordability Act of 2014 sought to address affordability concerns by repealing or altering some Biggert-Waters Act requirements.", "GAO was asked to identify options for policyholders who may face affordability issues if charged full-risk rate premiums.", "This report describes options to target assistance to policyholders, estimates of eligible policyholders and associated costs of these options, and mechanisms for delivering assistance.", "GAO reviewed literature on approaches for targeting and delivering assistance, interviewed 18 organizations familiar with flood insurance and officials from FEMA and other agencies, and analyzed NFIP premium data and Census income data for 2009-2013 (most recent)." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, 1, -1, -1, 4, -1, 0, -1, -1, -1, 0, -1, 2, -1, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0, 0, 1, 1, 1 ] }
CRS_RL32014	{ "title": [ "", "WTO Dispute Settlement Procedures", "Uruguay Round Agreements Act (URAA): Statutory Requirements for Implementing WTO Decisions", "Section 102: Domestic Legal Effect of WTO Decisions", "Federal Law", "State Law", "Preclusion of Private Remedies", "Domestic Implementation of WTO Decisions Involving Administrative Action", "Section 123: Regulatory Action Generally", "Section 129: Agency Determinations in Trade Remedy Proceedings", "U.S. International Trade Commission", "Department of Commerce", "Prospective Implementation of Section 129 Determinations", "Judicial Responses", "Pending WTO Disputes: An Overview", "A Thumbnail Sketch of Pending Cases", "A Major Focus: Use of \"Zeroing\" in Antidumping Proceedings", "Domestic Legal Basis for Zeroing", "Pending Disputes: Trade Remedies", "Antidumping Measures on Hot-Rolled Steel Products from Japan (DS184)", "Administrative Compliance", "Legislative Compliance", "Recent Developments", "Continued Dumping and Subsidy Offset Act (DS217/DS234)", "Original WTO Complaints", "Complainants' Retaliation Requests and Subsequent Arbitration", "U.S. Judicial and Legislative Action", "Recent Developments", "Laws, Regulations, and Methodology for Calculating Dumping Margins (\"Zeroing\") (DS294)", "Panel and Appellate Body Reports", "U.S. Actions in Response", "Compliance Proceedings", "Compliance Proceedings: Panel and Appellate Body Reports", "EU's Retaliation Request and Subsequent Arbitration", "Commerce Department's Proposed Zeroing Rule (December 2010)", "Recent Developments", "Measures Relating to Zeroing and Sunset Reviews (DS322)", "Panel and Appellate Body Reports", "Actions by the United States and Japan in Response", "Compliance Panel Proceedings", "Arbitration of Japan's Sanctions Request", "Commerce Department's Proposed Zeroing Rule (December 2010)", "Recent Developments", "Final Anti-Dumping Measures on Stainless Steel from Mexico (DS344)", "Recent Developments", "Continued Existence and Application of Zeroing Methodology (DS350)", "Recent Developments", "Definitive Anti-Dumping and Countervailing Duties on Certain Products from China (DS379)", "U.S. Trade Remedy Law and NME Countries", "U.S. WTO Obligations and NME Countries", "China's Complaint", "Panel Report", "Appellate Body Report", "Implementation of WTO Reports", "Related U.S. Litigation: GPX Int'l Tire Corp. v. United States", "Recent Developments", "Anti-Dumping Administrative Reviews and Other Measures Related to Imports of Certain Orange Juice from Brazil (DS382)", "Anti-Dumping Measures on Certain Shrimp from Vietnam (DS404)", "Pending Disputes: Subsidies", "Subsidies on Upland Cotton (DS267)", "Panel and Appellate Body Reports", "Responses of the United States and Brazil", "Compliance Panel Proceeding", "2008 Farm Bill Amendments", "Brazil's Retaliation Request and Subsequent Arbitration", "Brazil's Preparation of Retaliatory Measure/Bilateral Negotiations to Resolve the Dispute", "Recent Developments", "Measures Affecting Trade in Large Civil Aircraft (Second Complaint) (\"Boeing\" Case) (DS353)", "U.S. WTO Case Against the European Union (\"Airbus\" Case) (DS316)", "EU Panel Request", "Panel Report", "Appellate Body Report", "Implementation of WTO Decision", "Pending Disputes: Trade in Services", "Measures Affecting Cross-Border Supply of Gambling and Betting Services (DS285)", "Panel and Appellate Body Reports", "Responses of the United States and Antigua", "Compliance Proceedings", "Negotiations on Compensation under GATS Article XXI", "Antigua's Retaliation Request", "Recent Developments", "Pending Disputes: Trade-Related Intellectual Property Rights", "Section 110(5)(B) of the Copyright Act (Music Copyrights) (DS160)", "Recent Developments", "Section 211 of the Omnibus Appropriations Act of 1998 (Trademark Exclusion Involving Property Confiscated by Cuba) (DS176)", "Recent Developments" ], "paragraphs": [ "This report provides a summary of the status of U.S. compliance efforts in pending World Trade Organization (WTO) disputes that have resulted in adverse rulings against the United States. The report focuses on cases in which panel and Appellate Body reports have been adopted by the WTO Dispute Settlement Body, an action sending the disputes into the compliance phase of the WTO dispute process. Although the United States has complied with adverse rulings in many past WTO disputes, there are 14 pending cases in which the United States is facing compliance deadlines in 2012; deadlines have expired but the United States has not yet fully implemented the WTO decisions involved; or the United States has taken action, including the enactment of legislation, but the prevailing parties in the dispute continue to question whether the United States has fully complied and, as in one case, continue to impose WTO-authorized trade sanctions. Compliance in these cases may implicate either legislative or administrative action by the United States, or both.\nThe report begins with an overview of WTO dispute settlement procedures, focusing on the compliance phase of the process, followed by a discussion of U.S. laws relating to WTO dispute resolution proceedings. The report then lists pending WTO disputes in the compliance phase categorized by subject matter: trade remedies, subsidies, trade in services, and trade-related intellectual property rights. Disputes are listed in chronological order based on the date on which the panel and any Appellate Body in the case were adopted by the WTO Dispute Settlement Body. Each entry contains a discussion of major issues and U.S. compliance history. Long-standing cases also include a section titled \"Recent Developments\" discussing the latest activity in the dispute.", "WTO disputes are conducted under the terms of the WTO Understanding on the Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU). The DSU, which entered into force with the establishment of the World Trade Organization on January 1, 1995, carries forward and expands upon dispute settlement practices developed under the General Agreement on Tariffs and Trade (GATT). The DSU is administered by the WTO Dispute Settlement Body (DSB), which is composed of all WTO Members. Where individual WTO agreements contain special or additional dispute settlement rules that differ from those in the DSU (e.g., expedited timelines for subsidy disputes in the Agreement on Subsidies and Countervailing Measures), the former will prevail. A list of these agreements and rules is contained in Appendix 2 of the DSU. The Office of the United States Trade Representative (USTR) represents the United States in the WTO and in WTO disputes.\nWTO dispute settlement may be characterized as a three-stage process: (1) consultations; (2) panel and, if requested, Appellate Body (AB) proceedings; and (3) implementation. Within this framework, the DSB establishes panels; adopts panel and appellate reports; authorizes countermeasures when requested; and monitors the implementation of dispute settlement results. The establishment of panels, adoption of panel and AB reports, and authorization of countermeasures are decisions that are subject to a \"reverse consensus\" rule under which the DSB agrees to these actions unless all DSB Members object. In effect, these decisions are virtually automatic. Article 23 of the DSU requires a complaining Member to act in accordance with the DSU when it initiates a dispute, including making any internal determination that another Member has violated a WTO obligation consistent with the WTO decision in the case and following DSU procedures to set a deadline by which the defending Member must comply, determining the level of sanctions for non-compliance, and obtaining authorization from the DSB to impose any such sanctions.\nAfter the DSB adopts an adverse panel and any Appellate Body report, the defending Member must inform the DSB of its compliance plans. If it is impracticable for the Member to comply immediately, the Member will be allowed a \"reasonable period of time\" to do so. If the Member proposes a compliance period and it is not approved by the DSB, the disputing parties may negotiate a deadline themselves. If this fails, the length of the period will be arbitrated. A WTO Member found to have violated WTO obligations is expected to comply by withdrawing the offending measure by the end of the established compliance period, with compensation and temporary retaliation available to the prevailing party as alternative remedies. Full compliance is the preferred outcome, however, so as to ensure that negotiated rights and obligations are preserved and maintained.\nArticle 22 of the DSU provides that if the prevailing Member in a dispute believes that the defending Member has not implemented the WTO rulings and recommendations by the end of the established compliance period, it may request the other Member to negotiate a compensation agreement or it may ask the DSB for authorization to suspend WTO concessions, usually to impose higher tariffs on selected imports from the defending country. The Member may choose the latter option without first requesting compensation. In some cases, the prevailing party may agree to extend the original compliance deadline instead of immediately seeking a remedy.\nIf a prevailing Member does choose to suspend concessions, it is expected to do so in the same sector in which the WTO violation was found, but if the Member finds that this is not \"practicable or effective,\" it may seek to suspend concessions in other sectors in the same agreement. If, however, the Member finds that this alternative would also be impracticable or ineffective and that \"the circumstances are serious enough,\" it may seek to suspend obligations under another WTO agreement, referred to as \"cross-retaliation.\" A prevailing Member may seek to cross-retaliate if, for example, in a dispute involving trade in goods, the Member does not import a sufficient amount of goods from the defending Member to remedy the trade injury involved or the Member believes that placing tariff surcharges on goods imported from the defending Member would be unreasonably costly for the prevailing Member's economy.\nUnder the DSU, the DSB is to authorize the retaliation request under the reverse consensus rule within 30 days after the compliance period expires. If the defending Member objects to the request, however, the proposed retaliation will be arbitrated and the 30-day deadline for approving the retaliation request effectively extended. The objection may relate to the level of nullification or impairment of benefits involved or whether DSU cross-retaliation rules have been followed. The arbitration, which may be carried out by the original panel if members are available, or by an arbitrator appointed by the WTO Director General, is ordinarily to be completed within 60 days after the compliance period expires. The DSB then meets to authorize the retaliation request, subject to any modification by the arbitrator.\nIn addition, Article 21.5 of the DSU provides for further dispute settlement proceedings in the event the disputing parties disagree as to whether the defending Member has implemented the WTO rulings and recommendations in a particular case. Once a compliance panel is convened, it is expected to issue its report within 90 days; the report may then be appealed. In practice, compliance panels may require a considerably longer period of time to complete their work where a complicated case is involved. For example, in the European Union's challenge to the U.S. use of \"zeroing\" in antidumping proceedings (DS294), the EU made its compliance panel request in September 2007, panelists were appointed in November 2007, and the panel report was not publicly circulated until December 2008.\nBecause the DSU fails to incorporate Article 21.5 proceedings into the 30-day period for approving countermeasures and the time frame for any subsequent arbitration, a procedural problem, referred to as \"sequencing,\" has resulted. Disputing Members have often filled the gap by entering into ad hoc bilateral procedural agreements setting out timelines for any requested compliance-related proceedings and reserving Members' rights in the unfolding of these proceedings. Such agreements have been entered into in many of the cases discussed below.\nThe DSU provides that any suspension of concessions or other obligations is temporary and may only be applied by the prevailing Member until the WTO-inconsistent measure is removed, the defending Member provides a solution to any trade injury at issue, or a mutually satisfactory resolution of the dispute is reached. Moreover, if a prevailing Member is ultimately authorized to impose countermeasures, the Member is not required to implement them. As evident from some of the cases discussed in this report, WTO Members may manage disputes in a variety of ways at the compliance phase, short of imposing sanctions.", "The legal effect of Uruguay Round agreements and WTO dispute settlement results in the United States is comprehensively dealt with in the Uruguay Round Agreements Act (URAA), P.L. 103-465 , which addresses the relationship of WTO agreements to federal and state law and prohibits private remedies based on alleged violations of WTO agreements. The statute also requires the United States Trade Representative (USTR) to keep Congress informed of disputes challenging U.S. laws once a dispute panel is established, any U.S. appeal is filed, and a panel or Appellate Body report is circulated to WTO Members. In addition, the URAA places requirements on regulatory action taken to implement WTO decisions and contains provisions specific to the implementation of panel and appellate reports that fault U.S. actions in trade remedy proceedings.", "Section 102 of the URAA and its legislative history establish that domestic law supersedes any inconsistent provisions of the Uruguay Round agreements and that congressional or administrative action, as the case may be, is required to implement adverse decisions in WTO dispute settlement proceedings.", "Section 102(a)(1), 19 U.S.C. Section 3512(a)(1), provides that \"[n]o provision of any of the Uruguay Round Agreements, nor the application of any such provision to any person or circumstance, that is inconsistent with any law of the United States shall have effect.\" The URAA further provides, at Section 102(a)(2), 19 U.S.C. Section 3512(a)(2), that nothing in the statute \"shall be construed ... to amend or modify any law of the United States ... or ... to limit any authority conferred under any law of the United States ... unless specifically provided for in this act.\"\nAs explained in Statement of Administrative Action (SAA) accompanying the Uruguay Round agreements when they were submitted to Congress in 1994, \"[i]f there is a conflict between U.S. law and any of the Uruguay Round agreements, section 102(a) of the implementing bill makes clear that U.S. law will take precedence.\" Moreover, Section 102 is further intended to clarify that all changes to U.S. law \"known to be necessary or appropriate\" to implement the WTO agreements are incorporated in the URAA and that any unforeseen conflicts between U.S. law and the WTO agreements \"can be enacted in subsequent legislation\" Congress has traditionally treated potential conflicts with prior GATT agreements and free trade agreements in this way, treatment that it also deems to be \"consistent with the Congressional view that necessary changes in Federal statutes should be specifically enacted, not preempted by international agreements.\"\nThis approach carries over into the implementation of WTO dispute settlement results, a situation explained as follows in URAA legislative history:\nSince the Uruguay Round agreements as approved by the Congress, or any subsequent amendments to those agreements, are non-self-executing, any dispute settlement findings that a U.S. statute is inconsistent with an agreement also cannot be implemented except by legislation approved by the Congress unless consistent implementation is permissible under the terms of the statute.", "Where a state law is at issue in a WTO dispute, the URAA provides for federal-state cooperation in the proceeding and limits any domestic legal challenges to the law to the United States. The act's general preclusion of private remedies (discussed below) further centralizes the response to adverse WTO decisions involving state law in the federal government.\nSection 102(b) provides as follows:\nNo State law, or the application of such a State law, may be declared invalid as to any person or circumstance on the ground that the provision or its application is inconsistent with any of the Uruguay Round Agreements, except in an action brought by the United States for the purposes of declaring such law or application invalid.\nAccording to legislative history, the provision \"makes clear that the Uruguay Round agreements do not automatically preempt State laws that do not conform to their provisions, even if a WTO dispute settlement panel or the Appellate Body were to determine that a particular State measure was inconsistent with one or more of the Uruguay Round agreements.\" The statute also contains certain restrictions in any such legal action brought by the United States, including that the report of the WTO dispute settlement panel or the Appellate Body may not be considered binding or otherwise accorded deference. Any such suit by the United States is expected to be a rarity.", "Private remedies are prohibited under Section 102(c)(1) of the URAA, 19 U.S.C. Section 3512(c)(1), which provides that \"[n]o person other than the United States ... shall have a cause of action or defense under any of the Uruguay Round Agreements or by virtue of congressional approval of such an agreements\" or \"may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of the United States, any State, or any political subdivision of a State, on the ground that such action or inaction is inconsistent with such agreement.\"\nCongress has additionally stated in Section 102(c)(2) of the URAA, 19 U.S.C. Section 3512(c)(2), that it intends, through the prohibition on private remedies:\nto occupy the field with respect to any cause of action or defense under or in connection with any of the Uruguay Round Agreements, including by precluding any person other than the United States from bringing any action against any State or political subdivision thereof or raising any defense to the application of State law under or in connection with any of the Uruguay Round Agreements—\n(A) on the basis of a judgment obtained by the United States in an action brought under any such agreement; or\n(B) on any other basis.\nThe House Ways and Means Committee report on the URAA discusses the rationale and implications of Section 102(c) as follows:\nFor example, a private party cannot bring an action to require, preclude, or modify government exercise of discretionary or general \"public interest\" authorities under other provisions of law. These prohibitions are based on the premise that it is the responsibility of the Federal Government, and not private citizens, to ensure that Federal or State laws are consistent with U.S. obligations under international agreements such as the Uruguay Round agreements.\nThe SAA notes, however, that Section 102(c) \"does not preclude any agency of government from considering, or entertaining argument on, whether its action or proposed action is consistent with the Uruguay Round agreements, although any change in agency action would have to be authorized by domestic law.\"", "In addition to the URAA provisions that limit the direct effect of WTO rules and decisions in U.S. law, the URAA also places requirements on agencies in their implementation of WTO panel and Appellate Body reports. These provisions apply to regulatory action in general and to new agency determinations in response to WTO decisions involving trade remedy proceedings.", "Section 123(g) of the URAA, 19 U.S.C. Section 3533(g), provides that in any WTO case in which a departmental or agency regulation or practice has been found to be inconsistent with a WTO agreement, the regulation or practice may not be rescinded or modified in implementation of the decision \"unless and until\" the United States Trade Representative and relevant agencies meet congressional consultation and private sector advice requirements, the proposal has been published in the Federal Register with a request for public comment, and the final rule or other modification has been published in the Federal Register . Section 123(g) does not apply to any regulation or practice of the U.S. International Trade Commission.\nThe statute requires the USTR to consult with \"the appropriate congressional committees\" regarding the proposed contents of the final rule or other modification. These committees include the House Ways and Means Committee, the Senate Finance Committee, and any other congressional committees that have jurisdiction over matter at hand. In addition, the final rule or other modification may not take effect until 60 days after the USTR has begun committee consultations, unless the President determines that an earlier effective date is in the national interest. The House Ways and Means Committee and the Senate Finance Committee may vote to indicate the disagreement of the committee with the proposed action during the 60-day period. Any such vote is not binding on the agency or department involved.", "Section 129 of the URAA, 19 U.S.C. Section 3538, sets forth authorities and procedures under which the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) may issue new subsidy, dumping and injury determinations, referred to as Section 129 Determinations, in implementation of adverse WTO decisions involving U.S. safeguards, antidumping, and countervailing duty proceedings. Section 129 does not authorize the Commerce Department or the ITC to issue new determinations on their own motion, but instead grants the USTR the discretion to direct the agency to do so in a given case.\nIn antidumping and countervailing duty investigations, which are carried out under authorities in Title VII of the Tariff Act of 1930, 19 U.S.C. Sections 1671-1677n, the Commerce Department determines the existence and level of dumping or subsidization, as the case may be, and the ITC determines whether the dumped or subsidized imports cause material injury, or a threat of material injury, to a domestic industry. Under U.S. safeguards law, set forth in Title II of the Trade Act of 1974, 19 U.S.C. Sections 2251-2254, the ITC conducts investigations to determine if increased imports, whether or not they are fairly traded, are a substantial cause of serious injury to a domestic industry. If the ITC makes an affirmative injury determination, it recommends remedial measures (e.g., a tariff surcharge or import quota) to the President, who ultimately determines whether or not to take action.\nImplemented Section 129 Determinations in antidumping and countervailing duty cases are reviewable in the U.S. Court of International Trade and by binational panels established under Chapter 19 of the North American Free Trade Agreement (NAFTA). Chapter 19 panels are available to review final agency determinations in antidumping and countervailing duty investigations involving NAFTA countries in lieu of judicial review in the country in which the determination is made.", "If an interim WTO panel report or a WTO Appellate Body report concludes that an action by the ITC in connection with a trade remedy proceeding is inconsistent with U.S. obligations under the WTO Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures, or the Agreement on Safeguards, the USTR may request the ITC to issue an advisory report on whether U.S. antidumping, countervailing duty, or safeguards law, as appropriate, allows the ITC to take steps with respect to the proceeding at issue that would render its action \"not inconsistent with\" the panel or AB findings.\nThe ITC is to report to the USTR within 30 calendar days of the USTR's request where an interim report is involved, and within 21 calendar days in case of an AB report. These deadlines are aimed at ensuring that the USTR will receive the requested advice in time to decide whether to appeal a panel's interim report or to implement an adverse report, and to estimate the period of time that may be needed to implementing the WTO decision.\nIf a majority of the ITC Commissioners have found that action may be taken under existing law, the USTR must consult with the House Ways and Means Committee and the Senate Finance Committee and may request the ITC in writing to issue a new determination in the underlying proceeding that would render the ITC action \"not inconsistent with\" the WTO findings. The new determination must be issued within 120 days of the USTR's request. The 120-day limit is intended to allow the USTR to propose a reasonable period of time for implementation to the WTO Dispute Settlement Body once the DSB adopts a WTO panel and any Appellate Body report in a case.\nIn the event the ITC issues a new negative injury or threat of injury determination, the imports subject to antidumping or countervailing duty order at issue, or a least a portion of them, would no longer be considered to have caused a harmful effect, even though they may in fact be dumped or subsidized. The Tariff Act requires that the imposition of antidumping or countervailing duties on dumped or subsidized imports be supported by an affirmative injury determination and thus, absent such a determination, the antidumping or countervailing duty order would need to be revoked in whole or in part. Section 129(a)(6) authorizes the USTR to direct the Commerce Department to take this action. The USTR must consult with the House Ways and Means and Senate Finance Committees before the ITC's new determination is implemented.\nWhere a safeguard proceeding is involved, Section 129 authorizes the President, after receiving a new ITC determination, to reduce, modify, or terminate the safeguard notwithstanding other statutory requirements governing changes in existing safeguard measures. The President must consult with the House Ways and Means Committee and Senate Finance Committee before acting under this authority. The USTR is required to publish a notice of the implementation of any ITC determination in the Federal Register .", "Section 129 also sets out a procedure for new Department of Commerce determinations in antidumping and countervailing duty proceedings, though without the requirement for an initial agency advisory report regarding the scope of the agency's statutory discretion. Instead, promptly after the issuance of a WTO panel or Appellate Body report finding that a DOC determination in an antidumping or countervailing duty proceeds is inconsistent with U.S. obligations under the WTO Antidumping Agreement or the Agreement on Subsidies and Countervailing Measures, the USTR is to consult with the Commerce Department and the House Ways and Means and Senate Finance Committees, and may request the department, in writing, to issue a determination in connection with the underlying antidumping or countervailing duty proceeding that would render its action \"not inconsistent with\" the panel or appellate findings. The Commerce Department must issue its Section 129 Determination within 180 days of the request. A new determination may, for example, reduce the dumping margin or net subsidy and thus result in a reduction of existing duties. After consulting with DOC and the above-named congressional committees, USTR may direct DOC to implement its determination in whole or in part.", "Section 129(c)(1) of the URAA provides that Section 129 Determinations, whether issued by the ITC or the Commerce Department, apply prospectively, that is, the full or partial revocation of the antidumping or countervailing duty order or the implementation of the DOC determination, as the case may be, applies to unliquidated entries of the subject merchandise that are entered, or withdrawn from warehouse for consumption, on or after the date on which the USTR directs the Commerce Department to revoke the order or implement the determination. Unliquidated entries are those for which the U.S. Customs and Border Protection (CBP) has not ascertained a final rate and amount of duty. Notices of the implementation of Section 129 Determinations must be published in the Federal Register .\nThe Uruguay Round SAA explains the operation of Section 129(c)(1) as follows:\nConsistent with the principle that GATT panel recommendations apply only prospectively, subsection 129(c)(1) provides that where determinations by the ITC or Commerce are implemented under subsections (a) or (b), such determinations have prospective effect only. That is, they apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the date on which the Trade Representative directs implementation. Thus, relief available under subsection 129(c)(1) is distinguishable from relief available in an action brought before a court or a NAFTA binational panel, where, depending on the circumstances of the case, retroactive relief may be available. Under 129(c)(1), if implementation of a WTO report should result in the revocation of an antidumping or countervailing duty order, entries made prior to the date of Trade Representative's direction would remain subject to potential duty liability.\nCanada unsuccessfully challenged Section 129(c)(1) in a WTO dispute settlement proceeding in 2001 on the ground that the provision violated the WTO Dispute Settlement Understanding and various WTO antidumping and countervailing duty obligations. Under the retrospective U.S. antidumping and countervailing duty system, DOC ordinarily makes a final assessment of the duties owed on dumped or subsidized goods in an administrative review conducted after the goods are imported. The review covers goods that enter the United States during a specified prior 12-month period. Until this final duty assessment is made for particular goods, importers must deposit estimated duties with CBP on entry. Canada argued that, where a DOC or ITC determination in an antidumping or countervailing duty proceeding is found to violate a WTO obligation, Section 129(c)(1) effectively prohibits the United States from fully complying with the WTO decision by preventing it from refunding estimated duties deposited with CBP before the date that the Section 129 Determination is implemented. In other words, because the duty deposits supported by the challenged determination would no longer have a WTO-consistent basis, Canada argued that they must be returned.\nIn response to Canada's claim, the United States maintained that Section 129(c)(1) addresses only the treatment of imports entered after the implementation date and does not govern the treatment of prior entries for which final duties have not yet been calculated. The United States further argued that the statute does not mandate any particular treatment of these prior unliquidated entries and that the United States has other legal options for dealing with them, including establishing a new dumping or subsidy margin by using a WTO-consistent methodology in an administrative review of the entries or, in the event the duty order or orders were revoked as a result of the WTO proceeding, revising the duty rate in response to a domestic court decision involving the earlier entries.\nIn a report issued in July 2002, the WTO panel concluded that Canada failed to establish that the statute either required WTO-inconsistent action on the part of the United States or precluded the United States from taking action in accordance with its WTO obligations. Canada did not appeal, and the panel report was adopted by the DSB in August 2002.", "Although private rights of action based on Uruguay Round agreements are precluded under Section 102(c) of the Uruguay Round Agreements Act, WTO panel findings have at times been brought to the attention of federal courts, most often in challenges to agency determinations in antidumping and countervailing duty proceedings initiated under judicial review provisions contained in Section 516A of the Tariff Act of 1930, 19 U.S.C. Section 1516a. Section 129 determinations issued by the ITC and the Commerce Department to comply with WTO decisions are also reviewable under this statute. These cases are heard in the U.S. Court of International Trade (USCIT), which has exclusive jurisdiction over civil actions brought under Section 516A. The USCIT's decisions may be appealed to the U.S. Court of Appeals for the Federal Circuit, whose decisions are reviewable by the U.S. Supreme Court.\nFederal courts must hold a final agency determination in an antidumping or countervailing duty proceeding or a Section 129 Determination unlawful if it is found to be \"unsupported by substantial evidence on the record, or otherwise not in accordance with law.\" To determine whether an agency legal interpretation applied in an agency determination is in accordance with law, the court employs the two-step analysis set out by the U.S. Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). First, the court, using tools of statutory construction, determines whether Congress has clearly spoken to the issue at hand. Second, if the underlying statute is silent or ambiguous, the court decides whether the agency's construction of the statute is permissible and will defer to an agency's interpretation of a statute provided it is reasonable. It has also been argued that, in considering whether an agency construction is reasonable for purposes of the second prong of the Chevron test, the court should apply the canon of construction articulated by the Supreme Court in 1804 in Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804). This canon holds that where a statute does not require a specific interpretation, that is, it permits more than one interpretation, it should be interpreted consistently with U.S. international obligations. In the current context, the international obligation would be that contained in a WTO agreement, either by itself or as interpreted in one or more WTO decisions. Plaintiffs thus argue, on the basis of the Charming Betsy canon, that an agency interpretation that violates a WTO obligation is unreasonable under Chevron step two.\nBecause the underlying cause of action in domestic legal challenges to the agency actions described above is based in the Tariff Act and not on a provision of a WTO agreement, courts have not viewed Section 102(c) of the URAA as preventing them from hearing a WTO-based argument in these challenges. When faced with such arguments, courts may deem WTO decisions to be \"persuasive\" or a source of useful reasoning, \"if sound\" to inform a court's decision, but state that WTO decisions are not binding on the United States, U.S. agencies, or the judiciary. Most recently, courts have made clear that, given the statutory scheme established in the URAA for regulatory implementation of adverse WTO decisions, questions as to whether the United States should comply with an adverse WTO decision, and what the extent of U.S. compliance should be, are matters falling within the province of the executive branch. As a result, in ruling on whether an agency's interpretation of a statute is reasonable, courts have rejected Charming Betsy arguments and declined to base their decision making on a WTO decision adverse to the United States where the executive branch has not taken the necessary domestic action to comply.", "", "There are currently 14 pending WTO cases in which the United States is the defending (or in the language of the WTO Dispute Settlement Understanding, \"responding\") party. As noted earlier, this report treats a WTO case as pending if the United States has not fully implemented adopted WTO panel and Appellate Body reports or the United States has taken action, including the enactment of legislation, but the prevailing parties in the dispute continue to question whether the United States has fully complied. In one such case, complaining Members are continuing to impose WTO-authorized trade sanctions. Of the 14 cases, nine involve U.S. trade remedies, with the remainder involving subsidies, trade in services, or trade-related intellectual property rights.\nSix of the nine pending trade remedy cases focus on the U.S. practice of \"zeroing\" in antidumping proceedings, discussed in greater detail below. The remaining three are a long-standing dispute with Japan over a portion of U.S. antidumping law governing the calculation of dumping rates for producers and exporters who are not individually investigated by the Commerce Department in an antidumping proceeding; a dispute involving the Continued Dumping and Subsidy Offset Act, a statute that required the distribution of collected antidumping and countervailing duties to petitioners and interested parties in the underlying trade remedy proceedings; and the application of U.S. antidumping and countervailing duty law to products of China.\nThe United States took administrative action to resolve its antidumping dispute with Japan, but has yet to amend a statutory provision at issue in the case. While Congress repealed the CDSOA as of October 1, 2005, and Congress placed additional restrictions on available funds in 2010, the 2005 repeal legislation mandates the distribution to U.S. firms of duties collected on goods entered through September 30, 2007. The European Union and Japan, two complainants who have objected to the post-repeal disbursements, are continuing to retaliate with tariff surcharges on U.S. goods, albeit in decreasing amounts. The United States and China have agreed to a deadline of April 25, 2012, in their countervailing duty dispute.\nAs the result of a compliance panel proceeding, the United States was found not to have fully complied in Brazil's challenge to U.S. cotton subsidies and continues to face the possibility of retaliation by Brazil against U.S. goods and possibly U.S. services or intellectual property interests. While Congress repealed or made statutory changes to U.S. export credit guarantee programs that were found by the WTO to be prohibited subsidies and the executive branch made administrative changes to one of these programs under revised statutory authority, Congress also reauthorized payments under two domestic support programs that Brazil successfully challenged as actionable subsidies. Payments under these programs were found to cause serious prejudice to Brazil in the form of significant price suppression in the world upland cotton market. Brazil is currently authorized to impose sanctions to remedy both prohibited and actionable subsidy measures at issue in the case. The United States and Brazil have temporarily resolved their dispute, however, forestalling any application of sanctions by Brazil.\nAntigua's challenge to federal laws governing the remote supply of gambling services, while only partially successful, left certain issues unresolved and resulted in the United States withdrawing its market access commitments for gambling services under the General Agreement on Trade in Services (GATS). Antigua sought authorized retaliation in the WTO dispute as well as compensation under the GATS for the negative effects of the U.S. withdrawal of GATS commitments. Outstanding issues still remain subject to discussion by the two parties.\nTwo long-standing disputes involve intellectual property rights, each of these brought by the European Union (EU). The first involves Section 110(5)(B) of the Copyright Act, a statute affecting music licensing; the second, Section 211 of the Omnibus Appropriations Act of 1998, a statute addressing trademarks that involve property confiscated by Cuba. The United States made a payment of $3 million to the EU in partial resolution of the music licensing case, but has not yet fully complied. While bills have been introduced in past and current Congresses aimed at resolving the trademark dispute, none has been enacted.", "Twenty-one WTO complaints against the United States have challenged the use of \"zeroing,\" a practice used by the Department of Commerce (DOC) in antidumping proceedings to calculate dumping margins, that is, the amount by which the home market or \"normal\" value of a good exceeds its export price. Under this practice, DOC, in calculating dumping margins for an imported product, disregards non-dumped sales and thus, complainants argue, inflates the dumping margin or establishes a dumping margin where one might not otherwise exist. Of the 21 cases, six are currently in the compliance phase. Two of these cases were brought by the European Union (DS294 and DS350), with one each brought by Japan (DS322), Mexico (DS344), Brazil (DS382), and Vietnam (DS404). The decisions in these cases have resulted in a broad WTO prohibition on the use of zeroing in U.S. antidumping proceedings, a multi-phased process consisting of original investigations, annual administrative reviews, five-year \"sunset\" reviews, and, in some cases, \"changed circumstances\" and \"new shipper\" reviews.\nIn response to the first EU challenge (DS294), the Commerce Department in early 2007 discontinued the use of zeroing in the price comparison employed most frequently in original antidumping investigations and recalculated dumping margins in the investigations cited by the EU, issuing new determinations under Section 129 of the Uruguay Round Agreements Act (URAA). The United States has yet to fully comply with the WTO decisions in this case, the cases initiated by Japan (DS322) and Mexico (DS344), and the second EU challenge (DS350), to the extent that the WTO decisions involve the use of zeroing in other phases of U.S. antidumping proceedings.\nBoth the EU (in DS294) and Japan requested authorization from the WTO to impose trade sanctions against the United States for non-compliance with the WTO decisions involved; the United States objected to the proposals and, thus, under WTO dispute settlement rules, the requests were automatically sent to arbitration. In 2010, the EU and Japan agreed to suspend the arbitrations on the understanding that the United States would address outstanding issues by early September 2011. In response, the Department of Commerce issued a Federal Register notice in December 2010 in which it proposed as a general rule to calculate dumping margins and duty assessment rates with an offset for non-dumped sales, that is, without zeroing, in administrative, expedited administrative, and new shipper reviews and, by implication, to eliminate zeroing in sunset reviews as well.\nThe dates for resuming the sanctions arbitrations were extended several times, ultimately to February 6, 2012, for both the EC and Japan. Under separate memoranda signed by the United States with the EU and Japan on that date, the suspensions will continue while the United States finalizes the December 2010 zeroing proposal and issues Section 129 determinations using the new methodology in eight AD proceedings challenged by the EU, one proceeding challenged by Japan, and possibly a second proceeding challenged by Japan if U.S. courts do not uphold the revocation of the antidumping order at issue. The sanctions arbitrations are to be terminated once the Section 129 proceedings are completed, that is, on the date the USTR directs DOC to implement the new determinations. DOC is expected to issue the Section 129 determinations within four months of February 6, 2012, and the USTR is expected to direct DOC to implement these determinations within seven days after they are issued. Implementation will be on a prospective basis; that is, the new cash deposit rates resulting from the recalculated dumping margins will apply to unliquidated entries (i.e., entries for which final duties have not been assessed) that enter on or after the date that the determinations are implemented.\nIn September 2010, Mexico requested a compliance panel in DS344, alleging the failure of the United States to comply with the WTO decision as it involves antidumping administrative reviews in general and reviews of the original antidumping order challenged in the case. The panel has not yet publicly circulated its report. The United States was expected to comply by March 17, 2012, in Brazil's zeroing challenge (DS382), but it is unclear if recent actions taken by the United States will resolve the dispute. A deadline of July 2, 2012, is set in the dispute with Vietnam (DS404).\nNew complaints involving zeroing were filed in 2011 by Korea (DS420), China (DS422), and the EU (DS424), and by Vietnam in February 2012 (DS429). A panel was established in Korea's challenge on February 22, 2012, following the entry into a bilateral procedural agreement by Korea and the United States; among other things, the agreement aims at expediting the panel proceeding and excludes from the panel's consideration U.S. compliance efforts in other WTO zeroing cases that may address issues also raised in Korea's panel request. A panel was established in China's challenge in October 2011 after the United States and China entered into a bilateral procedural agreement under which the parties agreed to expedite the panel process, China pledged to provide the necessary evidence and arguments to support its allegations, and the United States agreed not to contest China's claim that the measures identified in the agreed-upon panel request are inconsistent with the relevant section of the WTO Antidumping Agreement, an approach the United States has taken in recent cases in which the use of zeroing in initial investigations was challenged. The panel was appointed on December 21, 2011. The complaint by the EU remains in consultations, as does the complaint by Vietnam, which involves a variety of antidumping issues.\nFinally, 11 other WTO complaints have cited the U.S. use of zeroing; some of these disputes were resolved through the panel process, while others remain in consultations or have been otherwise settled. To date, more than 25 WTO panel and Appellate Body reports have been rendered on this issue.\nThe conduct of antidumping investigations and the imposition of antidumping duties are subject to obligations in the WTO Agreement on Antidumping and Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which permits the imposition of an antidumping duty on an imported product \"not greater in amount than the margin of dumping in respect of such product.\" While neither of these agreements expressly address the use of zeroing in antidumping investigations or in the various reviews and duty assessments carried out in antidumping proceedings, WTO panels and the Appellate Body have found that the use of zeroing in original investigations, as applied in two types of price comparisons, is inconsistent with obligations in Article 2.4.2 of the WTO Antidumping Agreement, a provision requiring WTO Members to determine dumping margins by comparing normal and export values of \"all comparable export transactions.\" In addition, WTO panels and the Appellate Body have concluded that the use of zeroing in administrative and new shipper reviews violates GATT and Antidumping Agreement prohibitions on imposing antidumping duties that exceed the dumping margin for the goods under investigation. Further, reliance on zeroing-based dumping margins in mandatory five-year sunset reviews of antidumping duty orders has been found to violate Article 11.3 of the WTO Antidumping Agreement on the ground that such reliance taints the fundamental determination made in sunset reviews, namely, whether revocation of the antidumping order is likely to lead to the recurrence or continuation of dumping and injury.\nAs a result of these cases, the use of zeroing has been found to be broadly prohibited in the calculation of dumping margins in U.S. antidumping proceedings, both as a general practice and as applied in particular proceedings. Moreover, findings in related compliance panel proceedings that a WTO decision faulting the use of zeroing in an original antidumping investigation continues to apply with respect to subsequent annual administrative reviews are particularly important for the U.S. \"retrospective\" antidumping duty system of which administrative reviews are a key component. It has also been found in these cases that, where goods have entered the United States before the end of the compliance period established in a WTO dispute but final duties have not been collected, zeroing-based duties may not be applied to such goods once the compliance period has ended. In addition, the Appellate Body has found that an additional claim may be made in an initial WTO complaint against zeroing, namely, the \"continued use\" of the practice in subsequent domestic proceedings relating to a particular antidumping duty order.\nAs mentioned earlier, the United States has responded to these decisions by prospectively eliminating the use of zeroing in original investigations under a regulatory modification issued by the Commerce Department under Section 123(g) of the Uruguay Round Agreements Act and finalizing its December 2010 regulatory modification on the use of zeroing in subsequent phases of antidumping proceedings. Where the use of zeroing in an individual original antidumping investigation has been challenged, the United States has resolved the case by the issuance of a Section 129 Determination in which the dumping margin in question has been recalculated without the use of zeroing. The United States has not contested recent complaints of this type before the panel.\nIt is not clear that prospective modification of U.S. zeroing practice—that is, its application to new proceedings only—and the issuance of case-by-case recalculations under Section 129 will be sufficient to satisfy the concerns of all WTO complainants. The EU, however, appears to have dropped any demands that it had for the refund of zeroing-based duties paid after the expiration of the compliance periods in its zeroing cases, given that the memorandum that the EU signed with the United States in February 2012 aimed at resolving its zeroing disputes with the United States provides that the new WTO-compliant dumping margins to be calculated by the United States will be applied only to future entries of merchandise.\nThe United States has been critical of the Appellate Body's broad prohibition on the use of zeroing at meetings of the WTO Dispute Settlement Body and in related documents circulated to Members. In addition, the United States submitted proposals in June 2007 to the WTO Negotiating Group of Rules, which has been negotiating revisions to antidumping and subsidy rules in the Doha Round, asking that negotiators evaluate the reasoning of the WTO panels that have examined the issue of zeroing and stating that \"the proper resolution of this issue requires clear text providing that margins of dumping may be determined without offsets for non-dumped transactions, consistent with the long-held concept of dumping.\" The United States also proposed revised language for the Antidumping Agreement to this effect. While the draft negotiating text issued by the Chairman of the Doha Negotiating Group in November 2007 contained proposed language reflecting U.S. concerns, the draft text issued in December 2008 does not contain such language and instead notes that, with regard to zeroing, \"[d]elegations remain profoundly divided on this issue,\" with positions ranging from \"insistence on a total prohibition of zeroing irrespective of the comparison methodology used and in respect of all proceedings to a demand that zeroing be specifically authorized in all contexts.\" Notwithstanding these uncertainties, including the continued inability of WTO Members to complete the Doha Round, the United States stated at a February 2012 meeting of the WTO Dispute Settlement Body that \"it will continue to press in ongoing WTO negotiations for affirmation that 'zeroing' is consistent with WTO rules.\"", "Although the Tariff Act of 1930, at Section 735(A), 19 U.S.C. Section 1677(35), defines the terms \"dumping margin\" and \"weighted average dumping margin,\" it does not expressly address the practice of zeroing. Using the Chevron standard of judicial review, U.S. courts have held that the statute does not unambiguously require zeroing, but that the Commerce Department's interpretation of the statute as allowing the practice is a permissible one. Courts have also refused to implement adverse WTO decisions on zeroing, leaving determinations as to \"whether, when, and how\" to comply with such rulings to the executive branch.\nFurther, the U.S. Court of International Trade (USCIT) ruled in July 2009 that the Commerce Department's determination under Section 123 of the Uruguay Round Agreements Act to eliminate the use of zeroing in average-to-average comparisons in original antidumping investigations and to offset sales made at less than fair value with fair value sales, an action taken in response to the WTO decision in DS294, was based on a reasonable interpretation of U.S. antidumping law for purposes of Chevron and was thus in accordance with law. As discussed earlier, Section 123 sets out statutory requirements for U.S. regulatory modifications taken to implement WTO decisions. Thus, in its Chevron analysis, the court also considered that the department was undertaking this interpretation in the context of statutory authorities and requirements with an international dimension, stating that the \"deference accorded to Commerce's interpretation [under Chevron ] is at its highest when that agency acts under the authority of a Congressional mandate to harmonize U.S. practices with international obligations, particularly when it allows the Executive Branch to speak on behalf of the U.S. to the international community on matters of trade and commerce.\" The court further held that, because the Section 123 action was in accordance with law, the department's use of this new approach in a Section 129 Determination taken to comply with the WTO decision was \"not unlawful.\" In October 2010, the U.S. Court of Appeals for the Federal Circuit (CAFC), in a decision focused on the Section 129 claim, found that the department's Section 129 Determination \"reflects Commerce's reasonable interpretation of an ambiguous statute\" and affirmed the USCIT decision.\nIn March 2011, however, the CAFC ruled in Dongbu Steel Co. v. United States that DOC's use of zeroing in administrative reviews while abandoning it in initial investigations was an arbitrary interpretation of the statute for purposes of Chevron step two, vacating and remanding the contrary USCIT judgment and remanding to DOC for further proceedings to enable DOC to explain its reasoning. The court found, in part, that the government's decision to implement an adverse WTO decision \"standing alone does not provide sufficient justification for the inconsistent statutory interpretations.\" The court stated in summary:\nour prior case law does not address the situation at hand where Commerce has decided to interpret 19 U.S.C. §1677(35) differently based on the nature of the antidumping proceeding at issue. Applying Chevron step two to this ambiguous statute, we conclude that the agency has not provided a reasonable explanation for why the statute supports such inconsistent interpretations.... We accordingly vacate the decision of the Court of International Trade and remand for further proceedings to give Commerce the opportunity to explain its reasoning. It may be that Commerce cannot justify using opposite interpretations of 19 U.S.C. §1677(35) in investigations and in administrative reviews. Under such circumstances, Commerce is of course free to choose a single consistent interpretation of the statutory language.\nIn a subsequent case, JTEKT Corp. v. United States , DOC explained to the CAFC that the reason for continuing to use zeroing in administrative reviews was that investigations and administrative reviews are \"different proceedings with different purposes,\" with the dumping margin calculation in the former used to determine if an antidumping order will be imposed and the dumping margin calculation in the latter used to determine the amount of the duty assessment on entries subject to the order. In response, the court ruled in June 2011 that DOC had \"failed to address the relevant question—why is it a reasonable interpretation of the statute to zero in administrative reviews, but not in investigations?\"—and again vacated and remanded.\nThe U.S. Court of International Trade remanded the case to the Commerce Department on December 15, 2011, ordering the department to issue a redetermination in which it reconsiders its decision in the administrative review at issue; to modify its decision or explain how the language of 19 U.S.C. §1677(35) may be construed differently as to the use of zeroing whether an original investigation or an administrative review is involved; and, if the department modifies its decision and decides not to apply zeroing or to make some other change, to redetermine the dumping margin for the exporter involved. The court stated that to be adequate under the CAFC standard articulated in Dongbu and JTEKT , discussed above, \"any such explanation must identify a ' basis in the statute for reading 19 U.S.C. §1677(35) differently in administrative reviews than in investigations' … and must explain why the differences between antidumping investigations and antidumping administrative reviews, 'make it reasonable to continue zeroing in one phase, but not the other.'\"\nIn Union Steel v. United States , a February 2012 decision of the USCIT, the court accepted the department's more expansive explanation and upheld the continued use of zeroing in administrative reviews. The department provided three reasons for its different approaches: (1) zeroing has been was the department's \"preferred method\" and has been consistently upheld by the courts; (2) the difference in procedures was the result of the department's decision to comply with WTO decisions; and (3) there exist inherent differences in the nature and purpose of investigations and reviews. Regarding the third rationale, the department contrasted the fact that investigations focus on \"overall pricing behavior of an exporter in order to establish an antidumping duty order\" while reviews are used to set final rates to be used to assess antidumping duties. The court stated that, in reviews, \"it is reasonable for the agency to look for more accuracy, which it achieves in some measure through monthly averaging, and also for the agency to look for the full measure of duties resulting therefrom, which it better achieves through zeroing.\" The court thus concluded that's \"when it comes to reviews, which are intended to more accurately reflect commercial reality, Commerce is permitted to unmask dumping behavior in a way that is not necessary at the investigation stage.\" Considering these reasons in the context of a statute that is silent on the matter of zeroing, the court held that Commerce did not abuse its discretion in changing only its investigation methodology and acted reasonably in applying the antidumping statute to conform to the different purposes of the two.", "", "In November 1999, Japan challenged determinations made by the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) in an antidumping investigation of hot-rolled steel products from Japan initiated in 1998. Under Section 703 of the Tariff Act of 1930, 19 U.S.C. Section 1673, antidumping duties will be imposed if DOC determines that dumping exists, that is, that a product is sold, or likely to be sold, in the United States at less than its fair value, and ITC determines that the dumped imports cause, or threaten to cause, material injury to a domestic industry. At issue in the WTO case were the manner in which DOC calculated the dumping margins in these cases, that is, the amount by which the fair market or \"normal\" value of the product under investigation exceeded the export price, and elements of the affirmative material injury determination made by the ITC.\nDOC calculates dumping margins for individual exporters, as well as an \"all others\" rate for firms that are not investigated individually. Under Section 735(c)(5)(A) of the Tariff Act of 1930, 19 U.S.C. Section 1673d(c)(5)(A), the \"all others\" rate is to be based on rates determined for individually investigated producers, excluding any zero and de minimis margins (i.e., margins of less than 2%) and any margins determined \"entirely\" under \"facts available.\" The department uses \"facts available\" whenever necessary information is not on the public record or any person involved in the investigation withholds requested information, fails to provide information in a timely manner, significantly impedes an investigation, or provides information that cannot be properly verified. When the department decides to use \"facts available,\" it needs to determine what is the most appropriate information on which to base the dumping margin and whether a party has failed to cooperate in such a manner that an adverse inference against it is warranted.\nAlso at issue was the test used by the United States to determine if sales were \"in the ordinary course of trade\" and therefore included in the calculation of normal value. The Antidumping Agreement requires that sales not made \"in the ordinary course of trade\" are to be excluded from this calculation, but the agreement neither defines this concept nor establishes a general test for determining whether sales fall within this category. In the case at hand, the \"arm's length\" pricing test used by the United States to determine whether sales made by exporters and producers to affiliated customers were \"in the ordinary course of trade\" was argued to unfairly exclude certain low-priced sales and therefore to increase normal value and consequently inflate the dumping margin for the goods under investigation.\nIn 2001, the WTO panel, as upheld by the Appellate Body, found that the United States was in violation of the WTO Antidumping Agreement because (1) U.S. law requires, in effect, that any dumping margins based in part on \"facts available\" be used in calculating the \"all others\" rate; (2) the Commerce Department improperly applied \"facts available\" in calculating dumping margins for producers who were individually investigated; and (3) the department improperly determined the normal value of the goods under investigation due to the manner in which it determined whether sales were \"in the ordinary course of trade.\" While the panel had focused on the \"arm's length\" test, the Appellate Body looked at the combined operation of two tests used by the department in determining whether goods were \"in the ordinary course of trade\"—the \"arm's length\" test and the related and even more limited \"aberrationally high\" test—finding a \"lack of even-handedness\" that disadvantaged exporters. As stated by the Appellate Body, the \"combined application of these two tests operated systematically to raise normal value, through the automatic exclusion of marginally low-priced sales, coupled with the automatic inclusion of all high-priced sales, except those proved, upon request, to be aberrationally high priced.\" The Appellate Body reversed the panel on a related point, finding that the United States was not in violation of its WTO obligations regarding the calculation of normal value when it replaced home market sales to affiliates that were excluded under the \"arm's length\" test with downstream home market sales by the affiliates to independent purchasers.\nThe Appellate Body also ruled against the United States with respect to the ITC's injury determination, reversing two panel findings favorable to the United States. First, in contrast to the panel, the AB found that ITC had not applied a provision of the antidumping statute addressing \"captive production\" consistently with the Antidumping Agreement. \"Captive production\" refers to the situation in which a domestic producer does not sell the domestic counterpart of the product under investigation to unrelated parties (the \"merchant market\") but instead processes it into a higher-value good downstream. Second, the AB determined that the ITC had not found a causal link between the dumped imports and material injury to the domestic industry involved. The AB also found, however, that there was an insufficient factual record to allow completion of the required causation analysis.\nThe original compliance period in the case, which had been determined by arbitration, expired November 23, 2002. It was later extended until December 31, 2003, or the end of the 108 th Congress, first session, whichever was earlier, in order to facilitate full compliance.", "Addressing the normal value finding, the Commerce Department modified its \"arm's length\" test by establishing a price band covering a range of prices both below and above those charged by producers or exporters to non-affiliated companies and treating sales to affiliates within the band as being \"in the ordinary course of trade\" for purposes of determining normal value. It stated that the new methodology would be used to implement the WTO findings regarding the Japan hot-rolled steel AD proceeding, and applied in all investigations and reviews initiated on or after November 23, 2002. The department announced a new dumping determination in the AD proceeding at issue in December 2002, stating that in implementation of the WTO rulings and recommendations, it had recalculated dumping margins for three affected Japanese producers using the new methodology; addressed issues related to the use of adverse facts available; and recalculated the all-others rate based on the new rates for the respondent companies. The recalculations resulted in reduced dumping margins for the three companies as well for all other exporters. Although ITC findings were also faulted in the case, no action was taken by the ITC in response to the WTO decision.", "The WTO panel, as affirmed on appeal, also concluded that Section 735(c)(5)(A) of the Tariff Act of 1930 is inconsistent with Article 9.4 of the WTO Antidumping Agreement because it requires DOC to consider dumping margins based in part on facts available in determining the all-others rate, whereas Article 9.4 was found to require the exclusion of dumping margins based either in whole or in part on such facts. Absent legislative compliance by the United States, the December 2003 deadline referred to earlier was extended twice, most recently to July 31, 2005. The deadline lapsed without U.S. action. In an understanding between the disputing parties reached earlier in July 2005, Japan stated that it would not request authorization to retaliate at the time but might choose to do so in the future.", "No legislation has been introduced to amend Section 735(c)(5) of the Tariff Act since the 109 th Congress. H.R. 2473 (Shaw), 109 th Congress, 1 st Sess., would have amended Section 735(c)(5) to remove the word \"entirely\" each time it appears in the provision, thus enabling the Department of Commerce to exclude dumping margins based in whole or in part on facts available in determining the \"all others\" rate, as called for by the WTO decision. Although the text of H.R. 2473 was listed for possible inclusion in 109 th Congress miscellaneous tariff legislation, the bill was not made part of the tariff legislation nor was it acted upon as stand-alone legislation.\nJapan continues to seek legislative action, as the United States continues to state its support for legislative amendments that would achieve full compliance in the case. The United States has also submitted a proposal to the Doha Round Negotiating Group on Rules that Article 9.4 of the Antidumping Agreement be clarified to allow the invalidated practice. No revisions or clarifications of Article 9.4, however, were included in the draft texts of proposed revisions to the Antidumping Agreement circulated by the Chair of the Negotiating Group in November 2007 and December 2008.", "The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, also known as the Byrd Amendment, required that duties collected under an existing antidumping or countervailing duty order be distributed annually to petitioners and interested parties in the underlying antidumping or countervailing duty proceeding. Payments were available for \"qualifying expenditures\" in specified categories (e.g., manufacturing facilities or equipment) incurred by the petitioners and interested parties after the applicable antidumping or countervailing duty order was issued. To be eligible, petitioners and interested parties, referred to in the statute as \"affected domestic producers,\" must also have remained in operation. Although the statute was held WTO-inconsistent in January 2003 and repealed, effective October 2005, by P.L. 109-171 , it remains the target of authorized sanctions by complainants European Union and Japan due to continued payments to U.S. firms under the CDSOA program.", "Eleven WTO members challenged CDSOA shortly after its enactment in October 2000 as violative of the WTO Antidumping Agreement, the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), and other WTO obligations. The complainants based their argument in part on the prohibitions in Article 18.1 of the Antidumping Agreement and Article 32.1 of the SCM Agreement against Members' taking any \"specific action against\" dumping and subsidization, respectively, except for action taken in accordance with the GATT 1994 as interpreted by the Antidumping Agreement or the SCM Agreement. Two complaints were filed: DS217, filed jointly by Australia, Brazil, Chile, the European Union (EU), India, Indonesia, Japan, Korea and Thailand; and DS234, filed jointly by Canada and Mexico.\nConsidering both complaints at the same time, the WTO panel found that the CDSOA did create an impermissible \"specific action against\" dumping and subsidization and that it provided a financial incentive for domestic producers to file or support antidumping and countervailing duty petitions, thereby undermining the industry support requirements in the Antidumping and SCM Agreements. At the same time, the panel rejected other arguments made by the complainants, including Mexico's claim that the act constituted a subsidy in and of itself. The Appellate Body upheld the panel's finding that the statute created a \"specific action against\" dumping and subsidization not allowed under WTO agreements, but reversed the panel on its conclusion regarding industry support requirements. The reports were adopted January 27, 2003, and the compliance period was subsequently determined by arbitration to expire December 27, 2003.", "Because the United States did not comply by the December 2003 deadline, eight complaining Members—Brazil, Chile, EU, India, Japan, Korea, Canada, and Mexico—asked the WTO in January 2004 for authorization to impose retaliatory measures. The United States objected to the requests, sending them to arbitration. The remaining three complainants—Australia, Indonesia, and Thailand—agreed to give the United States until December 27, 2004, to comply.\nIn awards issued August 31, 2004, the Arbitrator determined that each of the eight Members could impose countermeasures on an annual basis in an amount equal to 72% of the CDSOA disbursements for the most recent year for which official U.S. data are available relating to antidumping and countervailing duties paid on imports from the Member at that time. The Arbitrator stated that the disbursements \"operate, in economic terms, as subsidies that may generate import substitution production\" and used an economic model to determine the level of nullification or impairment of benefits, or what the Arbitrator characterized as \"a value of trade\" affected by application of the CDSOA.\nThe eight complainants received formal authorization from the DSB to impose retaliatory measures in late 2004. The EU and Canada began to impose countermeasures in the form of higher tariffs and surcharges on selected U.S. products, respectively, as of May 2005. Mexico began to impose $20.9 million in retaliatory tariffs effective August 18, 2005. In addition, Japan imposed additional tariffs of 15% on 15 categories of U.S. goods as of September 2005.", "In April 2006, the U.S. Court of International Trade ruled that the CDSOA did not apply to imports from Canada or Mexico, and on September 28, 2006, U.S. Customs and Border Protection (CBP) announced that it was withholding FY2006 and subsequent years' distributions on imports from the two countries pending the outcome of any appeal. Canada allowed its retaliatory tariffs to terminate as of April 30, 2006. Mexico, after a month's lapse, imposed increased tariffs on U.S. dairy products from September 18 through October 31, 2006. These tariffs surcharges have not been reimposed.\nA provision repealing the CDSOA as of October 1, 2005, but providing for the distribution of \"duties on entries of goods made and filed before October 1, 2007,\" was enacted in the Deficit Reduction Act of 2005, signed by the President on February 8, 2006. While collection of antidumping and countervailing duties for purposes of CDSOA disbursal has thus ceased, duties will continue to be available for disbursement until all relevant customs entries before September 1, 2007, are liquidated, that is, the final assessment of duties on these entries is made.\nFollowing the 2006 enactment, the United States informed the WTO Dispute Settlement Body (DSB) that it had taken the actions necessary to implement the WTO rulings. Although complaining Members expressed support for the repeal, Members also stated their concerns that the requirement that duties be distributed through 2007 and possibly after this date would prevent the United States from complying fully with its WTO obligations in the case. While WTO Members have regularly called on the United States to cease payments under the CDSOA program, no Member has formally challenged the compatibility of the 2006 statute with U.S. WTO obligations.", "A December 2010 enactment, as amended, restricted the funds available for continued payments under the CDSOA program. Section 822 of the Claims Resolution Act of 2010, P.L. 111-291 , a provision included in the public law as a funding offset, provides that no payments may be distributed under the CDSOA with respect to entries of any goods that, on the date of enactment, that is, December 8, 2010, are (1) not liquidated and (2) not in litigation and not under an order of liquidation from the Commerce Department.\nThe EU and Japan are continuing to impose retaliatory tariffs on U.S. products due to the continued CDSOA disbursements, albeit at diminishing levels due to the generally decreasing amount of duties available for distribution to U.S. firms. As of May 1, 2011, the EU removed 30 U.S. products from its retaliation list and suspended tariff concessions on only three products—sweet corn, glass frames, and crane lorries—for a total value of trade that does not exceed $9.96 million. Japan has reduced its retaliation as well, lowering tariffs on U.S. ball bearings and tapered roller bearings to 1.7% beginning September 1, 2011.\nIn June 2011 CBP announced that approximately $25.1 million was preliminarily available for FY2011 disbursements, with approximately $18.2 million under review pursuant to amended Section 822, discussed above.", "In June 2003, the European Union (EU) requested consultations with the United States over the use of zeroing by the Commerce Department in determining dumping margins, arguing that the practice as it relates to original antidumping investigations and subsequent administrative, new shipper, changed circumstances, and sunset reviews was inconsistent \"as such\" with provisions of the WTO Agreement on Antidumping and Article VI of the GATT 1994. That is, complainants argued that the existence of the practice violated these agreements regardless of any specific application. The EU also alleged that the United States had acted inconsistently with its WTO obligations in applying zeroing in 31 specific cases, including 15 original investigations and 16 administrative reviews. The EU further claimed that insofar as dumping margins in original investigations should be calculated without the use of zeroing and some exporters may thus have de miminis dumping margins, these imports should be excluded from the volume of dumped imports that the ITC takes into account in determining whether such imports are causing material injury to domestic industry. The EU argued that WTO obligations require the United States to make this determination based only on the volume of imports remaining after this exclusion. A panel was established in March 2004.", "In a report issued October 31, 2005, the WTO panel found that zeroing, as applied in the weighted-average-to-weighted average price comparisons made in the 15 original investigations cited in the EU's complaint, was inconsistent with Article 2.4.2 of the Antidumping Agreement. This article provides, in pertinent part, that \"[s]ubject to the provisions governing fair comparison in [Article 2] paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of weighted-average normal value of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.\" The panel based its conclusion on Appellate Body rulings in earlier cases that \"when a margin of dumping is calculated on the basis of multiple averaging by model type, the margin of dumping for the products in question must reflect the results of all such comparisons , including weighted average export prices that are above the normal value for individual models.\" The Appellate Body had earlier concluded that the term \"dumping\" in WTO agreements is defined \"in relation to a product as a whole\" and that, as a result, dumping can thus be found to exist \"only for the product under investigation as a whole\" and not solely \"for a type, model, or category of that product.\" Thus, in considering the U.S. multiple averaging technique in light of WTO obligations, the Appellate Body concluded that the only was that a dumping margin could be properly established for the product as a whole would be to aggregate \" all of the 'results' of the multiple comparisons for all product types.\"\nThe panel also found that zeroing, as it relates to original investigations, was a \"well established and well-defined norm\" that could be challenged \"as such\" in a WTO dispute even though it was not in written form, and that, with respect to its use in weighted-average-to-weighted-average price comparisons in original investigations, the norm \"as such\" was inconsistent with Article 2.4.2.\nThe panel rejected the EU's claims regarding the application of zeroing in the 16 administrative reviews cited by the EU, as well as on the use of zeroing \"as such\" in administrative reviews, new shipper reviews, changed circumstances reviews, and sunset reviews. One dissenting panelist would have struck down the use of the practice in proceedings other than original investigations, however. The panel did not address EU claims involving the need for a new injury determination based on excluded imports, viewing this as a dependent claim and finding that any conclusion would not provide the United States with additional guidance as to how to remedy the primary violation.\nThe panel report was appealed by the United States and the EU. While the United States appealed the panel's finding that zeroing was a challengeable norm, it did not appeal the panel's conclusion that the use of zeroing in weighted-average-to-weighted-average price comparisons in the cited original investigations violated the Antidumping Agreement.\nOn April 18, 2006, the Appellate Body found, although on different grounds from the panel, that the zeroing methodology could be challenged \"as such\" as it relates to original investigations and upheld the panel's finding that the practice is inconsistent with Article 2.4.2 of the Antidumping Agreement.\nThe AB also expanded the range of proceedings in which zeroing was prohibited, finding, contrary to the panel, that the United States could not use zeroing in making weighted-average-to-transaction comparisons to assess duties and set cash deposit rates in the 16 administrative reviews challenged by the EU. The AB found that the application of zeroing in these reviews violated Article 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 since the practice resulted in the imposition of antidumping duties that exceeded the exporters' or producers' dumping margins. Article 9.3, which sets out obligations regarding the assessment of antidumping duties, provides that the \"amount of the anti-dumping duty\" imposed by a WTO Member \"shall not exceed the margin of dumping as established under Article 2\" of the Agreement. Article VI:2 of the GATT 1994 provides that a WTO Member may impose an antidumping duty on a dumped product \"no greater in amount than the margin of dumping in respect of such product.\" The Appellate Body did not determine whether the use of zeroing in these reviews was \"as such\" inconsistent with WTO obligations, however, due to insufficient facts in the panel record to complete this analysis.\nThe AB report, which also addressed other issues, and the modified panel report were adopted on May 9, 2006. While the United States vigorously disputed the Appellate Body decision, it stated at a subsequent DSB meeting that it intended to comply. The disputing parties later agreed on an implementation deadline of April 9, 2007.", "Shortly before the AB report was issued, DOC had announced in the Federal Register that, in response to the WTO panel report, it would abandon the use of zeroing in weighted-average-to-weighted-average comparisons in antidumping investigations and was seeking comments on alternative approaches that might be appropriate in future investigations. The department noted that the United States had not appealed the panel's finding that the zeroing could not be used in making such comparisons in the specific antidumping investigations challenged by the EU.\nOn December 26, 2006, the department, following the requirements in Section 123 of the Uruguay Round Agreements Act (URAA), published a Federal Register notice stating that it was modifying its antidumping practice as announced earlier, noting that the modification would be used in implementing the findings of the WTO panel pursuant to Section 129 of the URAA with regard to the specific antidumping investigations challenged by the EU in the dispute and, moreover, that it would apply the modification in all current and future antidumping investigations as of the effective date, which at the time was planned for January 16, 2007. The department later extended the date to January 23, 2007, and then to February 22, 2007, noting each time that it was acting \"[a]fter further consultations with Congress and in order to afford adequate time for review.\"\nThe department also announced on February 22, 2007, that it was initiating Section 129 proceedings in which it would implement the WTO ruling with respect to 12 of the 15 original antidumping investigations cited by the EU, three of the cited AD orders having been revoked. On April 9, 2007, the Department of Commerce issued new Section 129 Determinations in 11 of the proceedings using average-to-average comparisons in which offsets were provided, two of which resulted in findings of no dumping. DOC also postponed its determination in the 12 th investigation, a proceeding involving stainless steel products from Italy, as it was investigating a possible clerical error in the original investigation alleged by the respondent. Recalculations were done without the use of zeroing as provided in the modification originally announced in December 2006. Regarding the administrative reviews at issue in the dispute, the United States stated that since they had been superseded by new administrative reviews, it did not need to take any further action to bring these reviews into compliance with the WTO decision. The USTR instructed DOC to implement the new determinations on April 23, 2007.\nWhile the United States considered itself in compliance, the EU questioned the prospective nature of the new determinations, that is, that they did not cover duties on goods entered before the date the Section 129 Determinations were implemented; claimed that DOC had \"massively increased the 'all others' rate (applicable to exporters who do not have an individual duty rate, notably new exporters)\"; and stated that the United States was obligated to review the dumping margins in the 16 challenged administrative reviews, claiming that to its knowledge the United States had not taken any action to bring these reviews into compliance with the WTO decision.\nOn May 4, 2007, the United States and the EU entered into a procedural agreement regarding possible Article 21.5 compliance panel proceedings and the sequencing of a possible retaliation request in the event the United States was found not to have complied in the case. The EU requested consultations with the United States under Article 21.5 in July 2007.\nIn September 2007, DOC issued a new determination in the outstanding antidumping case involving steel products from Italy, finding that the alleged clerical errors were not raised in the WTO dispute and thus were outside the scope of the Section 129 proceeding.", "The EU requested a compliance panel in September 2007, claiming that the United States had failed to take compliance actions in some cases and that measures that it had taken in others were inconsistent with WTO obligations. In its panel request, the EU cited specific administrative reviews and sunset reviews undertaken by the United States in the 15 original investigations and 16 administrative reviews that were successfully challenged in the original proceeding. The EU also claimed that United States violated its WTO obligations in those cases where it had recalculated dumping margins in original investigations without the use of zeroing, found that some exporters were not dumping or had de miminis margins, and maintained the antidumping order without determining whether the remaining amount of dumped goods were causing material injury to domestic industry.\nThe compliance proceeding was complex not only because of the number of U.S. antidumping determinations that the EU claimed were WTO-inconsistent, but also because of the interaction of the retrospective U.S. duty system with what has generally been considered to be the prospective nature of remedies in a WTO dispute. As described by the WTO Appellate Body, the WTO dispute settlement system is one under which \"compliance has to be accomplished at the latest from the end of the reasonable period of time [i.e. the compliance period] with prospective effect.\" At the same time, due to the U.S. retrospective system, there were goods that had entered the United States before the date on which the compliance period ended but for which final duty assessments would not be made until after this date, or for which final assessments were made before this date, but the duties were not collected until after the period expired. While the United States and the EU agreed that the WTO Dispute Settlement Understanding provides only for prospective remedies, the parties disagreed on what this entailed for the United States with regard to these earlier-entered goods.\nQuestions also arose as to whether dumping determinations made in a phase of the proceeding that occurred after the one at issue in the original WTO dispute were considered measures taken to comply or whether they were properly before the panel for other reasons. Some of the challenged determinations, which had been rendered in original investigations, were the subject of later administrative or sunset reviews. In addition, the challenged administrative reviews had been superseded by determinations made in subsequent administrative reviews. Further, the United States had taken new action in some of the challenged proceedings before the panel and Appellate Body reports were issued.\nThe United States argued that administrative reviews of challenged dumping determinations made in original investigations were not measures taken to comply with the WTO decision and thus outside the panel's terms of reference. In its view, the compliance panel could only review whether the original determination now complied with the WTO decision and could not examine whether the United States had employed zeroing in the subsequent review. The United States made the same argument with regard to administrative reviews that occurred after those that were challenged in the dispute and protested the inclusion of sunset reviews of challenged determinations as well. As noted above, the United States maintained that since the challenged administrative reviews had been superseded by later reviews, the United States was not required to take any action to ensure that the challenged determinations were in compliance. The EU argued that under this approach, the EU would need to initiate a new dispute settlement proceeding for each subsequent administrative review with which it disagreed, thus allowing the United States to avoid permanent compliance with a WTO decision as it related to a specific investigation or review that was successfully challenged. In addition, the United States had undertaken sunset reviews of some of the challenged original determinations and administrative reviews prior to the adoption of the panel and Appellate Body reports by the Dispute Settlement Body, actions that the EU claimed could not be considered measures taken to comply with the WTO rulings and recommendations in these reports.", "In December 2008, the panel issued a mixed report regarding U.S. compliance, which the EU appealed. In a report issued May 20, 2009, the Appellate Body found that the United States remained out of compliance with its WTO obligations in a variety of respects.\nRegarding whether actions taken by the United States before the panel and Appellate Body reports were adopted were within the panel's terms of reference, the Appellate Body, reversing the panel, found that measures taken before this date were potentially reviewable as compliance measures. The Appellate Body found that the relevant inquiry was not whether the measures were intentionally taken to comply, but instead whether they each had a \"sufficiently close nexus, in terms of nature, effects, and timing ,\" with the WTO decision and with the declared measures that were in fact taken to comply. The AB found that of the five sunset reviews that met this test determinations in four of these, having relied on dumping margins calculated with the use of zeroing, were inconsistent with WTO obligations; no findings were made on the fifth.\nRegarding whether subsequent administrative and sunset reviews of challenged measures were amenable to review, it was determined in the compliance proceeding that administrative reviews involving the calculation of a dumping margin based on zeroing and subsequent sunset reviews in which DOC relies on dumping margins calculated with the use of zeroing, could potentially fall within the scope of the compliance proceeding, This conclusion was based on two grounds: (1) the \"close nexus that exists in terms of their nature\" between the subsequent reviews and measures at issue in the original dispute and (2) the fact that \"the subsequent reviews potentially affect or undermine the steps otherwise taken—or the steps that should have been taken—by the United States to comply with the recommendations and rulings of the DSB, notably in the form of Section 129 determinations.\" The panel had noted that the use of zeroing in an administrative review of an original determination could potentially negate the results of a Section 129 determination in which the dumping margin was calculated without its use, thus undoing an action taken to comply with the WTO decision.\nFurther, regarding the scope of U.S. obligations involving imports entering the United States before the end of the compliance period, the Appellate Body agreed with the panel that the calculation of dumping margins in administrative reviews, or \"definitive duty determinations,\" that occurred after the end of the compliance period, but that involved imports entered before this date, could not be made with the use of zeroing. Contrary to the panel, however, the Appellate Body determined that duties could not be collected after the end of compliance period consistently with WTO obligations if they are based on dumping margins calculated with the use of zeroing during administrative reviews that occur before the end of the compliance period. The panel had found entries could be liquidated on the basis of a zeroing-based dumping determination without violating WTO obligations even though actions taken by the United States after the compliance deadline would ordinarily be expected to comply with the WTO decision. The Appellate Body found that any measures that \"derives mechanically \" from the assessment of duties, as is the case with the collection (or liquidation) of antidumping duties, would not be WTO-compliant to the extent they are based on zeroing and are applied after the compliance deadline expires.\nBefore drawing these conclusions, the AB had generally noted that, with respect to the original determinations and administrative reviews in which the use of zeroing was challenged \"as applied,\" the assessment of a final duty for previously imported goods in an administrative review also affects the cash deposit rate for certain future imports, a situation that has implications for the administrative reviews not directly at issue in the case. Thus, in light of the prospective nature of WTO remedies, \"compliance is not confined by the limited duration of the original measures at issue, especially when a subsequent measure replaces or supersedes the measure at issue in the original proceeding.\"\nThe panel and AB made various findings regarding the inconsistency of particular determinations challenged by the EU with the obligation to eliminate zeroing. Further, the panel, in an issue not reviewed by the AB, determined that, with regard to four original determinations for which Section 129 determinations were issued, the United States violated the Antidumping Agreement by not revisiting its ITC material injury determinations due to revised import volumes. In some cases, the recalculated dumping margins had led to findings of no dumping or de minimis margins for particular exporters and thus the panel found that, in these four cases, the United States was obligated to reconsider whether dumped imports were causing material injury to domestic industry using import volumes that excluded these non-dumped and de minimis imports.\nThe adverse Appellate Body report and the modified compliance panel report were adopted on June 11, 2009. With the compliance panel proceeding completed, the EU has stated that the United States is required to comply \"without delay\" by recalculating dumping margins without the use of zeroing in the numerous dumping determinations faulted in the case and then collecting duties at the recalculated rates. At the same time, the United States has raised concerns about what it views as the expanded scope of U.S. obligations in the case.", "On February 2, 2010, the EU requested authorization from the WTO Dispute Settlement Body to suspend WTO tariff concessions owed the United States for non-compliance in the case. The EU proposed either a \"a prohibitive tariff (such as, for example, 100%) on a specified annual value of trade from the United States to the European Union; or of an equivalent ad valorem tariff on an equivalent annual value of trade.\" In the first scenario, the prohibitive tariff would be applied to an annual value of trade from the United States to the EU of $311 million; in the second scenario, an ad valorem tariff of 13.18% would be applied to an annual value of trade of $477 million. The United States objected to the EU's request, automatically sending it to arbitration.\nAt the request of the parties, the arbitration was suspended as of September 8, 2010, upon the understanding that the United States would take action \"in the foreseeable future\" to comply fully with its obligations in the case. The suspension could last up to one year, but might also be terminated by either party before then. The Arbitrator stated that if a request for resumption of the arbitration had not been received by September 7, 2011, the Arbitrator's report would be circulated on September 15, 2011. The United States and the European Union subsequently asked for further suspensions, with these dates now extended to June 28, 2012, and July 12, 2012, under a February 2012 bilateral agreement, discussed below, aimed at ultimately resolving the dispute.", "To respond to outstanding WTO dispute settlement issues, the Commerce Department issued a proposed rule on December 28, 2010, to eliminate the use of zeroing in administrative reviews, new shipper reviews, and expedited administrative reviews. While the department had been making price comparisons in administrative, new shipper, and expedited administrative reviews using transaction-specific export prices and average normal values without offsets for export prices that exceeded normal value, it would now use average-to-average comparisons and provide offsets for non-dumped sales \"in a manner that parallels the WTO-consistent methodology\" that DOC has been using since 2007 in original antidumping investigations. As stated by the department, unless the department determined that a different price comparison was \"more appropriate,\" the department proposed \"to compare monthly weighted average export prices with monthly weighted average normal values and to grant an offset for such comparisons that show export price exceeds normal value\" in calculating both the weighted average margin of dumping and the duty assessment rate.\" Antidumping duties will not be assessed if the weighted average margin is zero or de minimis . Further, if the use of transaction-to-transaction price comparisons in any prior original investigations \"could be considered as establishing a practice of the Department\" with respect to use of zeroing when calculating the weighted average margin of dumping, an issue arising in Japan's challenge in DS322 (see discussion later in this report), the department proposes \"to withdraw any such practice.\"\nRegarding the WTO-inconsistency of U.S. practice in five-year sunset reviews, the Commerce Department has stated the following:\nthe Department notes that the underlying issue is the methodology for calculating weighted average dumping margins in investigations and reviews, which is addressed by the modifications the Department has made with respect to investigations and is proposing herein to make with respect to reviews. Moreover, the Department recognizes that while section 752(c) of the [Tariff] Act [of 1930] provides that the Department shall consider the weighted average dumping margins determined in the investigation and subsequent reviews, among other factors, the Act does not require that Department to rely on the weighted average dumping margins, or any particular weighted average dumping margin, as the basis for its determinations in five-year (sunset) reviews where such reliance would render the determination inconsistent with the United States international obligations.\nThe comment period on the proposal closed on February 18, 2011. At 2011 meetings of the WTO Dispute Settlement Body, the EU and Japan responded positively to the U.S. proposal to eliminate the use of zeroing as a general practice in reviews, but indicated that they will not consider the United States to be in full compliance with its WTO obligations unless the United States ceases the collection of zeroing-based duties under existing antidumping orders and, as argued by the EU, refunds zeroing-based duties collected after the termination of the compliance period in the cases brought by the EU.", "On February 6, 2012, the United States and the EU signed a Memorandum providing a \"roadmap\" for conclusively resolving both DS294 and the EU's subsequent zeroing dispute, DS350. Under the plan, the United States: (1) by February 13, 2012, was to have completed its internal regulatory procedures under Section 123 of the Uruguay Round Agreements Act and issued a final version of the modification of antidumping practices regarding the use of zeroing in later phases of antidumping proceedings proposed by the Commerce Department in December 2010; (2), by February 18, 2012, was to have begun Section 129 proceedings for eight antidumping proceedings enumerated in the Memorandum using the revised methodology with the aim of revising the current cash deposit rates, which were established as a result of past zeroing-based administrative reviews; and (3) by June 6, 2012, is to issue final dumping determinations in the eight cited proceedings. The Section 129 proceedings are to be completed within seven days after the Department of Commerce issues its final determinations; the proceedings will be considered to be completed on the day that the USTR directs the Commerce Department to implement \"each and every [listed] section 129 determination … that would result in a change in the current cash deposit rate.\"\nIf the Section 129 deadlines are met, the EU and the United States will continue the suspension of the arbitration of the EU's retaliation request in DS294 until the arbitrator notifies the WTO that it is not necessary to render an award. Additionally, within 15 days after the United States completes the above-mentioned Section 129 proceedings, the EU is to withdraw its retaliation request, and the United States and the EU, by joint letter to the arbitrator, are to note that the EU has taken this action, inform the arbitrator that the United States accordingly no longer objects to the request, and request that the arbitrator notify the DSB that it is not necessary to issue an award in the proceeding. The arbitrator has notified the WTO that, if the EU does not submit a request in writing to the arbitrator by June 28, 2012, to terminate the arbitration, the suspension will automatically terminate, the arbitrator will resume work on June 29, 2012, and the arbitral decision will be circulated on July 12, 2012.\nIn furtherance of the U.S.-EU Memorandum, the Commerce Department Final Rule and Final Modification for Reviews (FMR), reflecting the department's December 2010 proposal, was approved on February 7, 2012, and published in the Federal Register of February 14, 2012. The Final Rule and FMR, under which the department will terminate the use of zeroing in calculating dumping margins and the antidumping duty rates in administrative reviews, new shipper reviews, expedited administrative reviews, and sunset reviews, are effective April 16, 2012, with the modification applicable to preliminary dumping determinations in administrative reviews issued after that date. While the EU had sought revisions in antidumping determinations using zeroing issued after the compliance periods had ended, and possible refunds of antidumping duties imposed, the Memorandum is prospective in nature, as indicated above.\nThe department noted again, however, that, as is the case with original investigations, it will determine on a case-by-case basis whether it is appropriate to use a price comparison methodology in administrative, new shipper, and expedited administrative reviews other than the average-to-average method. Regarding five-year sunset reviews, the department stated that it would modify its practice so that it would no longer rely on weighted-average dumping margins that were calculated using the methodology that the Appellate Body found to be inconsistent in the two cases brought by the EU and the case brought by Japan, but that \"only in the most extraordinary circumstances will the department rely on margins other than those calculated and published in prior determinations,\" as provided in current regulations.", "In November 2004, Japan instituted a broad challenge of the use of zeroing by the United States, claiming in its subsequent panel request that the use of this practice in original antidumping investigations, administrative reviews (referred to in the case as \"periodic reviews\"), new shipper reviews, sunset reviews, and changed circumstances reviews was in violation of obligations in the WTO Antidumping Agreement. Japan also challenged zeroing as applied in 15 specific antidumping proceedings, including one original investigation, 12 administrative reviews, and two sunset reviews. The cited cases involved imports of steel plate and steel flat products, as well as roller, ball, spherical plain, and antifriction bearings. In addition, Japan challenged subsequent material injury determinations made by the U.S. International Trade Commission based on dumping margins determined through zeroing and made further claims regarding sunset reviews and changed circumstances reviews in which determinations were based on dumping margins obtained in this way.", "In a report circulated September 20, 2006, the WTO panel concluded that zeroing, when used by DOC in weighted-average-to-weighted-average comparisons in original antidumping investigations and consequently, the use of zeroing in the one original investigation cited by Japan, were inconsistent with Article 2.4.2 of the Antidumping Agreement. As in DS294, discussed above, zeroing was found to be a norm that could be challenged \"as such\" in a WTO dispute settlement proceeding.\nAt the same time, the panel rejected Japan's claims that the use of zeroing in transaction-to-transaction comparisons and weighted-average-to-transaction comparisons in original investigations, its use administrative reviews and new shipper reviews, its application in the 11 cited administrative reviews was violative of the Antidumping Agreement. The panel also found that Japan had failed to make a prima facie case that the use of zeroing in changed circumstances reviews and sunset reviews violated WTO obligations. The panel also rejected Japan's claims that the ITC had improperly relied on dumping margins calculated in previous proceedings in the two sunset reviews cited by Japan. Both Japan and the United States appealed the decision.\nIn a ruling issued January 9, 2007, the Appellate Body upheld the panel's findings that zeroing could be challenged \"as such,\" but went further in finding that U.S. measures did in fact constitute \"as such\" violations of the WTO antidumping obligations. The Appellate Body found that, in maintaining zeroing procedures in transaction-to-transaction comparisons in original investigations, the United States was in violation of Articles 2.4 of the Antidumping Agreement, which requires that a \"fair comparison ... be made between the export price and the normal value,\" and Article 2.4.2 of the Agreement, which as noted earlier, provides that \"[s]ubject to the provisions governing fair comparison in paragraph 4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of weighted-average normal value of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.\"\nThe Appellate Body further found that by maintaining zeroing procedures in administrative reviews, the United States acted inconsistently with Article 2.4 of the Antidumping Agreement, Article 9.3 of the Agreement, which provides that amount of the antidumping duty actually assessed \"shall not exceed the margin of dumping\" as determined under Article 2 of the Agreement, and Article VI:2 of the GATT 1994, which provides that a WTO Member may impose an antidumping duty on a dumped product \"no greater in amount than the margin of dumping in respect of such product.\"\nThe Appellate Body also found that, by using zeroing in new shipper reviews, the United States was out of compliance with Articles 2.4 and 9.5 of the Antidumping Agreement, the latter setting out requirements for such reviews.\nIn addition, the Appellate Body upheld Japan's \"as applied\" claims, finding that the United States had acted inconsistently with Articles 2.4 and 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 by applying zeroing in the 11 administrative reviews cited by Japan.\nThe Appellate Body also determined that, in relying on zeroing-based dumping margins in two cited sunset reviews, the United States had acted inconsistently with Article 11.3 of the Antidumping Agreement. Article 11.3 requires that duties be terminated after five years unless authorities determine in a review \"that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury.\" The Appellate Body had found in an earlier dispute that WTO Members are not required to rely on dumping margins in making this determination, but that, if Members choose to do so, they must calculate the margin in conformity with the requirements of Article 2.4 of the Agreement. If not, the \"likelihood\" determination would not serve as a proper foundation for maintaining the duty under Article 11.3 The Appellate Body found in the instant case that the United States, in making its sunset determinations, had relied on zeroing-based margins calculated in earlier administrative reviews. Since the Appellate Body had also found that the use of zeroing in such reviews is inconsistent \"as such\" with Articles 2.4 and 9.3 of the Antidumping Agreement, it concluded that reliance on these margins in the sunset reviews thus violated Article 11.3.\nThe Appellate Body report and the panel report, as modified, were adopted by the DSB at its January 23, 2007, meeting. The United States, while once again disputing the Appellate Body's reasoning, told the DSB on February 20, 2007, that it intended to comply with its WTO obligations in the case and that it needed a reasonable period of time to do so. It later circulated a critical analysis of the Appellate Body decision to WTO Members. While Japan had originally requested the compliance period be arbitrated, the parties later agreed on a compliance period ending December 24, 2007.", "In its December 7, 2007, WTO status report on the case, the United States made reference to the modification adopted by the Commerce Department in February 2007 under which zeroing would no longer be used in weighted average-to-weighted average comparisons in original investigations and stated only that is was \"continually to consult internally on steps to be taken with respect to the other DSB recommendations and rulings.\" While the Department of Commerce had initiated a proceeding under Section 129 of Uruguay Round Agreements in November 2007 regarding the challenged original investigation, a proceeding involving certain steel plate products, and publicly released final results on December 27, 2007, it took no final action to comply by the December 24 deadline.\nIn January 2008, Japan requested authorization to retaliate by imposing additional import duties on selected products in an initial annual amount of $181.2 million. While the subsequent U.S. objection sent Japan's request to arbitration, the disputing parties entered into a procedural agreement in March 2008 under which Japan was permitted to request a compliance panel without first seeking consultations and, if it made such a request, its retaliation request would be suspended. Under the procedural agreement, either party may request that the arbitration resume in the event that the compliance proceeding results in a finding that U.S. compliance measures are inadequate or non-existent or \"there is no disagreement\" between Japan and the United States that \"a measure taken to comply does not exist\" with respect to certain U.S. actions that were successfully challenged in the original dispute.\nThe United States maintained in a status report to the Dispute Settlement Body and in a DSB meeting held on January 21, 2008, that it was in compliance in the case because it was no longer making average-to-average price comparisons in original investigations without offsets, it had issued a revised dumping determination using this methodology in the one challenged original investigation, and it did not need to take action with respect to the challenged administrative reviews because they had been superseded by subsequent reviews.", "As provided for in the U.S.-Japan procedural agreement, Japan requested a compliance panel on April 7, 2008, stating that the United States was in violation of its WTO obligations by not having fully complied with respect to the one original investigation at issue; by continuing to use zeroing in transaction-to-transaction comparisons in original investigations, administrative reviews, and new shipper reviews; by applying zeroing in five of the administrative reviews originally challenged by Japan and as well as in three \"closely connected\" administrative reviews that the United States argued had superseded earlier reviews; and by relying on zeroing in one of the originally challenged sunset reviews and a subsequent sunset review of the same antidumping duty order. The compliance panel was established on April 18, 2008. On June 6, 2008, the United States and Japan asked the arbitration panel that was reviewing Japan's January 2008 retaliation request to suspend its work.\nIn the interim, DOC, on May 20, 2008, announced the results of the Section 129 proceeding involving the challenged original investigation, stating in the Federal Register that it had recalculated the affected dumping margins, arriving at slightly reduced rates, which, at the direction of the U.S. Trade Representative, went into effect on April 8, 2008.\nThe compliance panel issued its report on April 20, 2009, finding that the United States had not complied with its WTO antidumping obligations in the administrative reviews cited by Japan and in maintaining zeroing in transaction-to-transaction comparisons in original investigations and in any price comparison used in administrative and new shipper reviews. While the United States had argued that it did not have compliance obligations with respect to five of the reviews because the covered goods had entered the United States before the end of the compliance period, the panel found that the United States was required to bring the importer-specific assessment rates determined in these reviews into compliance with its WTO obligations by the end of the compliance period. The panel also addressed a situation that had not been ruled upon in DS294—that is, one in which duties are assessed before the end of the compliance period, but liquidation instructions are delayed because of injunctions issued under domestic judicial proceedings challenging the assessment—and found that the fact that the delay was due to litigation was of no consequence to compliance with the WTO obligations in the case.\nThe panel further determined that the United States had violated GATT Article II prohibitions on imposing tariff surcharges on goods subject to negotiated tariff rates (so-called \"bound items\") by issuing WTO-inconsistent liquidation instructions in four challenged administrative reviews involving ball bearing products after the compliance period expired. These reviews were among the five with delayed liquidations because of pending litigation. While the panel had agreed with the United States that the Article II claims were derivative of Japan's claims under the Antidumping Agreement, it nonetheless found it appropriate to rule on them because \"they raise an important point of contention between the parties regarding the right of the United States to continue liquidating entries after the expiry of the RPT [reasonable period of time] on the basis of liquidation measures issued pursuant to administrative reviews that have already been found to be WTO-inconsistent.\"\nThe panel additionally concluded that the United States was out of compliance with its WTO obligations by not withdrawing or modifying the likelihood of dumping determination in the challenged 1999 sunset review in which the United States had relied on zeroing-based dumping margins.\nThe United States appealed the adverse compliance panel report in May 2009. In a report issued August 18, 2009, the Appellate Body upheld the compliance panel on all issues appealed, including against U.S. claims regarding the judicial delay of liquidation and violations of GATT Article II. The Appellate Body emphasized that all antidumping duties collected after the end of the compliance period needed to be calculated without the use of zeroing. Among other things, it upheld the panel's dismissal of the U.S. argument that judicial delay of liquidation permits the collection of zeroing-based antidumping duties after the compliance period expires, stating, inter alia, that it was \"not persuaded that the initiation by private parties of domestic judicial proceedings is relevant for determining the scope of the United States compliance obligations in this case.\"\nThe Appellate Body and compliance panel reports issued in the Article 21.5 proceeding were adopted by the WTO Dispute Settlement Body on August 31, 2009. At the meeting, the United States referred Members to its earlier public statements regarding its intent to comply in all the WTO zeroing disputes and stated that it was \"working actively to implement these recommendations and rulings, including those made in other disputes for which the reasonable period of time … is still ongoing.\" The United States added, however, that in its view the appeal of the compliance panel report in this case \"was not about zeroing but rather concerns what a Member with a retrospective antidumping system must do to come into compliance with the DSB's recommendations and rulings with respect to individual administrative reviews\" and that the dispute in addition \"raised important procedural issues as to the scope of dispute settlement proceedings.\" Noting the prospective nature of WTO remedies, the United States cited the systemic implications of applying obligations under a WTO decision to governmental actions involving goods that enter the defending Member's customs territory before the end of the compliance period, an approach that, in its view, could be taken toward all border measures imposed on imports, including ordinary tariffs. It also took issue with Appellate Body's finding that the obligation not to use zeroing applied to duty liquidations that take place after the expiration of the compliance period where the liquidation is delayed due to litigation, as well as the Appellate Body's affirmance that a particular administrative review could be reviewed by a compliance panel even though the proceeding was not in existence at the time that Japan made its panel request.", "In April 2010, Japan requested that arbitration of the sanctions proposal it had made in January 2008 be resumed. The arbitration, which was requested by the United States, had been suspended since June 2008 following Japan's request for a compliance panel. Under the U.S.-Japan procedural agreement in the case, Japan had reserved the option to resume the arbitration once the compliance panel process was completed, assuming, as here, that Japan prevailed before the panel and Appellate Body. On December 10, 2010, the United States and Japan asked the arbitrator to suspend its work once again on the ground that the parties were entering into informal discussions on the implementation of the WTO decisions in the case. The suspension could be terminated at any time at the request of either party; further, the arbitrator would automatically resume its work on September 8, 2011, unless Japan submitted a written communication to the contrary by September 7, 2011. At the request of the disputing parties, the latter date has been extended four times, most recently to January 31, 2012.", "To address outstanding issues in the case, the Commerce Department, on December 28, 2010, issued a proposed rule to eliminate the use of zeroing in administrative reviews, new shipper reviews, and expedited administrative reviews and to withdraw the use of zeroing in transaction-to-transaction price comparisons in original investigations to the extent that this activity may be considered a WTO-inconsistent \"practice.\" The proposal also implies that zeroing-based dumping margins will no longer be used in sunset reviews. For further discussion, see the entry for \"Commerce Department's Proposed Zeroing Rule (December 2010),\" under DS294.", "On February 6, 2012, the United States and Japan signed a Memorandum of Understanding (MOU) setting out a series of steps to be taken by the parties for conclusively resolving the dispute. Similar to the EU-U.S. Memorandum discussed above, the United States: (1) by February 13, 2012, was to have completed its internal regulatory procedures under Section 123 of the Uruguay Round Agreements Act and issued a final version of the Commerce Department's December 2010 regulatory modification terminating the use of zeroing; (2) by February 18, 2012, was to have begun Section 129 proceedings for the antidumping order on Japanese stainless steel products cited in the memorandum using the revised methodology with the aim of revising the current cash deposit rate, which was established as a result of past zeroing-based administrative reviews; and (3) by June 6, 2012, is to issue a final dumping determination in the cited proceeding. The section 129 proceeding on Japanese steel is to be completed within seven days after the Department of Commerce issues its final determinations. If there is a change in the cash deposit rate, the proceeding will be considered completed on the date the USTR directs the Commerce Department to implement the final determination; if there is no change, the proceeding will be completed when the section 129 determination is issued. The United States has also agreed to recalculate the dumping margin in a an antidumping order on antifriction bearings from Japan within a specified time frame if an existing revocation of the order is not upheld by U.S courts.\nIf the Section 129 deadlines are met, Japan and the United States will continue the suspension of the arbitration of Japan's retaliation request until the arbitrator notifies the WTO that it is not necessary to render an award. Additionally, no later than six months after the MOU was signed, Japan is to withdraw its retaliation request and the United States and Japan, by joint letter to the arbitrator, are to note that the Japan has taken this action, inform the arbitrator that the United States accordingly no longer objects to the request, and request that the arbitrator notify the DSB that it is not necessary to issue an award in the proceeding. The arbitrator has notified the WTO that, if Japan does not submit a request in writing to the arbitrator by August 20, 2012, to terminate the arbitration, the suspension will automatically terminate and the arbitrator will resume work on the following day.\nIn furtherance of the MOU, the Commerce Department Final Rule and Final Modification for Reviews (FMR), reflecting the department's December 2010 proposal, was approved on February 7, 2012, and published in the Federal Register of February 14, 2012. For further discussion of the Final Rule, see \" Recent Developments \" under DS294.", "Mexico challenged (1) the use of model zeroing by the United States in original antidumping investigations, both as such and as applied in an original investigation of Mexican stainless steel sheet and strips in coils and (2) the use of simple zeroing in annual administrative reviews, both as such and as applied in five administrative reviews in the antidumping proceeding involved. A panel report issued December 20, 2007, concluded that model zeroing, as used in original investigations, was inconsistent with Article 2.4.2 of the Antidumping Agreement, both as such and as applied in the cited antidumping investigation. The panel ruled in favor of the United States, however, in finding that the use of simple zeroing, either as such or as applied in the cited administrative reviews, was not inconsistent with the GATT Article VI or the Antidumping Agreement.\nIn an appeal by Mexico, the Appellate Body issued a report on April 30, 2008, in which it reversed the panel's findings on the use of simple zeroing, finding, as it had in earlier disputes, that the use of this practice in administrative reviews, both as such and as applied in cited antidumping cases, was inconsistent with Article VI:2 of the GATT and Article 9.3 of the Antidumping Agreement. The Appellate Body also criticized the panel for not adhering to earlier Appellate Body rulings on this issue, stating that, although it was \"well settled that Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties,\" this principle \"does not mean that subsequent panels are free to disregard the legal interpretations and the ratio decidendi contained in previous Appellate Body reports that have been adopted by the DSB.\" Examining the use made of panel and Appellate Body reports in subsequent disputes and by WTO Members in enacting laws and issuing regulations, and the role played by the Appellate Body in the WTO dispute settlement system vis à vis panels, the Appellate Body concluded that the \"Panel's failure to follow previously adopted Appellate Body reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU.\"\nThe Appellate Body report and modified panel report were adopted at the May 20, 2008, meeting of the Dispute Settlement Body. During the meeting, the United States stated its support for the panel's conclusions regarding simple zeroing and questioned the approach taken by the Appellate Body in reversing the panel. It did not, however, discuss compliance in the case. The United States later circulated a document in which it questioned in a more detailed fashion the reasoning and approach of the Appellate Body regarding the use of zeroing in the transaction-specific calculations employed in administrative reviews.\nBecause the parties could not agree on the length of the compliance period, the issue was arbitrated at Mexico's request. In an October 31, 2008, decision, the Arbitrator set a deadline of April 30, 2009.\nThe Commerce Department issued a determination under Section 129 of the Uruguay Round Agreements Act on March 31, 2009, in which it recalculated the dumping margin in the original investigation without the use of zeroing, and later published a notice in the Federal Register that the USTR had instructed the department to implement this determination effective April 23, 2009. The recalculation resulted in a reduction of the dumping margin from 30.85% to 30.69% for one individually investigated exporter and the same reduction in the \"all others\" rate.\nWith respect to the administrative reviews that were challenged \"as applied,\" the United States has reportedly informed the WTO Dispute Settlement Body at its May 20, 2009, meeting \"that 'any prospective effect of those reviews has been eliminated and all entries of merchandise under the five reviews have been liquidated for customs purposes.'\" With regard to other rulings and recommendations in the dispute, however, the United States \"informed the DSB that it 'has also been conferring with Mexico about the steps that the United States has taken to comply with the recommendations and rulings of the DSB.'\" On May 19, 2009, the United States and Mexico entered into a sequencing agreement involving the possible request by Mexico of a compliance panel and, if it is later determined that the United States has not taken a measure to comply or its compliance measures are inconsistent with WTO obligations, a request for authorization to suspend concessions owed the United States.", "On August 19, 2009, Mexico requested consultations with the United States under Article 21.5 of the DSU regarding U.S. compliance in the case. Mexico maintains that the United States has not complied with the WTO decision because it (1) \"has not taken any steps\" to eliminate the use of simple zeroing in periodic, that is, administrative, reviews; (2) continues to maintain and use simple zeroing in the five administrative reviews originally challenged in the case; and (3) continues to \"impose, assess and/or collect anti-dumping duties in excess of the proper margin of dumping, and evidences its intention to continue to do so, through … five subsequent periodic reviews [of the original antidumping duty order on stainless steel and sheet in coils from Mexico] ... , any amendments thereto, any measures closely related thereto, any future subsequent periodic reviews, and the United States Government instructions and notices.\"\nThe U.S.-Mexico procedural agreement gave the parties 15 days to consult on Mexico's request, after which Mexico could request a compliance panel. Mexico requested a compliance panel on September 7, 2010, and DSB referred the matter to the original panel later that month. Because one of the members of the original was unavailable, a replacement panelist was named on May 13, 2011. The compliance panel was expected to issue its final report to the disputing parties by March 2012.", "Although the European Union (EU) had successfully challenged the U.S. use of zeroing in DS294, it was concerned that the United States had not yet broadly discontinued use of the practice. In October 2006, the EU challenged the continued use and application of zeroing in 18 specific antidumping cases, citing the continued application of antidumping duties at a level in excess of the margins that would result from correct application of the Antidumping Agreement. Ten of the 18 cases had been at issue in the EU's earlier challenge, DS294. The EU also challenged the use of zeroing in administrative and sunset reviews in 13 cases, a sunset review in one case, and original investigations in four others, a total of 52 agency determinations.\nAlong with challenging the use of zeroing both \"as such\" and \"as applied\" in the cited antidumping determinations, the EU also claimed that a duty based on zeroing, while not falling within either of these two categories, was a \"measure\" subject to WTO dispute settlement. The EU considered this new argument to be \"key\" to the proceeding since, in its view, its effect \"would be that of bringing the future use of United States zeroing in each case within the scope of the panel findings.\" The EU later abandoned its \"as such\" claim after Japan successfully obtained a ruling on this point in DS322.\nIn its October 1, 2008, report, the WTO panel found that the United States acted inconsistently with its obligations in the Antidumping Agreement by (1) using model zeroing in the four cited original investigations; (2) applying simple zeroing in 29 of the cited administrative reviews cited; and (3) relying on dumping margins obtained through model zeroing in the eight sunset reviews at issue. The panel found, however, that claims involving the continued application of antidumping duties in the18 antidumping cases were not within the panel's terms of reference. One panelist, while agreeing with these conclusions, disagreed with the legal reasoning used by the panel in considering the EU's claims on simple zeroing in periodic reviews and, in part, on model zeroing in original investigations. The report was appealed by both the EU and the United States.\nIn a report issued on February 4, 2009, the Appellate Body ruled that \"the continued use of zeroing in successive proceedings in which duties resulting from the 18 anti-dumping duty orders are maintained, constitute 'measures' that can be challenged in WTO dispute settlement.\" The Appellate Body determined that it had a sufficient factual record to make findings on this basis in four of the 18 cases cited by the EU and found that, with respect to these four cases, the application and continued application of antidumping duties was (1) inconsistent with Article 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 to the extent that the duties were calculated with zeroing in administrative reviews, and (2) inconsistent with Article 11.3, to the extent that reliance was placed on a zeroing-based margin in sunset reviews.\nThe Appellate Body also upheld the panel's findings that zeroing was improperly applied in 29 of the challenged administrative reviews and, contrary to the panel, was able to find that the United States had acted inconsistently with its WTO obligations in five additional administrative reviews originally cited by the EU. In addition, the Appellate Body upheld the panel's finding that the United States had acted inconsistently with Article 11.3 of the Antidumping Agreement in eight sunset reviews.\nThe Appellate Body Report and the modified panel report were adopted at the February 19, 2009, meeting of the Dispute Settlement Body. As it had with respect to past appellate reports on zeroing, the United States expressed concerns with the Appellate Body's approach to a variety of issues in the case. At the March 20, 2009, meeting of the Dispute Settlement Body, the United States stated that it intended to comply in the dispute, \"would be considering carefully how to do so,\" and would need a reasonable period of time for this undertaking. In June 2009 the United States and the EU agreed on a compliance period ending December 19, 2009.", "With the compliance deadline of December 19, 2009, before it, the United States stated in its December 10, 2009, WTO status report that the USTR had sent a written request to the Secretary of Commerce to issue a Section 129 determination that would render four final antidumping determinations at issue in the case not inconsistent with the recommendations and rulings of the WTO Dispute Settlement Body. The United States also stated that it would \"continue to consult with interested parties in order to address the other findings\" contained in the adopted panel and Appellate Body reports. At the December 21, 2009, meeting of the WTO Dispute Settlement Body, the United States added that it was \"sure that Members appreciate the difficulties that are raised for the United States by the Appellate Body findings on zeroing in this disputes and others,\" reiterating the action that it had taken and the ongoing discussions on unresolved issues. At the same meeting, the EU reportedly \"expressed its disappointment that the reasonable period of time for implementation had expired and the US had yet to bring itself into compliance.\"\nWith other issues in the case remaining unaddressed, the United States and the EU entered into a procedural agreement in the case in January 2010 providing for a possible compliance panel request by the EU. To address outstanding issues in this and other related cases, the Commerce Department, on December 28, 2010, issued a proposed rule to eliminate the use of zeroing in administrative reviews, new shipper reviews, and expedited administrative reviews. For further discussion of the proposed rule, as well as the February 2012 U.S.-EU memorandum aimed at conclusively resolving this dispute and the final version of December 2010 rule issued in furtherance of this memorandum, see entries for \" Commerce Department's Proposed Zeroing Rule (December 2010) \" and \" Recent Developments \" under DS294.", "China requested consultations with the United States in September 2008 regarding U.S. law and practice in four antidumping and countervailing duty investigations involving Chinese products. China made both \"as applied\" and \"as such\" claims; that is, it argued that both the application of U.S. antidumping and CVD law in particular investigations and the law in itself violated WTO obligations. While panel and Appellate Body reports in the case were adopted in March 2011 and the parties originally settled on a February 2012 compliance deadline, U.S. compliance in the dispute was complicated by the December 2011 ruling of the U.S. Court of Appeals for the Federal Circuit in GPX I n t'l Tire Corp. v. Un ited States that the Commerce Department did not have statutory authority to impose CVDs on goods from NME countries. Legislation to provide the department with express authority to do so, effective November 20, 2006, was signed into law on March 13, 2012 ( P.L. 112-99 ). Litigation in the GPX case is still pending.", "The United States treats China as a nonmarket economy (NME) country for purposes of antidumping investigations, thus triggering a provision of U.S. antidumping law permitting Department of Commerce (DOC) to use a \"surrogate country\" methodology to determine the fair market or \"normal\" value of products imported from NME countries. Under the statute, if DOC finds that available information does not permit it to determine normal value under the rules that are ordinarily applicable in U.S. antidumping investigations, DOC must make this determination \"on the basis of the value of the factors of production\" used in producing the product, adding certain other costs and expenses and base its valuation of these factors on the best available information regarding the valuation of such factors in a market economy country or countries that DOC considers to be appropriate.\nIf DOC finds that available information is inadequate for these purposes, it is to determine normal value on the basis of the price at which merchandise that is (1) comparable to that under investigation, and (2) that is produced in one or more market economy countries that are at a level of economic development comparable to that of the NME country involved, is sold in other countries, including the United States. Assuming that a Chinese product is subsidized and that this subsidization results in a lower domestic sale price, the NME methodology generally produces a higher fair market value than would result if the actual sale price in China were used. Since a dumping margin is determined by measuring the export price against the normal value of the good, a higher normal value may result in a higher dumping margin or, in some cases, might produce a dumping margin that would not otherwise exist.\nThe United States only recently began to impose CVDs on the goods of NME countries, having long refrained from doing so due to the high level of subsidization in such countries and the resulting difficulty of isolating the economic value of subsidies provided with respect to specific products. The Commerce Department's 1984 determination to this effect was upheld by the U.S. Court of Appeals for the Federal Circuit in its 1986 decision in Georgetown Steel Corp. v. United States . The Commerce Department changed its policy in 2006 in accepting the CVD petition in Coated Free Sheet Paper from the People's Republic of China and in issuing affirmative preliminary and final subsidy determinations in the resulting CVD investigation. Although the U.S. International Trade Commission issued a negative final material injury determination in the Coated Free Sheet Paper investigation, thus ending the proceeding, the Department of Commerce issued CVD orders in subsequent CVD investigations involving Chinese products, with more than 20 CVD orders on Chinese goods in effect as of October 2011.\nFurther, because domestic industries often file both antidumping and countervailing duty petitions with regard to the same NME merchandise, the United States may ultimately impose both antidumping and countervailing duties on imports of the same product. As discussed above, the use of NME surrogate country methodology in an antidumping investigation generally produces an unsubsidized (and likely higher) price for normal value, the subsidy later being captured in the margin of dumping. In such situations, subsidization is thus offset not only by the CVD but also by the dumping margin, potentially resulting in a double remedy. In calculating a dumping margin, the Commerce Department is required under Section 772(c)(1)(C) of the Tariff Act, 19 U.S.C. §1677a(c)(1)(C), to make an upward adjustment of the export price to account for any countervailing duty imposed on the same merchandise to offset an export subsidy, thus reducing the margin. There is, however, no such requirement or authority where a CVD is imposed to offset a domestic subsidy, that is, a subsidy that is not contingent on export but that may nonetheless benefit exported goods, thus creating a double remedy or \"double counting\" where domestic subsidization is involved. This result has been argued to violate both the SCM Agreement and domestic trade remedy law.", "U.S. international obligations regarding the imposition of CVDs on NME goods are primarily centered in the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). Briefly, in order for a subsidy to exist under the SCM Agreement, a preliminary requirement for remediation under WTO rules, there must be \"a financial contribution by a government or any public body\" within the territory of a WTO Member, or any form of income or price support, that confers a benefit. A financial contribution may take the form of (1) a direct or potential direct transfer of funds such as a loan or loan guarantee, (2) the foregoing of revenue \"otherwise due,\" (3) government provision of goods of services other than general infrastructure or government purchase of goods, or (4) government payments to a funding mechanism, or entrustment or direction of a private body to carry out one of the functions described above. As provided in GATT Article VI and the SCM Agreement, subsidized imports must also be found to cause or threaten to cause material injury to a domestic industry for a countervailing duty to be imposed.\nUnless a subsidy is prohibited under the SCM Agreement (as are export subsidies and subsidies contingent on the use of domestic over imported products), a subsidy may only be remedied in a direct WTO challenge or a CVD investigation if it is specific to an enterprise or industry or group, either in law ( de jure ) or in fact ( de facto). A subsidy that is limited to certain enterprises in a designated geographic region within the jurisdiction of the subsidizing WTO Member is deemed specific in the Agreement. What qualifies as a \"public body\" and how to quantify the benefit of a financial contribution such as a loan or the provision of goods and services are important issues in CVD investigations involving Chinese products.\nArticle 14 of the SCM Agreement contains guidelines for WTO Members to follow in calculating the benefit from four types of governmental financial contributions—the provision of equity capital; loans; loan guarantees; and the provision or goods or services or the purchase of goods by a government—each providing for the use of market-based benchmarks. In addition, Article 15(c) of China's WTO Accession Protocol provides that Article 14 provisions will apply in benefit calculations in countervailing duty investigations involving Chinese goods, but that \"if there are special difficulties in that application, the importing WTO Member may then use methodologies for identifying and measuring the subsidy benefit which take into account the possibility that prevailing terms and conditions in China may not always be available as appropriate benchmarks.\" Because a market-based benchmark may not be available in China, the United States has thus used benchmarks based on rates or prices from one or more foreign market economy countries to make its benefit determinations in these investigations.", "These and other related issues arose in China's 2008 request for consultations and its subsequent panel request in December of that year. In its \"as applied\" claims, China cited inconsistencies with the GATT articles, the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), the WTO Antidumping Agreement, and Article 15 of China's WTO Accession Protocol in four antidumping and four CVD investigations involving Chinese goods. Among other claims, China alleged the following:\n(1) that in connection with U.S. findings that the alleged provision of goods for less than adequate remuneration fulfilled the definition of a subsidy under the SCM Agreement, DOC erroneously determined that certain state-owned enterprises (SOEs) were public bodies for purposes of the definition, that DOC failed to find that the alleged benefits that trading companies had received from SOE-provided goods were passed on to the producers of the merchandise that was the subject of the CVD investigations, and, in an argument analogous to that used in challenges to the use of \"zeroing\" in antidumping cases, that DOC improperly included in subsidy benefit calculations only those transactions that produced a positive benefit, while excluding transactions that yielded no benefit;\n(2) that the United States had failed to demonstrate that the alleged provision of land and land use rights for less than adequate remuneration was specific to an industry or group of industries;\n(3) that in connection with finding that the government had provided loans on preferential terms, that the United States had erroneously determined that certain state-owned commercial banks were public bodies, and also failed to find specificity;\n(4) that in each case where the United States chose a benchmark outside of China in order to determine the existence and amount of any subsidy benefit, an action permitted under Article 15 of China's Accession Protocol, the United States had improperly rejected the prevailing terms and conditions in China as the basis for making its determinations;\n(5) that in using its non-market economy (NME) methodology for determining dumping and imposing antidumping duties simultaneously with a determination of subsidization and the imposition of CVDs on the same product, the United States levied CVDs in excess of the subsidy found to exist in violation of the SCM Agreement, that is, an impermissible \"double remedy\"; that the levied antidumping and countervailing duties were in excess of the \"appropriate\" amounts, as called for in Article 9.2 of the AD Agreement and Article 19.3 of the SCM Agreement; that the United States failed to make a \"fair comparison\" between export price and normal value in its antidumping determination as required under the WTO Antidumping Agreement; that the United States imposed antidumping duties in excess of the amount of dumping found to exist; and that the United States failed to grant China the most-favored-nation (MFN) treatment required under Article I of the GATT by not according it \"the same unconditional entitlement to the avoidance of a double remedy for the same unfair trade practice that it accords to imports of like products from the territories of other WTO Members.\"\n(6) that in conducting the antidumping and countervailing duty investigations in question, the United States made various procedural errors involving notification and transparency and used improperly made adverse inferences from available information without having requested information from interested parties regarding the factual issue involved.\nChina also argued that U.S. law is inconsistent \"as such\" with U.S. obligations under the WTO Antidumping and SCM Agreements because it does not provide the Department of Commerce with authority to avoid imposing an impermissible \"double remedy\" on goods from China when it uses surrogate country values for determining costs of production of goods made in a country designated a NME. Because imports from WTO Members with market economies are not subject to this treatment, China also considered this situation to be a violation of the GATT Article I, the GATT most-favored-nation article.", "In a report publicly circulated on October 22, 2010, the WTO panel rejected most of China's claims, as follows:\nRegarding the WTO-consistency of DOC's determinations in cited investigations that there was a financial contribution for purposes of the SCM Agreement's definition of a subsidy, the panel found that China had not established that the United States violated the SCM Agreement in determining that state-owned enterprises and state-owned enterprises (SOEs) and state-owned commercial banks (SOCBs) were \"public bodies,\" agreeing with the United States that the term \"public body\" means \"any entity that is controlled by the government.\" The panel also rejected China's claim that the United States had violated the Agreement in determining that certain trading companies were \"entrusted\" or \"directed\" by the government to provide goods and services to producers of the investigated products. Regarding DOC's determinations of specificity , the panel rejected China's claims that DOC had improperly determined that lending by SOCBs to the off-the-road (OTR) tire industry was de jure specific, but also found that the United States had not acted consistently with the SCM Agreement in determining that the government provision of land-use rights in one investigation was regionally specific. Regarding U.S. benefit determinations, which, at China's later request, were reviewed only in light of Article 14 of the SCM Agreement and not the price comparison provisions in China's Accession Protocol, the panel found that China had not established that DOC violated the SCM Agreement by failing to conduct a \"pass through\" analysis in the OTR investigation to determine whether any subsidy benefits received by trading companies selling rubber inputs were passed on to OTR tire producers who purchased those inputs; by failing to \"offset\" positive with \"negative\" benefit amounts in the same investigation; and by rejecting Chinese prices and interest rates as benchmarks with respect to various government loans and government-provided inputs and land use rights in the OTR and other investigations. At the same time, the panel determined that DOC had acted inconsistently with the SCM Agreement in the OTR investigation (1) by not ensuring that the methodology used to determine the benefit to tire producers from purchases of SOE-manufactured inputs from trading companies did not result in a benefit that exceeded that conferred by the government's provision of the inputs, and (2) by using average annual interest rates as benchmarks for one company's U.S. dollar-denominated loans from SOCBs. Regarding China's double remedy claims, the panel rejected China's \"as such\" challenge, and reviewing its \"as applied\" claim, found that, while the panel did not doubt that in general the simultaneous imposition of an antidumping order based on NME methodology and a CVD order on the same merchandise likely result in the same subsidization being offset twice, China did not establish that double remedies were inconsistent with the SCM Agreement, Article VI:3 of the GATT, which prohibits the imposition of CVDs in excess of the amount of subsidization, or the GATT MFN article. Regarding alleged procedural violations , the panel found that China had not established that the United States violated the SCM Agreement by not granting China and various Chinese producers extra time to respond to certain questionnaires in the CVD investigations, but that the United States did violate an obligation under the SCM Agreement in using \"facts available,\" that is, facts not provided by China or its companies, in determining the amount of SOE-provided hot-rolled steel that investigated producers purchased from trading companies.", "In an appeal by China, the WTO Appellate Body (AB), on March 11, 2011, reversed the panel on two especially significant issues: the interpretation of the term \"public body\" and the permissibility of \"double remedies.\" The AB reversed the panel's finding that the term \"public body\" means an entity controlled by the government and thus its consequent finding that the United States had not violated the SCM Agreement in finding that certain SOEs and SOCBs qualified as such. The AB also completed the analysis on this point and concluded that DOC's determinations in the four CVD investigations that SOE input suppliers were public bodies were inconsistent with the Agreement, on the ground that a public body \"must be an entity that possesses, exercises or is vested with governmental authority\" and not merely an entity that is owned or controlled by the government. The AB also concluded, however, that China had not established that DOC's determination that the SOCBs in the OTR investigation constituted public bodies was improper.\nThe AB upheld panel findings on specificity appealed by China. The AB also upheld two of the appealed findings approving DOC's use of foreign benchmarks in determining the subsidy benefit. The AB reversed the panel's rejection of China's claim that the foreign benchmark actually used by DOC to calculate the benefit from RMB-denominated SOCB loans in three investigations was inconsistent with Article 14(b) of the SCM Agreement, a provision governing the calculation of loan benefits, but, at the same time, found that it could not complete the analysis of China's claim under this article. The AB's reversal was based on its finding that the panel had not made an \"objective assessment\" of the issue, as required under Article 11 of the WTO Dispute Settlement.\nIn reversing the panel on the issue of \"double remedies,\" the AB found that offsetting the same subsidization twice by the simultaneous imposition of antidumping duties based on NME methodology and countervailing duties is inconsistent with Article 19.3 of the SCM Agreement, which requires that, when a CVD is imposed on a product, it be levied \"in the appropriate amount in each case.\" The AB also reversed related panel findings and found that, in the four sets of challenged antidumping and CVD investigations, because the United States had imposed duties concurrently without having assessed whether \"double remedies\" arose, the United States acted inconsistently with Article 19.3. As result, the AB also found that the United States was also in violation of two other provisions of the SCM Agreement: Article 10, which requires WTO Members, inter alia, to ensure that the imposition of CVDs is consistent with Article VI of the GATT, and Article 32.1, which prohibits WTO Members from imposing a \"specific action\" against the subsidy of another Member except in accordance with the GATT, as interpreted by the SCM Agreement.", "The Appellate Body report and modified panel report were adopted by the WTO Dispute Settlement Body at its March 25, 2011, meeting. At the meeting, the United States and other WTO Members expressed considerable concern over the AB's approach to the term \"public body,\" the United States noting that the AB's interpretation appeared to have \"collapsed the terms 'government' and 'public body,' such that there was no purpose for the term 'public body' to have been included by Member in the SCM Agreement at all.\" As recounted in the DSB minutes, the United States elaborated on the difficulties that it believed would result from this test in attempts by WTO Members to address trade distortions caused by state-owned enterprises:\nIn moving away from an objective \"control\" standard, as adopted by this Panel and previous panels, the Appellate Body adopted an undefined \"governmental authority\" standard. The test created by the Appellate Body Report appeared to require an additional analysis into what constitutes \"governmental authority\" within the domestic legal system of the exporting Member. There was, in addition, no elaboration in the Report as to how to determine whether the entity in question possessed or exercised such authority. In a CVD case, such an analysis could place a considerable additional burden on the responding companies and governments to provide appropriate data, as well as on administering authorities to collect and analyze all of the appropriate data. It may be difficult in many instances to identify concrete evidence establishing that state-owned enterprises (SOEs) were vested with or exercising \"governmental authority\", despite the fact that they were owned by the government. Yet at the same time, governments could and did use SOEs as key instruments through which to manage national economic activity. In such cases, the pricing policies of SOEs in NMEs could be very trade distorting, primarily the provision of inputs and financing at below market rates. Consequently, the Appellate Body Report could make it much more difficult to address trade distorting subsidies provided through SOEs.\nThe United States and other Members also expressed concerns over the legal reasoning and implications of the AB's finding on double remedies. As described in the DSB minutes, the United States noted that no provision of the Antidumping Agreement or the SCM Agreement restricted a WTO Member's ability to apply antidumping duties based on NME methodology and countervailing duties concurrently. It further maintained that Article 19.3 of the Agreement, on whose language the AB based its conclusion, was not concerned with the definition and calculation of CVDs and \"still less\" with the concurrent application of antidumping and countervailing duties, but rather with the imposition and collection of CVDs, with the phrase \"appropriate amounts\" referring \"simply to the fact that the CVD on particular imports may vary, even though a CVD should be imposed in a non-discriminatory manner.\"\nThe United States further stated that the report gave Members \"no certainty in determining what would constitute an 'appropriate' amount of a CVD in a given situation\" and that it \"appeared to impose the entire burden of proving that there was no 'double remedy' on the importing Member.\" The United States added that the Appellate Body \"appeared to impose significant administrative burdens on Members' trade remedy administrators in the situation of concurrent application of CVDs and NMEs,\" since [\"[i]f required, measuring the effect of a subsidy on the export price of a good and other components of the dumping margin may involve highly complex economic and econometric analysis,\" a measurement that may entail \"significant\" difficulties. In the U.S. view, this situation \"raised serious questions about whether Members would be able to address trade-distorting subsidies by NME Members.\"\nThe United States stated at the following DSB meeting that it intended to comply with the WTO decision and that it would need a reasonable period of time in which to do so. In July 2011, the United States and China agreed on a compliance deadline of February 25, 2012.", "As the WTO case was proceeding, the U.S. Court of International Trade (USCIT), in a case involving the antidumping and CVD orders on over-the-road tires at issue in the WTO case, ruled in August 2010 in GPX Int'l Tire Corp. v. United States , that the application of CVDs on these imports concurrently with antidumping duties calculated under the NME methodology without making adjustments to avoid double counting was unreasonable and inconsistent with U.S. law. In an earlier ruling involving the same CVD order, the USCIT stated that \"[if] there is a substantial potential for double counting, and it is too difficult for Commerce to determine whether, and to what degree double counting is occurring, Commerce should refrain from imposing CVDs on NME goods until it is prepared to address this problem through improved methodologies or new statutory tools.\" The court instructed Commerce that it \"has a choice,\" explaining as follows:\n... The unfair trade statutes ... give Commerce the discretion not to impose CVDs as long as it is using the NME AD methodology. Thus, Commerce reasonably can do all of its remedying though [sic] the NME statute, as it likely accounts for any competitive advantages the exporter received that are measurable. If Commerce now seeks to impose CVD remedies on the products of NME countries as well, Commerce must apply methodologies, including methodologies that will make it unlikely that double counting will occur.\nDOC considered in the remand that it had three options—not to apply the CVDs, to apply the market economy antidumping methodology to either the company involved or the PRC, or to offset the CVD against the duty deposit rate for the NME ADs—and chose the third option. In its August 2010 ruling, the USCIT held the offset to be \"unreasonable\" since it would always result in the unaltered NME AD margin and thus render concurrent AD and CVD investigations unnecessary. The court also found that, \"[p]erhaps even more importantly,\" this practice was inconsistent with Section 772(c)-(d) of the Tariff Act of 1930, 19 U.S.C. 1677a(c)-(d), which lists the specific offsets in dumping margin calculations that are \"permissible\" and held that the offset \"does not comply with the statute.\" The court further stated that it found DOC's tripartite list to be \"exhaustive\" and as such \"a tacit admission that, at this time, it is too difficult for Commerce to determine, using improved methodologies and in the absence of new statutory tools, whether and to what degree double counting is occurring.\" The court remanded again, ordering DOC not to apply CVD law to the goods of the exporter that had challenged the duties on this basis as well as to the goods of a second company even though it had not raised the issue in the litigation.\nThe U.S. government and domestic industry defendants appealed the GPX decision to the U.S. Court of Appeals for the Federal Circuit (CAFC). On December 19, 2011, a three-judge panel of the CAFC affirmed the lower court ruling, but on the ground that Congress had legislatively ratified the 1984 DOC interpretation that CVD law did not apply to NMEs and the CAFC's upholding of that interpretation in its 1986 decision in Georgetown Steel Corp. v. United States , and that, as a result, the Commerce Department was no longer permitted to interpret the statute as providing authority to impose CVDs on NME products. The ruling thus prohibited DOC from imposing CVDs on the imports in question even if it were able to reasonably resolve the double counting issue or if there were no concurrent antidumping order on the merchandise under investigation. As the court instructed, the department needed to seek legislative authority to apply CVDs to NME countries it if believed that the law should be changed.\nIn mid-January 2012, Secretary of Commerce Bryson and USTR Kirk wrote to the Senate Finance Committee and the House Ways and Means Committee that the Administration was continuing to review \"all options\" in the litigation, \"including a request for a rehearing by the full appellate court,\" but that it also wished to pursue legislation amending the CVD statute. The letter stated that without legislation \"should the decision of the court become final, Commerce would be required to revoke all CVD orders and terminate all CVD proceedings involving non-market economy countries, including 24 existing CVD orders on imports from China and Vietnam, as well as five pending investigations and two recently filed petitions.\" According to the letter, the Administration was seeking legislation \"clarifying that the CVD law can be applied to subsidized goods from non-market economies, that CVD proceedings Commerce has already initiated on products from non-market economies are to continue, and that CVD determinations Commerce has made with respect to such products are to remain in effect.\"\nLegislation to remedy the GPX ruling ( H.R. 4105 ) was introduced on February 29, 2012. The bill was quickly passed by the House and Senate and was signed into law on March 13, 2012. The new statute, P.L. 112-99 , generally authorizes the application of CVDs to NME products, makes this authority effective as of November 20, 2006, and prospectively amends antidumping law to address double counting issues.\nWhile the legislation was pending, the Administration filed a petition with the CAFC for a rehearing en banc in the GPX case. The day after the new legislation was signed, the CAFC requested the GPX litigants to submit arguments on the effect of P.L. 112-99 on further proceedings in the case. The United States has asked that the appellate decision be vacated, arguing that it is not final and has been superseded by the new law, and that the case be remanded to the U.S. Court of International Trade for further proceedings in light of the new statute. Importers are primarily arguing that the effective date for the new CVD authority is unconstitutionally retroactive and that the court should affirm its earlier decision.", "Notwithstanding the December 2011 appellate court ruling that U.S. CVD law did not cover goods from NME countries, the United States proceeded with compliance in China's WTO dispute. In January 2012, the United States and China agreed to extend the compliance deadline in the case to April 25, 2012. In its January 2012 status report to the DSB, the United States stated that the United States Trade Representative (USTR) had \"made a written request to the Secretary of Commerce to issue determinations under section 129(b) of the Uruguay Round Agreements Act that would render US Department of Commerce ('Commerce') determinations in four original antidumping investigations and four original countervailing duty determinations of products from China—circular welded pipe, light-walled rectangular pipe, certain new pneumatic off-the-road tires, and laminated woven sacks—not inconsistent with the recommendations and rulings of the DSB.\" The United States continued:\nCommerce has been actively working on this matter and has issued questionnaires to Chinese respondents and to the Government of China, seeking additional information related to the issues on which the DSB adopted recommendations and rulings. Respondents have requested and Commerce has granted additional time for the submission of responses to the questionnaires. Commerce is analyzing responses provided to date and awaiting further responses from Chinese respondents and the Government of China.\nThe Commerce Department is statutorily required to issue a Section 129 determination within 180 days after receiving a written request from the United States Trade Representative (USTR). After the determination is issued and the USTR consults with the department and congressional committees, the USTR may direct the department to implement the determination in whole or in part.\nAs noted earlier, P.L. 112-99 , signed into law on March 13, 2012, authorizes the department to impose CVDs on goods of NME countries, effective November 20, 2006, and thus covers the CVD proceedings at issue in China's WTO case. The United States made note of the new law in its April 2012 status report to the WTO Dispute Settlement Body, mentioning the potential role of the statute in resolving the impermissible \"double counting\" that had been found by the Appellate Body:\nThe new legislation makes clear that where countervailing duties are applied to the exports from a nonmarket economy country at the same time that anti-dumping duties, calculated using a \"surrogate value\" methodology, are applied to the exports, and evidence is presented that this has resulted in an increase in the dumping margin, Commerce may reduce the antidumping duty to avoid what has referred to as a \"double remedy.\" Commerce is currently working to implement this new law and including as part of US efforts to implement the recommendations and rulings of the DSB in connection with this dispute.\nThe United States also noted that in early April 2012 it had issued to interested parties preliminary determinations in two of the Section 129 proceedings being carried out in the case (off-the-road tires and laminated woven sacks) and had requested comments on these determinations.", "In November 2008 and May 2009, Brazil requested consultations with the United States over the use of zeroing in antidumping proceedings involving Brazilian orange juice. The Department of Commerce first issued an antidumping duty order on imports of orange juice from Brazil on March 9, 2006. Brazil's consultation request, as expanded, cited the use of zeroing in the original 2003-2004 antidumping investigation, the resulting antidumping order, the continued use of zeroing in successive antidumping proceedings involving the order, specific administrative reviews related to the order, and any ongoing and future administrative reviews involving the covered imports. Brazil also contested any assessment and case deposit requirements resulting from the order and action taken by U.S. Customs and Border Protection (CBP) to collect definitive antidumping duties at zeroing-based rates. In addition, it challenged U.S. statutes, regulations, and practices, including the use of zeroing in administrative reviews, both as such and as applied in the administrative reviews cited in its request.\nA panel was established at Brazil's request in September 2009. In a report publicly circulated on March 25, 2011, the panel found that Brazil had established that the United States acted inconsistently with Article 2.4 of the Antidumping Agreement in using zeroing to determine the weighted-average margins of dumping—amounts used to set cash deposit rates—and to determine importer-specific assessment rates for two firms in the first and second administrative reviews under the order. The United States chose not to appeal and the panel report was adopted by the WTO Dispute Settlement Body on June 17, 2011. At the meeting, the United States made note of its December 2010 proposal to change its existing practice for calculating dumping margins and assessment rates in administrative reviews. The United States and Brazil later agreed on a compliance deadline of March 17, 2012.\nAt the February 22, 2012, meeting of the WTO Dispute Settlement Body, the United States indicated that its final modification regarding the use of zeroing in administrative reviews, as published in the February 14, 2012 issue of the Federal Register , would address the issues raised in the case. The United States has since reported to the WTO that, as the result of a five-year sunset review, the antidumping order at issue in the case is to be revoked, effective March 9, 2011. It is unclear whether Brazil is satisfied with these responses and will thus seek additional relief. On April 3, 2012, Brazil and the United States entered into a procedural agreement providing for a possible compliance panel and sanctions request by Brazil and a joint effort to expedite any such proceedings.", "Vietnam instituted dispute settlement proceedings against the United States in 2010 regarding the final dumping determination in a U.S. antidumping investigation of frozen and canned warmwater shrimp from that country, challenging, inter alia, the U.S. use of zeroing in calculating the dumping margins involved; a limitation that the Commerce Department placed on the number of exporters entitled to individual reviews (i.e., exporters eligible to receive company-specific dumping rates as opposed to what is generally a higher \"all others\" rate and, later, to seek revocation of the antidumping order on an individual basis); and the application of a country-wide dumping rate that was substantially higher than the \"all-others\" rate to imports of shrimp from companies that were unable to rebut a presumption used by DOC in antidumping proceedings that companies in nonmarket economy countries such as Vietnam operate under the control of the government and, thus, as units of one, government-controlled, country-wide entity. Vietnam also challenged the use of zeroing and the continued application of the \"all others\" rate and the Vietnam-wide entity rates in subsequent administrative reviews of the order.\nA panel was established at Vietnam's request in May 2010, and a panel was appointed in July 2010. The panel report, publicly circulated July 11, 2011, generally found against the United States on the zeroing issues and on the application of the higher country-wide dumping rate instead of the \"all others\" rate to companies that had not rebutted the presumption of government control, but upheld the United States with respect to its limitation on firms eligible for individual reviews. The panel report was adopted on September 2, 2011. The United States and Vietnam have agreed on a compliance deadline of July 2, 2012.", "", "In September 2002, Brazil requested consultations with the United States regarding U.S. statutes and programs that Brazil claimed provided prohibited and actionable subsidies to U.S. producers, users, and exporters of upland cotton. Brazil alleged violations of the WTO Agreement on Agriculture, the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and national treatment obligations in the GATT. It requested a panel in February 2003, adding a claim based on subsidy obligations in GATT Article XVI. The panel was established in March 2003; panelists were appointed in May of that year.\nWTO Members have made commitments in the WTO Agreement on Agriculture to reduce, and in some cases eliminate, domestic support in favor of agricultural producers and export subsidies on agricultural products. The commitments made by each Member to limit domestic support and export subsidization are contained in the Member's Schedule, which is attached to and considered an integral part of the Agreement. \"Scheduled products\" are those products for which a WTO Member has made domestic support and export subsidy reduction commitments. The United States did not schedule any export subsidy reduction commitments regarding upland cotton.\nThe types of export subsidies for which reduction commitments are made are listed in Article 9.1 of the Agreement. Members may not provide any export subsidy listed in Article 9.1 to an \"unscheduled product\" or to a \"scheduled\" product in excess of the Member's scheduled reduction commitments. If the Member does so it is in violation of Articles 3.3 and 8 of the Agreement. In addition, Article 10.1 prohibits Members from applying any subsidy that is not listed in Article 9.1 \"in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments.\"\nAlleged violations of the Agriculture Agreement may be challenged under WTO dispute settlement procedures. Agricultural subsidies may also be challenged under the SCM Agreement, which defines the term \"subsidy,\" prohibits export subsidies and subsidies contingent on the use of domestic over imported products \"except as provided in the Agreement on Agriculture,\" and makes any subsidy fitting the Agreement definition \"actionable\" if the subsidy is specific to an industry and causes \"adverse effects\" to the interests of another WTO Member. Among these adverse effects is what the SCM Agreement refers to as \"serious prejudice,\" which is defined in Article 6.3 of the Agreement as including, among other effects, \"a significant price undercutting by the subsidized product as compared with the price of a like product of another Member in the same market or significant price suppression, price depression or lost sales in the same market.\" The SCM Agreement contains timelines for dispute settlement proceedings that are shorter than those in the WTO Dispute Settlement Understanding and in general contemplates expedited compliance with adverse WTO decisions in disputes arising under the Agreement.\nResort to WTO dispute settlement had been temporarily limited by Article 13 of the Agriculture Agreement—the now-expired \"Peace Clause\"—which provided that certain domestic support measures and export subsidies that conformed fully with enumerated requirements in the Agriculture Agreement were \"exempt from actions\" under specified subsidy-related provisions in the GATT 1994 and the SCM Agreement through the end of the \"implementation period,\" that is, the end of the nine-year period following the date the Agriculture Agreement entered into force (January 1, 1995), or December 31, 2003. The United States unsuccessfully argued in the case that certain of its agricultural programs were covered by this provision.", "In a report issued September 8, 2004, the WTO panel found that the United States was maintaining export subsidy programs and providing payments under domestic support programs in violation of the Agriculture Agreement and the SCM Agreement.\nFirst, the panel found that three U.S. export credit guarantee programs in effect at the time constituted export subsidies for purposes of WTO obligations because the programs were provided at premium rates that were \"inadequate to cover the long-term operating costs and losses\" of the programs. The panel looked to the Illustrative List of Export Subsidies set out in Annex I of the SCM Agreement, which includes export credit guarantee programs fitting this description in item (j) of the List. The cited programs were (1) the Commodity Credit Corporation (CCC) Export Credit Guarantee Program (GSM-102), providing export credit guarantees for up to three years; (2) the CCC Intermediate Export Credit Guarantee Program (GSM-103), providing export credit guarantees for up to 10 years; and (3) the Supplier Credit Guarantee Program (SCGP), allowing export guarantees for 180 days and in some cases up to 360 days.\nThe panel found that the premiums charged for the U.S. programs would not insure adequate financial coverage for several reasons: (1) the existence of a statutory 1% fee cap in connection with GSM-102 and SCGP transactions; (2) the fact that premiums were not risk-based either as to country risk or the creditworthiness of the borrower in individual transactions; and (3) even though the premiums charged offset the programs' long-term costs and losses \"to some degree,\" coverage was \"effectively ensure[d]\" by the U.S. government's subsidy estimates and re-estimates \"and ultimately the availability of United States government funds to cover any costs to government.\" The panel further found that, to the extent that these programs applied to exports of upland cotton and other unscheduled agricultural commodities supported under the programs, and to exports of rice (a scheduled commodity), the export subsidies were being applied in a manner that circumvented U.S. export subsidy commitments in the Agriculture Agreement in violation of Article 10 of the Agreement. As these programs did not conform fully to export subsidy obligations in the Agreement, they were found not to be covered by the Peace Clause and thus subject to challenge. The panel went on to find that these programs were prohibited export subsidies under Article 3.1(a) of the SCM Agreement.\nSecond, the panel faulted the \"Step 2\" program, authorized in Section 1207(a) of the Farm Security and Rural Investment Act of 2002, P.L. 107-171 (\"2002 farm bill\"), 7 U.S.C. Section 7937(a), as it applied both to exporters and domestic users of upland cotton. To the extent that the program provided for payments to exporters for their purchase of higher priced upland cotton, it was found to constitute an export subsidy that was not scheduled by the United States in the Agreement on Agriculture and was therefore inconsistent with U.S. obligations under the Agreement. As such, this part of the Step 2 program was found not to be covered by the Peace Clause and thus also subject to challenge. The panel then found that the program constituted a prohibited export subsidy under the Article 3.1(a) of the SCM Agreement. In addition, the panel found that the Step 2 program, insofar as it provided for payments to domestic users of upland cotton, qualified as a subsidy contingent on the use of domestic over imported products and was thus prohibited under Article 3.1(b) of the SCM Agreement.\nThird, the panel found that payments under various U.S. domestic support programs, including counter-cyclical payments (CCP), market loss assistance payments (MLA), marketing loan program payments, and Step 2 payments for U.S. cotton producers, were measures that granted sufficient amounts of support to upland cotton to exempt them from the Peace Clause. The panel then found that the payments under the four cited programs—which it characterized as \"mandatory price-contingent subsidies\"—caused serious prejudice to Brazil's interests in the form of significant price suppression in the world upland cotton market for purposes of Articles 5(c) and Article 6.3(c) of the SCM Agreement.\nAt the time, CCP payments, market loan program payments, and Step 2 payments were authorized in the 2002 farm bill, while the authority for the MLA payments had expired. Among other findings, however, the panel determined that an agricultural program could be challenged in the WTO even though it had expired so long as the program was in force during the Agriculture Agreement implementation period (i.e., between 1995 and the end of 2003) and continued to have an adverse effect on the complaining Member. This finding allowed Brazil to challenge MLA payments and flexibility contract payments (FCP), the legislative basis of which had lapsed in 2002. Brazil was unable, however, to show serious prejudice from the FCP program.\nThe panel recommended that the prohibited subsidies be removed \"without delay\" and specified that this be done at the latest within six months of the date of adoption of the panel report or July 1, 2005, whichever was earlier. The panel cited Article 4.7 of the SCM Agreement, which requires that where an export subsidy is found, the panel recommend expeditious removal and specify a time period for such action. The panel also recommended that the adverse effects of the actionable subsidies, or alternatively, the subsidies themselves, be removed, as provided in Article 7.8 of the SCM Agreement, that is, upon adoption of the panel report.\nThe panel's finding of serious prejudice for the actionable subsidies also implicated a deadline in Article 7.9 of the SCM Agreement affecting requests for authorization to impose retaliatory measures. Provided there is no agreement between the disputing parties on compensation, Article 7.9 accords a prevailing Member the right to make such a request in the event the defending Member \"has not taken appropriate steps to remove the adverse effects of the subsidy or withdraw the subsidy within six months\" after the date the panel or Appellate Body report is adopted.\nThe United States and Brazil appealed the panel report, and the Appellate Body, in a March 5, 2005, report largely upheld the panel. The reports were adopted on March 21, 2005. This action effectively established a July 1, 2005, deadline for removal of the prohibited subsidies and an Article 7.9 deadline of September 21, 2005, with respect to the actionable subsidies.\nThe United States told the WTO Dispute Settlement Body, on April 20, 2005, that it would implement the WTO rulings, but that it would need a reasonable period to comply and that it had begun to consider its options for doing so. Brazil complained that the U.S. statement was not sufficiently detailed and made reference to the panel's recommended time periods for compliance. The European Union noted that because the subsidies at issue were found to infringe both the SCM Agreement and the Agreement on Agriculture, the United States was entitled to a \"reasonable period of time\" to comply with Agriculture Agreement, that is, a compliance period determined on an ad hoc basis, as ordinarily available under the WTO Dispute Settlement Understanding.", "In response to the WTO finding that fees charged by the Commodity Credit Corporation (CCC) guarantee programs must be risk-based, the United States Department of Agriculture (USDA) announced on June 30, 2005, that, as of July 1, 2005, CCC would use a risk-based fee structure for both the GSM-102 and SCGP program. USDA also announced that CCC would no longer accept applications for payment guarantees under the GSM-103 program.\nBecause prohibited export subsidies had not been removed by July 1, 2005, Brazil requested that the DSB meet on July 15, 2005, to consider its request for authorization to impose countermeasures against the United States. Brazil sought to suspend tariff concessions as well as obligations under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS) until the United States withdrew the exports subsidies identified by the WTO. Brazil proposed sanctions in an amount corresponding to (1) the Step 2 payments made in the most recent concluded marketing year and (2) the total of exporter applications received under the GSM-102, GSM-103, and SGCP programs, for all unscheduled commodities and for rice, for the most recent concluded fiscal year, estimating the annual total for both to be $3 billion.\nOn July 5, 2005, USDA announced that, to further comply with the WTO decision, it was sending proposed statutory changes to Congress to eliminate the Step 2 cotton program, remove the 1% cap on origination fees under the GSM-102 program, and terminate the GSM-103 program. According to USDA:\nRepealing the Step 2 program would remove both the export subsidies and import substitution subsidies that the WTO cited and address issues related to suppression of cotton prices in world markets. Eliminating the one-percent fee cap would make the Export Credit Guarantee Program more risk-based. Terminating the GSM-103 program would reinforce the recent U.S. decision to stop using longer-term export credit guarantees.\nOn the same day, Brazil and the United States notified the DSB that they had entered into a procedural agreement covering the implementation phase of the dispute. The agreement also recognized both the changes to the CCC programs announced June 30, 2005, and the legislative proposal sent to Congress to repeal the Step 2 program. As provided in the agreement, the United States requested arbitration of Brazil's retaliation proposal; the DSB referred the matter to arbitration at its July 15, 2005, meeting; and the two countries, on August 17, 2005, requested that the arbitration be suspended. The agreement also provided that Brazil could request an Article 21.5 compliance panel at any time after the July 15, 2005, meeting.\nIn addition, because the United States had not complied with its WTO obligations regarding the actionable subsidies by September 21, 2005, Brazil shortly thereafter proposed to suspend tariff concessions as well as obligations under the TRIPS Agreement and the GATS in the annual amount of $1.037 billion. The United States objected to the proposal, and the matter was referred to arbitration. On November 21, 2005, the parties requested that the arbitration be suspended, \"noting that the United States reaffirmed\" at the November 18, 2005, DSB meeting \"its commitment to implement the recommendations and rulings of the DSB in this dispute, and in light of the preference for WTO-consistent solutions mutually acceptable to the parties to a dispute set out in DSU Article 3.7.\"\nCongress subsequently repealed the Step 2 program, effective August 1, 2006.", "On August 21, 2006, Brazil requested an Article 21.5 compliance panel, claiming WTO violations stemming from the U.S. failure to repeal the Step 2 program as of end of the six-month period set out in Article 7.9 of the SCM Agreement (i.e., by September 21, 2005), the continued payments under the marketing loan and counter-cyclical programs authorized in the 2002 farm bill, and continued WTO-related defects in the export credit guarantee programs at issue in the case.\nIn December 2007, the compliance issued a report adverse to the United States with respect to both the marketing loan and CCP payments and the GSM-102 program.\nFirst, the panel found that payments under the marketing loan and counter-cyclical programs authorized in the 2002 farm bill resulted in significant price suppression, which constituted present serious prejudice to the interests of Brazil in violation of Articles 5(c) and 6.3(c) of the SCM Agreement. The panel thus found that the United States was in violation of its obligation under Article 7.8 of the SCM Agreement to take \"appropriate steps to remove the adverse effects of … or withdraw the subsidy.\"\nSecond, regarding GSM-102 export credit guarantees provided after July 1, 2005 (the deadline set by the original panel), the panel found that Brazil had established that the revised GSM-102 program constituted an export subsidy on the ground that the program continued to be provided against premiums that were inadequate to cover its long-term operating costs and losses and that the program thus qualified as such under item (j) of the Illustrative List. The panel further found that United States was in violation of its obligations in the Agreement on Agriculture in applying export subsidies in a manner that circumvented its export subsidy commitments regarding various unscheduled products (e.g., cotton, oilseeds, protein meals) as well as three scheduled products (rice, poultry meat, and rice). By providing export subsidies both to unscheduled products and to scheduled products in excess of its reduction commitments, the United States was also found to be granting prohibited subsidies in violation of the SCM Agreement.\nThe panel based its conclusion that the GSM-102 program constituted an export subsidy on the following factors:\n(a) The US Government continues to project that new GSM 102 export credit guarantees issued under the new fee schedule will be provided at a net cost to the Government.\n(b) GSM 102 fees are well below the OECD MPR's [minimum premium rates], which we consider to provide an informed appraisal of the level of fees necessary to cover the long-term, operating costs and losses of an export credit guarantee programme;\n(c) Elements of the structure, design and operation of the GSM 102 programme indicate that the programme is not designed to cover the long term operating costs and losses of that programme.\nThe compliance panel's conclusion in (c) resulted from the following considerations: \"the CCC's access to funds from the US Treasury, which facilitates the functioning of the programme\"; \"the fact that GSM 102 fees do not vary with foreign obligor risk\"; and \"the fact that the one percent fee cap has not been repealed and in our view prevents the adoption of risk-based fees (notably due to the insufficient 'scaling' of GSM 102 fees [as risk increases]).\" The panel ultimately found that the United States had failed to bring its measures into conformity with the Agreement on Agriculture and to \"withdraw the subsidy without delay\" as recommended by the WTO Dispute Settlement Body pursuant to Article 4.7 of the SCM Agreement.\nBoth the United States and Brazil appealed. In a report issued June 2, 2008, the Appellate Body largely upheld the compliance panel, though taking issues with an aspect of the panel's methodology regarding the existence of export subsidization. The Appellate Body reversed the panel's intermediate conclusion that the GSM-102 program would be run at a net cost to the government on the ground that the panel had not accorded sufficient weight to data provided by the United States concerning re-estimates of initial subsidy estimates for the three challenged programs for 1992-2006. The United States had argued that the re-estimates demonstrated that the programs \"were in fact not provided at a net loss to the US Government even before the United States took any measures to comply with the DSB recommendations\" in the case. At the same time, the Appellate Body upheld the panel's ultimate conclusion that the revised program fell within the scope of item (j) and thus constituted an export subsidy, determining that the panel's findings on the structure, design, and operation of the revised GSM 102 program provided \"a sufficient evidentiary basis for the conclusion that it is more likely than not that … [it] operates at a loss.\"\nThe WTO Dispute Settlement Body adopted the reports on June 25, 2008.", "On June 18, 2008, a week before the compliance panel and appellate reports were adopted, President George W. Bush signed the Food, Conservation, and Energy Act of 2008, P.L. 110-246 (\"2008 farm bill\"), a statute containing several provisions relevant to the pending dispute. Section 3101 of the act made statutory changes affecting U.S. export credit guarantee programs, changes that the bill Managers believed \"satisfy U.S. commitments to comply with the Brazil cotton case with regard to the export credit programs.\" The act repealed the GSM-103 intermediate export credit guarantee program and the Supplier Credit Guarantee Program (SCGP) and eliminated the 1% cap on origination fees under the GSM-102 program, a requirement contained in 7 U.S.C. Section 5622(b). While leaving the GSM-102 program intact, Congress placed new requirements on the Secretary of Agriculture in administering the program, including \"work[ing] with industry to ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees cover, but do not exceed, the operating costs of and losses over the long term.\" The phrase \"long term\" is defined in the statute as \"a period of 10 or more years.\" In addition, Congress directed the Commodity Credit Corporation to make available for GSM-102 programs each year through FY2012 a maximum $5.5 billion, or \"the amount of guarantees that can be supported by $40 billion in budget authority (plus any budget authority for prior years)—whichever amount is less.\"\nIn addition, Congress reauthorized counter-cyclical payments and marketing assistance loans for cotton and other commodities for the 2008-2012 crop years. As discussed earlier, these two programs, as authorized in the 2002 farm bill, were successfully challenged by Brazil as actionable subsidies in the pending WTO case and are the basis of one of Brazil's retaliation requests.", "In August 2008, following the DSB's adoption of the compliance panel and Appellate Body reports finding the United States not to be in full compliance in the case, Brazil requested that the arbitrations on its retaliation proposals be resumed. Brazil lowered its retaliation requests in March 2009 to approximately $2.5 billion consisting of three components: (1) a one-time countermeasure of $350 million based on payments made under the repealed Step 2 program during the 13-month period between the compliance deadline of July 1, 2005, set by the original panel, and August 1, 2006, the date that the statutory repeal entered into force; (2) an annual countermeasure of approximately $1.2 billion for prohibited subsidies resulting from the GSM-102 export credit guarantee program; and (3) an annual countermeasure of approximately $1 billion based on actionable subsidies resulting from marketing loan and countercyclical payments.\nIn an arbitral proceeding involving prohibited subsidies, the Arbitrator determines whether the proposed countermeasures are \"appropriate,\" that is, not \"disproportionate in light of the fact that the subsidies … are prohibited.\" Where actionable subsidies are involved, the Arbitrator determines whether the proposed countermeasures are \"commensurate with the degree and nature of the adverse effects determined to exist.\"\nOn August 31, 2009, the Arbitrator issued two reports—the first addressing retaliation for prohibited subsidies, the second for actionable subsidies. The Arbitrator rejected Brazil's request for a one-time payment based on the Step 2 program; lowered the other amounts proposed by Brazil to a total $297.4 million annually for both prohibited and actionable subsidies (based on the FY2006 figures); and set out conditions under which Brazil could suspend WTO obligations involving U.S. services and intellectual property, or \"cross-retaliate.\" Among other findings, the Arbitrator rejected U.S. arguments that, with the expiration of the statutory authority for the marketing loan and countercyclical payments at issue in the underlying WTO proceedings, Brazil could not pursue countermeasures for serious prejudice resulting from payments under these programs. The Arbitrator's decisions are final and not subject to appeal.\nRetaliation for Prohibited Subsidies\nIn examining Brazil's request for countermeasures for the prohibited subsidies, the Arbitrator first concluded that there was no legal basis for Brazil's request for a one-time payment based on past disbursements under the Step 2 program. The Arbitrator found that countermeasures are an exceptional temporary remedy aimed at inducing compliance and that the United States had in fact complied with respect to this program.\nSecond, the Arbitrator determined that Brazil could suspend concessions amounting to $147.4 million annually for the continued operation of the GSM-102 export credit guarantee program, based on GSM-102 transactions in FY2006. As summarized by the Arbitrator, Brazil determined the trade-distorting impact of the program and thus the level of \"appropriate\" countermeasures for the prohibited subsidy by determining \"the interest rate discounts secured by creditworthy and uncreditworthy foreign obligors backed by GSM-102 guarantees and estimating the additional export sales obtained by US exporters as a result of these discounts.\" Brazil referred to these two factors as the \"interest rate subsidy\" and \"additionality.\" The Arbitrator modified Brazil's calculations, however, \"in order to more accurately calculate the trade-distorting impact of the GSM-102 programme on Brazil\" and, taking into account other determinations it had made, reduced Brazil's original proposal to the figure stated above.\nThe Arbitrator found that $147.4 million figure was variable, however, and could change annually depending on the total of amount of GSM-102 transactions in the most recently concluded fiscal year. The Arbitrator set out a formula that Brazil would need to use to determine the amount of permissible sanctions for a given year due to these payments, noting that \"the United States does not dispute that it would be permissible for the level of appropriate countermeasures to be determined through a formula, provided that this formula was sufficiently well defined so as to make it applicable in a transparent and predictable manner.\"\nThird, the Arbitrator determined that Brazil could cross-retaliate in order to remedy the prohibited subsidy resulting from the GSM-102 payments, but set conditions on Brazil's use of this remedy. The Arbitrator stated that \"Brazil has at its disposal a sufficient range of imports of goods, including consumer goods, from the United States so as to enable it to suspend concessions in the area of trade in goods alone, without causing itself such economic harm so as to render such suspension 'not practicable or effective,'\" the standard set out in the Dispute Settlement Understanding, taking into account the cumulated $294.7 million in countermeasures the Arbitrator had determined Brazil could impose for both prohibited and actionable subsidies in this case. Based on Brazil's imports of consumer goods for 2007, the Arbitrator identified at least $409.7 million of such goods that could be the subject of countermeasures. For certain consumer goods (food, medical products, and arms), the Arbitrator adopted a benchmark of 20%, finding that a U.S. import share of the good of less than this amount \"constitutes a reasonable threshold by which to estimate the extent to which Brazil may be able to find alternative sources of supply\" for the product. This annual goods \"threshold\" is to be updated, however, under a formula set out by the Arbitrator, to take into account any change in Brazil's total imports of U.S. consumer goods for the same year for which the annual countermeasures are determined.\nUnder the decision, if the total level of countermeasures for prohibited and actionable subsidies that Brazil is entitled to for a given year exceeds the updated goods threshold for that year, Brazil may cross-retaliate, that is, suspend WTO obligations involving U.S. services, intellectual property rights, or both, in excess of the goods threshold to the full amount of permissible sanctions for the year. If permissible sanctions do not exceed the goods threshold, however, Brazil may only suspend concessions on trade in goods.\nRetaliation for Actionable Subsidies\nThe United States preliminarily argued in the arbitration involving actionable subsidies that, with the expiration of the 2002 farm bill, payments would no longer be made under the marketing loan and countercyclical payments programs at issue in Brazil's WTO challenge and that, because the challenged measures were removed, there was no longer a legal basis for Brazil to impose countermeasures with regard to these payments. Brazil argued that because these programs were reauthorized in the 2008 farm bill in a manner that did not materially change them as they applied to cotton, the problematic payments would continue under the same conditions and criteria as the payments subject to the earlier WTO proceedings. Until the United States achieved what the WTO Appellate Body deemed \"substantial compliance,\" Brazil claimed that it had the right to pursue countermeasures for continuing present serious prejudice. The United States responded that Brazil's conclusions about payments that might be made under the 2008 farm bill and their price effect were speculative.\nIn assessing whether the United States had complied, the Arbitrator quoted from the Appellate Body report referred to by Brazil, in which the Appellate Body had stated that for purposes of determining whether a WTO Member has complied in a case, \"substantive compliance is required, rather than formal removal of the inconsistent measure.\" Informed by this principle, the Arbitrator compared the 2002 and 2008 farm bills and concluded that the replacement of the 2002 provisions with new measures that are \"essentially the same\" as those found to be WTO-inconsistent was not a basis for finding that the United States had complied, if the United States had not shown that \"the inconsistencies that were the object of the [prior WTO] proceedings have been remedied.\" Seemingly alluding to possible activity under the reauthorized CCP and marketing loan provisions, the Arbitrator noted that \"any uncertainty about what might happen in the future\" could not dissuade the Arbitrator from \"assessing the adverse effects determined to exist in relation to a measure which did exist and which, on the facts, continues to exist.\" The Arbitrator thus stated that \"although the legal basis for the granting of ML and CCPs has been modified, such payments continue to be offered and may continue to be made under a new legal basis.\" The Arbitrator concluded that, to the extent that it was entitled to review whether compliance has been achieved in a case (a task it earlier admitted was not normally the task of arbitrators), it would not have adequate grounds to conclude that the United States had complied. Further noting that the findings in the underlying WTO proceedings related to the payments under the 2002 farm bill and not to the farm bill as such, the Arbitrator concluded that the United States had failed to establish that Brazil no longer had a legal basis to seek countermeasures for payments under these two programs.\nThe Arbitrator ultimately determined that Brazil could impose countermeasures for the actionable subsidies in an amount not to exceed $147.3 million annually. The Arbitrator arrived at this figure by first determining that the world cotton price would have been 9.38 % higher but for the U.S. programs, with adverse effects for the rest of the world of $2.905 billion in marketing year (MY) 2005. The Arbitrator further found that this overall amount needed to be apportioned to Brazil, basing this apportionment on Brazil's 5.1% share of worldwide cotton production for the same marketing year, or $147.3 million.\nThe Arbitrator also found that Brazil may cross-retaliate with regard to the actionable subsidies only if the total amount of permissible countermeasures for a given year (i.e., $284.7 million, as adjusted) exceeds the monetary import threshold (i.e., $409.7 million, as adjusted). Since annual countermeasures for the actionable subsidies is fixed at $147.3 million, the use of cross-retaliation will depend on annual increases in countermeasures due to increased U.S. payments under the prohibited subsidy, that is, the GSM-102 export credit guarantee program.", "After the WTO arbitral panel issued its August 2009 reports setting out the permissible scope of Brazil's requested retaliation for both prohibited and actionable U.S. subsidies, Brazil asked the United States to provide it with information on transactions under the GSM-102 export credit guarantee program for FY2008 and FY2009 and the most recent data on U.S. export prices of products for which the United States had made export subsidy reduction commitments (\"scheduled\" products), namely, pig meat, poultry meat, and rice, for 2008 and 2009. Brazil's request was based on language in the Arbitrator's report on prohibited subsidies directing the United States to provide such data to Brazil to enable it to calculate its annual countermeasures under the formula set out in the report.\nIn early November 2009, Brazil published a preliminary list of over 200 U.S. products, primarily consumer and agricultural goods, that could potentially be subject to increased tariffs. On November 19, 2009, the WTO Dispute Settlement Body approved Brazil's request to impose countermeasures against the United States consistent with the August 2009 Arbitrator's decisions. The United States stated at the DSB meeting that it intended to comply and hoped that a resolution of the dispute could be reached, obviating any need for Brazil to impose tariff increases and other authorized measures. WTO dispute settlement rules do not require that Brazil impose countermeasures once it is authorized to do so or that it impose these measures by a given date.\nAs Brazil prepared for and pursued its retaliation request during the fall of 2009, the USDA tightened requirements for the GSM-102 program for FY2010. On September 21, 2009, the Commodity Credit Corporation (CCC) and the Foreign Agricultural Service (FAS) solicited comments from stakeholders on revisions to the GSM-102 fee rate schedule. The revisions were being proposed to implement requirements in the 2008 farm bill to develop a risk-based fee structure for the program. In November 2009, CCC posted higher program fees than those proposed earlier. In addition, CCC announced that maximum credit terms for FY2010 would be based on the risk category of the obligor country associated with the CCC payment guarantees, with shorter repayment terms or \"tenor\" as country risk category increased.\nOn December 21, 2009, Brazil reported to the WTO Dispute Settlement Body that, based on U.S.-supplied fiscal and calendar year data for 2008, it was entitled to annual retaliation of $829.3 million, with $561 million covering trade in goods and $268.3 million covering other sectors and agreements. At the same time, Brazil delayed announcing a final list of sanctioned products as the two countries engaged in negotiations on at least a temporary resolution of the dispute. On March 12, 2010, however, Brazil notified the WTO that, beginning on April 7, it intended to impose up to $829.3 million in retaliation against the United States, $591 million of which would consist of tariff increases on various agricultural products, cosmetics, cotton textiles, appliances, motor vehicles, and other items. The remainder would involve the suspension of unspecified concessions under the Agreement on Trade Related Intellectual Property Rights (TRIPS) or the General Agreement on Trade in Services (GATS), or both.", "On April 6, 2010, the United States and Brazil announced a preliminary agreement in the cotton dispute that temporarily forestalled the imposition of WTO-authorized sanctions by Brazil against the United States. The United States agreed (1) to establish a fund with Brazil to provide technical assistance and capacity building to Brazilian cotton farmers and to contribute approximately $147.3 million to the fund per year on a pro rata basis; (2) to make some \"near term\" modifications of the GSM-102 program and engage in bilateral discussions on the further operation of the program; and (3) to address various food safety issues involving Brazilian exports to the United States. Regarding food safety, the United States agreed that it would publish a proposed rule by April 16, 2010, declaring that the Brazilian state of Santa Catarina is free of various diseases, complete an ongoing risk analysis for the area, and \"identify appropriate risk mitigation measures to determine whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the United States.\" In return, Brazil postponed its retaliatory measures until April 22, but also agreed that if sufficient progress were made under the preliminary agreement by April 21, it was willing to suspend its measures for an additional 60 days.\nOn the same day the agreement was announced, the USDA stated that, effective April 9, it was canceling all unused balances of the GSM-102 export credit program announcements issued for FY2010 and that, if any unused allocations remained under these announcements, it would issue new announcements making the allocations available under new guarantee fee rates. On April 16, the USDA issued a proposed rule adding Santa Catarina to a list of regions considered free of foot-and-mouth disease (FMD), rinderpest, swine vesicular disease, classical swine fever, and African Swine fever, an action that USDA stated \"would relieve certain restrictions on the importation into the United States of live swine, swine semen, pork meat, pork products, live ruminants, ruminant semen, ruminant meat, and ruminant products\" from that region \"while continuing to protect against the introduction of these diseases into the United States.\" On April 20, the parties signed a memorandum of understanding providing for the above-described fund for Brazilian cotton farmers. According to USTR, the fund \"is scheduled to continue until the next Farm Bill or a mutually agreed solution to the Cotton dispute is reached\" and may be terminated by the United States if Brazil imposes retaliatory measures. On the same day, USDA activated a fee increase for most transaction categories in the GSM-102 program.\nOn June 25, 2010, the United States and Brazil signed a framework agreement aimed at permanently settling the cotton dispute, including a pledge by Brazil not to impose authorized countermeasures during the life of the agreement and an understanding that the dispute may be legislatively resolved in the 2012 farm bill. The agreement provides for (1) bilateral discussions on U.S. domestic cotton support; (2) semi-annual reviews of the GSM-102 program to determine whether program usage exceeds $1.3 billion for the relevant six-month period and thus whether USDA must implement an agreed-upon increase in program fees; (3) bilateral consultations at least four times a year on issues relevant to the dispute; (4) Brazil's agreement not to impose countermeasures as long as the agreement is not terminated; and (5) upon the enactment of a successor to the 2008 farm bill, consultations to determine whether the statute provides a mutually agreed resolution to the dispute. The United States and Brazil notified the WTO of their agreement on August 27, 2010.\nThe United States reportedly began making payments into the cotton fund for Brazilian farmers in June 2010. Further, the United States and Brazil reportedly determined during the October 2010 GSM-102 review, the first semi-annual review under the framework agreement, that actual usage of the GSM-102 program from April through September 2010 approached, but did not exceed, the $1.3 billion threshold and thus an automatic increase in fees for the program was not triggered. The USDA issued a final rule regarding the disease-free status of the state of Santa Catarina on November 16, 2010.\nThe USDA, which must release $5.5 billion in GSM-102 allocations each year, announced its first set of FY2011 allocations at the end of October 2010. In addition, USDA announced new GSM-102 guarantee fees, effective February 17, 2011, aimed in part at encouraging the use of loans of shorter length (or \"tenor\"), a less desirable alternative for exporters. A joint U.S.-Brazil review of the GSM-102 program, tasked with examining actual usage of the program for the six-month period from October 2010 through March 2011, took place in April 2011. Following the review, USDA increased GSM-102 fees based on the amount of program usage during the six-month review period, as called for in the framework agreement. In the six-month joint review held in October 2011, usage of the GSM-102 program was again found to exceed agreed-upon levels, with USDA once more raising its program fees as a result.\nOn June 16, 2011, the House passed H.R. 2112 , appropriations legislation for the Department of Agriculture, with a provision that would have prohibited the USDA from using appropriated funds for FY2012 to provide payments to the Brazil Cotton Institute for the fund established in the framework agreement. Such a prohibition did not appear in the Senate-passed version of the bill and was not included in the final public law.\nIn January 2012, the Brazilian Ambassador to the World Trade Organization wrote to the chairmen and ranking members of the House and Senate agriculture committees that various cotton-related proposals suggested for inclusion in the 2012 farm bill \"would result in subsidy programs that are more trade-distortive than the programs currently in place,\" noting further that modifications to the GSM-102 program, which Brazil views as essential to U.S. compliance in the case, had not been the subject of any legislative proposals to date. As of the date of this report, the passage of a new 2012 farm bill, and thus the possible enactment of provisions to resolve the U.S.-Brazil cotton dispute, is uncertain. Further, the April 2012 bilateral operational review of the USDA's GSM-102 loan guarantee program reportedly found that U.S. exporters' usage of the program for the previous six months exceeded a $1.5 billion benchmark established in the 2010 bilateral framework agreement, requiring the USDA to increase its premiums for the program by at least 15%.", "The United States and the European Union (EU) challenged each other in the WTO in October 2004 regarding alleged government subsidies provided by each to their major airline manufacturers in what is referred to as the \"Boeing/Airbus\" dispute. Although a panel began hearing the case in the original EU proceeding (DS317), the panel did not issue a report. In June 2005, however, shortly before the first panel was established, the EU submitted a second complaint, which is the basis of the current dispute proceeding against the United States (DS353). WTO dispute panels and the WTO Appellate Body (AB) ultimately found that the EU provided injurious subsidies to Airbus and that the United States provided prohibited export subsidies and injurious export and domestic subsidies to the Boeing Corporation in violation of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement). While each dispute is currently in the compliance phase, the EU challenge to U.S. aircraft subsidies focused on in this report is at an earlier point in the implementation process. Panel and Appellate Body reports in the U.S. challenge were adopted by the WTO Dispute Settlement Body (DSB) on June 1, 2011, with those in the EU challenge adopted on March 23, 2012.", "In the pending proceeding involving EU aircraft subsidies (\"Airbus\" case), the EU informed the DSB on December 1, 2011, that it had complied with its WTO obligations, meeting the six-month compliance deadline for subsidy disputes set out in Article 7.9 of the SCM Agreement. The United States disagreed and on December 9, 2011, requested authorization from the DSB to retaliate against the EU in an estimated annual amount of $7 billion to $10 billion. The United States also initiated consultations with the EU regarding a compliance panel under Article 21.5 of the WTO Dispute Settlement Understanding (DSU) on the same day. The EU objected to the U.S. retaliation request on December 22, 2011, sending it to arbitration. The United States and the EU entered into a procedural agreement on January 12, 2012, permitting the compliance proceeding and the arbitration (if needed) to proceed sequentially. Under the agreement, the arbitration has been suspended and the parties will expedite any compliance panel proceeding. At the request of the United States, the DSB established a compliance panel on April 13, 2012. If the EU is found to be out of compliance in the case, the U.S. or the EU may request that the arbitration of the U.S. sanctions request be resumed.\nA main issue of concern to the United States in its compliance challenge in the Airbus case is the provision of \"launch aid\" by EU for two Airbus models, the A380 and the A350. The United States is arguing that the EU has not yet removed the largest launch aid subsidies for the A380, which, while not found to be prohibited subsidies in the original proceeding, were nonetheless found to cause serious prejudice to U.S. interests. The United States has also expressed concerns over new launch aid for the Airbus A350, aid that is not covered by the WTO decision in DS316 but that the U.S. maintains exacerbates the subsidy problems addressed in the case. The United States had unsuccessfully argued that all launch aid is part of a unified EU program, a finding that may have made it easier for the United States to challenge any new EU assistance of this type.", "The SCM Agreement, at Article 1.1 defines the term \"subsidy\" as a financial contribution by a government or any public body within a WTO Member's territory that confers a benefit. A financial contribution may take the form of a direct transfer of funds, such as a grant, loan, or equity infusion; the foregoing of revenue that is \"otherwise due,\" such as a tax credit; or government provision of goods or services or the purchase of goods. Article 3 of the Agreement prohibits subsidies contingent on export performance and subsidies contingent on the use of domestic over imported products. Subsidies that are not prohibited, but that fall within the Agreement's definition of a subsidy are deemed \"actionable\" under Article 5 of the Agreement; that is, they may be challenged by a WTO Member if they are alleged to cause one or more types of \"adverse effects\" to the Member's interests: (1) material injury to a domestic industry; (2) impairment of a tariff concession; or (3) \"serious prejudice.\" To successfully challenge a subsidy, the complaining Member must also show that the subsidy is \"specific\" in law or in fact to an industry or group of industries under principles set out in Article 2 of the SCM Agreement. Prohibited subsidies are considered to be specific per se , however, and thus complainants do not need to make this showing when challenging subsidies of this type. What constitutes \"serious prejudice\" is set out in Article 6.3 of the Agreement, which lists such adverse economic effects as significant price suppression, displacement of exports, and significant lost sales.\nIn its panel request, the EU cited subsidies granted to the Boeing Corporation by the states of Washington, Kansas, and Illinois, identifying a variety of \"tax breaks, bond financing, fee waivers, lease arrangements, corporate headquarters relocation assistance, research funding, and infrastructure measures and other benefits.\" The EU also alleged various subsidies on the federal level, claiming that, through a variety of cited programs, the National Aeronautics and Space Administration (NASA), the Department of Defense (DOD), the National Institute of Standards and Technology (NIST), the Department of Labor, and various statutory tax incentives transferred to the U.S. large civil aircraft (LCA) industry economic resources on terms more favorable than available on the market or at arm's length.\nThe EU claimed two types of violations: (1) that the U.S. Foreign Sales Corporation (FSC) program, as modified in subsequent enactments, and a tax reduction under Washington State law constituted export subsidies prohibited under Article 3 of the SCM Agreement, and (2) that all of the subsides alleged by the EU were actionable under Article V of the SCM Agreement as they were specific and caused adverse effects to the interests of the EU, specifically, \"serious prejudice\" as contemplated by Articles 5(c) and 6.3 of the SCM Agreement. The EU also alleged violations of agreed levels of industry support contained in the bilateral 1992 U.S.-EU Agreement on Trade in Large Civil Aircraft (LCA Agreement), an agreement from which the United States withdrew the same day that it filed its WTO complaint against EU aircraft subsidies (October 6, 2004). The EU estimated that the alleged U.S. subsidies amounted to $14.1 billion between 1989 and 2006, more than half of which ($10.4 billion) was attributable to alleged research and development (R&D) subsidies provide by NASA.\nThe EU argued that the United States maintained an export subsidy on the federal level in providing tax benefits to U.S. companies under the U.S. Foreign Sales Corporation (FSC) program, 26 U.S.C. §§921-927, as well as through subsequent statutes enacted to repeal and replace it, namely the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 (ETI Act) and the American Jobs Creation Act of 2004, which repealed the 2000 statute. The FSC program had been found to constitute an export subsidy in violation of the SCM Agreement in an earlier dispute brought by the EU (DS108). Transition and grandfathering clauses in the 2000 and 2004 acts, which permitted Boeing to continue to receive FSC benefits under existing contracts, were a particular source of contention in the Boeing case. In 2005, Congress repealed the objectionable provision in the 2004 statute in response to adverse panel and AB reports in compliance proceedings in DS108.\nAmong the forms of serious prejudice alleged by the EU in its Article V claims were:\nprice undercutting by subsidized U.S. aircraft of competing EU products in world, EU, U.S., and third country markets where the U.S. and EU producers compete; significant depression and suppression of the prices of competing EU LCA products in these markets; significant lost sales of competing EC LCA products in these markets; and the displacement and impeding of exports of competing EU LCA products in the U.S. and third country markets.\nA panel was established on February 17, 2006. Because of the complexity of the case, the panel did not issue a final report to the disputing parties until January 31, 2011. The panel report was made public on March 31, 2011.", "The WTO panel issued a mixed ruling in the case, finding that the United States had provided prohibited subsidies and specific subsidies causing adverse effects, while rejecting a number of EU claims and declining to rule on whether the specific subsidies caused serious prejudice in the form of a threat of significant price suppression or whether the United States had violated the bilateral LCA Agreement. Regarding the EU's prohibited subsidy claims, the panel concluded that the FSC/ETI measures that were in force at the time that the panel was established (provisions that have since been repealed) constituted prohibited export subsidies under Article III of the SCM Agreement, but that the EU had not shown that challenged Washington State tax measures qualified as such. The panel also found that of the 31 subsidies alleged to be specific by the EU, only 15 qualified as such; moreover, the panel estimated that, in total, they provided at least $5.3 billion in subsidies to Boeing's LCA division between 1989 and 2006, less than half the amount originally claimed by the EU.\nThe panel grouped the specific subsidies into three categories: (1) aeronautics R&D subsidies provided by NASA and DOD; (2) tax subsidies; and (3) other subsidies, including property and sales tax relief provided to Boeing under Industrial Revenue Bonds (IRBs) issued by the city of Wichita, KS; various tax credits and exemptions and employment assistance provided by the state of Washington; relocation reimbursement, tax credits, and tax abatement by the state of Illinois; and assistance related to Boeing's move to new headquarters in Chicago. The panel found, however, that only some of these specific subsidies caused serious prejudice to EU interests. In particular, the panel found that:\nNASA and DOD R&D aeronautics subsidies affected Boeing's development of technologies for the Boeing 787 Dreamliner, causing adverse effects in the 200-300 seat wide-body product market, specifically significant price suppression of the Airbus A330 and Original A350; significant lost sales of the A330 and original A350; and the threat and threat of displacement and impedance of EC exports of the A330 and Original A350 from third-country markets; the FSC/ETI subsidies and the Washington State business and occupation (B&O) tax rate reduction affected Boeing's pricing of the 737NG, causing adverse effects in the 100-200 seat single-aisle LCA product market, specifically significant price suppression of the Airbus A320, significant lost sales of the A320, and displacement and impedance of EC exports of the A320 from third country markets; the FSC/ETI subsidies and B&O tax subsidies provided by the state of Washington and the City of Everett, WA, affected Boeing's pricing of the Boeing 777, causing adverse effects in the 300-400 seat wide-body LCA product market, specifically significant price suppression of the Airbus A340, significant lost sales of the A340, and displacement and impedance of EC exports from third country markets.\nThe panel refrained from making a recommendation as to compliance with its rulings on the FSC/ETI measures, noting (1) that \"the FSC/ETI measures in force at the time of the Panel's establishment have been substantially changed during the course of the present proceedings and indeed it appears that the measure is no longer in force with respect to Boeing\" and (2) that the rulings in the FSC dispute (DS108) were still \"operative\" and thus the United States would be subject to those rulings to the extent that it had not already withdrawn the FSC/ETI subsidies to Boeing. With regard to the adverse effects, however, the panel recommended, consistent with the prescription in Article 7.8 of the SCM Agreement, that once the panel and any Appellate Body reports were adopted, the United States \"take appropriate steps to remove the adverse effects or … withdraw the subsidy.\" Both the United States and the EU appealed the ruling.", "The Appellate Body, in a report publicly circulated on March 12, 2012, again issued a mixed ruling, confirming the existence of NASA and DOD aeronautics subsidies and the specificity of the subsidies provided by the Washington State B&O tax rate reduction and the Wichita IRBs, but, unlike the panel, finding that all DOD programs cited by the EU constituted subsidies and that the Wichita IRBs caused adverse effects. The AB, however, limited some of the adverse effects caused by the specific subsidies that the panel had found. Addressing a systemic issue, the AB found that the information-gathering procedure for serious prejudice cases provided for in Annex V of the SCM Agreement, a mechanism for obtaining \"information from the government of the subsidizing Member as necessary to establish the existence and amount of subsidization, the value of total sales of the subsidized firms, as well as information necessary to analyse the adverse effects caused by the subsidized products,\" is initiated automatically when a disputing party requests the procedure and a panel is established and does not require the consensus of the WTO Dispute Settlement Body.\nAmong the findings made by the AB regarding the existence and effects of subsidization are the following:\nFinancial contribution/benefit (eight NASA R&D programs) : the AB invalidated the panel's finding that government \"purchases of services\" are excluded from the definition of a financial contribution in Article 1.1(a)(1) of the SCM Agreement, an argument made by the United States, and instead found that the payment and access to facilities, equipment, and employees provided to Boeing under NASA procurement contracts constituted direct transfers of funds and the provision of goods or services and thus financial contributions under the definition; it also upheld for different reasons the panel's finding that these actions conferred a benefit on Boeing, rejected the U.S. claim that the panel erred in estimating the amount of the subsidy provided, and upheld the panel's findings that the estimated value of the NASA procurement-related subsidies totaled $2.6 billion; Financial contribution/benefit (23 DOD Research, Development, Testing and Ev a luation (RDT&E) programs ) : the AB found that payments and access to facilities provided to Boeing under all 23 DOD (instead of just the two programs cited by the panel) also constituted direct transfers of funds and the provision of goods or services and thus financial contributions under Article 1.1; it also upheld for different reasons the panel's finding that DOD programs conferred a benefit on Boeing; Financial contribution (Washington State B&O tax rate reduction): the AB upheld the panel's finding that the state's reduction of the tax rate applicable to commercial aircraft and component manufacturers constituted the foregoing of revenue otherwise due and thus a financial contribution under Article 1.1; Specificity (allocation of patent rights under NASA/DOD contract s ): the AB found that, with respect to the allocation of patent rights under contracts and agreements between NASA and DOD and Boeing, and on the assumption that each allocation is a subsidy in and of itself, the subsidy is not explicitly limited to certain enterprise, that is, is not specific in law; while the AB also found that the panel erred in not examining whether such allocation was specific \"in fact\" as argued by the EU, and thus could not uphold the panel's finding that these measures were not specific, the AB declined to find de facto specificity; Specificity (Washington State B& O tax rate reduction and Wichita IRBs): the AB upheld the panel's findings that the Washington State tax rate reduction is a subsidy that is specific in law and that the Wichita IRBs are subsidies that are specific in fact; Adverse effects (technology effects of aeronautics R&D subsidies): the AB modified and upheld that panel's overall conclusion that the aeronautics R&D subsidies caused serious prejudice with respect to the 200-300 seat LCA market, inter alia, finding that the panel was correct in finding that these subsidies \"contributed in a genuine and substantial way to Boeing's development of technologies for the 787\" in 2004; upholding the panel's finding that the effect of these subsidies is significant lost sales with respect to the 200-300 seat LCA market; reversing the panel's finding that, insofar as it relates to Kenya, Iceland, and Ethiopia, that the effect of the subsidies is a th r eat of displacement and impedance of EC exports in third country markets with respect to the 200-300 seat LCA market; and upholding the panel's finding that the effect of these subsidies is significant price suppression with respect to the 200-300 seat LCA market; Adverse effects ( price effects of FSC/ETI subsidies and the B&O tax rate reductions) : the AB reversed the panel's findings that these subsidies caused serious prejudice to EU interests with respect to the 100-200 seat and 300-400 seat LCA markets, and went on to complete the analysis, finding that the subsidies caused serious prejudice in the 100-200 seat LCA market, particularly that in two sales campaigns the subsidies affected Boeing's prices for the 737NG, causing significant lost sales for the EU product; Adverse effects ( collective assessment of the subsidies and their effects): the AB found that the panel erred in not considering whether the price effects of the Washington State B&O tax rate reductions \"complement and supplement\" the technology effects of the R&D subsidies so as to cause significant lost sales and significant prices suppression and a threat of displacement and impedance in the 200-300 seat LCA market; reversed the panel's finding that the EU had not shown that the remaining subsidies had affected Boeing's prices so as to give rise to serious prejudice in the 100-200 seat and 300-400 seat LCA markets; and, in completing the analysis, found that the effects of the Wichita IRBs complemented and supplemented\" the price effects of the FSC/ETI subsidies and the Washington State B&O tax rate reduction, thus causing serious prejudice in the form of significant lost sales in the 100-200 seat LCA market.\nThe Appellate Body acknowledged that \"after more than five years of panel proceedings and eleven months of appellate review, a number of issues remain unresolved in the dispute,\" but that, where there were sufficient facts available to it on an issue, it had tried to complete the analysis \"with a view to fostering the prompt settlement of this dispute.\" The Appellate Body made note of the panel's finding regarding the continuing obligation of the United States to comply with the rulings in the FSC case and recommended that, in accordance with Article 7.8 of the SCM Agreement, the United States \"take appropriate steps to remove the adverse effects found to have been caused by its use of subsidies, or to withdraw those subsidies.\"", "As was the case with respect to the EU in the Airbus proceeding, Article 7.9 of the SCM Agreement gives the United States six months from the date that the panel and Appellate Body reports were adopted (here, up to September 23, 2012) to remove the subsidies or their adverse effects. Absent an agreement on compensation, the EU may then seek authorization from the WTO Dispute Settlement Body to impose sanctions against the United States, \"commensurate with the degree and nature of the adverse effects determined to exist.\" Any such request will be considered under the reverse consensus rule and therefore approved unless the DSB decides without objection to reject the request. The United States informed WTO Members at the April 13, 2012, meeting of the Dispute Settlement Body that it intends to comply with the WTO decision within Article 7.9 time frame. To address future contingencies, the United States and the EU have reportedly entered into a procedural agreement that would coordinate any sanctions proceedings with a possible compliance panel.\nGiven the panel and AB findings, compliance will focus on NASA and DOD subsidies, the income tax breaks provided by the State of Washington and the City of Everett, and the property tax breaks provided through Wichita's Industrial Revenue Bonds (IRBs). While the United States has repealed the problematic FSC/ETI tax provisions and Boeing has publicly stated that it did not receive benefits under the program after 2006, the EU continues to express concerns that benefits may be provided to Boeing under the program.", "", "Antigua and Barbuda (Antigua) requested consultations with the United States in March 2003 regarding federal, state, and local laws affecting the remote supply of gambling and betting services, alleging that the overall effect of these laws was to prevent the supply of gambling and betting services from the territory of one WTO Member into the United States in violation of U.S. market access commitments in Article XVI of the General Agreement on Trade in Services (GATS).\nAs part of their GATS obligations, WTO Members make specific commitments involving particular service sectors, subject to any terms, limitations, or conditions Members may add. Commitments are made with respect to four means or \"modes\" by which services may be supplied, including supply from the territory of one Member into the territory of any other Member, which is the mode of supply at issue in this case. Each Member's sectoral commitments are set out in a Schedule of Specific Commitments, which is attached to the GATS and considered an integral part of the agreement. GATS market access and national treatment apply only with respect to scheduled commitments. These obligations are set out in GATS Articles XVI and XVII, respectively. All GATS obligations are subject to various general exceptions set out in Article XIV.\nAmong other market access obligations, Article XVI(a) of the GATS prohibits a WTO Member, in sectors where it has scheduled a specific commitment, from maintaining or adopting, unless specified in its Schedule, \"limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test.\" In addition, Article XVI(c) prohibits a Member, in any such sectors, from maintaining or adopting, unless specified in its Schedule, \"limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test.\"", "Although the United States did not expressly identify gambling and betting services in its Schedule of Specific Commitments to the GATS, the WTO panel, in its November 2004 report, interpreted the services sub-sector titled \"Other Recreational Services (except sporting)\" as including gambling and betting services, and concluded that the United States, by not placing any limitations on the supply of such services from the territory of one WTO Member into the United States, had made market access commitments in the area. The panel then found that three federal statutes and provisions of four state laws conflicted with these obligations. The federal statutes were the Wire Act, the Travel Act, and the Illegal Gambling Business Act (IGBA); the state laws were those of Louisiana, Massachusetts, South Dakota, and Utah. The panel found that by preventing one, several, or all means of delivering gambling and betting services, the statutes constituted impermissible market access limitations on the number of service suppliers for purposes of Article XVI:2(a) of the GATS or, alternatively, on the total number of total number or service operations or total quantity of service output for purposes of Article XVI:2(c).\nThe panel further found that, with regard to the federal laws, the United States could not successfully invoke exceptions in GATS Article XIV for \"measures necessary to protect public morals or to maintain public order\" (Article XIV(a)) or for \"measures necessary to secure compliance with\" GATS-consistent laws and regulations (Article XIV(c)) because the United States had not shown that the measures were \"necessary\" to achieve the stated end or that they were consistent with the Article XIV proviso, which requires that measures justified under the exception not be applied \"in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail.\" Under WTO jurisprudence, such discrimination may occur not only between the different exporting Members but also between an exporting Member and the importing Member and thus in this case between foreign and domestic providers of Internet gambling services.\nIn an appeal by both parties to the dispute, the WTO Appellate Body, using a different mode of analysis than the panel, nonetheless determined that the United States had made sectoral commitments regarding gambling and betting services. Though the AB upheld the panel's finding of a violation of GATS market access obligations, it reversed the panel on its finding that the United States could not justify the federal measures under GATS exceptions. The AB also reversed the panel's finding that four state laws were inconsistent with the GATS, finding that because Antigua had not made a prima facie case that eight state measures violated the Agreement, the panel had improperly examined their GATS-consistency.\nWith respect to the GATS exceptions, the AB found that the panel had erroneously concluded that the three federal statutes could not be considered \"necessary\" for purposes of Articles XIV(a) and XIV(c) because the United States had not entered into consultations with Antigua to find a less trade-restrictive alternative. The AB ultimately found that statutes were \"necessary to protect public morals or to protect public order\" for purposes of Article XVI(a) and that they thus fell within the scope of this exception. At the same time, the AB also found that, in light of a provision in the Interstate Horseracing Act (IHA) that might facially continue to allow the remote supply of wagering on horseracing by domestic firms, the United States had not shown that the Wire Act, the Travel Act, and the IGBA were being applied consistently with the Article XVI proviso, that is, that they may possibly be used to prosecute foreign, but not domestic, providers of remote horserace gambling services.\nAntigua had based its argument that the United States was applying the three statutes inconsistently with the Article XIV proviso on two aspects of the IHA, a statute allowing the acceptance of interstate off-track wagers provided certain conditions are met, making violators civilly liable for damages to named entities, including the state in which the subject horserace takes place, and authorizing certain civil suits against violators. First, Antigua cited Section 5 of the act, which it characterized as expressly allowing an interstate off-track wager to be accepted by an off-track betting system, where consent is obtained from certain organizations. Second, it cited the statutory definition of \"interstate off-state wager,\" which, in pertinent part, includes pari-mutuel wagers \"placed or transmitted by an individual in one State via telephone or other electronic media and accepted by an off-track betting system in the same or another State,\" provided the wagers are lawful in the States involved. In the words of the AB, Antigua thus argued that \"the IHA, on its face, authorizes domestic service suppliers, but not foreign service suppliers, to offer remote betting services in relation to certain horse races. To this extent, in Antigua's view, the IGHA 'exempts' domestic service suppliers from the prohibitions of the Wire Act, the Travel Act, and the IGBA.\"\nAs further described by the AB, \"[t]he Panel found that the evidence provided by the United States was not sufficiently persuasive to conclude that, as regards wagering on horseracing, the remote supply of such services by domestic firms continues to be prohibited notwithstanding the plain language of the IHA.\" The AB concluded that the panel did not err in making this finding.\nThe Appellate Body report and the panel report, as modified by the AB, were adopted April 20, 2005.", "The United States reported at the May 19, 2005, meeting of the DSB that it intended to implement the rulings and had begun to consider options for doing so, but that it would need a reasonable period to comply. After the disputing parties had failed to agree on a reasonable period of time for compliance, Antigua requested that the compliance period be arbitrated. In its submission to the Arbitrator, the United States stated that compliance would be achieved \"by further clarifying the relationship between the IHA and preexisting federal criminal laws\" and that \"U.S. authorities intend to seek further clarification through legislation.\"\nThe United States sought a 15-month compliance period, stressing that such legislative action would be \"technically complex.\" In an award made public August 19, 2005, the Arbitrator determined that the compliance period would last 11 months and two weeks from the date of adoption of the panel and AB reports, thus expiring April 3, 2006.\nLegislative action was not taken before the deadline; instead, the United States stated in a status report to the DSB that it had complied in the case based on the position of the Department of Justice (DOJ) regarding remote gambling on horse racing, articulated as follows in April 5 DOJ testimony before a House committee:\nThe Department of Justice views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races. The Department is currently undertaking a civil investigation relating to a potential violation of law regarding this activity. We have previously stated that we do not believe that the Interstate Horse Racing Act, 15 U.S.C. §§3001-3007, amended the existing criminal statutes.\nAntigua disagreed that the United States was in compliance, and in May 2006, the parties entered into a procedural agreement regarding the possible seeking by Antigua of a compliance panel and countermeasures in the case.", "Antigua requested a compliance panel in July 2006, claiming that the United States had failed to bring the Wire Act, the Travel Act and the Illegal Gaming Business Act into conformity with U.S. GATS obligations and that then-pending legislation— H.R. 4777 and H.R. 4411 —was \"expressly contrary \"to the WTO ruling in that each bill \"would further institutionalise the discriminatory effect\" of the three cited statutes. It also questioned whether the DOJ statement was a \"measure\" or a \"measure taken to comply\" for purposes of the DSU, noting that the same position had been maintained by the United States during the course of the dispute and was subsequently rejected by the panel and Appellate Body. Antigua further argued that regardless of the nature of the DOJ statement for purposes of the DSU, the United States remained out of compliance with the GATS because of, inter alia, the existence of reasonable technical alternatives to prohibitions on remote gambling and betting services and governmental enforcement problems regarding domestic and cross-border service providers. The compliance panel was established July 19, 2006.\nOn March 30, 2007, the compliance panel issued a report adverse to the United States, finding that the United States had not taken any measures to comply in the case and thus left the statutory ambiguity cited by the panel unresolved. The panel noted that legislation was not the only means of compliance in the proceeding and that \"other forms of administrative action, or judicial action, [could be used] to bring the measures into conformity.\" The United States did not appeal the report, which was adopted by the DSB on May 22, 2007.\nIn early May 2007, the Office of the USTR announced that the United States intended to invoke Article XXI of the GATS \"in order to clarify its commitment involving 'recreational services,'\" in order to bring the United States into compliance in the dispute and to resolve the dispute permanently. The modification would explicitly exclude gambling and betting services from this broader services category. With Antigua's subsequent pursuit of retaliation in the underlying WTO dispute, the United States became engaged in two WTO proceedings, one involving negotiations with various WTO Members under Article XXI on compensation for changes in the U.S. GATS schedule, and the other involving arbitration of Antigua's request to impose countermeasures against the United States for non-compliance with the WTO decision.", "Article XXI allows a WTO Member to modify or withdraw any commitment in its GATS Schedule, but any WTO Member whose GATS benefits may be affected by the proposed change has a right to negotiate a compensation agreement with the Member making the change. In negotiating an agreement, Members must try to maintain \"a general level of mutually advantageous commitments\" that are as favorable to trade as was the case with the Schedule in its original form. In its May 2007 announcement, USTR stated that in negotiating the GATS, the United States \"did not make it clear\" that its international commitments to open its market to recreational services did not extend to gambling and that since \"no WTO Member either bargained for or reasonably could have expected the United States to undertake a commitment on gambling, there would be very little, if any basis for ... [compensation] claims.\"\nAntigua, Australia, Canada, Costa Rica, European Union (EU), India, Japan, and Macao requested consultations with the United States by June 22, 2007, the deadline for WTO Members to notify the United States that their interests may be affected by the U.S. Schedule modification. The following month USTR filed a notice in the Federal Register asking for public comment on the requested compensation negotiations. As provided in GATS procedural rules, negotiations were expected to conclude within three months, that is, toward the end of September 2007, but the parties agreed on two extensions with a final deadline of January 14, 2008. On December 17, 2007, the United States and the EU announced that they had reached a bilateral compensation agreement providing EU service suppliers with improved market access in the U.S. postal and courier, research and development, warehouse and storage, and technical testing services sectors. The United States also announced that it had reached agreement with Canada and Japan as well. Australia had reportedly settled outstanding issues with the United States several months earlier and had withdrawn from the negotiations.\nSince the United States had not agreed on compensation with Antigua, Costa Rica, India, or Macao by the end of the negotiating period, these Members had a right to request that compensation be arbitrated, provided that they made their request within 45 days after deadline, that is, by January 28, 2008. If none of these Members requested arbitration, the United States would then be free to implement its Schedule modification, as originally proposed. Antigua and Costa Rica each filed timely arbitration requests. India and Macao reportedly did not choose this option and thus effectively abandoned their claims. In February 2008, Costa Rica reached agreement with the United States on compensation and as a result withdrew its request to arbitrate. Antigua was thus the only remaining Member pursuing arbitration under Article XXI.\nUnder GATS rules, any arbitral panel established under Article XXI would be expected to issue its report within three months after the panel is appointed. Once a report is issued, the United States would not be able to modify its GATS Schedule until it made compensatory adjustments in conformity with the arbitration. If the United States modified its Schedule without complying with the arbitral decision, Antigua could modify or withdraw substantially equivalent benefits in conformity with the arbitral findings. GATS rules would allow Antigua to apply any such change only to the United States, notwithstanding the general most-favored-nation obligation in GATS Article II.", "In the WTO dispute itself, Antigua has requested authorization from the DSB to impose $3.4 billion in countermeasures against the United States for non-compliance, primarily by suspending obligations owed the United States under the Agreement on Trade-Related Intellectual Property Rights. The United States objected to the request, challenging both the level of suspension of concessions and Antigua's compliance with DSU principles and procedures governing a WTO Member's consideration of which concessions to suspend. Because of the U.S. objection, Antigua's proposal was sent to arbitration. In a ruling issued December 21, 2007, the Arbitrator determined that Antigua may request authorization from the DSB to suspend concessions under the TRIPS agreement at a level not to exceed $21 million annually. The amount was based on the Arbitrator's assumption that the United States would have complied with the ruling by opening its market to Antiguan providers of remote gambling on horseracing.", "Although Antigua requested arbitration in January 2008 under GATS Article XXI on compensation owed by the United States because of the U.S. withdrawal of gambling commitments in its GATS Schedule, there have not been reports that panelists have been appointed to hear this claim. Moreover, Antigua has not yet requested the WTO Dispute Settlement Body to authorize its retaliation request as modified by the December 2007 Arbitrator's report in the original WTO dispute settlement proceeding. In a July 2009 government press release, the Minister of Finance of Antigua is quoted as stating that \"'[w]hile we may in the future consider exercising the right to impose sanctions, as of this moment, I am instead looking forward to meeting with the United States government in the near future and focusing on a mutually beneficial resolution of the issues raised by the remote gambling case.'\" The USTR's annual report for 2010 also indicates that the parties have been consulting with a view to achieving \"a mutually agreeable resolution\" to the dispute.\nA June 10, 2009, European Commission staff report on an investigation under the European Union (EU) Trade Barriers Regulation, initiated as a result of a complaint submitted by the London-based Remote Gambling Association, indicates persistent EU concerns over U.S. Internet gambling regulation and its consistency with U.S. GATS obligations. Regarding possible future action, a fact sheet accompanying the report states as follows: \"The report concludes that WTO action would be justified. However, this is not an automatic consequence. The report does not include any recommendation for action and also suggests that the issue should be addressed with the US Administration, with a view to finding an amicable solution.\" During their July 2009 meeting in Washington, USTR Kirk and EU Trade Ambassador Ashton discussed the EU report \"and its implications for the WTO rights and obligations of the parties concerned.\"\nIn November 2008, the Treasury Department and the Board of Governors of the Federal Reserve System issued a final rule implementing the provisions of the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), P.L. 109-347 , Title VIII. The statute prohibits gambling businesses from accepting checks, credit cards, electronic transfers and similar forms of payment in connection with illegal Internet gambling, while exempting intrastate and intratribal Internet gambling operations that include age and location verification requirements imposed as a matter of law. The rule became effective on January 19, 2009, with the original compliance date of December 1, 2009, extended to June 1, 2010.\nVarious bills were introduced in the 111 th Congress to permit Internet gambling under a federal licensing program. Two 112 th Congress bills— H.R. 1174 (Campbell) and H.R. 2366 (Barton)—would do the same. H.R. 2230 (McDermott), introduced June 16, 2011, would establish a tax on \"Internet gambling licensees.\" H.R. 2702 (Gibson), introduced July 29, 2011, would amend the federal criminal code to provide that provisions of federal law that establish criminal penalties for any activity involved in placing, receiving or otherwise transmitting a bet or wager will not apply to any bet or wager that is permissible under the Interstate Horseracing Act of 1978.\nIn addition, on December 23, 2011, the Office of Legal Counsel (OLC) of the Department of Justice made public a September 2011 opinion in which it provided an avenue for states to permit certain types of online betting. OLC concluded in its opinion that \"interstate transmissions of wire communications that do not relate to a 'sporting event or contest,' 19 U.S.C. § 1084(a), fall outside the reach of the Wire Act of 1961,\" and that, because state-run lotteries proposed by New York and Illinois did not involve wagering on sporting events or contests, they were not prohibited by the act. Further, because OLC found that the Wire Act did not apply in this situation, it found it unnecessary \"to consider how to reconcile the Wire Act with the UIGEA.\"", "", "This case, sometimes referred to as the \"Irish music\" dispute, involves legislation enacted in 1998 (17 U.S.C. §110(5)(b), as added by P.L. 105-298 , §202(a)), which provides that it is not a copyright infringement for bars and restaurants and other retail outlets to play radio and television music without authorization from the copyright holder or the payment of fees so long as the establishments meet certain size limitations or equipment requirements. Challenged by the European Union (EU) in 1999, this so-called \"small business\" exemption was found to be an improper rights limitation in violation of Article 13 of the Agreement on Trade-Related Intellectual Property Rights (TRIPS).\nIn the absence of U.S. legislative action by the end of the initial compliance period (July 27, 2001), complainant EU agreed to extend the period to the end of 2001, and to consider U.S. compensation for the EU music industry based on an amount of trade injury determined by arbitration under Article 25 of the DSU, a free-standing arbitration provision. A November 9, 2001, arbitral award determined that some $1.1 million in EU trade benefits are affected annually.\nNotwithstanding the arbitration, the EU, in January 2002, requested authorization from the DSB to impose countermeasures against the United States on the ground that the United States had not fully complied with its obligations in the case by the extended deadline. The EU proposed suspending concessions under the TRIPS Agreement so it could levy \"a special fee from US nationals in connection with border measures concerning copyright goods.\" The United States asked for arbitration of the proposal, but the disputing parties later asked that the arbitration be suspended, with the understanding that it could be reactivated by either party after March 1, 2002.\nIn April 2003, Congress appropriated $3.3 million for a \"one-time only, lump-sum payment\" to the EU to cover a three-year period of nullification and impairment of benefits in the dispute ( P.L. 108-11 ). The parties notified the WTO in June 2003 that the payment, which will be made into a fund for EU performers, constitutes a temporary settlement of the dispute. They also agreed that the EU may request that the suspended arbitration be resumed any time after December 20, 2004, or if the United States fails to pay within 45 days after being notified that the fund has been established.", "In November 2004, shortly before the three-year U.S.-EU agreement expired, the EU complained to the DSB that the United States had taken only minimal steps to secure the passage of legislation that would bring the United States into full compliance in the case. The EU has regularly raised the issue of U.S. noncompliance at DSB meetings, with the United States continuing to report to the DSB that it will work with Congress on the matter. During a July 2009 meeting on bilateral trade relations held in Washington, DC, USTR Kirk and European Union Trade Commissioner Ashton \"exchanged ideas on potential steps to address\" this dispute, and \"directed … [their] staffs to explore new options on this dispute in the coming weeks.\" No agreement on resolving the dispute has yet been announced. As it has since the 2009 meeting with the EU, the United States reported to the DSB in February 2011 that, as well as working closely with Congress, it \"will continue to confer with the European Union in order to reach a mutually satisfactory resolution of this matter.\"", "This dispute, at the time referred to as the \"Havana Club\" case, involves a statute ( P.L. 105-277 , 112 Stat. 2681-88), which prohibits the registration or enforcement in the United States, without the consent of the original owner or successors, of a trademark that is the same or substantially the same as one used in connection with a business or assets confiscated by the Cuban government. Challenged by the European Union (EU) in 1999, the law was ultimately found to violate national treatment and most-favored-nation obligations in the TRIPS Agreement in that it limited the prohibition on registration and enforcement of rights to rights asserted by Cuba and Cuban nationals or their successors-in-interest. Panel and Appellate Body reports in the case were adopted January 2, 2002.\nThe original compliance period, as agreed upon by the United States and the EU, expired December 31, 2002; it was extended four times, also by agreement, most recently to June 30, 2005. The United States did not comply by this date. Instead of agreeing to an extension of the deadline or, alternatively, requesting authorization to retaliate, the EU entered into an agreement with the United States regarding rights and procedures involving any future EU retaliation request. The EU agreed not to request authorization from the DSB to suspend concessions for the time being, but pledged to notify and consult with the United States before making any such request in the future. For its part, the United States agreed not to block any retaliation request by the EU on the ground that the request is outside the 30-day window provided for in Article 22.6 of the DSU. The United States also retained the right to object to a proposed retaliation request and to refer the matter to arbitration.", "The EU, Cuba, and other WTO Members continue to raise the issue of U.S. noncompliance at DSB meetings, while the United States has reported to the DSB that legislative proposals that would implement the WTO ruling have been introduced in the House and Senate and that it will work with Congress on legislative vehicles to resolve this matter. A hearing on possible changes to U.S. law in light of the WTO decision was held by the House Judiciary Committee on March 3, 2010. In the 112 th Congress, H.R. 255 (Serrano) and H.R. 1887 (Rangel) would repeal Section 211, remove the current trade embargo on Cuba, and make other statutory changes involving U.S.-Cuba relations. H.R. 1888 (Rangel) would repeal Section 211 and make various statutory changes to facilitate the export to Cuba of U.S. agricultural and medical products. S. 603 (Bill Nelson) and H.R. 1166 (Issa) would amend Section 211 to apply to all persons claiming rights in trademarks confiscated by Cuba, whatever their nationality." ], "depth": [ 0, 1, 1, 2, 3, 3, 3, 2, 3, 3, 4, 4, 4, 2, 1, 2, 2, 3, 1, 2, 3, 3, 3, 2, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 2, 3, 2, 3, 2, 3, 3, 3, 3, 3, 3, 3, 3, 2, 2, 1, 2, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 1, 2, 3, 3, 3, 3, 3, 3, 1, 2, 3, 2, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h1_full", "", "h1_title", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "", "", "", "", "", "", "", "h1_full", "", "", "h0_title h2_title", "h0_title h2_title", "h0_full", "", "", "", "", "", "h2_full", "h2_full", "", "", "", "", "", "h2_title", "h2_full", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "How has the U.S. historically reacted to adverse WTO rulings?", "How are WTO Members supposed to respond to dispute settlements?", "What recourse is available if the Member does not comply?", "How is the compliance of a Member determined?", "How many unresolved cases involve trade remedies?", "Why is the Offset Act a continuing source of controversy?", "What role does \"zeroing\" play in the U.S.'s unresolved cases?", "To what extent has the U.S. taken action about zeroing?", "How will the sanctions arbitrations be concluded?", "How did the WTO rule on the EU's challenge of U.S. aircraft subsidies?", "How did the WTO rule on Brazil's dispute over U.S. cotton subsidies?", "How did the WTO react to the U.S.'s non-compliance?", "What are other examples of unsettled cases involving the United States?" ], "summary": [ "Although the United States has complied with adverse rulings in many past World Trade Organization (WTO) disputes, there are currently 14 cases in which rulings have not yet been implemented or the United States has acted and the dispute has not been fully resolved.", "Under WTO dispute settlement rules, a WTO Member will generally be given a reasonable period of time to comply.", "While the Member is expected to remove the offending measure by the end of this period, compensation and temporary retaliation are available if the Member has not acted or not taken adequate remedial action by this time.", "Either disputing party may request a compliance panel if there is disagreement over whether a Member has complied in a case.", "Nine unresolved cases involve trade remedies, including a long-standing dispute with Japan over a provision of U.S. antidumping (AD) law and another with various WTO Members over the Continued Dumping and Subsidy Offset Act of 2000.", "The Offset Act was repealed as of October 2005, but remains the target of sanctions by the European Union (EU) and Japan due to continued payments to U.S. firms authorized under the repealer (P.L. 109-171).", "Six of these cases involve \"zeroing,\" a practice under which the Department of Commerce (DOC), in calculating dumping margins in AD proceedings, disregards non-dumped sales.", "The United States administratively resolved one aspect of DS294 by abandoning zeroing in original AD investigations, but has yet to comply fully either in this case or in DS350, 322, or 344, leading the EU (in DS294) and Japan to request the WTO to authorize sanctions. Under memoranda signed by the United States with each complainant on February 6, 2012, however, U.S.-requested arbitration of the two sanctions proposals has been suspended while the United States makes new dumping determinations in challenged AD proceedings using a methodology finalized in March 2012 that eliminates zeroing in later stages of AD cases.", "The sanctions arbitrations will be terminated once implementation of the new determinations is complete.", "Panel and Appellate Body reports were adopted in the EU's successful challenge of U.S. aircraft subsidies on March 23, 2012 (DS353) (\"Boeing\" case), and the United States is expected to comply by September 23, 2012.", "In Brazil's dispute over U.S. cotton subsidies (DS267), Congress repealed a WTO-inconsistent cotton program in 2006 (P.L. 109-171), but other programs were also successfully challenged and the United States was found not to have fully complied.", "While the WTO has authorized Brazil to retaliate, the United States and Brazil signed an agreement in June 2010 aimed at permanently resolving the dispute. It includes Brazil's pledge not to impose sanctions during the life of the agreement and foresees possible legislative resolution of the dispute in the 2012 farm bill.", "The United States and Antigua have been consulting on outstanding issues in Antigua's challenge of U.S. online gambling restrictions (DS285); compensation agreements between the United States and various WTO Members in exchange for U.S. withdrawal of its WTO gambling commitments, an action taken to resolve the case, will not enter into effect until issues with Antigua are settled. Also unsettled are long-pending disputes with the European Union (EU) over a music copyright law (DS160) and a statutory trademark provision affecting property confiscated by Cuba (DS176)." ], "parent_pair_index": [ -1, -1, 1, -1, -1, -1, -1, 2, 3, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2 ] }
GAO_GAO-17-726	{ "title": [ "Background", "Federal Institutional Investors", "Investment Decisions and Stakeholders in the Investment Process", "Asset Classes and Portfolio Management", "Federal Regulatory Requirements", "Minority- and Women- Owned Asset Managers Face Challenges, but Found Opportunities at Some Nonfederal Retirement Plans and Foundations", "Federal Entities We Reviewed Invest in Asset Classes in Which Minority- and Women-Owned Asset Managers Have a Presence, but Use of these Firms Varied", "Some Federal Entities Made Limited Use of Key Practices When Selecting Asset Managers", "Asset Manager Selection Processes Varied by Federal Entity and Some Entities Relied More on Consultants Than Others", "Some of the Federal Entities We Reviewed Made Limited or No Use of Key Practices", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Objective 1: Challenges Faced by MWO Asset Managers", "Objective 2: Asset Classes Invested in by Selected Federal Entities and Use of MWO Firms", "Objective 3: Asset Manager Selection Processes and Use of Key Practices", "Appendix II: National Railroad Retirement Investment Trust", "Appendix III: Minority- and Women-Owned Brokerage Firms", "Appendix IV: Comments from Army and Air Force Exchange Service and Navy Exchange Service Command", "Appendix V: Comments from Federal Retirement Thrift Investment Board", "Appendix VI: Comments from Tennessee Valley Authority Retirement System", "Appendix VII: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments" ], "paragraphs": [ "", "Institutional investors include public and private entities that pool funds on behalf of others and invest the funds in securities and other investment assets. Examples of institutional investors include federal, state, and local government, and private retirement plans, endowments, and foundations.\nIn 2015, the eight entities we reviewed held close to $388 billion in externally managed investment assets used to support their investment objectives, including funding retirement benefits for federal employees (see table 1). They administered or oversaw defined benefit retirement plans, defined contribution retirement plans, an endowment, and an insurance program, each with distinct investment objectives.\nThree of the eight entities we reviewed manage defined benefit plans that provide participants a retirement benefit amount using a formula based on factors such as years of employment, age at retirement, and salary level. Typically, benefits are paid from a fund made up of assets from annual contributions by employers, employees, or a combination of the two and investment earnings from those contributions. Defined benefit plans typically have investment policies and guidance that outline goals for how the funds are to be invested.\nOne of the eight entities we reviewed sponsors a defined contribution plan in which employees and employers contribute to an account directed by the employee into investment options offered by the plan. Policy objectives for defined contribution plans typically focus on offering a range of prudent investments suitable for participants to direct contributions in ways that meet their personal investment objectives.\nTwo of the eight entities we reviewed both manage defined benefit plans and sponsor defined contribution plans.\nTwo of the eight entities we reviewed hold other types of investments.\nThe Smithsonian Institution manages an endowment, which is comprised of trust funds, the majority of which have been permanently restricted by donors for a particular use, such as acquisition of artwork, funding curator positions, or public programs, according to agency officials. The Pension Benefit Guaranty Corporation operates an insurance program designed to partially insure defined benefit pensions sponsored by private employers. While the Pension Benefit Guaranty Corporation insures the pension benefits of nearly 40 million workers and retirees, as a federal guarantor of these plans it takes over the assets of underfunded terminated plans and is responsible for paying benefits to participants who are entitled to receive them.", "For the defined benefit plans, endowment, and insurance program we reviewed, the entities generally make investment decisions within a framework spelled out in investment policy statements approved by boards of directors, trustees, or regents. Their investment policy statements generally define an asset allocation, or mix of asset classes in proportions designed to meet the entity’s overarching investment objectives. For defined contribution plans, participants make investment decisions by deciding how to allocate the contributions they and their employer make among investment options offered through the plan. Entities that administer these plans may outline these options in plans’ investment policy statements. For three entities in our review, legislative mandates also specify certain investment decisions, such as asset diversification and investment options.\nThe federal entities we reviewed and the National Railroad Retirement Investment Trust are fiduciaries that have responsibilities that are typically similar to those of private sector retirement plans in that they are required to act solely in the interest of participants and beneficiaries in the retirement plans. These responsibilities may include acting with the exclusive purpose of providing benefits to the participants and beneficiaries and defraying reasonable expenses of plan administration; carrying out their duties prudently; following the plan documents; and diversifying plan investments.\nA number of stakeholders are typically involved in the investment process. Generally, investment boards of directors or trustees, investment committees, investment officials and staff, investment consultants, asset managers, and brokers work together to invest clients’ funds in securities that match clients’ financial objectives (see fig. 1).\nThe defined benefit plans, endowment, and insurance program we reviewed generally retained external asset managers to select individual investments in accordance with the asset allocation frameworks in their investment policy statements. The defined contribution plans generally retained external asset managers to provide plan participants with investment options. Asset management firms typically select investments on behalf of the investors that hired them and regularly report on investment performance. Many earn income by charging service fees based on a percentage of assets they manage. These fees generally include the costs of trading charged by brokerage firms.", "Asset management firms registered in the United States manage more than $70 trillion. Although thousands are registered to operate in the United States, the 100 largest asset managers account for more than 50 percent of total reported assets under management. Institutional investors we reviewed work with asset managers to typically invest in or offer participants investments in four broad asset classes: equity, fixed income, alternative assets, and cash and cash equivalents.\nEquity indicates ownership in a business in the form of common stock or preferred stock. The equity asset class includes mutual funds, collective investment trusts, and exchange-traded funds that invest in equity securities.\nFixed income refers to any type of investment under which the borrower or issuer is obligated to make payments of a fixed amount on a fixed schedule. The fixed-income asset class includes mutual funds, collective investment trusts, and exchange-traded funds that invest in fixed-income securities.\nAlternative assets can include hedge funds, private equity, real estate, and commodities. Plans may make such investments in an attempt to diversify their portfolios, achieve higher returns, or for other reasons. In recent years, two of the most common alternative assets that institutional investors held were hedge funds and private equity.\nCash and cash equivalents are the company’s assets that are cash or can be converted into cash in a very short period of time. They include bank accounts, marketable securities, commercial paper, Treasury securities, short-term government bonds (with maturities of 3 months or less), short-term certificates of deposit, and money-market funds.\nInstitutional investors generally use (or offer to participants) passive or active portfolio management strategies, or a mix of both. Passive management involves buying or creating an investment portfolio that closely tracks the performance of a broad class of assets usually defined by an index, such as the S&P 500. Passive managers attempt to match the performance of an index, typically with lower fees than active managers. Active managers attempt to exceed the performance of an index using their judgment about which individual investments in that asset class will do better than average. In defined contribution plans, the portfolio management is directed by the participants based on the range of options provided by the plan.", "The Federal Acquisition Regulation (FAR) establishes uniform policies and procedures for the acquisition of goods and services by executive agencies. Among other things, the FAR includes requirements agencies must meet, such as full and open competition through competitive procedures. With the exception of the Pension Benefit Guaranty Corporation, the FAR does not apply to the asset manager selection processes used by the federal entities or the National Railroad Retirement Investment Trust, according to representatives we interviewed.", "According to many asset managers and industry associations with which we spoke, MWO asset managers face various challenges when competing for investment management opportunities with institutional investors, including retirement plans and foundations. However, nonfederal plans and foundations with which we spoke used various approaches to help address many of these challenges. These plans and foundations cited several factors that led them to take steps to increase opportunities for MWO firms. For example, some noted organizational interest in diversity as the driving force behind more inclusive selection practices for asset managers. Others cited potential benefits of using MWO firms, such as helping to diversify risk in their portfolios.\nInvestor and consultant brand bias. According to most asset managers and industry associations we interviewed, institutional investors and their consultants often prefer to contract with larger asset managers with brand recognition or with whom they are familiar. Furthermore, according to some asset managers and industry associations, unless clients directly ask for MWO firms to be included in asset manager searches, consultants generally will not include them. For example, one industry association noted that consultants generally exclude MWO asset managers due to an implicit bias that their clients’ investment portfolio performance could potentially suffer if they use a MWO firm despite no information to indicate this would in fact be the case.\nHaving recognized brand bias as a challenge for MWO firms, some nonfederal plans and foundations have asked their investment consultants to maintain an inclusive process for sourcing, evaluating, and recommending investment managers across race, ethnicity, and gender. One of these plans and a local plan in Illinois told us that they asked their investment staff or consultants to ensure that at least one qualified MWO asset manager was invited to present to the institutional investor’s decision-making body. In addition, one foundation ensured that its consultant was held accountable to more inclusive processes by requiring its investment consultant to annually report the number of diverse managers evaluated, recommended, and hired across the consultant’s client base.\nPerception of weaker performance. According to most MWO asset managers and industry associations with whom we spoke, MWO firms may face challenges because institutional investors generally have a perception that MWO asset managers do not perform as well as non- MWO firms. However, a May 2017 study on diversity in the asset management industry by an academic institution and a research group found no differences in the performance of funds managed by MWO firms and the performance of those managed by non-MWO firms, among the firms they analyzed.\nFurthermore, all nonfederal plans and foundations we interviewed told us that all firms managing assets in their respective portfolios, including MWO asset managers, were selected based on track record of performance and evaluated against the same performance standards as other asset managers in their portfolios. In addition, some nonfederal plans noted that these asset management firms may provide certain benefits in generating profit for their clients. For example, one plan noted that MWO firms offer more differentiated investment strategies than larger firms.\nSize and infrastructure. The size and limited infrastructure of smaller, newer MWO firms also may pose challenges. For example, according to most asset managers and industry associations with which we spoke, small MWO asset managers are frequently not able to meet threshold requirements set by institutional investors, such as minimum limits established for assets under management, liability insurance, and length of track record. Moreover, an asset manager and some nonfederal plans and foundations noted that back office functions and operational costs, such as for accounting and compliance, are high and make investments in these areas difficult for smaller, newer firms (including many MWO firms).\nIn light of these minimum threshold challenges for MWO firms and smaller firms in general, many nonfederal plans adjusted requirements to allow these firms to compete, while noting that they maintained the same performance requirements for all asset managers in their selection processes. Specifically, most nonfederal plans and two foundations either lowered their minimum requirements for assets under management, length of track record, or amount of liability insurance to help ensure the requirements were proportional to the size of the firms, or did not set any minimum or maximum assets under management threshold levels. As we will discuss later, the Federal Reserve System and Pension Benefit Guaranty Corporation have made similar adjustments to increase opportunities for MWO asset management firms. Representatives from most nonfederal plans, foundations, the Federal Reserve System, and Pension Benefit Guaranty Corporation stated that they have not sacrificed performance or fallen short of their fiduciary responsibility in increasing opportunities for MWO firms.\nIndustry trends. In May 2016, we reported that defined contribution plans have replaced defined benefit plans and become the dominant form of retirement plan for U.S. workers over the past three decades. According to some asset management firms and industry associations, MWO firms face challenges due to this industry shift from defined benefit plans toward defined contribution plans where business opportunities for MWO firms may be too costly. The marketplace shift from defined benefit to defined contribution plans also will likely drive up costs for asset managers and branding will be more important for defined contribution plans because asset managers will need to interact more directly with participants, according to an industry association we interviewed.\nThe industry shift from active management to passive management may also be a challenge. According to some asset managers, industry associations, and nonfederal plans we interviewed, MWO firms are less able to compete at defined contribution plans with passive management investment strategies because MWO firms lack the size and resources that larger firms have to keep asset management fees low for clients. Furthermore, because asset management fees for passive management strategies are low, an asset management firm must have a volume of business large enough to be profitable.\nIn addition to adjusting minimum size and length of track record requirements, the nonfederal plans and foundations with which we spoke developed other strategies to help increase opportunities for MWO asset management firms.\nSome nonfederal plans and one foundation allocated a target amount of their investment portfolio to MWO asset managers. For example, to help increase opportunities for MWO asset management firms, a local plan in Texas developed a program that sets aside 10 percent of its total assets across all asset classes to be managed by asset management firms with $50 million or less in assets under management and at least 30 percent ownership by minorities or women. In addition, some nonfederal plans said they have developed emerging manager programs. For example, a state retirement plan in California has an emerging manager program— generally defined as a program geared towards newer, smaller asset managers—wherein each of the plan’s asset classes has emerging manager definitions based on assets under management, length of track record, or both. In the plan’s private equity class, emerging managers do not have to meet a minimum track record requirement and must have $1 billion or less in assets under management.\nMost of the nonfederal plans with whom we spoke used a fund-of- funds structure, in which a larger fund works as an intermediary for multiple, smaller managers. Three of these nonfederal plans noted that working with one firm to recruit, select, and manage underlying firms was an efficient and effective means of working with smaller, newer managers, including MWO firms. For example, a local government retirement plan in Illinois noted that the fund-of-funds manager they hired was able to hire MWO firms much more quickly than they would have been able to directly. Similarly, a foundation that sought to increase diversity told us that it specifically hired a fund-of- funds manager to help find MWO firms for its foundation. In addition, three nonfederal plans noted that another benefit to hiring a fund-of- funds manager was that the firm could serve as a mentor (providing guidance and coaching to the smaller asset management firms and MWO firms), which can help build institutional relationships over the long-term.\nNonfederal plans and foundations also helped increase opportunities for MWO firms by using outreach strategies to identify MWO managers that could meet their investment needs. For example, many nonfederal plans regularly participated in networking events, such as conferences, with MWO asset managers or networked with asset management trade associations that represent MWO firms. Many of these nonfederal plans facilitated one-on-one interactions with MWO firms so prospective asset managers could better understand their selection processes.", "The federal entities we reviewed and the National Railroad Retirement Investment Trust invested primarily in equity and fixed income, while some also invested in alternative assets or maintained some level of cash and cash equivalents. The 2015 allocations of the defined contribution plans we reviewed, shown in table 2, reflect both the investment options plans offered to participants and participants’ decisions about how to invest among them.\nValley Authority Savings and Deferral Retirement Plan also used BlackRock to offer passively managed funds in which participants invested over 60 percent of total 2016 plan assets (see sidebar). Similarly, the Federal Reserve Thrift Plan contracted with six large asset managers to offer the plan’s 12 funds. Eight of these, accounting for nearly three-quarters of participant investments, were passively managed. The defined contribution plans’ use of passively managed funds may limit opportunities for MWO firms. As discussed earlier, the shift toward defined contribution plans and passive management poses a challenge for MWO firms. In particular, some asset managers and industry associations with whom we spoke said MWO firms lack the size and resources to compete with the low fees larger firms can offer through passive management.\nThe federal defined benefit plans we reviewed and the Smithsonian Institution endowment generally invested more extensively in alternative assets in addition to equity and fixed income. As shown in table 3, in 2015 the Smithsonian Institution invested more than half the endowment’s assets in alternative assets. Fiduciaries of four of the five defined benefit plans in our review also invested substantially in alternative assets, ranging from about one-quarter to about one-third of plan assets. The Pension Benefit Guaranty Corporation generally does not invest in alternative assets, but does hold a limited amount of these assets in line with its investment policy.\nWe determined that MWO asset managers operate in the asset classes in which federal entities and the National Railroad Retirement Investment Trust invest. To do so, we identified more than 180 asset management firms designated through publicly available sources as having some level of minority- or women-owned ownership. These MWO asset managers operate in all four asset classes in which the entities in our review invested or offered investment options to participants. MWO asset managers we identified reported managing assets totaling more than $529 billion. As shown in table 4, most operate in the equity, fixed income, or alternative asset classes. The market presence of these firms equaled less than 1 percent of all regulatory assets under management. Two of the firms, with combined regulatory assets under management of about $42 billion, identified themselves as specializing in passive management investment strategies.\nAlthough we identified MWO asset managers operating in each of the four major asset classes, use of MWO asset managers in 2015 and 2016 by the federal entities we reviewed and the National Railroad Retirement Investment Trust varied (see table 5). For example, in 2015, none of the three defined contribution plans we reviewed used MWO asset managers. Four of the five defined benefit plans we reviewed reported using at least some MWO asset managers, but one of these plans did not track this information and was unable to provide us with specific data on its use. Finally, the Pension Benefit Guaranty Corporation did not use MWO asset managers in 2015, but did retain four MWO asset managers in 2016.\nThe Federal Reserve System’s, National Railroad Retirement Investment Trust’s, and Smithsonian Institution’s use of MWO asset managers for their defined benefit plans and endowment was proportionately higher than the market presence of such firms. In 2015, 5 of the Federal Reserve System Retirement Plan’s 32 asset management firms (16 percent) were MWO firms. These firms managed 2 percent of the plan’s total assets, totaling $253 million. Four of these asset managers were private equity firms. The fifth handled a portion of the plan’s fixed income portfolio with two other asset managers handling much larger portions of plan assets under a similar investment strategy. The MWO asset manager achieved investment performance for the plan in 2015 comparable to that achieved by the two larger asset managers. In 2016, 10 of the National Railroad Retirement Investment Trust’s approximately 140 asset management firms (about 7 percent) were majority owned by women and minorities. Collectively, these 10 firms managed about 5 percent of total plan assets. Additionally, another 46 of the plan’s asset management firms had some level of ownership by minorities and women. Representatives of the Smithsonian Institution estimated 14 percent of their asset management firms—equal to about 13 of the more than 90 firms the endowment retained as of the end of 2016—were owned by women or minorities.\nIn comparison, we identified a number of nonfederal entities that use MWO asset managers. These include retirement plans in five states, one of which set a goal of having 20 percent of its plan’s assets managed by MWO asset managers. We also identified three foundations that increased opportunities for MWO asset managers, for example by amending their investment policy or establishing a program to hire MWO asset managers. Finally, we interviewed officials from two corporations, one of which retains MWO firms for both its defined contribution and defined benefit plans. Representatives of the other corporation told us they retain almost 30 MWO firms to manage nearly $600 million, or about 4 percent, of the corporation’s defined benefit plans and foundation. Despite not having an explicit program in place to hire these firms, the corporation cited two key actions that create opportunities for MWO firms to compete. The first is conducting outreach so MWO asset managers understand how to do business with the corporation. The second is communicating to the plan consultant that the corporation expects to see a diverse array of firms when selecting asset managers.", "Asset manager selection processes varied by federal entity, but generally included conducting research to identify potential asset managers and conducting an evaluation of potential asset managers before making final selections. We identified four key practices that institutional investors can use to increase opportunities for MWO asset managers: establishing and maintaining top leadership commitment, removing potential barriers, conducting outreach to MWO firms, and communicating priorities and expectations about inclusive practices to investment staff and consultants. Some of the federal entities we reviewed implemented all these key practices, but others made partial, limited, or no use of the practices.", "All the federal entities we reviewed had internal policies related to their selection processes for asset managers. The processes generally included conducting research to identify potential asset managers and evaluating candidates before making final selections, but varied in some respects as the examples below show. We did not evaluate the National Railroad Retirement Investment Trust’s asset manager selection processes because it is not a department, agency, or instrumentality of the federal government, and it is not subject to the federal law that governs the financial operations of the federal government and establishes the powers and duties of the GAO.\nSelection criteria. All the entities had performance requirements and most had minimum requirements related to size (assets under management) and length of track record, but the thresholds asset managers had to meet for these requirements varied. For example, the minimum size requirements were $1 billion in assets under management for two of the defined benefit plans we reviewed, and ranged from $1 billion to $60 billion in assets under management for the defined contributions plans. The minimum size requirement for the Pension Benefit Guaranty Corporation was $250 million in assets under management for applicants in the smaller asset managers pilot program (discussed later in the report), and ranged from $10 billion to $50 billion for managers outside of the program. Minimum length of track record requirements ranged from 3–5 years for two of the defined benefit plans we reviewed, and ranged from 3–15 years for the defined contribution plans. The minimum length of track record requirement for all managers used by the Pension Benefit Guaranty Corporation was 5 years. In addition to performance, size, and length of track record, the entities we reviewed used other criteria when selecting asset managers, such as investment strategies, diversification of portfolio, organization and resources, and best value.\nUse of public solicitation process. The Pension Benefit Guaranty Corporation and the Federal Retirement Thrift Investment Board use full and open competition when selecting asset managers. Full and open competition allows all prospective asset managers who meet certain requirements to submit bids or competitive proposals. The Pension Benefit Guaranty Corporation and Federal Retirement Thrift Investment Board seek competitive proposals from prospective asset managers by issuing requests for proposals, which are published publicly on the Federal Business Opportunities website. Asset management opportunities for the other entities are not published publicly. Instead, the entities use other avenues such as internal investment staff or consultants to identify potential asset managers, as discussed later in this report.\nFrequency of asset manager searches. The Federal Retirement Thrift Investment Board solicits asset management services for its four externally managed funds every 5 years. The Federal Reserve System reviews its public markets asset manager arrangements at least every 5 years and, based on the results of the review, may search for new asset managers. Pension Benefit Guaranty Corporation officials told us that their asset manager searches are ongoing, with generally from one to three searches occurring each year for varying asset classes. The rest of the entities we reviewed do not have a set schedule for conducting asset manager searches. Asset manager searches for these entities typically occur when an asset manager underperforms and needs to be replaced, there is a change in asset allocation that warrants a new asset manager, or when a new investment opportunity arises.\nAlmost all of the entities used consultants to some extent in their selection processes, but some entities relied on consultants more than others.\nThree entities (Army and Air Force Exchange Service, Navy Exchange Service Command, and Tennessee Valley Authority Retirement System) work closely with consultants. While these entities approve final asset manager selections, the consultants primarily drive the search and evaluation process. Specifically, the consultants identify potential asset managers from their proprietary databases based on the entities’ selection criteria. The consultants then produce evaluation reports on candidates for the entities to review and provide recommendations about which asset managers to select.\nThree entities (Federal Retirement Thrift Investment Board, Pension Benefit Guaranty Corporation, and Smithsonian Institution) told us they use consultants to help identify potential asset managers or provide expertise on other areas, such as specific asset classes or asset manager fees. However, evaluations to select asset managers are conducted internally by the entities. As stated earlier, the Federal Retirement Thrift Investment Board and the Pension Benefit Guaranty Corporation issue requests for proposals, which allow prospective asset managers to submit proposals to be considered for asset management opportunities. The entities evaluate the submissions and then make final selections. The Smithsonian Institution’s investment staff prepare a memorandum after reviewing and vetting asset managers. The memorandum is provided to the endowment’s Investment Committee, which makes final selections.\nFederal Reserve System representatives told us they primarily rely on internal market searches to identify potential asset managers for both of its retirement plans, but use consultants in limited instances. Specifically, the Federal Reserve System uses a consultant for asset classes in which it may be difficult to find asset managers, such as real estate. After identifying potential asset managers, the Federal Reserve System issues a request for proposal to potential candidates. Candidate submissions are graded using a scoring matrix and the results are used to identify from three to five firms, which then are invited to interview. Final selections are made following the interviews.", "We identified four key practices that can be used as part of investors’ asset manager selection processes to help broaden the processes and ensure that qualified MWO firms are considered (see table 6). We identified the key practices based on a review of industry reports and interviews with a sample of state, local, and private retirement plans and foundations. We then validated the practices by obtaining feedback from experts and industry stakeholders. The key practices are closely related, and improvements or shortfalls in one practice may contribute to improvements or shortfalls in another practice. The practices do not require investors to develop targets or allocations for MWO asset management firms or to change performance standards. In addition, we identified examples of how some institutional investors have implemented the key practices, which may provide insights to other investors as they undertake or attempt to strengthen or improve their own initiatives related to MWO firms. The examples are not exhaustive and each institutional investor may implement the identified practices in its own way.\nAs stated earlier, many nonfederal plans and foundations we interviewed have implemented these practices to increase opportunities for MWO firms and told us that using the practices does not conflict with their fiduciary responsibilities. According to these plans and foundations, MWO firms they used were selected based on track record of performance and may provide certain benefits in generating profit for their clients. Furthermore, according to plan representatives and other industry stakeholders with whom we spoke, diversifying plan investments to manage risk can be accomplished through the diversification of asset managers. Industry reports and industry stakeholders, including plan representatives with whom we spoke, also noted that implementing a more inclusive selection process for asset managers can widen the pool of candidates, which can help ensure that retirement plans and foundations are identifying the best asset managers.\nAdditionally, as stated earlier, the federal government has an interest in helping increase opportunities for minority- and women-owned businesses and addressing barriers they face. The key practices we identified, which can broaden an investor’s pool of asset manager candidates to help ensure qualified MWO firms are considered for asset management opportunities and increase opportunities for these firms, are consistent with this interest.\nWe found that three of the federal entities we reviewed used all the practices, but the other four entities made partial, limited, or no use of them (see table 7).\nSpecifically, the Federal Reserve System and Smithsonian Institution have developed inclusive policies and taken other steps to increase opportunities for MWO asset managers, and the Pension Benefit Guaranty Corporation has developed a program to help increase opportunities for smaller asset management firms, including smaller MWO firms.\nFederal Reserve System. The Federal Reserve System’s Office of Employee Benefits (OEB) has documented top leadership commitment by developing policies that support the inclusion of MWO firms in its asset manager searches. For example, OEB’s procurement guidelines, which describe the process that staff should follow when procuring goods and services, state that the office fully supports equal opportunity in procurement. The guidelines also state that prospective lists of vendors (including asset managers) to receive requests for proposals should take into account OEB’s policy that qualified firms interested in doing business with the office, including minority- and women-owned businesses, should be included in the candidate pool as appropriate. Additionally, in 2014 the Federal Reserve System’s Committee on Investment Performance established a policy requiring that each investment mandate for its two retirement plans be reviewed at least every 5 years on a rolling basis, which has provided additional opportunities to qualified MWO firms to compete for all of OEB’s investment mandates on a regular basis.\nThe Federal Reserve System removed a potential barrier to MWO firm participation by lowering its minimum requirement for assets under management. According to Federal Reserve System representatives, about 5 years ago OEB lowered the requirement from $5 billion in assets under management to $1 billion in assets under management for its defined benefit and defined contribution plans. To conduct outreach, the Federal Reserve System has participated in meetings and conferences organized by industry associations that represent MWO firms and met with MWO firms individually, according to Federal Reserve System representatives. Federal Reserve System representatives have communicated their priorities and expectations to investment staff by implementing policies that have opened opportunities for MWO firms, as discussed earlier. The entity has also tracked its use of MWO asset management firms and the proposals it received from prospective MWO asset managers.\nFederal Reserve System officials told us that their efforts to increase opportunities for MWO asset managers were primarily driven by two factors. First, the decision was driven by a desire to find the best managers in the industry. Second, officials stated that they were aware of the issues surrounding the lack of inclusion in the asset management industry and made changes to help address these issues. Federal Reserve System officials noted that actively including MWO asset management firms in their searches was consistent with prudent investor requirements and fiduciary obligations. Officials also noted that some potential benefits could be gained by a more inclusive selection process, such as helping manage risk by diversifying the portfolio and mitigating manager concentration risk through new MWO managers.\nGuaranty Corporation demonstrated top leadership commitment by launching a Smaller Asset Managers pilot program in 2016. According to the entity’s 2016 annual report, the program was created to reduce barriers that smaller investment firms face when competing for the agency’s business. As part of this program, the Pension Benefit Guaranty Corporation removed a potential barrier to entry faced by smaller firms by lowering its minimum requirement for assets under management. Specifically, its minimum, which representatives told us typically ranges from $10 billion to $50 billion, was lowered to $250 million for program applicants. All other asset manager selection requirements, including performance, remained the same.\nThe Pension Benefit Guaranty Corporation conducted outreach to smaller asset managers to promote its pilot program. For example, the Pension Benefit Guaranty Corporation held a pre-bidding conference designed to help applicants understand the selection process. The entity also listed the request for proposal for its program on the Federal Business Opportunities website and advertised the program in industry publications. In addition, the Pension Benefit Guaranty Corporation communicated its priorities and expectations regarding its program to its consultant by requesting the consultant help identify prospective MWO firms for the pilot program, according to officials.\nAfter completing the selection process for its pilot program, the Pension Benefit Guaranty Corporation selected five firms to participate. Of the five firms, four were minority- or women-owned firms or both. Pension Benefit Guaranty Corporation officials stated that, moving forward, they will evaluate the firms on their performance against the portfolio benchmark over a full market cycle.\nSmithsonian Institution. The Smithsonian Institution has demonstrated top leadership commitment by revising its investment guidelines and asset manager questionnaire to reflect its commitment to diversity. Specifically, in March 2017 the Smithsonian Institution revised its investment guidelines by adding “environmental, social, and corporate governance considerations in the investment process” as one of its selection criteria. According to Smithsonian Institution representatives, this change allows the Smithsonian Institution to incorporate diversity as additional criteria for asset manager selection. The Smithsonian Institution also included a statement in its annual asset manager questionnaire stating that its Office of Investments strives to promote diversity and inclusion among its manager hires. Furthermore, representatives stated that the Board of Regents and Investment Committee encourage them to look broadly at portfolio diversification not only in terms of asset classes and investment strategies, but also of the racial and gender diversity of asset managers. In addition, the Smithsonian Institution does not have minimum size or length of track record requirements, which has allowed smaller asset managers, including small MWO firms, to compete for asset management opportunities with the endowment.\nThe Smithsonian Institution has also conducted outreach to MWO firms. According to Smithsonian Institution representatives, investment staff meet with MWO asset managers on an ongoing basis. Staff have also participated in conferences focused on women- owned and emerging managers. Finally, the Smithsonian Institution has communicated its priorities and expectations about inclusive selection processes by asking its consultants for a list of diverse managers, according to Smithsonian Institution representatives. Representatives also told us that investment staff have been directed to proactively identify MWO asset managers to add to this list based on their capability and expertise.\nSmithsonian Institution representatives told us they have often found investing with smaller asset managers (including smaller MWO firms) to be attractive to them. According to the Smithsonian Institution, small firms tend to be entrepreneurial and entrepreneurial firms are more successful when dealing with changing market dynamics, which can increase the chances of delivering superior investment returns. Representatives also noted that even though the endowment has a small staff and limited resources, they have not found it difficult to identify MWO asset managers for the endowment.\nThree entities have used one or more of the practices, but have not fully implemented all of them.\nArmy and Air Force Exchange Service. The Army and Air Force Exchange Service has used two of the key practices we identified (outreach and communicating priorities and expectations) and partially used (has started but has not completed actions related to) the other two practices (top leadership commitment and removing potential barriers). Specifically, the Army and Air Force Exchange Service has taken several steps to conduct outreach to MWO asset managers. For example, representatives told us that they have held face-to-face interviews with many MWO firms and gathered information on these firms for potential future investments. Army and Air Force Exchange Service representatives have also attended conferences and networking events with MWO asset managers, directed these firms to their consultant to learn more about the Army and Air Force Exchange Service’s selection process, and accepted visitation requests from MWO asset managers, according to representatives. The Army and Air Force Exchange Service also has communicated its priorities and expectations for a more inclusive asset manager selection process. For example, the Army and Air Force Exchange Service has instructed its investment staff to meet with representatives from MWO trade groups. Additionally, the entity has requested that its consultant include MWO asset managers who meet its portfolio needs in asset manager searches.\nHowever, the Army and Air Force Exchange Service has not completed actions related to top leadership commitment and removing potential barriers. According to representatives, plan trustees have had initial discussions about taking additional steps to increase opportunities for MWO firms at trustee meetings, but have not taken actions related to these initial discussions. In addition, representatives told us they use some fund-of-funds investments, which have allowed smaller firms, including some MWO firms, to compete for opportunities with the Army and Air Force Exchange Service and have started to review their policies and practices to include more participation of MWO firms in asset manager searches, but have not completed this review as of June 2017.\nArmy and Air Force Exchange Service representatives told us they consider the Army and Air Force Exchange Service to have used all of the key practices we identified because they have taken at least some action related to each of the practices. However, they did not have an expected completion date for two of these actions.\nNavy Exchange Service Command. The Navy Exchange Service Command has used one key practice (removing potential barriers), but has not used the other three practices (top leadership commitment, outreach, and communicating priorities and expectations). Specifically, the Navy Exchange Service Command does not have minimum size or length of track record requirements for its asset managers. According to officials, the Navy Exchange Service Command does not use these two criteria to select asset managers in part to help ensure asset manager searches are conducted as widely as possible and include smaller asset managers, including smaller MWO firms. However, the Navy Exchange Service Command has not directly made efforts to reach out to MWO firms. Moreover, the entity has not taken any actions to demonstrate top leadership commitment and has not communicated its priorities and expectations to its consultant because it has not specifically requested that its consultant include qualified MWO asset managers in its searches for the Navy Exchange Service Command.\nAccording to Navy Exchange Service Command representatives, they have not taken steps to implement all of the key practices because they rely on their consultant to take these actions. Navy Exchange Service Command representatives told us that their consultant is committed to conducting inclusive asset manager searches for all of its clients, performs outreach to MWO asset managers, and regularly reports to the Navy Exchange Service Command on its outreach efforts. Navy Exchange Service Command representatives also noted that it may not be practical for the Navy Exchange Service Command to directly conduct outreach to MWO firms because the entity is small and its consultant has the resources and practices in place for performing outreach to MWO firms. However, Navy Exchange Service Command representatives have not specifically directed their consultant to be more inclusive in their asset manager searches or to conduct outreach.\nTennessee Valley Authority Retirement System. The Tennessee Valley Authority Retirement System has used one key practice (removing potential barriers). The entity does not have minimum size or length of track record requirements, which can help widen the pool of asset managers that the Tennessee Valley Authority Retirement System considers for selection. However, the Tennessee Valley Authority Retirement System has not used the other three practices (top leadership commitment, outreach, and communicating priorities and expectations).\nAccording to Tennessee Valley Authority Retirement System representatives, it is their understanding that their consultants research and evaluate MWO asset managers and that to the extent such firms meet selection criteria and rank high in the evaluation of a particular investment mandate or strategy that the Tennessee Valley Authority Retirement System is pursuing, the firms would be considered for selection. Tennessee Valley Authority Retirement System representatives also told us that limited staff and resources make it difficult for them to conduct outreach to MWO firms. However, the entity has not communicated its priorities or expectations to its consultants because it has not directly requested or ensured that its consultants include qualified MWO asset managers in searches specifically conducted for the Tennessee Valley Authority Retirement System, nor has the entity directed its consultants to conduct outreach to MWO firms. Furthermore, the Tennessee Valley Authority Retirement System has not taken any actions to demonstrate top leadership commitment.\nThe Federal Retirement Thrift Investment Board has not used any of the key practices. The board described a variety of reasons that have prevented it from taking steps to increase opportunities for MWO asset managers.\nFederal Retirement Thrift Investment Board. According to Federal Retirement Thrift Investment Board representatives, the Federal Retirement Thrift Investment Board and Executive Director serve as fiduciaries to Thrift Savings Plan participants and as such administer the Thrift Savings Plan in the sole interest of participants and beneficiaries. According to Federal Retirement Thrift Investment Board representatives, the criteria used to select asset managers for the Thrift Savings Plan funds include providing a passive index strategy (as mandated by statute) and best value, which is a combination of technical ability and low price. Representatives stated that while qualified MWO firms are not restricted from responding to their requests for proposals, given the size of Thrift Savings Plan funds and the operational scale needed to manage a significant amount of assets at a low cost, only a relatively small number of firms respond.\nFurther, Federal Retirement Thrift Investment Board representatives told us they plan to implement a mutual fund window platform for the Thrift Savings Plan in 2020, and acknowledged that the platform could provide an opportunity for MWO asset management firms. According to plan representatives, they are seeking a platform that will provide participants with a “broad array” of options, which they define as a platform that includes a large number of mutual funds covering a wide range of investment options. However, plan representatives told us they do not plan to incorporate key practices into their selection process when selecting a mutual fund platform.\nAccording to Federal Retirement Thrift Investment Board representatives, they are fiduciaries required to act solely in the best interest of plan participants and beneficiaries and therefore cannot make a decision based on criteria that favor any vendor or potential vendor and cannot require that MWO firms be included in the platform. As stated earlier, the key practices we identified can help broaden the pool of qualified asset managers that investors can select from, and do not mandate the hiring of MWO firms or sacrificing performance standards. Moreover, other entities that have implemented the key practices, including two that administer defined contribution plans, have found that using inclusive selection practices do not conflict with fiduciary obligations.\nBy fully implementing the key practices, the four entities could widen the pool of potential candidates in their asset manager searches and help ensure that they are finding the most qualified firms that meet their investment needs. In keeping with federal interests, the practices could also help address barriers MWO firms face and increase opportunities for these firms.", "Some of the federal entities we reviewed have taken steps to implement more inclusive selection processes for asset managers, including developing a pilot program for smaller asset managers and establishing policies that support the inclusion of MWO firms in asset manager searches. However, opportunities exist for other entities we reviewed to take additional actions by implementing key practices. Specifically, the Army and Air Force Exchange Service, Navy Exchange Service Command, and Tennessee Valley Authority Retirement System have used one or more of the key practices to increase opportunities for MWO firms, but have not fully implemented all of them. The Federal Retirement Thrift Investment Board has not used any of the key practices. Implementing (or fully implementing) the key practices could widen the pool of potential candidates in their asset manager searches and help ensure that they are finding the most qualified firms that meet their or their plan participants’ investment needs. Additionally, in keeping with federal interests, if implemented, the practices could eliminate or mitigate some of the barriers that MWO firms face and increase opportunities for MWO firms.", "We are making a total of four recommendations to four agencies:\nThe Chief Investment Officer of the Army and Air Force Exchange Service should fully implement key practices to increase opportunities for MWO asset managers as part of its selection processes. Specifically, the Chief Investment Officer should complete actions related to top leadership commitment and removing potential barriers. (Recommendation 1)\nThe Chief Investment Officer of the Federal Retirement Thrift Investment Board should use key practices as appropriate to increase opportunities for MWO asset managers if and when implementing its mutual fund window platform. Specifically, the Chief Investment Officer should take actions to demonstrate top leadership commitment, remove potential barriers, conduct outreach to MWO firms, and communicate its priorities and expectations for an inclusive selection process to its staff and consultants if and when it begins to search for a mutual fund window platform. (Recommendation 2)\nThe Chief Investment Officer of the Navy Exchange Service Command should fully implement key practices to increase opportunities for MWO asset managers as part of its selection processes. Specifically, the Chief Investment Officer should take actions to demonstrate top leadership commitment, and to the extent that staff and resources are a constraint, should direct its consultant to conduct outreach to MWO firms and communicate its priorities and expectations for an inclusive selection process by requesting its consultant conduct more inclusive asset manager searches specifically for the Navy Exchange Service Command. (Recommendation 3)\nThe Chief Investment Officer of the Tennessee Valley Authority Retirement System should fully implement key practices to increase opportunities for MWO asset managers as part of its selection processes. Specifically, the Chief Investment Officer should take actions to demonstrate top leadership commitment, and to the extent that staff and resources are a constraint, should direct its consultant to conduct outreach to MWO firms and communicate its priorities and expectations for an inclusive selection process by requesting its consultant conduct more inclusive asset manager searches specifically for the Tennessee Valley Authority Retirement System. (Recommendation 4)", "We provided a draft of this report to the Army and Air Force Exchange Service, Federal Reserve System, Federal Retirement Thrift Investment Board, Railroad Retirement Board, Smithsonian Institution, Pension Benefit Guaranty Corporation, Navy Exchange Service Command, National Railroad Retirement Investment Trust, and Tennessee Valley Authority Retirement System for review and comment. We received written comments from the Army and Air Force Exchange Service, Federal Retirement Thrift Investment Board, Navy Exchange Service Command, and Tennessee Valley Authority Retirement System.\nIn their comments, reprinted in appendix IV, the Army and Air Force Exchange Service and Navy Exchange Service Command agreed with our recommendations. The Army and Air Force Exchange Service stated that it would continue to press forward in implementing the key practices to increase opportunities for MWO asset managers in a manner consistent with its investment goals and guidelines. The Navy Exchange Service Command stated that it will demonstrate top leadership commitment by formally directing its consultant in writing to conduct outreach to MWO firms on the entity’s behalf and communicate expectations for an inclusive selection process for asset managers. The Navy Exchange Service Command also provided technical comments, which we incorporated as appropriate.\nIn its comments, reprinted in appendix V, the Federal Retirement Thrift Investment Board disagreed with our recommendation. The Federal Retirement Thrift Investment Board said that when developed, the request for proposal for the mutual fund window will cover topics such as information security and compatibility with the Thrift Savings Plan recordkeeping software, and breadth of fund choices offered. The Federal Retirement Thrift Investment Board stated that this will allow the Thrift Savings Plan to offer participants that wish to use the mutual fund window the greatest amount of choice in a secure, seamless, and efficient manner. The Board also noted that fiduciary rules make it difficult to make guarantees about any fund that might be offered in a future mutual fund window. However, as we discuss in our report, implementing a more inclusive selection process could bring in a broad array of asset managers with different investment strategies and products that can help the Federal Retirement Thrift Investment Board provide participants with more investment options. Further, our recommendation would not require the use of MWO asset managers in the mutual fund window, but instead would help broaden the Federal Retirement Thrift Investment Board’s selection processes and help ensure that qualified MWO firms are considered. The Federal Retirement Thrift Investment Board also provided technical comments, which we incorporated as appropriate.\nIn its comments, reprinted in appendix VI, the Tennessee Valley Authority Retirement System agreed with our recommendation. The entity stated that it was committed to a process with its consultants and asset managers that provides equal opportunities for asset managers of all types of ownership, including MWO firms. The entity also outlined actions it would take to implement the key practices, such as documenting its commitment to equal opportunity for all asset managers, including MWO firms, in its investment policy statement and working with its consultant to set up a process for providing the Tennessee Valley Authority Retirement System information on potential MWO asset managers researched and evaluated by its consultant.\nThe Federal Reserve System, Pension Benefit Guaranty Corporation, and the Smithsonian Institution provided technical comments, which we incorporated as appropriate. The National Railroad Retirement Investment Trust and the Railroad Retirement Board informed us that they had no comments.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the agencies and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact (202) 512-8678 or clementsm@gao.gov, or (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII.", "In this report we examined (1) the challenges minority- and women- owned (MWO) asset managers may face when competing for investment opportunities, and practices used by selected state, local, and private entities that administer or oversee retirement plans and foundations to increase opportunities for MWO firms; (2) the major asset classes in which selected federal entities invested, their use of MWO firms, and the market presence of MWO firms in these asset classes; and (3) the policies and processes selected federal entities use to identify and select asset management firms, and their use of key practices to increase opportunities for MWO firms.\nWe reviewed federal retirement plans, an endowment, and an insurance program administered or overseen by eight entities (collectively referred to as federal entities): Army and Air Force Exchange Service, Federal Reserve System, Federal Retirement Thrift Investment Board, Railroad Retirement Board, Smithsonian Institution, Pension Benefit Guaranty Corporation, Navy Exchange Service Command, and Tennessee Valley Authority. We selected the federal entities and the National Railroad Retirement Investment Trust based on size (assets of more than $1 billion in 2015) and investment strategies (passive or active management or both). We excluded federal entities that solely invested in Treasury securities that are not traded (and thus do not use external asset managers), such as the Civil Service Retirement System and the Federal Employees Retirement System. These two retirement systems fund the primary defined benefit pension benefits for the vast majority of federal employees.", "To identify challenges that MWO asset management firms face, we analyzed reports by industry stakeholders, such as asset management trade associations, institutional investors, and investment managers. We also conducted interviews with asset management trade associations (National Association of Investment Companies, National Association of Securities Professionals, Association of Black Foundation Executives, Association of Asian American Investment Managers, New America Alliance, Private Equity Women’s Initiative, and Diverse Asset Managers Initiative), 10 MWO asset managers, and 4 MWO brokerage firms. These firms were selected based on size of the firms (assets under management for asset managers and revenue for brokers), literature reviews, and recommendations from industry stakeholders. Information gathered from these interviews cannot be generalized to all MWO asset managers or MWO brokerage firms.\nTo identify how entities that administer or oversee state, local, and private retirement plans and foundations (nonfederal plans and foundations) increase opportunities for MWO asset management firms, we interviewed 14 entities: California Public Employees’ Retirement System, California State Teachers’ Retirement System, Employees’ Retirement Fund of the City of Dallas, Exelon, Illinois Municipal Retirement Fund, Kellogg Foundation, Knight Foundation, Maryland State Retirement and Pension System, New York State Common Retirement Fund, Prudential’s Strategic Investment Research Group, Silicon Valley Community Foundation, Teachers’ Retirement System of Illinois, Teacher Retirement System of Texas, and Verizon Investment Management Corp. Seven of these entities administered defined benefit plans; three administered defined benefit and defined contribution plans; three were foundations; and one was an investment group. These entities were selected based on size (assets), use of an MWO program or other initiative designed to increase opportunities for MWO asset management, a literature review, and recommendations by industry stakeholders. Information gathered from these interviews cannot be generalized to all nonfederal plans and foundations. We also analyzed reports by industry stakeholders on key practices for MWO programs or similar initiatives. When relevant, we also gathered information from these sources on the challenges faced by MWO brokerage firms and practices used to increase their business opportunities.", "To determine the major asset classes invested in by selected federal entities and the National Railroad Retirement Investment Trust, we obtained data from the entities and reviewed their annual reports and audited financial statements for information on annual allocations made to each asset class. Allocation data from annual reports and audited financial statements reflect in some instances the investment objectives of funds managed by external asset management firms, which may not align precisely with the holdings of each fund. However, we concluded these data were sufficiently reliable to document the asset classes in which the federal entities we reviewed and the National Railroad Retirement Investment Trust, invest.\nTo determine the presence of MWO firms in the same asset classes in which the federal entities in our review and the National Railroad Retirement Investment Trust invested, we reviewed publicly available directories and databases of MWO asset managers compiled by industry stakeholders and state retirement plans. We then reviewed the firms’ Form ADV filings in the Investment Adviser Public Disclosure database of the Securities and Exchange Commission to identify the asset classes in which they operate and the assets they reported managing. Finally, we compared the total assets reported by MWO firms we identified to total regulatory assets under management reported by all registered investment advisers in the database as of May 2017. To assess the reliability of data in the Securities and Exchange Commission database, we identified and removed duplicate entries. We also checked data in the database against the Form ADV filings of a random selection of firms to ensure the database accurately reflects firms’ filings. Finally, we compared total regulatory assets under management for all investment advisers in the database to a July 2016 industry estimate of the global asset management industry and found them to be similar. We also compared the proportion of assets reported by the MWO firms we identified to one calculated by researchers in May 2017 and also found them to be similar. Although we did not independently verify the accuracy of Form ADV filings, we concluded the data we obtained from them were sufficiently reliable to estimate the proportion of regulatory assets under management held by MWO asset managers.\nTo the extent available, we reviewed data on the percentage of each federal entity’s and the National Railroad Retirement Investment Trust’s asset managers that are minority- or women-owned, the percentage of assets managed by these MWO firms, and the asset classes in which the firms invested. To assess the reliability of these data, we interviewed representatives of three federal entities and the National Railroad Retirement Investment Trust with knowledge of the systems and methods used to produce these data. We determined that the data we used were sufficiently reliable for purposes of estimating federal entities’ and the National Railroad Retirement Investment Trust’s use of MWO asset managers in 2015 and 2016.", "To determine the policies and processes that selected federal entities and the National Railroad Retirement Investment Trust used to identify and select asset managers and efforts to include MWO firms, we analyzed investment policies; documentation on the processes and criteria used to select asset managers, including internal guidelines and examples of requests for proposals for investment management services; and available documentation on programs, policies, or initiatives related to MWO firms. In addition, we interviewed representatives from the entities we reviewed to learn more about their selection processes and efforts related to MWO asset managers.\nWe assessed the extent to which federal entities used key practices to increase opportunities for MWO firms. Specifically, we identified key practices by examining the practices used by nonfederal plans and foundations and by reviewing industry reports. We then validated the practices by obtaining input from 10 industry stakeholders and experts selected based on factors such as depth of experience working with MWO firms and published research. The stakeholders and experts generally agreed with the practices we identified, but one expressed a concern about implementing two of the practices. We then assessed the extent to which the federal entities we reviewed used each key practice using three categories. “Uses” indicates that the entity completed an action or actions to implement the practice; “partially uses” indicates that the entity has started an action or actions to implement the practice, but has not completed the action(s); and “does not use,” which indicates that the entity has not started or completed any action(s) to implement the practice. One analyst reviewed the entities’ policies and practices and made the initial assessment. A second analyst then verified these steps to ensure consistent results.\nWe conducted this performance audit from April 2016 to September 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Representatives from the National Railroad Retirement Investment Trust (Trust) stated that trustees and investment staff have a fiduciary obligation to invest the Trust’s assets solely in the best interest of the Trust and its beneficiaries. Representatives told us they do not believe their asset manager selection process, described below, has precluded the Trust from hiring smaller or minority- and women-owned (MWO) firms.\nSelection criteria and process. According to Trust representatives, the Trust does not have minimum size or length of track record requirements for its asset managers, but considers an asset manager’s size, as well as the appropriate size of a possible allocation to the manager, when determining whether to hire the manger. They also stated that it was important to hire managers that have a demonstrable history of successfully investing and that generally, track records that cover longer time periods are more statistically significant than shorter-term track records because there are more data points to analyze. Trust representatives emphasized that considering these factors has not prevented the Trust from hiring smaller firms, and that about half of their asset managers are small to mid-size firms.\nAccording to Trust representatives, the Federal Acquisition Regulation does not apply to the Trust’s asset manager selection process. The Trust uses internal investment staff to identify potential asset managers. Trust representatives told us that searches for asset managers in the public markets (for example, publicly traded stocks and bonds) typically occur when an asset manager needs to be replaced (due to a variety of reasons, such as personnel changes), whereas searches for asset managers in private markets (for example, alternative assets such as private equity and real estate) occur on an ongoing basis.\nUse of Consultants. Trust representatives told us that they do not use consultants; rather, in-house investment staff conduct the research and evaluation process. Generally, investment staff identify potential asset managers by researching commercial or internally developed databases and then conduct an internal review, which includes reviewing information on prospective firms’ investment strategies and meeting with the firms. Investment staff subsequently develop a memorandum on the prospective asset managers and conduct a final internal analysis before recommending asset managers to trustees, who approve all final selections and the amount of the planned investment.\nKey Practices. According to Trust representatives, the Trust has taken steps to increase opportunities for MWO firms. Specifically, the Trust’s board has discussed the Trust’s selection practices as they relate to MWO firms on an ongoing basis during its quarterly meetings and has analyzed its use of MWO firms. In addition, Trust representatives told us they conducted outreach by meeting with trade associations representing MWO firms. Further, according to Trust representatives, the Trust does not have minimum size or length of track record requirements for its asset managers, which has removed potential barriers to smaller firms, including smaller MWO firms. Finally, according to Trust representatives, the Trust has tentatively approved revisions to its investment procedures manual that would incorporate statements about valuing diversity and having an inclusive asset manager selection process. Trust representatives told us that the Trust’s board intends to formally approve the revisions at its upcoming board meeting.", "The federal entities we reviewed and the National Railroad Retirement Investment Trust do not directly hire brokerage firms. However, in conducting our work on nonfederal plans, we identified challenges minority- and women-owned (MWO) brokerage firms face that may limit them from fully competing for opportunities with institutional investors, including retirement plans and foundations, and the asset managers these entities use.\nBrand bias. According to two MWO brokerage firms with which we spoke, MWO brokers may have difficulty competing with larger brokerage firms that are well known in the industry and have long- standing relationships with asset managers.\nSize. One brokerage firm with which we spoke noted that some institutional investors and asset managers may have the misconception that smaller broker dealers cannot execute trades as effectively as large brokerage firms, and that using MWO brokers will cost more. Another brokerage firm told us that net capital thresholds were too high for newer, smaller MWO brokers to meet. As a result, MWO brokers may have greater difficulty competing for opportunities.\nTrack record. Shorter track records are also a hindrance, according to brokerage firms we interviewed. For example, one brokerage firm noted that although most brokers may have worked with large corporations before starting their own companies, they may not get the credit for the experience they have because they are a new firm. As a result, they may be overlooked when investors search for brokerage firms.\nSome state, local, and private plans have taken actions to address these challenges and increase opportunities for MWO brokerage firms.\nCommunicate expectations. Two nonfederal plans and one foundation we interviewed directed their asset managers to use more inclusive practices for sourcing and hiring qualified MWO brokerage firms.\nConduct outreach. A state plan also directly communicated with MWO brokerage firms at networking events, and directed its asset managers to do so as well.\nReport usage of MWO brokers. Some state and local retirement plans have legislative mandates to promote the use of MWO firms, including brokers, and require that their asset managers report on their use of MWO brokerage firms. For example, a local plan in Illinois sets MWO broker-dealer utilization percentage goals across asset classes for its asset managers, and requires that asset managers report monthly on MWO broker utilization.", "", "", "", "", "", "In addition to the contacts named above, Kay Kuhlman (Assistant Director), Kimberley Granger (Assistant Director), Erika Navarro (Analyst in Charge), Farah Angersola, Bethany Benitez, Raheem Hanifa, John Karikari, Risto Laboski, Jill Lacey, Marc Molino, Tom Moscovitch, Barbara Roesmann, Adam Wendel, and Amber Yancey-Carroll made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 1, 1, 2, 2, 1, 1, 1, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h1_title", "h1_full", "", "h1_full", "", "h0_full", "h1_full", "h2_title h1_full", "", "h2_full h1_full", "", "", "h2_full", "h0_full h2_title h1_full", "h1_full", "", "h2_full", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What challenges do MWO asset managers face when competing for investment management opportunities?", "What is a common preference among institutional investors?", "How does business size affect MWO contracting bids?", "How are some investors attempting to mitigate this issue?", "How much money is managed by United States asset management firms?", "How does this compare to the money managed by MWO firms?", "Why is this important to the federal government?", "What was GAO asked to examine?", "How did GAO source their data for this review?", "What did GAO's report conclude regarding MWO firms?", "How many federal entities do these suggestions affect?", "To what extent did federal entities agree with the recommendations?", "To what extent does GAO support the conclusion of the report?" ], "summary": [ "According to asset managers and industry associations with which GAO spoke, minority- and women-owned (MWO) asset managers face challenges when competing for investment management opportunities with institutional investors, such as retirement plans and foundations.", "For example, institutional investors and their consultants often prefer to contract with large asset managers with brand recognition and with whom they are familiar.", "Also, small firms, including MWO firms, are often unable to meet minimum requirements set by institutional investors, such as size (assets under management) and past experience (length of track record).", "State, local, and private retirement plans and foundations GAO interviewed addressed these challenges in a variety of ways, such as asking their consultants to include MWO firms in their searches. Many plans also lowered their minimum threshold requirements so that the requirements were proportional to the size of the firms while maintaining the same performance requirements for all asset managers in their selection processes.", "Asset management firms registered in the United States manage more than $70 trillion.", "MWO firms manage less than 1 percent of those assets.", "The federal government has an interest in increasing opportunities for MWO businesses.", "GAO was asked to examine, among other things, (1) competitive challenges MWO firms face and how institutional investors address them, (2) selected federal entities' use of MWO firms, and (3) the entities' asset manager selection processes, including their use of key practices.", "GAO reviewed investment policies and financial statements of 8 entities that manage or sponsor federal retirement plans, an endowment, and an insurance program. GAO also interviewed 14 state, local, and private retirement plans and foundations and 10 MWO asset managers (selected based on size and other factors).", "GAO makes four recommendations to increase opportunities for MWO firms, in keeping with federal interests.", "Four federal entities should use key practices, as appropriate.", "The Army and Air Force Exchange Service, Navy Exchange Service Command, and Tennessee Valley Authority Retirement System agreed. The Federal Retirement Thrift Investment Board disagreed.", "GAO maintains that key practices should be used, as discussed in the report." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, 0, -1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 0, 0, 0, 0, 0, 13, 13, 13, 13 ] }
GAO_GAO-12-406	{ "title": [ "Background", "Statement of Budgetary Resources", "Army Personnel Role in the Military Pay Process", "Creation of a Military Pay Account", "Processing of Military Payroll", "Process and System Weaknesses Hindered Army’s Ability to Identify a Valid Population of Military Payroll Transactions", "DFAS-IN Did Not Have an Effective Process for Identifying the Population of Army Military Payroll Records", "System Weaknesses Hindered the Matching of Army Pay Accounts to Personnel Files", "The Army Was Unable to Provide Documentation to Support the Validity and Accuracy of a Sample of Payroll Transactions", "DFAS-IN Could Not Readily Provide Usable Leave and Earnings Statement Files for Sample Items", "The Army Was Unable to Locate Supporting Documentation for Military Pay Account Sample Items", "Army Military Pay Audit Readiness Efforts Currently Under Way", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of the Army", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The United States Army is responsible for land-based military operations. It is the largest and oldest established branch of the U.S. military. The modern Army has its roots in the Continental Army, which was formed on June 14, 1775, before the establishment of the United States, to meet the demands of the American Revolutionary War. The Army’s mission is to fight and win our nation’s wars by providing prompt, sustained land dominance across the full range of military operations and spectrum of conflict in support of combatant commands. The Army does this by organizing, equipping, and training forces; accomplishing missions assigned by the President, the Secretary of Defense, and combatant commanders; and transforming for the future.\nFor fiscal year 2010, Congress appropriated more than $52 billion to the “Military Personnel, Army” appropriation, which is a 1-year appropriation available for the pay, benefits, incentives, allowances, housing, subsistence, travel, and training primarily for active duty service members. The Defense Finance and Accounting Service in Indianapolis, Indiana (DFAS-IN) is responsible for accounting, disbursement, and reporting for the Army’s military personnel costs using the Defense Joint Military Pay System-Active Component (DJMS-AC). According to DFAS-IN, of the $52 billion in fiscal year 2010 military personnel appropriations, the Army’s nearly 680,000 service members received $46.1 billion in pay and allowances. To provide payroll support to the vast number of active Army service members, DFAS-IN has over 40 Defense Military Pay Offices within the United States that provide finance services to military personnel in designated geographical areas.", "The Statement of Budgetary Resources is the only financial statement predominantly derived from an entity’s budgetary accounts in accordance with budgetary accounting rules, which are incorporated into generally accepted accounting principles (GAAP) for the federal government. The Statement of Budgetary Resources is designed to provide information on authorized budgeted spending authority as reported in the Budget of the United States Government (President’s Budget), including budgetary resources, availability of budgetary resources, and how budgetary resources have been used.", "The Under Secretary of Defense for Personnel and Readiness (USD (P&R)) advises the Secretary of Defense on a number of personnel areas such as recruitment, pay and benefits, and oversight of military readiness, and serves as DOD’s Chief Human Capital Officer. The Office of the Assistant Secretary of the Army for Manpower and Reserve Affairs (ASA (M&RA)) is responsible for setting the strategic direction and providing overall supervision for manpower, personnel, and Reserve component affairs of the Department of the Army, and serves as the Army’s lead for manpower policy and human resources, among other things. In order to fulfill these responsibilities, ASA (M&RA) relies on the Deputy Chief of Staff, G-1, for advice and assistance. In addition to being the principal military advisor to ASA (M&RA), G-1’s other responsibilities include developing policy that provides guidance for responsive and flexible human resources support of the Army and overseeing the officer accession and enlisted recruiting policy. The Human Resources Command supports the Deputy Chief of Staff, G-1, in the management of all military personnel by serving as the functional proponent for military personnel management and personnel systems. Army Human Resources Command, unit commanders, and training certification officials, among others, are responsible for providing DFAS-IN with accurate and timely information regarding changes in individual military member status necessary to maintain accurate and timely payroll accounts.\nOffsetting collections are collections from intragovernmental transfers, business-like transactions with the public, and collections from the public that are governmental in nature but required by law to be classified as offsetting. These collections are all authorized by law to be credited to appropriation or fund expenditure accounts.", "As illustrated in figure 1, military pay accounts are established as part of the enlistment process for new recruits and are based on personnel records. The recruiting office establishes the basics of the recruit’s personnel file in the Army Recruiting Information Support System (ARISS). This file contains the recruit’s full name, contact information, country of origin, social security number (SSN), and recruiting status. After applying, the recruit reports to a Military Entrance Processing Station (MEPS), which works with the recruiting office to qualify applicants for military service and serves as the quality control unit between the recruiter and the military service. The applicant concludes the MEPS visit by signing either an enlistment contract or a delayed entry contract. The contract notes the terms of enlistment, such as pay grade, which relate to basic pay information. This completes the entrance documents that the MEPS collects. MEPS personnel then administer the Oath of Enlistment. All of the documents created are electronically transmitted to the respective service recruiting system, that is, ARISS for the Army, and a paper copy, referred to as a “Packet,” is created that accompanies the recruit to the training installation where the Packet is delivered to the personnel office at the Reception Battalion.\nRecruits generally report to their assigned installation Reception Battalion for training within 2 weeks to 14 months after signing their enlistment contract. The service liaison counselor keeps the documentation Packet until the enlistee reports to the Reception Battalion, at which time the Packet is sent to the respective training installation. The Reception Battalion uses information contained in the Packet to create a personnel file in the Reception Battalion Automated Support System (RECBASS). The enlistee provides additional information on dependents, such as a marriage certificate, birth certificates for dependent children, and W-4 dependent information. Reception Battalion personnel staff assist the enlistee in filling out any additional forms if they were not included in the Packet, such as direct deposit, pay allotments for base housing, savings account deposits, child support, and emergency contact information.\nPersonnel staff enter this information into the personnel system and send the information to the installation’s Defense Military Pay Office where the enlistee’s payroll account, referred to as a master military pay account, is created in DJMS-AC.\nMilitary pay starts once the payroll account is established in DJMS-AC. Army active duty military personnel receive pay and allowances based on their grade and time in service; location; and whether they are married, have dependents, or are performing special duties. The Army’s active duty service members may elect to be paid once a month at the end of the month or twice a month at mid-month and at the end of month. The service member’s pay information is consolidated into one monthly Leave and Earnings Statement. In addition to basic pay, military members may also be eligible for cash recruitment or retention incentives (i.e., bonuses). Any necessary pay change after the pay account is set up is initiated by the appropriate officials throughout the Army. These changes generally relate to promotions, special duty pay, incentive pay, Permanent Change of Station assignments, Temporary Change of Station assignments, and changes in dependents.\nThe Defense Manpower Data Center (DMDC) is the central DOD source to identify, authenticate, authorize, and provide information on DOD- affiliated personnel. As such, it is the one, central access point for information and assistance on DOD entitlements, benefits, and medical readiness for uniformed service members, veterans, and their families. Major DMDC databases include information on pay; accessions and examinations (USMEPCOM); authorizations and requirements; military units and addresses, special purposes, for example, contingency operations; Joint Command duty assignments; retirement point repository; and mobilization/activations. DMDC has five major operating locations, including the DOD Center, in Monterey Bay, California; the Washington, D.C. area; and overseas locations in South Korea, Europe, and Southwest Asia. In addition, DMDC has 2,145 issuing stations (badge offices, etc.) at 1,400 worldwide locations. Computer support for the DOD Center in Monterey Bay is provided by the DOD Center in Monterey Bay and the Naval Postgraduate School in Monterey, California. Other computer support offices are located in Arlington, Virginia, and Auburn Hills, Michigan.", "Payments of basic pay and allowances to service members are made via electronic funds transfer (EFT) through DJMS-AC. At the local level, DMPOs are required to review any substantial changes (defined as +/- 150 percent) in payroll data daily. The intent of this review is to identify data input errors. In addition, a day before payroll is processed, DFAS-IN conducts a pre-payroll review. This is a manual process, where the DFAS-IN Military Pay Operations (Mil Pay Ops) staff obtain a sample of Leave and Earnings Statements from DJMS-AC and trace the information in the statements to the relevant table outside of DJMS-AC. The purpose of this review is to identify potential system problems with the pay information used to calculate the pay amount. After completing this review, DFAS-IN then sends the DJMS-AC totals to the certifying official for certification. The certification process checks the DJMS-AC totals against the disbursing file totals. The certifying official sends an authorization and voucher to the Disbursing Office requesting release of payment. The DFAS-IN Disbursing Office uses the Army’s disbursing system to send electronic payments to the Federal Reserve Banks, which in turn distribute payments to each service member’s bank account.\nDFAS-IN’s Accounting Division performs a number of steps to transfer payroll transactions from DJMS-AC to the Army’s general ledger accounting system. from Mil Pay Ops that contain the computed total pay costs and disbursements for the payroll transactions, which are recorded as summary records by budget activity (e.g., officer, enlisted, and cadet pay). An individual soldier’s payroll information is not recorded in the accounting system. Military pay accounting data is uploaded from the Army’s general ledger accounting system into the Defense Departmental Reporting System-Budgetary (DDRS-B) for budgetary reporting and then to DDRS-Audited Financial Statement (DDRS-AFS) for financial statement reporting. Figure 2 provides a high-level illustration of the Army’s complex environment for establishing military personnel and payroll records and processing military pay.\nThe Standard Financial System (STANFINS) is the Army standard general ledger system currently used for recording military payroll. iPERMS does not feed DJMS-AC.\nArmy Regulation No. 600-8-104, Military Personnel Information Management/Records, establishes requirements for the Army’s Official Military Personnel File. The Army deployed iPERMS in 2007, and certain MilPer (Military Personnel) Messages and a Department of the Army memorandum indicate that iPERMS is intended to serve as the system of record for the Official Military Personnel File. In addition, the Army is in the process of developing the Integrated Personnel and Pay System-Army (IPPS-A), which is targeted for completion in 2017.", "The Army could not readily identify a complete population of Army payroll accounts for fiscal year 2010, given existing procedures and systems. The Army and the Defense Finance and Accounting Service in Indianapolis (DFAS-IN) did not have an effective, repeatable process for identifying the population of active duty payroll accounts. In addition, the Defense Manpower Data Center (DMDC) did not have an effective process for comparing military pay account files to military personnel files to identify a valid population of military payroll transactions. For example, it took 3 months and repeated attempts before DFAS-IN could provide a population of service members who received active duty Army military pay in fiscal year 2010. Similarly, it took DMDC over 2 months to compare the total number of fiscal year 2010 active duty payroll accounts to its database of personnel files. Standards for Internal Control in the Federal Government requires all transactions and other significant events to be clearly documented and the documentation readily available for examination.with DOD’s own guidance or financial audit guidance. DOD’s Financial In addition, these ineffective processes are not in accord Improvement and Audit Readiness (FIAR) Guidance sets out key tasks essential to achieving audit readiness, including defining and identifying the population of transactions for audit purposes. The GAO/PCIE Financial Audit Manual (FAM) provides guidance concerning typical control activities, such as independent checks on the validity, accuracy, and completeness of computer-processed data. One example of a control in this area includes comparing data from different sources for accuracy and completeness. Without effective processes for identifying a complete population of Army military pay records and comparing military pay accounts to personnel records, the Army will have difficulty meeting DOD’s 2014 audit readiness goal and its 2017 goal for a complete set of auditable financial statements.", "DFAS-IN made three attempts from November 2010 through early January 2011 to provide us a Defense Joint Military Pay System-Active Component (DJMS-AC) file extract of Army service members who received active duty pay in fiscal year 2010. The first attempt included 11,940 duplicate pay accounts, and the total number of pay accounts included in the second attempt increased by 28,035 records over the first attempt, necessitating a third attempt to establish the population of fiscal year 2010 active duty pay records. We requested that DMDC compare the results of DFAS-IN’s third attempt to identify the population of Army fiscal year 2010 payroll accounts against DMDC’s compilation of monthly active duty payroll data that it received from DFAS-IN. Of the 677,024 Army active duty pay accounts, per DJMS-AC, we were able to reconcile all but 1,025 pay accounts (less than 1 percent of the total active duty pay accounts, which is not considered material) to pay account data that DFAS-IN had previously provided to DMDC. Standards for Internal Control in the Federal Government requires all transactions and other significant events to be clearly documented and the documentation readily available for examination.were unable to verify the validity of the records. Further, we did not attempt to reconcile military payroll amounts to the related disbursements because an Office of the Secretary of Defense (Comptroller) and Chief Financial Officer (OUSD(C)) contractor was in the process of performing a pilot reconciliation of payroll to disbursement data.\nAs discussed later in this report, we DOD’s Financial Improvement and Audit Readiness (FIAR) Guidance states that being able to provide transaction-level detail for an account balance is a key task essential to achieving audit readiness. At the time we initiated our audit, Army officials told us that they had not yet focused on this area in their audit readiness efforts because the target date for The Army military pay was not until the first quarter of fiscal year 2015. inability to readily provide a population of military pay accounts impeded our efforts to accomplish our audit objectives and, if not effectively addressed, will impede the Army’s ability to meet DOD’s new Statement of Budgetary Resources audit readiness goal of September 30, 2014.", "Subsequent to this discussion, the Secretary of Defense issued a memo accelerating the Statement of Budgetary Resources audit readiness goal from 2017 to 2014.\nDMDC, these differences related primarily to personnel who had either left or were scheduled to leave the service, were reserve component soldiers released from active duty, or were soldiers who had died during fiscal year 2010. For these reasons, the service members were not included in the personnel file on September 30, 2010, that DMDC used for our initial comparison. We confirmed six duplicate SSNs in personnel records with the Social Security Administration and referred these records to DMDC and the Army for further research and appropriate action.\nDMDC attempted to complete our requested comparison of active duty Army pay accounts to military personnel records in January 2011, but was unable to complete the reconciliation until early March 2011. DMDC officials told us that the reasons for the delays included mainframe computer issues, staff illness and turnover, and management data quality reviews of the file comparison results, including additional file comparisons to resolve differences. Without an effective process for confirming that the Army’s active duty payroll population reconciles to military personnel records, the Army’s efforts to meet DOD’s Statement of Budgetary Resources auditability goal of September 30, 2014, will be impeded.\nDMDC and other DOD agencies use the Navy Postgraduate School mainframe computer to support their activities and share data processing priorities.", "The Army does not have an efficient or effective process or system for providing documentation that supports payments for Army military payroll. For example, DFAS-IN had difficulty retrieving and providing usable Leave and Earnings Statements files for our sample items, and the Army and DFAS were unable to provide personnel and finance documents to support our statistical tests of all 250 service members’ pay accounts for fiscal year 2010. Standards for Internal Control in the Federal Government and DOD’s FIAR Guidance require audited entities to document transactions and events and assure that supporting documentation can be identified, located, and provided for examination. In addition, DOD Regulation 7000.14-R, Financial Management Regulation (FMR), requires the military components to maintain documentation supporting all data generated and input into finance and accounting systems or submitted to DFAS. Further, DOD’s Financial Improvement and Audit Readiness (FIAR) Guidance states that identifying and evaluating supporting documentation for individual transactions and balances, as well as identifying the location and sources of supporting documentation and confirming that appropriate supporting documentation exists, is a key audit readiness step. However, because the Army was unable to provide documents to support reported payroll amounts, we were unable to determine whether the Army’s payroll accounts were valid, and we were unable to verify the accuracy of payments and reported active duty military payroll. Further, because military payroll is significant to the financial statements, the Army will not be able to pass an audit of its Statement of Budgetary Resources without resolving these control weaknesses. The following discussion summarizes the problems with the Army’s processes related to military pay audit readiness.", "DFAS-IN staff experienced difficulty and delays in providing usable Leave and Earnings Statement files to support our testing of Army military payroll. We selected a sample of 250 service members and requested the relevant Leave and Earnings Statement files for fiscal year 2010. After multiple discussions and requests, we ultimately obtained usable Leave and Earnings Statement files for our sample items—5 weeks after our initial request. DFAS-IN took over 2 weeks to obtain the initial set of Leave and Earnings Statement files because it retrieves the files from two areas of the Defense Joint Military Pay System-Active Component (DJMS-AC). The active DJMS-AC database holds the current month plus the previous 12 months’ data; older data are archived. When we requested Leave and Earnings Statement files for fiscal year 2010 in April 2011, a portion of these files had been archived and had to be retrieved from the archived database. In addition, the first set of Leave and Earnings Statement files that DFAS-IN provided included statements outside the requested fiscal year 2010 timeframe of our audit, thus we had to request a new set of files. It took over 1 week, including our data quality review, to obtain the second set of Leave and Earnings Statement files consisting of 445 separate files containing monthly statements for the 250 service member pay accounts in our sample. We determined that the Leave and Earnings Statements for an individual service member generally were in two or more of the files provided. Consequently, we had to combine these files into a format with each service member’s Leave and Earnings Statement files grouped together to include all of the pay and allowance information for the service members in our sample. This combining and formatting required 2 additional weeks.", "Although the Army deployed the Interactive Personnel Management System (iPERMS) as the Army’s Official Military Personnel File in 2007 and the requirements for assuring that adequate supporting documentation is available for audit and examination are clearly defined, the Army did not have procedures in place to assure that its military pay transactions were adequately supported and that the supporting documentation could be readily retrieved and provided for financial audit purposes. Standards for Internal Control in the Federal Government requires internal control and all transactions and other significant events to be clearly documented and the documentation readily available for examination. DOD Regulation 7000.14-R, Financial Management Regulation (FMR), requires the military components to maintain documentation supporting all data generated and input into finance and accounting systems or submitted to DFAS. This regulation also requires the components to ensure that audit trails are maintained in sufficient detail to permit tracing of transactions from their sources to their transmission to DFAS. Audit trails are necessary to demonstrate the accuracy, completeness, and timeliness of transactions as well as to provide documentary support for all data generated by the component and submitted to DFAS for recording in the accounting systems and use in financial reports. Further, DOD’s FIAR Guidance states that identifying and evaluating supporting documentation for individual transactions and balances, as well as the location and sources of supporting documentation and confirming that appropriate supporting documentation exists, is a key audit readiness step. Without the capability to readily locate and provide supporting documentation for military payroll transactions within a short timeframe, the Army’s ability to pass a financial statement audit will be impeded.\nA sample item constitutes a soldier’s pay account for fiscal year 2010, including reported Leave and Earnings Statements for all 12 months of the fiscal year. our 250 sample items, partial support for 3 sample items, and no support for the remaining 245 sample items. Our review of the partial documentation provided for 3 sample items showed that the Army was unable to provide supporting documentation for common elements of its military pay, including basic allowance for housing, cost of living allowance, hardship duty pay-location, and hostile fire/imminent danger pay. Specifically,\nThe Army was unable to provide supporting documentation for basic allowance for housing for one service member. In general, a service member on active duty is authorized a housing allowance based on the member’s grade, dependency status, and location. Basic allowance for housing is based on the median housing costs and is paid independently of the service member’s actual housing costs. At the conclusion of our fieldwork, a DFAS-IN official told us they had requested this documentation from the National Archives and Records Administration (NARA); however, they had not yet received it.\nFor two sample items, the Army did not provide adequate documentation that the two service members were appropriately paid for clothing allowance. A clothing allowance is paid to enlisted service members annually in the anniversary month each year after they received their first clothing allowance. At the end of our field work, DFAS-IN had not provided an explanation as to why these service members received their clothing allowance in a month other than their anniversary date.\nThe Army was unable to provide supporting documentation for one service member residing within the continental United States receiving a cost-of-living allowance. A cost-of-living allowance for soldiers stationed in the United States is a supplemental allowance designed to help offset higher prices in high-cost locations. At the end of our field work, a DFAS-IN official told us they had requested the documentation from NARA; however, they had not yet received it.\nFinally, for two service members, the Army was unable to provide supporting documentation for hardship duty pay and hostile fire/imminent danger pay. Service members are entitled to hardship duty pay for location assignments when there is a permanent change of station duty or temporary/deployed/attached duty of over 30 days in a specific location. Additionally, a service member is entitled to hostile fire/imminent danger pay when, as certified by the appropriate commander, the member is (1) subject to hostile fire or explosion of a hostile mine; (2) on duty in an area close to hostile fire incidents and the member is in danger of being exposed to the same dangers experienced by other service members; or (3) killed, injured, or wounded by hostile fire and the service member is on official duty in a designated imminent danger pay area. At the end of our field work, the Army was unable to provide adequate support for the dates that each of these service members reported for duty at the specified location which triggered the start of these two types of pay, and it was unable to provide documentation that one service member had been ordered to report to duty in the designated location.\nAs shown in figure 3, the Army provided complete documentation for soldier pay accounts associated with sample items #2 and #4, but it was unable to provide complete documentation for sample items #1, #3, and #5. Further, after 6 months, the Army was still unable to provide any documentation for the remaining 245 pay account sample items.\nOne of the reasons the Army was unable to provide supporting documentation is that it does not have a centralized repository for pay- affecting documents. Army personnel and finance documentation supporting basic pay and allowances resides in numerous systems, and original hard copy documents are scattered across the country—at hundreds of Army units and NARA federal records centers. According to Army and DFAS-IN officials, there are at least 45 separate systems that the Army uses to perform personnel and pay functions with no single, overarching personnel system. Although these systems contain personnel data on military members and their dependents and feed these data to DJMS-AC, the systems do not contain source documents.\nArmy Regulation No. 600-8-104, Military Personnel Information Management/Records, establishes requirements for the Army’s Official Military Personnel File. Army policies indicate that iPERMS is intended to serve as the system of record for the Official Military Personnel File. The Army deployed iPERMS in 2007 and designated iPERMS as the Army’s Official Military Personnel File. However, when we attempted to find supporting documents in iPERMS, we found that this system had not been consistently populated with the required service member documents, resulting in incomplete personnel records. For example, when attempting to test our sample, we discovered that documents, such as orders to support a special duty assignment, permanent change of station orders, and release or discharge from active duty, that should have been in iPERMS were not. The Army has designated the Human Resources Command as the owner of iPERMS; however, local installation personnel offices across the country are responsible for entering most documents into individual service member iPERMS accounts, and the Army has not established a mechanism for periodic monitoring, review, and accountability of iPERMS to ensure that personnel files are complete. For example, we found that documents needed to support pay transactions are not in iPERMS because (1) Army Regulation 600-8-104 does not require the personnel form to be included and (2) the documents are finance documents and not personnel documents.\nEfforts to achieve auditablity are further compounded by payroll system limitations. DJMS–AC, used to process Army active duty military pay, is an aging, Common Business Oriented Language (COBOL) mainframe-based system that has had minimum system maintenance because DOD planned to transition to the Forward Capability Pay System and then to the Defense Integrated Military Human Resources System (DIMHRS).DJMS-AC lacks key payroll computation abilities to pay active duty Army service members. To address these functionality limitations, DFAS has developed approximately 70 workaround procedures that are currently being used to compensate for the lack of functionality in DJMS-AC. An audit of Army military pay would necessitate an evaluation of these procedures and related controls.\nAnother factor in the Army’s inability to provide support for military payroll is that the Army has not adequately documented its personnel processes and controls related to military pay. During our audit, we spent considerable time attempting to identify the range of personnel and finance documents that would be needed to support basic military pay and allowances reported on service members’ Leave and Earnings Statements and the appropriate office responsible for providing the documentation. According to Internal Control Standards, written documentation should exist covering the agency’s internal control structure and all significant transactions and events. for internal control includes identification of the agency’s activity-level functions and related objectives and control activities and should appear in management directives, administrative policies, accounting manuals, and other such guidance.", "GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). the success of the Army’s efforts will be key to meeting DOD’s 2014 Statement of Budgetary Resources audit readiness goal.\nTo meet this goal, the Army has several military pay audit readiness efforts planned or under way—most of which were begun after we initiated our audit. However, many of these efforts are in the early planning stages and will need to be carefully documented and managed to ensure effective and timely implementation.\nIn November 2010, as part of the Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) effort to provide management consulting assistance where needed on financial audit readiness, DOD provided contractor support to the Army for documenting and testing DJMS-AC application system controls. In November 2011, OUSD(C) and contractor officials provided us a status briefing that indicated DOD’s contractor expects to complete documentation and testing of DJMS-AC controls in March 2012.\nThe November 2011 OUSD(C) status briefing also noted that the Army’s Financial Improvement Plan (FIP) team began executing discovery, documentation, and controls testing of front-end military pay business processes, including accessions; field service activities; and Military Personnel, Army appropriation budget activities. This effort includes processes executed by the Army financial management and personnel communities, including the Army Budget Office, Office of the Deputy Chief of Staff for Personnel, Army and DFAS installation finance and military pay offices, and Army installation military personnel offices. The Army FIP effort encompasses the active Army, Army National Guard, and U.S. Army Reserve. The Army plans to complete these efforts by December 31, 2012, and implement any required corrective actions by December 31, 2013.\nFurther, as part of the Army FIP discovery effort, Army officials told us they plan to develop a repository of military pay entitlement information by entitlement type, which includes governing laws and regulations; the necessary key supporting documentation, responsible parties, and location for retrieval; as well as the automated information systems involved and their owners. The Army plans to complete these efforts by December 31, 2013. However, it is not yet clear who will be responsible for entering pay-supporting documents in the repository and what process will be used for ensuring completeness of the files. As previously discussed, Army Regulation No. 600-8-104, Military Personnel Information Management/Records, established requirements for the Official Military Personnel File, but the regulation did not include requirements for ensuring that personnel documents are centrally located, retained in the service members’ Official Military Personnel File, or otherwise readily accessible. The regulation also did not require that these files be monitored to ensure their completeness.\nArmy officials told us that in conjunction with DFAS, it has identified other systems for SSAE No. 16 and DFAS self-reviews. Further, the Army plans to identify by March 31, 2012, all systems that have a material impact on the military pay processes and require Federal Information System Controls Audit Manual (FISCAM) assessments. The Army intends that all required reviews will be completed by December 31, 2013.\nAdditionally, the Army is working with DFAS-IN to document processes and perform control testing of payroll accounting, referred to by the Army as back-end processes. The Army expects to implement all corrective actions on these controls by December 31, 2012.\nAs a result of our work, Army and DFAS-IN officials told us they plan to develop a matrix of personnel documents that support military pay and allowances and identify officials responsible for providing this documentation. Army Deputy Chief of Staff, G-1, officials plan to work with IPPS-A team members to determine how IPPS-A will incorporate or link to this information. Effective development of such a matrix will be critical to ensuring that payroll transactions are supported and, therefore, audit ready. The need for such a matrix became apparent nearly 1 year ago, but the Army has not yet completed such a matrix or identified personnel responsible for providing needed documents. Further, it has not established a central repository for these documents, or designated iPERMS as the official repository, and it has not established a mechanism for periodic monitoring, review, and accountability to ensure that the central repository will be effectively maintained.\nIn addition, the Army is in the process of developing the Integrated Personnel and Pay System-Army (IPPS-A). However, the current targeted IPPS-A implementation date of 2017 will require the Army to rely on its current systems for purposes of meeting DOD’s Statement of Budgetary Resources audit readiness date of September 30, 2014. IPPS–A is planned to be developed and implemented in two increments, with multiple releases. The Army plans to employ 14- to 18-month development cycles for each release, with the goal of fielding capabilities every 12 months. The Army intends for Increment I to consist of a trusted data source of soldier personnel and human resource data and to provide the foundation for Increment II, which is expected to provide integrated personnel and pay services, to be developed and implemented across multiple releases. In response to our findings in this report, Army IPPS-A officials told us that they have recently begun efforts to determine how IPPS-A will link to personnel records that will be needed to support Army military payroll amounts. The Army’s strategy is for each release of IPPS-A to incrementally build upon the prior release’s design and capability, to ultimately contribute toward the Army’s goal of reaching financial auditability by fiscal year 2017. Because implementation of the IPPS-A is not targeted for completion until 2017, a slippage in the implementation date could impede the Army’s efforts to support DOD’s financial statement audit readiness goal of September 30, 2017. Without timely and effective efforts to establish an electronic repository of pay- supporting documents and ensure that the documentation is complete, IPPS-A will not be able to fully support the Army’s audit readiness efforts.", "Active Army military payroll, reported at $46.1 billion for fiscal year 2010, is material to all of the Army’s financial statements, and as such, will be significant to the Army’s audit readiness goals for the Statement of Budgetary Resources. The Army has several military pay audit readiness efforts that are planned or under way. Timely and effective implementation of these efforts could help reduce the risk related to DOD’s 2014 Statement of Budgetary Resources audit readiness goal. However, most of these actions are in the early planning stages. Moreover, these initiatives, while important, do not address (1) establishing effective processes and systems for identifying a valid population of military payroll records, (2) ensuring Leave and Earnings Statement files and supporting personnel documents are readily available for verifying the accuracy of payroll records, (3) ensuring key personnel and other pay-related documents that support military payroll transactions are centrally located, retained in service member Official Military Personnel Files, or otherwise readily accessible, and (4) requiring the Army’s Human Resources Command to periodically review and confirm that service member Official Military Personnel File records in iPERMS or other master personnel record systems are consistent and complete to support annual financial audit requirements. These same issues, if not effectively resolved, could also jeopardize the 2017 goal for audit readiness on the complete set of DOD financial statements. In addition, the Army’s military pay auditability weaknesses have departmentwide implications as the other military components, such as the Air Force and the Navy, share some of the same military pay process and systems risks as the Army. Going forward, focused and committed leadership and knowledgeable staff in key functional areas, including personnel, systems, military payroll, and accounting will be essential to effective implementation of military pay audit readiness efforts.", "To help the Army develop the processes and controls necessary to achieve financial statement audit readiness for military pay, we are making the following four recommendations.\nWe recommend that the Secretary of the Army direct the Assistant Secretary of the Army for Financial Management and Comptroller to work with Army Personnel (G-1), DFAS-IN, and audit readiness officials to document and implement a process for identifying and validating the population of payroll transactions for fiscal year periods at a minimum. identify key finance (i.e., pay-affecting) documents that support military payroll transactions and develop and implement procedures for maintaining them, including responsibility for coordination with Army Personnel (G-1) and audit readiness officials.\nIn addition, we recommend that the Secretary of the Army direct the Assistant Secretary of the Army for Manpower and Reserve Affairs to revise AR No. 600-8-104, Military Personnel Information Management/Records, to require that key personnel and other pay-related documents that support military payroll transactions are centrally located, retained in the service members’ Official Military Personnel File, or otherwise readily accessible. Consider first using the Interactive Personnel Management System (iPERMS) for this purpose. the Army’s Human Resources Command periodically review and confirm that service member Official Military Personnel File records in iPERMS or other master personnel record systems are consistent and complete to support annual financial audit requirements.", "We received written comments from the Secretary of the Army on March 12, 2012, stating that the Army agreed with our four recommendations. The Army’s letter also states that our work has been extremely helpful in identifying the need to have consistent agreed-upon rules for documenting files required to support audits of military pay and cited several efforts under way to improve the auditability of its military pay. The Army’s comments are reprinted in appendix II.\nThe Army’s letter states that it believes we found no significant issues in our review of the military pay accounts, but our report is very clear in highlighting the significance of the issues with the Army’s military payroll. For instance, our report states that without effective processes for identifying a complete population of Army military pay records and comparing military pay accounts to personnel records, the Army will have difficulty meeting DOD’s 2014 Statement of Budgetary Resources audit readiness goal and its 2017 goal for a complete set of auditable financial statements. In addition, because the Army was unable to provide documents to support reported payroll amounts, we were unable to determine whether the Army’s payroll accounts were valid, and we were unable to verify the accuracy of the payments and reported active duty military payroll.\nFurther, in responding to our first recommendation that the Army document and implement a process for identifying and validating the population of payroll transactions for fiscal year periods, the Army stated that it validates personnel and payroll records monthly in real time, and will evaluate the value of retaining personnel files for prior years. If the monthly pay to personnel comparison is a control procedure that the Army performs regularly and intends for the auditors to rely on, the process and results must be documented and retained for the auditor to assess and test beyond the end of the fiscal year, as we recommended.\nWe are sending copies of this report to the Secretary of Defense; the Under Secretary of Defense (Comptroller/Chief Financial Officer); the Deputy Chief Financial Officer; the Director, Financial Improvement and Audit Readiness; the Secretary of the Army; the Assistant Secretary of the Army for Financial Management and Comptroller; the Assistant Secretary of the Army for Manpower and Reserve Affairs; the Director of Army Finance Command; the Directors of DFAS and the DFAS- Indianapolis Center; the Director of the Defense Manpower Data Center; the Director of the Office of Management and Budget; and appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-9869 or khana@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "This audit was initiated under our mandate to audit the consolidated financial statements of the United States government. Our objectives were to perform basic audit procedures necessary to conclude about the validity and accuracy of Army’s active duty military payroll. Those basic audit procedures included (1) identifying a valid population of military payroll transactions, and (2) testing a sample of payroll transactions for validity and accuracy.\nTo identify the population of Army active duty payroll transactions, we obtained Army active duty military payroll records from the Defense Finance and Accounting Service, Indianapolis (DFAS-IN). DFAS-IN processes military payroll for the Army. At our request, DFAS-IN made three attempts from November 2010 through January 2011 to provide us a complete file of service members who were paid in fiscal year 2010. The first attempt included 11,940 pay accounts that were duplicate, and the total number of pay accounts included in the second attempt increased by 28,035 records over the first attempt, necessitating a third request for the population of fiscal year 2010 active duty pay records. To obtain assurance that the overall population of Army fiscal year 2010 payroll accounts matched the sum of monthly payroll accounts, we requested the Defense Manpower Data Center (DMDC) compare the results of our third request for the population of Army fiscal year 2010 payroll accounts against its compilation of monthly active duty payroll data that it received from DFAS-IN. We were able to reconcile all but 1,025 pay accounts (less than 1 percent of the total, which is not considered material). We did not reconcile military payroll amounts to the related disbursements because an Office of the Under Secretary of Defense (Comptroller) and Chief Financial Officer (OUSD(C)) contractor was in the process of performing a pilot reconciliation.\nIn addition, because the Army does not have an integrated military personnel and payroll system, we worked with the DMDC to match payroll accounts to personnel records to determine whether the population of Army military payroll accounts was in agreement with the population in the DMDC database. We relied on work performed by DMDC because we reviewed its quality control procedures and found them to be adequate, for our purposes. We compared the total number of records in DFAS-IN’s population and DMDC’s database for the service members who received active duty Army military pay in fiscal year 2010. We did not separately validate Army personnel file data. DMDC’s file comparison of Army active duty pay accounts to military personnel records identified 67,243 pay accounts that were not matched to a file of military personnel records on September 30, 2010. We asked DMDC to perform more detailed comparisons of these differences. These differences related primarily to personnel who were not active Army service members because they had either left or were scheduled to leave the service, were reserve component soldiers released from active duty, or were soldiers that had died during fiscal year 2010. Finally, we confirmed six duplicate SSNs in personnel records with different names with the Social Security Administration and referred these records to DMDC and the Army for further research and appropriate action.\nTo address our second objective, we documented key controls, laws, and pay regulations and used the population of matched personnel and payroll records to select a statistical sample of 250 soldiers for testing the accuracy and validity of Army military payroll. We obtained 12 months of fiscal year 2010 Leave and Earnings Statement files for each soldier in our sample, the most recent data available at the time, to compare with supporting Army personnel documents indicating such information as military orders, special duty and expertise entitlements, marital status, and dependent information. We gained an understanding of Army processes with a focus on key steps involved in establishing military personnel records related to specific pay and allowance amounts. We also performed process walkthroughs at DFAS-IN and assessed key controls over the accuracy of payroll payments made to service members. To document the process for capturing pay-related information and setting up military personnel records, we interviewed Army personnel, Human Resources Command, and Finance Command officials and visited a Military Enlistment Program Station in Indianapolis and a military reception battalion at Fort Jackson, South Carolina. We also interviewed finance officials at Defense Military Pay Offices at Fort Jackson, South Carolina, and Fort Carson, Colorado, to gain an understanding of how pay adjustments are initiated, input, and reviewed. We requested and obtained fiscal year 2010 monthly Leave and Earnings Statement files for the service members in our sample from DFAS-IN and requested Army personnel documents to support basic pay and allowance amounts reported on the Leave and Earnings Statements, including such information as military orders, and the certifications of special duty expertise, marital status, and dependent information. We did not plan to, nor did we test deductions and allotments for items such as Service Member’s Group Life Insurance, Thrift Savings Plan, and TRICARE. In addition to basic pay, we planned to test base housing allowance; hazardous duty pay; hostile fire/imminent danger pay; cost of living allowance; military overseas housing allowance; family separation housing; temporary lodging allowance; clothing allowance; and special duty pay, such as foreign language proficiency pay and parachute (jump) pay. We reviewed documentation provided by the Army for 5 sample items and documentation contained in the Army’s Interactive Personnel Management System (iPERMS), which serves as the Army’s Official Military Personnel File. We were unable to complete our tests of active duty military payroll accuracy because of a scope limitation related to the Army’s inability to provide support for its active component military payroll transactions.\nIn support of our objectives, we reviewed Army military personnel and payroll policies and procedures and identified sources of pay-related documentation. Throughout our work, we interviewed key Army officials in Manpower and Reserve Affairs, Human Resources Command, and Finance Command. We also interviewed DFAS-IN officials responsible for payroll functions and Office of the Under Secretary of Defense (Comptroller/Chief Financial Officer) audit readiness contractor officials. Additionally, we interviewed agency officials regarding the status of Army’s efforts to develop an Integrated Personnel and Payroll System- Army (IPPS-A). We also performed walkthroughs of DFAS-IN Military Pay Operations, accounting, disbursing, financial reporting, and related processes.\nWe conducted this performance audit from June 2010 through March 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Other matters identified in our work that merit management’s attention and correction will be reported in a separate letter to Army management.", "", "", "", "In addition to the contact named above, Gayle L. Fischer, Assistant Director; Carl S. Barden; Tulsi Bhojwani; Frederick T. Evans; Lauren S. Fassler; Wilfred B. Holloway; Sabur O. Ibrahim; John J. Lopez; Julia C. Matta, Assistant General Counsel; Sheila D. M. Miller, Auditor in Charge; Margaret A. Mills; Heather L. Rasmussen; Ramon J. Rodriguez; James J. Ungvarsky; and Matthew P. Zaun made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "", "", "", "", "h0_full h3_title", "h0_full", "h3_full", "h2_title h1_full", "", "h2_full h1_full", "h2_full h1_full", "h2_full", "", "h3_full", "h0_full h3_full", "", "", "", "" ] }	{ "question": [ "Why couldn't the Army readily identify the population of Army military payroll accounts?", "How does the lack of an effective process affect administrative work?", "How does this lack of an effective process affect other organizations?", "How important is the identification of the population of transactions?", "How might the lack of effective processes affect the Army's audit readiness goal?", "How efficiently can the Army provide supporting documents for military payroll?", "How does the Army's readiness compare to GAO's standards?", "To what extent has the Army properly deployed the iPERMS?", "How does the Army's readiness affect its ability to provide documentation?", "How is the Army attempting to rectify the lack of an effective pay audit process?", "What do these efforts consist of?", "To what extent have these efforts been documented?", "How large is Army military payroll?", "What are deficiencies with Army military payroll processes?", "How will DOD audit budgetary resources?", "Why did GAO audit the Army's active duty military payroll?", "How did GAO source data for its review?" ], "summary": [ "The Army could not readily identify the population of Army military payroll accounts given its existing procedures and systems. The Army and DFAS-IN did not have an effective, repeatable process for identifying the population of active duty payroll records.", "For example, it took 3 months and repeated attempts before DFAS-IN could provide a population of service members who received active duty Army military pay in fiscal year 2010. Further, because the Army does not have an integrated military personnel and payroll system, it was necessary to compare the payroll file to active Army personnel records.", "However, the Defense Manpower Data Center (DMDC), DOD’s central repository for information on DOD-affiliated personnel, did not have an effective process for comparing military pay account files with military personnel files to identify a valid population of military payroll transactions. It took DMDC over 2 months and labor-intensive research to compare and reconcile the total number of fiscal year 2010 active duty payroll accounts to its database of personnel files.", "DOD’s Financial Improvement and Audit Readiness (FIAR) Guidance states that identifying the population of transactions is a key task essential to achieving audit readiness.", "Without effective processes for identifying the population of Army military pay records and comparing military pay accounts to personnel records, the Army will have difficulty meeting DOD’s 2014 audit readiness goal for the Statement of Budgetary Resources.", "In addition, the Army does not have an efficient or effective process or system for providing supporting documents for Army military payroll. For example, DFAS-IN had difficulty retrieving and providing usable Leave and Earnings Statement files and the Army was unable to locate or provide supporting personnel documents for GAO’s statistical sample of fiscal year 2010 Army military pay accounts.", "GAO’s Standards for Internal Control in the Federal Government and DOD’s FIAR Guidance provide that audited entities document transactions and events and assure that supporting documentation can be identified, located, and provided for examination.", "Although the Army deployed the Interactive Personnel Management System (iPERMS) as the Army’s Official Military Personnel File in 2007, it had not consistently or completely populated iPERMS with personnel records.", "At the end of September 2011, 6 months after receiving GAO’s 250 statistical sample items, the Army and DFAS-IN were able to provide complete documentation for 2 of GAO’s sample items and provided partial documentation for 3 items, but provided no documentation for 245 of GAO’s 250 sample items.", "The Army has begun several military pay audit readiness efforts that, if successfully implemented, could help increase the likelihood of meeting DOD’s 2014 Statement of Budgetary Resources audit readiness goal and the 2017 mandate for audit readiness on a complete set of DOD financial statements.", "These efforts include documenting and testing payroll system application controls, documenting Army military pay business processes, identifying the range of supporting documents for military pay, and developing an integrated military personnel and payroll system.", "Most of these efforts are not yet documented and, therefore, there is no assurance that they will be implemented timely and effectively.", "The Defense Finance and Accounting Service-Indianapolis (DFAS-IN) reported that fiscal year 2010 active Army military payroll totaled $46.1 billion.", "However, for several years, GAO and others have reported continuing deficiencies with Army military payroll processes and controls, raising questions about the validity and accuracy of reported Army military pay and whether it is auditable.", "The Department of Defense (DOD) has recently accelerated its Statement of Budgetary Resources audit readiness goal by 3 months to 2014 and is required to achieve audit readiness for a full set of DOD financial statements by 2017.", "GAO performed basic audit procedures for the Army’s active duty military payroll to assess the Army’s ability to (1) identify a valid population of payroll transactions and (2) test a sample of payroll transactions for validity and accuracy.", "GAO reviewed applicable laws and regulations, analyzed DOD and Army policies and procedures, drew a statistical sample of payroll transactions to test their accuracy and validity, and met with DOD, DFAS-IN, Army, and Defense Manpower Data Center officials." ], "parent_pair_index": [ -1, 0, 1, -1, -1, -1, 0, -1, -1, -1, 0, -1, -1, -1, 1, -1, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 0, 0, 0, 0, 0 ] }
CRS_R40995	{ "title": [ "", "Recent Developments", "Background on the Sugar Program", "Main Features of U.S. Sugar Policy", "Price Support Loans", "Loan Rates", "Effective Support Levels", "Marketing Allotments", "Import Quotas", "Sugar Market Developments", "Food Use", "Significance of Sugar Ending Stocks", "Price Developments", "U.S. Raw Cane Futures Prices", "Relationship Between Domestic and World Raw Sugar Futures Prices", "Domestic Refined Sugar Wholesale Prices", "Retail Sugar Prices", "Price Setting and Outlook", "Issues", "2008 Farm Bill Sugar TRQ Provision", "Implications of the Timing of a TRQ Decision", "Sugar Users Call for Import Increase", "Sugar Producers View Supplies as Adequate", "Sugar Imports from Mexico", "Free Trade under NAFTA", "\"Substitution\" and Governments' Coordination of Sugar Policies", "Reallocation of Country Sugar Quota Allocations" ], "paragraphs": [ "", "On April 23, 2010, the U.S. Department of Agriculture (USDA), after determining that additional supplies of raw cane sugar are required in the U.S. market, announced a 200,000 short ton (ST) increase in the FY2010 raw sugar import quota. Manufacturers of sugar-containing food products welcomed the news, but signaled that they will press USDA to again quickly raise the quota to avoid a sugar shortage later this year. Sugar producers responded that USDA's decision \"shows that the Farm Bill is operating as intended and gives USDA the time and the tools it needs to ensure adequate supplies.\"\nOn March 23, 2010, the Office of the U.S. Trade Representative (USTR) announced the reallocation of shares of the FY2010 raw sugar TRQ from countries unable to fill the amount of their allocations (i.e., what they can export to the United States) to countries able to do so. This action is intended to increase the amount of imported sugar supplied to U.S. cane refiners by more than 90,000 short tons, without changing the FY2010 raw sugar TRQ that limits the overall import quantity that can enter. Of the 40 countries with shares of this TRQ, 25 will be able to ship additional amounts.", "Governments of every sugar-producing nation intervene to protect their domestic industries from fluctuating world market prices. Such intervention is necessary, it is argued, because both sugar cane and sugar beets must be processed soon after harvest using costly processing machinery. When farmers significantly reduce production because of low prices, a cane or beet processing plant typically shuts down, usually never to reopen. This close link between production and capital-intensive processing makes price stability important to industry survival.\nThe United States has a long history of protection and support for its sugar industry. The Sugar Acts of 1934, 1937, and 1948 required the U.S. Department of Agriculture (USDA) to estimate domestic sugar consumption and divide this market by assigning quotas to U.S. growers and foreign countries. These acts also authorized payments to growers when needed as an incentive to limit production and levied excise taxes on sugar processed and refined in the United States. This type of sugar program expired in 1974. For the next seven years, the U.S. market was relatively open to foreign sugar imports, with mandatory price support provided only in 1977 and 1978, and discretionary support in 1979. Congress reinstated mandatory price support for sugar in the Agriculture and Food Act of 1981 and the Food Security Act of 1985. Subsequently, the 1990 farm bill, the 1993 budget reconciliation bill, and the 1996, 2002, and 2008 farm bills extended sugar program authority with some changes. Current law authorizes the sugar program through the 2012 crops for sugar beets and sugarcane.\nEven with price protection available to producers, the United States historically has not produced enough sugar to satisfy domestic demand and thus continues to be a net sugar importer. Prior to the early 1980s, domestic sugar growers supplied roughly 55% of the U.S. sugar market. This share has grown over the last 25 years, reflecting the price protection provided by the sugar program. As high-fructose corn syrup (HFCS) displaced sugar in the United States during the early 1980s, and domestic sugar production increased later in that decade, foreign suppliers absorbed the entire adjustment and saw their share of the U.S. market decline significantly.\nU.S. sugar policy maintains domestic sugar prices above the world market price, and is structured to protect the domestic sugar-producing sector (sugar beet and sugarcane producers, and the processors of their crops) and to ensure a sufficient supply. During the last decade (FY2000-FY2009), the U.S. raw sugar domestic futures price averaged 21.0 cents per pound (¢/lb.), compared to the world raw sugar futures price of 10.8¢/lb. Because of the price differential, U.S. consumers and manufacturers of foods and beverages pay more for sugar than they would if imports were allowed to enter without any restriction. Various studies show that over the last 15 years, U.S. sugar users paid between $400 million and $1.9 billion more for sugar annually. These \"cost to user\" estimates vary widely, and largely reflect the extent of the difference between the higher U.S. price and the lower world price for sugar in the time period examined, and the differing assumptions and methodologies that analysts use to develop such estimates.\nThe sugar program differs from the grains, rice, peanut, and cotton programs in that USDA makes no direct payments to beet and cane growers and processors. With this structure, taxpayers do not directly support the program through federal government outlays. This fact is highlighted as a positive feature by the sugar production sector and program supporters. The program's support level and import protection, however, keep the U.S. sugar price above the price of sugar traded internationally, and constitute an indirect subsidy to the production sector by way of higher prices paid by U.S. sugar users (food and beverage manufacturers) and household consumers. Program opponents frequently refer to this subsidy component to argue for changes to U.S. sugar policy.", "U.S. sugar policy uses three tools to ensure that domestic growers and sugar processors receive a minimum price for their sugar. First, statutorily set loan rates determine the support level that processors, and in turn producers, are guaranteed to receive for raw cane and refined beet sugar. Second, \"marketing allotments\" limit the amount of domestically produced sugar that processors can sell, and now ensure that the domestic sugar production sector supplies at least 85% of U.S. food and beverage demand for sugar. Third, import quotas restrict the amount of foreign sugar allowed to enter the U.S. market. USDA decisions in administering allotments and quotas are intended to balance available sugar supply (i.e., domestic output plus imports) with U.S. food demand for sugar so that market prices do not fall below effective support levels. The 2008 farm bill ( P.L. 110-246 , Subtitle D of Title I) further requires USDA to operate the sugar program on a \"no-cost\" basis (i.e., to result in no federal government outlays). It is administered by the Farm Service Agency. Each tool is described below, with a discussion of what the 2008 farm bill requires and what USDA has announced in exercising its authorities for the FY2009 and FY2010 sugar programs.", "USDA extends \"non-recourse\" price support loans to processors of sugarcane and sugar beets rather than directly to the farmers who harvest these crops. Loans are available only to processors who agree to pay growers for deliveries of sugar beets and sugarcane at USDA-set minimum payment levels. Their \"non-recourse\" feature means that a processor can exercise the legal right to hand over sugar it initially offered USDA as collateral for the loan to meet its repayment obligation, if the market price is below the effective support level when the loan comes due. These loans at times can be attractive to sugar processors as a source of short-term credit at below-prime interest rates.", "The 2008 farm bill increases sugar loan rates by 4% to 5% in stages through FY2012. For the 2009 sugarcane and sugar beet crops that are harvested and processed during FY2010, the national average loan rate is 18.25¢/lb. for raw cane sugar, and 23.45¢/lb. for refined beet sugar. The loan rate increase is the first since 1985 for raw cane sugar and 1992 for refined beet sugar. The rate for beet sugar is statutorily set higher than for raw sugar because the former is available immediately after processing in white refined form, ready for industrial food and beverage use and for human consumption. By contrast, raw cane sugar must go through a second stage of processing at a cane refinery to be converted into white refined sugar. To reflect differences in marketing costs among production areas, USDA adjusts these national loan rates on a regional basis.", "Sugar loan rates alone do not serve as the guaranteed price floor for domestically produced sugar. In practice, USDA's aim is to support raw cane and refined beet sugar at higher price levels that take into account those costs that a processor incurs in taking out a price support loan and in marketing sugar to a first purchaser. During FY2009, the effective support level for raw cane sugar was 19.81¢/lb. in Louisiana and Texas, and about 20.6¢/lb. in Florida and Hawaii. These were based on each state's price support level, plus an amount to cover a processor's cost to transport raw cane sugar to a cane refinery, plus the interest paid on any price support loan taken out, plus location discounts. For refined beet sugar, effective support across six beet-producing regions ranged from about 23¢/lb. to about 26¢/lb. The support level was based upon the regional loan rate, plus specified marketing costs, plus interest paid on a price support loan, plus a cash discount. For FY2010, effective support levels are about the same.\nTo ensure that market prices do not fall below these \"effective\" price support levels, USDA limits the amount of sugar that can be marketed by administering marketing allotments and import quotas (i.e., limiting supply). A loan forfeiture (turning over sugar pledged as loan collateral to USDA) occurs if a processor concludes that the domestic market price when the loan comes due is below the \"effective\" sugar support level for his state or region. In other words, this is the price that would discourage a processor from \"forfeiting\" sugar placed under loan to USDA. It is this level—not the loan rate—that represents the minimum level of program benefits that sugar crop growers and processors expect to receive.\nMarket prices in the last half of FY2009 (the first year that the 2008 farm bill-authorized sugar program was in effect), and to date in FY2010, have remained significantly above loan forfeiture levels. Though the domestic raw cane sugar futures price skirted around the loan forfeiture range for much of the first half of the FY2009, prices began to rise in April 2009 once it became clear that USDA would not increase raw cane sugar imports ( Figure 1 ). By contrast, refined beet sugar prices were considerably above loan forfeiture levels during all of FY2009, and continue to be so in FY2010. Prices began to rise in August 2009 once USDA signaled that there would be no increase in the import quota for refined sugar before September 30 ( Figure 2 ). For more discussion on sugar prices, see \" Price Developments ,\" below.", "In the 2002 farm bill, the domestic production sector accepted mandatory limits on the amount of sugar that processors can sell—known as marketing allotments—in return for the assurance of price protection. The sector viewed allotments as a way to try to capture any growth in U.S. sugar demand, and assumed that the then-U.S. sugar import quota commitments would continue without change through the end of the 2002 farm bill (September 30, 2008). However, concerned that their market share would decline as sugar imports increase under various free trade agreements (in particular from Mexico beginning in 2008), sugar producers and processors secured a significant change in the 2008 farm bill on how the national marketing allotment is to be determined. USDA is now required each year to set an \"overall allotment quantity\" (OAQ)—the amount of sugar that all processors combined can sell—that is not less than 85% of estimated U.S. sugar consumption for food. This provision guarantees a minimum 85% market share for the domestic sector, and is intended to ensure that imports do not displace the ability of U.S. sugar processors to sell more of their output in each successive year, to the extent that there is growth in U.S. demand for sugar.\nThis change removed discretionary authority that USDA previously exercised, when it weighed four specified factors in determining the OAQ, or the amount of domestic sugar allowed to be marketed. Then, sugar processors and food manufacturers (i.e., users of sugar) weighed in to influence USDA's decision-making process on this issue. Each group differed in how USDA should define \"reasonable\" ending stocks—a key determinant of the level of domestic sugar prices in the last quarter of the marketing year (July to September) when price support loans come due. Sugar processors favored a smaller OAQ, seeking to benefit from sugar prices well above effective support levels. Food manufacturers advocated a larger OAQ, hoping that year-end prices would end up lower, and close to loan forfeiture levels. With USDA now only required to set the OAQ at not less than 85% of projected sugar food use, interest group focus has turned toward influencing USDA decisions on import quotas, where its discretionary authority is now considerably prescribed (see \" 2008 Farm Bill Sugar TRQ Provision ,\" below).\nThe 2008 farm bill continues to split the OAQ between the beet and cane sectors using 54.35% and 45.65% shares, respectively. Additional rules specify how each sector's allotment is to be allocated (i.e., distributed) to each sugar crop processing firm. Once USDA makes detailed calculations using specified criteria, each firm can sell only as much sugar as stated in its allocation notification received from USDA. Sugar produced and held in inventory in excess of a firm's allocation must be held off the market (referred to as \"blocked stocks\"). However, if a beet or cane processing firm is not able to fill its sugar allocation, USDA can reassign the sum of all such \"shortfalls\" to raw cane sugar imports.\nFor FY2009 , USDA set the final OAQ at 9.235 million short tons (ST), raw value —equal to 85% of U.S. food consumption of sugar as estimated in August 2009. Because this quantity was 11% higher than what all firms reported they had available to market (production from processing the 2008 crops, plus stocks held in inventory), USDA formally assigned a shortfall of 1.0 million ST to imports of raw cane sugar. A large portion of the sugar imported from Mexico can be viewed as having covered this shortfall. For FY2010 , USDA set the initial OAQ above the minimum—at 9.235 million ST, or 91% of its September 2009 estimate of food sugar consumption for the year. Because raw cane and beet sugar output then was projected to be 13% below the announced OAQ, USDA expected domestic processors again to sell all of their production. The Department also noted that since raw cane sugar output \"is expected to fall significantly short of its allotment,\" this shortfall will be reassigned to imports later in FY2010. On April 23, 2010, USDA formally acknowledged that additional supplies of raw cane sugar are required in the U.S. market, and reassigned to imports 200,000 ST of the unfilled cane sector allotment. Because of the uncertainties in forecasting each beet processor's FY2010 production (particularly the amount of sugar that could be processed in September if the sugar beet harvest starts early), USDA subsequently announced that no beet sugar allotment will be reassigned to imports at this time.", "The United States imports sugar to cover the balance of the demand that the U.S. production sector cannot supply. In FY2009, imports accounted for 26% of the sugar consumed domestically for food. In FY2010, imports are projected to cover about 21% of U.S. food use. USDA, however, restricts the quantity of foreign sugar allowed to enter for refining and/or direct sale to manufacturers for domestic food and beverage use. Tariff-rate quotas (TRQs) are used to restrict sugar imports to the extent needed to meet U.S. sugar program objectives. In other words, they serve to ensure that the amounts allowed to enter do not depress the domestic market price to below effective support levels, and that USDA as a result does not acquire sugar due to processors' loan forfeitures (i.e., that USDA is able to meet the \"no-cost\" requirement). Quota amounts are laid out in U.S. market access commitments made under World Trade Organization (WTO) rules and under bilateral free trade agreements (FTAs).\nThe U.S. market access commitment made under WTO rules means that a minimum of 1.256 million ST of foreign sugar must be allowed to enter the U.S. market each year. Although the WTO commitment sets this minimum level, the Secretary of Agriculture has authority to allow additional amounts of sugar to enter if \"domestic supplies of sugars may be inadequate to meet domestic demand at reasonable prices.\" The U.S. Trade Representative (USTR) allocates the announced raw cane sugar TRQ among 40 eligible countries. The much smaller refined sugar TRQ is allocated first to Canada and Mexico, with the balance reserved for the rest of the world on a first-come, first-served basis ( Table 1 ).\nIn a significant policy change, the 2008 farm bill requires USDA to set the WTO sugar TRQ commitments at the minimum levels at the beginning of the quota (i.e., marketing) year, lays out the factors to be considered to increase quota imports if there is an emergency sugar shortage before April 1 of each year, details what import actions USDA can take before and after April 1, and prescribes the mix of raw versus refined sugar allowed to enter, depending upon which half of the year such entries occur (see \" 2008 Farm Bill Sugar TRQ Provision \").\nEffective January 1, 2008, the end of the North American Free Trade Agreement's (NAFTA) transition period to free trade, Mexico no longer faces any tariff or quantitative limit on the amount of sugar that can be exported to the U.S. market. With this opening, imports have fluctuated considerably from year to year (almost 700,000 ST in FY2008, 1.4 million ST in FY2009, and 540,000 ST projected in FY2010; see Table 1 ). The doubling of Mexican exports in FY2009 over FY2008 was largely in response to higher prices for refined sugar in the U.S. market than mills could receive in Mexico. See \" Free Trade under NAFTA \" for discussion of implications of this year's Mexican exports on FY2010 U. S. supply and prices.\nUnder other bilateral FTAs, the United States has committed to allow entry to additional sugar imports from partners that already receive allocations under the U.S. WTO raw cane sugar TRQ. The most significant is the preferential access granted under the Dominican Republic-Central American FTA (DR-CAFTA) to Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. In 2010, five of these countries are eligible to ship up to an additional 121,000 ST of sugar to the U.S. market ( Table 1 ). Their preferential quotas combined will increase on average almost 3% per year, and total almost 169,000 ST in 2020 (year 15 of the agreement). Thereafter, quotas in the aggregate will increase by 1.7% (2,910 ST) annually in perpetuity. Though other FTAs grant other country partners formal access for their sugar to the U.S. market, actual exports will be minimal because these partners are not expected to show that they have a surplus in their sugar trade with the rest of the world.\nUnder all trade agreements, the amount of sugar that enters under the \"in-quota\" portion of the TRQ is subject to a zero or small duty. \"Above quota\" imports (no longer applicable to Mexico under NAFTA) are subject to a prohibitive tariff (in FY2008, the equivalent of 86% on raw cane sugar and 76% on refined sugar), which effectively keeps out additional foreign sugar.", "The policy debate will continue to revolve around how USDA should implement available authorities to either maintain sugar import quotas at already announced levels or raise them to increase available supplies. Because either alternative would affect market prices, the following reviews U.S. sugar use, supply, and prices in light of historical experience.", "The United States is the fifth-largest user of sugar for food in the world, consuming an estimated 10.5 million ST in FY2009. While total sugar use declined during the first half of the last decade, in recent years deliveries to food/beverage manufacturers and consumers have trended upward ( Figure 3 ). The increase in sugar demanded reflects population growth, food and beverage manufacturers' substitution of sugar for high-fructose corn syrup (HFCS) in response to changing consumer perceptions of HFCS, and consumers' shift towards diet drinks and bottled waters away from corn-sweetened soft drinks. As a result, the decline in HFCS use has been offset largely by an increase in total sugar use.\nIn calendar 2008, sugar alone accounted for about 41% of total U.S. sweetener consumption, up from 38% in 1999. This share includes the amount of sugar estimated to be present in net imports of sugar-containing products. HFCS and other corn sweeteners' share of domestic sweetener use stood at 40.5%, down from 46% a decade earlier.\nAnalysts differ over the FY2010 outlook for U.S. sugar food use. This key factor has implications for the policy decisions that USDA might make this year. If the available domestic supply appears to be tracking close to meeting USDA-projected domestic food demand for sugar, outside pressure on USDA to increase imports may recede. However, if sugar use trends higher than now projected, USDA would face continued calls to allow for additional imports.\nFor FY2010 compared to FY2009, USDA initially projected that food use of sugar would fall by almost 340,000 ST (-3.25%), to 10.14 million ST. This outlook assumed there would be a reversal this year of what happened in the last two years (when direct consumption imports—primarily refined sugar—increased to substitute primarily for HFCS use, and as a result, boosted total sugar use). During FY2008 and FY2009, imports had increased in response to USDA's August 2008 decision to temporarily allow additional shipments under the refined sugar TRQ, and as Mexican sugar mills significantly increased refined sugar shipments to the U.S. market, in large part to take advantage of higher U.S. prices. However, for FY2010 USDA projected that refined sugar imports from Mexico for direct consumption would be lower than in FY2009, and that entries under the raw and refined sugar TRQs will be capped by the announced access levels laid out in U.S. WTO commitments (top of Table 1 ). As a result, USDA expected HFCS deliveries to increase to recapture the market share lost to sugar in the previous two years.\nUSDA in fall 2009 acknowledged some uncertainty, however, about the extent to which HFCS use might increase during FY2010 at the expense of sugar. Consumer preferences may not \"change sufficiently to accept HFCS in products that had [already] made the switch to sugar.\" USDA also noted that HFCS use will depend much on how far corn refiners go to \"aggressively market their product to recapture [the market share] lost to sugar.\" Reflecting this uncertainty, USDA admitted that its FY2010 sugar use projection may be at the low end of a range.\nOther analyses project that FY2010 food use will be higher than last year. One estimates that sugar deliveries for food will instead increase by almost 100,000 ST (+0.8%) over FY2009 use, to slightly more than 10.5 million ST. This view takes into account the pace of sugar deliveries for food consumption to date (October 2009 through March 2010), which USDA reports are 2.4% higher compared to the same six-month period in FY2009. Another analysis posits that USDA data estimates could support a range of food-use estimates well above USDA's initial projection for FY2010. Use could range from 10.5 to 11.0 million ST, according to this analysis.\nMore recently, citing the \"recent strong pace to date\" of sugar deliveries for food, USDA raised its FY2010 estimate to 10.3 million ST and projected FY2011 use at the same level.", "USDA projected in early summer 2009 that U.S. sugar stocks relative to domestic food consumption would be much lower than usual at the end of both the FY2009 and FY2010 marketing years. This prompted calls by industrial sugar users for USDA to quickly allow for additional imports to head off sugar \"shortages.\" Since there is a close correlation between ending stocks and the price of refined sugar in the last few months of a marketing year, their call for additional imports reflected more of a concern that domestic prices would quickly spiral much higher unless USDA took quick action.\nDuring the marketing year, U.S. sugar stocks reach their lowest level in September. At that time, the sugar beet harvest begins in the Red River Valley straddling Minnesota and North Dakota, and in Michigan—the two main beet sugar producing regions in the country—followed by other beet-producing states. As factories process the harvested-and-then-stored sugar beets from late fall through early spring, the supply of refined sugar increases. Similarly, from November through late winter, sugarcane is cut and processed in Florida and Louisiana (where 90% of U.S. raw cane sugar is produced), further adding to available sugar supply ( Figure 4 ).\nUSDA estimates FY2009 ending stocks at 1.5 million ST, above the 1.33 million ST recorded at the close of FY2005 in the aftermath of Hurricane Katrina, which shut down two cane sugar refineries in New Orleans. For FY2010, ending stocks are estimated at 1.23 million ST, or 73% of the average ending stock level recorded in the six-year period (FY2003 to FY2008) covered by the 2002 farm bill. In looking ahead to FY2011, USDA projects sugar stocks at the end of next year at 844,000 ST ( Figure 4 ).\nHowever, Figure 4 presents only part of the story, in that nominal ending stocks do not capture the impact of the growth in domestic food/beverage demand for sugar on the supply available at the end of recent marketing years, and in turn, its impact on market prices. The \"stocks-to-use ratio\" takes both supply and demand into account, measuring the relationship between sugar stocks at the end of the marketing year to the total amount of sugar consumed during that year. Market participants view this ratio as a reasonably credible indicator of what the future price of sugar might be. In general, a higher ending stocks-to-use ratio suggests lower sugar prices in the future; conversely, a lower ratio implies higher prices later on.\nIn implementing the sugar marketing allotment provisions of the 2002 farm bill, USDA stated that its estimate of reasonable ending stocks will be set \"at a level expected to preclude sugar loan collateral forfeitures\" (i.e., to ensure that sugar market prices were above effective price support levels so that the statutory directive to operate the sugar program at no cost to the U.S. Treasury was met). While USDA did not use an explicit stocks-to-use ratio to meet this objective, observers frequently noted that it was around 15%. During the six years covered by the 2002 farm bill, ending stock-to-use ratios ranged from a low of 12.6% in FY2005 to a high of 18.7% in FY2004. This ratio averaged 16.1% on an annual basis during this period ( Figure 5 ).\nTo implement the 2008 farm bill provisions, USDA initially signaled that a sugar ending stocks-to-use ratio of about 14.5% is \"the level [it] normally considers necessary to provide for a balanced domestic sugar market\" and not likely to result in loan forfeitures. A change in USDA's thinking, however, is suggested in its long-term baseline outlook for the U.S. sugar sector. Its projections assume that policymakers, taking into account the 2008 farm bill's sugar and energy provisions and increased reliance on sugar imports from Mexico to cover U.S. food demand, can meet these objectives by aiming for a 13.5% stocks-to-use ratio.\nFor FY2009, lower beet production, the temporary loss of one cane refinery due to an explosion, and USDA's decision not to increase the import quota resulted in an ending stocks-to-use ratio of 13.9%. For FY2010, USDA's May 2010 supply and demand projections point toward an ending stocks-to-use ratio of 11.6% ( Figure 5 ), the lowest since 1974/1975.\nSome sugar users have expressed concern that sugar may be scarce in the July-September 2010 period. Also, some beet sugar processors have withdrawn from the market. They report that sales to users against individual accounts \"were running ahead on their withdrawals and were expected to reach the end of their commitments\" before new crop sugar becomes available in early fall.", "USDA estimates of tight domestic sugar supplies for year-end FY2009, and a similarly tight supply outlook for FY2010, contributed to a run-up in the prices of both raw cane sugar and refined sugar from mid-2009 through early 2010. Prices began to rise in early August 2009 when a top USDA official signaled that USDA would not \"for now\" increase the sugar import TRQ before September 30, the end of the marketing year. Two subsequent developments pushed prices higher—the official's confirmation on August 23 that there will be no quota increase in FY2009, and USDA's announcement on September 25 that only the minimum quantities of sugar as spelled out in the U.S. TRQ commitment under the WTO will be allowed entry in FY2010.", "In reaction to these decisions, from July 2009 to February 2010, the U.S. raw cane sugar futures price rose from a monthly average of 23.0¢/lb. to 40.0¢/lb., a 74% increase. The raw sugar futures price has since fallen back to average 31.0¢/lb. in April 2010. To place it in perspective, the 10-year (FY2000-FY2009) average futures price for raw cane sugar was 21.0¢/lb. ( Figure 6 ).", "Although U.S. sugar policy is structured to completely isolate the impact of lower world sugar prices on domestic sugar prices (by limiting imports), this can change whenever the world raw cane sugar price climbs above the U.S. effective raw sugar support level. This happened during the second half of 2009 and early 2010, when drought caused by weak monsoon rains in India and slow harvesting caused by heavy rains in Brazil—both major players in world sugar trade—reduced available global sugar supplies and propelled world sugar prices to a level not seen for almost three decades. As countries scrambled to secure limited sugar stocks, the world raw cane sugar price (futures #11, traded in New York) soared to the highest level since January 1981, climbing above 30.0¢/lb. on February 1, 2010. Since the United States must compete with other countries to cover its sugar import needs, U.S. cane refiners also faced paying a premium to secure the foreign sugar that enters under quota. This price premium manifested itself in the continued rise through late fall 2009 and early winter 2010 in the U.S. raw cane sugar futures price (#16) as the world futures price rose ( Figure 7 ). In other words, U.S. cane refiners had to pay a higher price to entice foreign exporters to ship sugar to the U.S. market against their quota allocations rather than to other country markets. A cane refiner—to cover the cost of processing raw sugar into the refined product plus secure a profit—then adds a margin to the price paid for raw cane sugar in setting a wholesale refined sugar price. As the U.S. raw cane sugar futures price (#16) tracked the rising world raw sugar price (#11) through early 2010, U.S. wholesale refined sugar prices followed suit ( Figure 8 ).\nSince late February 2010, reports that sugar production in Brazil and India are expected to improve have contributed to a quick drop in the world raw sugar price. Raw sugar futures prices in the first week of May 2010 were below 15¢/lb., less than half of the high price recorded three months earlier. This decline has been reflected in a corresponding drop in the U.S. raw sugar futures price, and to a lesser extent, in a fall in the U.S. wholesale refined sugar price quoted by processors ( Figure 8 ). With the world sugar price since early April 2010 falling below the U.S. effective raw sugar support level (about 20¢/lb.), this development will no longer be a factor in influencing U.S. raw sugar futures price levels. One result is that the domestic refined sugar price will increasingly reflect market participants' outlook for U.S. supply and demand (see \" Price Setting and Outlook ,\" below).", "During the same July 2009 to February 2010 period, the U.S. wholesale refined beet sugar price for spot sales rose from a monthly average of 35.4¢/lb. to 53.0¢/lb., a 50% increase. The quoted price of refined sugar has since retreated, and averaged 49.0¢/lb. in April ( Figure 9 ). The last time spot refined sugar prices significantly increased was in September 2005, after Hurricane Katrina put two cane refineries in New Orleans out of commission for a few months. Then, refined sugar prices rose 48% from an average 27¢/lb. (August 2005) to 40¢/lb. in September, where they remained for two months until beginning to decline in December 2005. In comparison, the 10-year (FY2000-FY2009) average wholesale price for refined beet sugar was 27.3¢/lb. ( Figure 9 ).", "About one-quarter of the sugar used as food in the United States is purchased at the retail price by households in consumer-sized packages at supermarkets and grocery stores. Most of the remaining sugar is consumed as an ingredient in sugar-containing products sold by food and beverage manufacturing firms. These firms pay the wholesale price for sugar, which represents one cost component along with the price paid for each other ingredient used to produce a food product. Since the sugar content varies from product to product, an increase in the wholesale refined sugar price, if passed on by manufacturers, may mean that consumers pay more for some products at the retail level. However, price declines over the past year in several other agricultural commodities purchased by food manufacturers and used with sugar in baked goods, for example, may have offset increased sugar costs, and resulted in little change in the retail price of some sugar-containing products.\nIn recent years, the retail price of refined sugar has lagged behind changes in the wholesale price, and since early 2008, has increased at a slower rate than the rise in the wholesale price. During FY2009, the retail price averaged 56.0¢/lb., compared to the 10-year average (FY2000-FY2009) of 46.5¢/lb. Since late 2009, however, the rise in the wholesale price paid by supermarkets among other retailers has partially been passed on to households and reflected in the retail price that consumers paid for sugar. In March 2010, the per-pound price averaged 63.6¢, the highest in nominal terms since December 1974 ( Figure 10 ).", "Since there is no futures market for refined sugar in the United States, common practice is for sugar processors and industrial sugar users to negotiate contracts that detail the sales price for specific quantities of refined sugar to be delivered at specified future points in time. Because these contracts frequently are negotiated far in advance (covering shipments up to more than a year into the future), sellers and buyers weigh what the following factors portend for future price levels. Before agreeing on price, both sides take into account projections of future U.S. sugar supply and demand, particularly ending stock levels; expectations about what USDA might decide with respect to sugar import quota levels; implications of future raw cane sugar prices as signaled by price quotes in the futures market; the nature of existing commercial relationships; and market intelligence on the quantity of refined sugar expected to enter from Mexico. During these negotiations, each sugar processor seeks to sell, at the highest possible price, much of the sugar it is permitted to under its marketing allotment to minimize what is held in inventory at the end of the year. Similarly, each user aims to line up guaranteed deliveries of sugar at the lowest price possible to cover its needs over time. Anecdotal reports suggest that a large portion of the sugar delivered each year is marketed on this basis.\nThe pricing agreed upon between sugar processors and industrial sugar users for near-term sales of refined beet sugar serves as a reasonable proxy for what refined sugar prices might be in the next few months. As of early May 2010, most beet and cane processors were offering sugar for shipment during the balance of FY2010 at 45¢/lb. to 49¢/lb. Sales for delivery in bags within 30 days and through September in bulk occurred at 41¢/lb. to 41½¢/lb. and 44¢/lb to 45¢/lb. Longer term, processors are offering sugar for 2011 at 38¢/lb. to 40¢/lb., for 2012 at 36¢/lb. to 38¢/lb., and for some of 2013 at 34¢/lb. to 36¢/lb. During April, sellers and buyers reportedly discussed and signed some multi-year contracts at these prices. Interest in covering sugar needs over a multi-year period reportedly reflects decisions by food manufacturers to switch from corn sweeteners to sugar for some of their food products and their desire to lock in future shipments at prices lower than the higher levels recorded in early 2010. Market participants will continue to monitor and base their decisions on which way U.S. raw cane futures prices (#16) trend—the primary indicator for what might be seen in future wholesale refined beet sugar price levels.", "Sugar users continue to press their case for USDA to increase sugar imports, arguing that action is needed to restore supplies to more normal levels. They also have proposed that USDA and USTR administer the sugar import quota in ways that maximize the amount of foreign sugar that actually enters the U.S. market each year. Sugar processors maintain that the domestic market is adequately supplied now that the harvesting and processing of the 2009 crops is completed. Although these contrasting views focus more on the availability of sugar in the current year, the underlying issue driving the debate is more about the level of the price of sugar. Sugar processors seek to maintain their advantage in negotiating sales prices with users. Food and beverage firms want prices for refined sugar that are lower and closer to the historical average. Members of Congress have weighed in with letters to USDA in support of each side's position.\nU.S. sweetener trade with Mexico—now free in both directions—continues to be watched carefully because of its impact on U.S. sugar supplies and prices. The uncertainty that USDA faces in projecting how much sugar from Mexico might enter the U.S. market has implications for how it manages U.S. sugar policy. To address this, sugar processors advocate increased coordination between the U.S. and Mexican governments on sugar policies.", "One new provision prescribes USDA's authority in administering the sugar TRQs established to meet U.S. WTO trade commitments. It requires USDA to set at the beginning of each marketing year (October 1) the quotas for raw cane sugar and refined sugar at the minimum WTO levels (i.e., 1,255,747 short tons (ST)). It also lays out the steps to be followed to increase imports in case there is a sugar shortage. The details differ, depending upon when in the year the Secretary of Agriculture exercises this authority.\nIn the event of an \"emergency shortage of sugar\" caused by a war, flood, hurricane, or other natural disaster, or other similar event as determined by the Secretary, during the first half of the marketing year (October 1 to March 31), USDA must take action to increase the supply of sugar. One action that can be taken is to increase the raw cane sugar TRQ to compensate for insufficient domestic cane and beet sugar output. If this step still leaves a sugar shortage, and the sale of domestic sugar \"has been maximized\" and U.S. raw cane sugar refining capacity also \"has been maximized,\" the Secretary may increase the refined sugar TRQ.\nIn the second half of the marketing year (April 1 to September 30), if a sugar shortage still exists and the marketing of domestic sugar has been maximized, the Secretary can only increase the raw cane sugar TRQ. USDA is required to ensure that any increase in imports under this authority \"will not threaten to result in\" a fall in domestic sugar prices below loan forfeiture levels.\nIn issuing the sugar program regulations to implement the 2008 farm bill changes, USDA did not define this provision's key terms (e.g., \"other similar event as determined by the Secretary\") or give any details indicating the circumstances under which an increase in sugar imports under this policy change would be implemented.\nThis provision removed considerable discretionary authority that USDA previously exercised in making sugar TRQ decisions on import quantities and on the timing of entry by sugar type (raw cane versus refined). As now structured, USDA is directed to ensure that most imports enter in the form of raw cane sugar rather than refined sugar. The sugar industry sought this provision to reduce the considerable uncertainty associated with how much sugar actually enters from Mexico under NAFTA, and what portion enters as refined sugar. Since most cane refineries are now a key part of vertically integrated firms owned by raw sugar processors and/or sugarcane producers, the 2008 farm bill's TRQ directive ensures that cane refineries (which process raw sugar into refined sugar) in an emergency situation can receive enough raw sugar in order to more fully utilize their operating capacity. Further, limiting the entry of refined sugar only when there is an emergency sugar shortage enhances the competitive position of domestic beet sugar refiners (and by extension, cane refiners) in securing the best possible price from purchasers.", "When USDA in late September 2009 set the FY2010 raw and refined sugar import quotas at the minimum WTO-commitment levels, it acknowledged that the U.S. market \"will require additional supplies of sugar.\" It stated plans to \"closely monitor stocks, consumption, imports, and all sugar market and program variables on an ongoing basis.\" Of these factors, the uncertainty surrounding how much sugar might be exported to the U.S. market by Mexican mills is the most significant (see \" Sugar Imports from Mexico \").\nIn the seven months since USDA announced the FY2010 sugar TRQs, USDA has raised its supply projection for the year by almost 450,000 ST (or 4.0%). Lower beet sugar output due to harvesting problems in freezing conditions and lower sugar content is expected to be more than offset by increased raw cane sugar output in Louisiana and additional imports under the sugar TRQ increase announced on April 23, 2010. Taking into account USDA's revised estimate for FY2010 and FY2011 sugar food use, USDA projects low ending stocks compared to historical experience for this year and next ( Figure 5 ).\nA significant factor influencing negotiations between sugar processors and industrial sugar users on the sales price for product to be delivered over the next 6- to 18-month period was whether or not USDA would increase the sugar TRQ, and in turn the timing of that decision. If USDA did intend to increase the import quota, a delay in making a decision (because of the uncertainty raised) strengthened the hand of processors as they negotiated prices for sugar that users sought to secure in the short term and beyond. Expecting that USDA would not decide until April 2010, some sellers raised price offers or contracted sales at higher prices from users seeking sugar to cover immediate needs. To illustrate, spot prices for the near-term delivery of refined sugar stood at 48¢/lb. in mid-January 2010, compared to 35¢/lb. one year earlier. However, most buyers reportedly were reluctant to contract on a longer-term basis.\nIf USDA does announce another TRQ increase, the impact of the additional imports on increased supply and prices in subsequent months will depend on the size of the increase. The focus will be on how much the announced increase covers the difference between projected ending stocks and what supply would be needed to conclude FY2010 with a 13.5% to 14.5% stocks-to-use ratio—the range of an informal benchmark that USDA appears to be working with (see \" Significance of Sugar Ending Stocks \" for explanation). At present, applying these ratios would imply additional imports ranging from about 200,000 ST to 300,000 ST. This assumes there is no additional increase in imports from Mexico beyond what USDA already projects and that USDA's May 2010 increase in its domestic food use estimate remains unchanged. However, if higher estimates of sugar food use are considered, additional sugar supplies (i.e., imports) would be required to meet the range of USDA stocks-to-use ratios cited above. With additional imports, prices could fall some, but the extent of the drop would depend on the amount that actually enters against the announced quota and on how quickly raw sugar is imported and refined.", "Sugar users, beginning in March 2009, have made repeated requests for USDA to increase import quotas for raw and refined sugar in order to head off a shortage in the domestic sugar supply. Pointing out that USDA projections showed historically low ending-stock levels for FY2009 and an even lower level for FY2010, the Sweetener Users Association (SUA) urged that quick action be taken to head off the potential for market disruptions, particularly should a hurricane occur. It argued this was necessary because of the lead time required to purchase, ship, and refine raw sugar before refined sugar actually becomes available to users.\nIn late October 2009, the SUA called upon USDA to \"responsibly manage the sugar program by announcing a significant increase in raw and refined sugar import quotas in coming weeks.\" It argued that even with the 2008 farm bill TRQ provision, the Secretary of Agriculture \"still has ample and clear cut authority to increase TRQs at any time\" by how he defines \"emergency\" and by using a sugar tariff headnote that gives him authority to increase imports if he concludes the U.S. sugar supply \"may be inadequate to meet domestic demand at reasonable prices\" (see footnote 15). Noting that the highest refined sugar prices in over 25 years do not represent \"'reasonable prices' under any normal understanding of that term,\" the SUA stated that the headnote's \"condition for a TRQ increase would appear clearly to be met.\" Further, it contended that \"there would be ample scope within the farm bill language itself to consider\" the outlook of record-low FY2010 ending stocks as constituting an \"emergency shortage\" and sufficient to announce an import quota increase. Referring to the stocks-to-use ratio as the best guide to follow to determine how much to increase the quota, the SUA argues current market conditions warrant a 1.0 to 1.2 million ST increase in the raw and refined sugar TRQs (for imports from countries eligible to export against their shares of the WTO import quota commitment). Its report concludes that \"[f]ailure to act in a timely manner risks locking in high sugar costs for consumers and for food and beverage manufacturers for another year.\"\nFood manufacturers of sugar-containing products welcomed USDA's April 23, 2010, announcement of a 200,000 ST increase in this year's raw cane sugar import quota, and signaled that they will press USDA to again quickly raise the quota to avoid a sugar shortage later this year. In a letter to USDA's Undersecretary, SUA's chairman recommended that USDA \"immediately increase raw and refined sugar TRQs by up to 800,000 ST\" in light of \"continuing strong deliveries and the need to increase stocks, not only for\" the rest of FY2010 but also for next year (see \" Food Use \" and \" Significance of Sugar Ending Stocks \" for background). He argued, in contrast to USDA's current assessment of demand, that the current strong refined sugar prices reflect the marketplace's belief that \"sugar supplies are tight and demand is relatively strong.\"", "Just before the FY2010 marketing year began, producers and processors maintained that there is plenty of sugar for sale and that with harvests underway, the domestic market \"will remain adequately supplied for the foreseeable future.\" Representing sugar crop farmers and processors, the American Sugar Alliance (ASA) noted that \"USDA projects a sugar surplus again this crop year.\" It applauded the decision to set sugar import quotas at their minimum levels, stating that this follows the congressional intent of the TRQ provision included in the 2008 farm bill. ASA again noted that this authority serves the purpose of taking \"the guesswork out of TRQ decisions\" and ensures that USDA makes them \"with the best market information available.\" Since the supply and demand outlook is more certain by the middle of the marketing year, ASA continued to advocate that USDA wait until April 1, 2010, or even later, before making any decision on whether to allow increased imports. The sugar production sector acknowledges that adherence to this directive contributed to the strong prices that beet and cane refiners have received this year. One beet refining executive commented that if this \"recent price recovery can be sustained, producers might be able to improve [their] returns over past years, reinvest, continue to improve efficiency and stay in business.\"\nReacting to USDA's April 23 import quota announcement, the ASA stated that its decision \"shows that the Farm Bill is operating as intended and gives USDA the time and the tools it needs to ensure adequate supplies.\"", "", "Unrestricted imports of sugar from Mexico since January 1, 2008, have introduced considerable uncertainty into USDA's efforts to manage the sugar program to ensure that market prices stay above effective support levels (i.e., that sugar processors have no incentive to forfeit on their loans if prices are lower). Since then, Mexico's share of U.S. sugar imports has fluctuated widely—from 34% in FY2008 to 51% in FY2009 to an estimated 25% in FY2010 ( Figure 11 ). While sugar imports under U.S. trade commitments to the WTO and FTA trading partners have been stable and predictable over the last few years, estimates of entries from Mexico can change substantially during a year's time. For example, as market conditions changed during FY2009, USDA increased its estimate of imports from Mexico by 2½ times, from an initial 550,000 ST projection early in the year to 1.4 million ST at the end. Similarly, in FY2010 to date, USDA import projections have ranged from an initial 165,000 ST to a high of 760,000 ST to its current 540,000 ST estimate.\nRecord sugar imports from Mexico in FY2009 were prompted by two major factors. Faced with the need to generate cash to meet financial obligations to cane growers and suppliers, Mexican sugar mills resorted to selling sugar in the U.S. market, even at times when U.S. prices were lower than in Mexico. More important, from late spring 2008 through early summer 2009, Mexican mills took advantage of the higher U.S. refined sugar price to significantly increase sales of refined sugar to the U.S. market. As the price in both markets converged in late summer 2009, Mexican sales to the United States began to decline ( Figure 12 ).\nFor FY2010, USDA projects 540,000 ST in sugar imports from Mexico, about one-third of the previous year's level. This represents 28% of expected total U.S. sugar imports for food use ( Figure 11 ). While still a sizable amount, the expected lower import level is due to the significant drawdown in Mexican sugar stocks during FY2009 (when a large portion was exported to the U.S. market). Also, as Mexico's sugarcane harvest season draws to a close, reports indicate that this year's sugar output could be up to 10% below last year's, meaning Mexico will have less available to export to the U.S. market. Both developments are behind the February 9, 2010, announcement by Mexico's government to allow imports of almost 300,000 ST to rebuild low inventories and dampen prices. Even with this decision, USDA projects that Mexican stocks at the end of FY2010 will still be about half of recent historical experience.\nFour factors could alter the amount of Mexican sugar that flows north. They introduce elements of uncertainty into USDA's efforts to project sugar imports from Mexico. First, the gap between Mexican and U.S. refined sugar prices will continue to influence the volume of shipments. If U.S. prices are above Mexican levels, Mexican mills have an incentive to ship sugar to the United States. Conversely, if Mexican prices stay above the U.S. price level, Mexican sellers can be expected to meet the demand found in the then-more-profitable Mexican sugar market. Second, irrespective of the relationship between Mexican and U.S. sugar prices, some Mexican mills still may ship sugar north to maintain the commercial trading relationships they have already developed and to generate dollars needed to cover their financial obligations. Third, U.S. exports of high-fructose corn syrup (HFCS)—a competitive sweetener—to Mexico, priced lower than Mexican-produced sugar, could displace some of the Mexican-produced sugar now used by that country's soft-drink manufacturing sector. This substitution occurred in the United States in the early 1980s, when cheaper HFCS almost completely substituted for the more expensive sugar that the U.S. soft drink sector had historically used. With the significant rise in the Mexican sugar price during 2009 and its continued high level in 2010, demand for HFCS is expected to nearly double in Mexico. Much of this demand is being met by a substantial increase in HFCS imports from the United States, where sales of, and prices for, HFCS are reportedly noticeably weak. To the extent that HFCS displaces sugar in Mexico's soft drink sector, any resulting surplus of Mexican sugar would have an incentive to move north to the U.S. market, particularly if U.S. refined sugar prices are higher than those in Mexico. Fourth, the Mexican government may take steps to rebuild domestic sugar stocks (e.g., license exports to the U.S. market, or announce another import quota).", "U.S. policymakers and U.S. sugar industry officials claim that Mexico is \"substituting\" lower-priced imported sugar to cover its domestic sugar needs. They point out that during 2009, Mexican mills exported much more sugar than expected to the U.S. market—a development that contributed to a fall in Mexican sugar stocks to below normal levels. In turn, the Mexican government substantially increased imports in order to avert shortages and to reduce the prices paid by users and consumers. Some Members of Congress have called for this \"loophole\" in NAFTA to be addressed. This practice, they contend, makes it very difficult for USDA to manage sugar policy, which in turn affects projections of U.S. sugar supply and the outlook for U.S. prices.\nThese statements were made against the backdrop of the Mexican government's sudden recognition in early August 2009 that there would not be sufficient stocks of sugar on hand to cover the country's needs before sugar from the next sugarcane crop becomes available in December 2009. To rebuild very low stock levels, the government announced temporary sugar import quotas to allow for the entry of 550,000 metric tons (MT) by year-end 2009.\nThe \"loophole\" refers to a provision negotiated in the more recent FTAs (e.g., with Chile, Morocco, the DR-CAFTA countries, and Peru) but not included in the NAFTA text negotiated more than 15 years ago with Mexico. The newer provision limits the preferential (i.e., duty-free and quota) access each FTA partner has to the U.S. market only to its net sugar trade surplus. This surplus is each country's volume of exports to the world, minus the volume of its imports from the world, of sugar and specified sugar-containing products, with adjustments for its sweetener trade with the United States, in the most recent year. If exports are greater than imports, the FTA partner's access to the U.S. market is limited to this surplus or to the U.S. quota commitment set in the FTA for the year, whichever is lower.\nAcknowledging that formal efforts to address the \"loophole\" would reopen the controversial issue of renegotiating NAFTA, parts of the U.S. and Mexican sugar production sectors late in 2009 presented to their respective governments a detailed framework for coordinating both countries' sugar policies to address the \"substitution\" issue. The most significant recommendation would have both governments cooperate when they determine (1) that a sugar shortage exists in the combined U.S.-Mexican sugar markets, and (2) the amount of \"non-NAFTA\" imports required to eliminate that shortage. Another would have both countries modify their sugar re-export programs so that sugar-containing products manufactured with lower-cost world (i.e., \"non-NAFTA\") sugar in the United States and Mexico are exported only to outside the two-country region. Other recommendations call for both governments to consult at least every three months to review data on both countries' sugar markets; to establish a permanent joint sugar commission to coordinate national sugar policies, monitor implementation of the framework's objectives, and handle any disputes that may arise under the framework; to consult about the likely impact of future trade agreements on how their sugar programs work; and to work together to improve the collection and publication of reliable data on each country's sugar supply and use, including mandatory and enforceable reporting requirements for sugar producers.\nU.S. sugar producers state that these recommendations can be put into place without making any changes to NAFTA, do not require any legislation, and maintain \"an open NAFTA market\" by not restricting the flow of sugar between Mexico and the United States. They also note that this proposal was structured so as not to affect other U.S. commodities that view Mexico as a major market, including corn sweeteners. U.S. sugar users, however, argue that this proposal would change how NAFTA operates, since both governments \"would not be able to independently operate their sugar programs.\" Further, they characterize the recommendations as interfering with Mexico's right under NAFTA to meet its needs with unlimited imports and for its sugar mills to ship all of their available sugar to the U.S. market.\nIn late February 2010, a top USDA official announced that the Mexican government was drafting a response to this industry proposal. Once a draft is received, he said, USDA will review it and present it to the sugar industry for comment.", "The sugar TRQ that reflects the U.S. WTO commitment to allow most raw cane imports to enter duty-free is allocated to 40 countries. Each country's allocation, or share, is based on its level of historical shipments to the U.S. market from 1975 to 1981—a period when free access for foreign sugar existed (i.e., no import quota was in place). Since then, the sugar industry in some of these countries has either collapsed or contracted to the point that sugar is no longer produced, or is not produced in quantities sufficient to generate a surplus for export. The amount of foreign raw sugar that is eligible to enter each year, but that has not done so (referred to as the quota \"shortfall\"), has increased in recent years. To illustrate, the FY2009 shortfall of 220,000 ST represented 17.8% of the announced 1.231 million ST TRQ, up considerably from the FY2005 shortfall of 30,000 ST (or 2.5% of the TRQ announced that year).\nBecause of these shortfalls, the Sweetener Users Association (SUA) has proposed that the Obama Administration take steps to reduce their impact. The SUA argues that these measures can be put into place under existing statutory authority already available to the Secretary of Agriculture and/or the U.S. Trade Representative. A paper submitted with SUA's request proposes five options for how the sugar TRQ can be administered differently. First, certificates of quota eligibility (CQEs) would be tradable among country quota holders after July 1. This would allow a quota holder with unused quota to sell the right to fill it to another quota holder. Trading would be limited through September 30 in order to prevent price manipulation. Second, one year's quota shortfall would carry over to the next year, and be distributed among all quota holders in a way that each holder's share of the total quota is unchanged. Third, CQEs would be tradable at the end of the fiscal year (September 30), with sugar required to enter the U.S. market before January 1. Such sugar would not be considered part of the new year's quota. Fourth, quota holders would be allowed to permanently sell their share to other countries. This would apply to those countries that have \"completely or largely failed to fill their quotas during three of the past five fiscal years.\" Fifth, refined sugar would be allowed to enter under the raw sugar TRQ when the price difference between the two is \"unusually high.\" Stating that a difference of 5¢/lb. is normal, the SUA proposes that imports of refined sugar be allowed when \"prices exceeded this normal spread by a certain margin for a predetermined period of time.\"\nA group of developing country sugar exporters—the International Sugar Trade Coalition—opposes these proposals. This group argues that the best way to address shortfalls that result in a U.S. sugar shortage would be to raise the global raw sugar TRQ and not change the way the quotas are administered. Further, it notes that moving away from how quota shortfalls have historically been reallocated \"could invite a WTO challenge from quota holders who may be left out.\" This method of reallocating quota shortfalls, though used infrequently, was last exercised in March 2010, when USTR reallocated 90,000 short tons to 25 countries that USDA determined were able to ship more sugar to the U.S. market." ], "depth": [ 0, 1, 1, 1, 2, 3, 3, 2, 2, 1, 2, 2, 2, 3, 3, 3, 3, 3, 1, 2, 3, 3, 3, 2, 3, 3, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h2_full", "h3_full", "", "", "", "", "", "", "h0_title h2_title h1_title", "h0_full", "h2_full", "h0_full h1_title", "h0_full", "", "", "", "h1_full", "h3_full h2_full h0_title h1_full", "h0_title h2_full", "h0_full", "h2_full", "h2_full", "", "", "", "h3_full" ] }	{ "question": [ "What is the current state of sugar consumption in the United States?", "What has changed concerning the recent availability of sugar in the United States?", "How is the price of beet sugar expected to behave in the future?", "How did the raw sugar futures price and the refined beet sugar spot price in April 2010 compare to price points in the past?", "What have sugar manufacturers argued that the sugar market needs?", "How do sugar crop growers feel about the sugar market?", "Why do sugar manufacturers’ and sugar crop growers’ attitudes on the sugar market differ?", "What is the difference between sugar processors' attitude on sugar prices versus sugar users' attitude on sugar prices?", "What has been the cause of contention surrounding sugar imports?", "How is the USDA expected to handle import quotas?", "How does the Secretary of Agriculture handle import quotas?", "What is a recent change in sugar import standards?", "Why is there concern regarding the Mexican sugar market?", "What is the ripple effect of Mexico's uncertain sugar market?", "How do sugar processors feel the U.S. and Mexico should operate regarding sugar policies?", "How do sugar users feel the U.S. and Mexico should operate regarding sugar policies?" ], "summary": [ "The United States is the fifth-largest consumer of sugar in the world. Consumption in food has increased in recent years, reflecting population growth and a shift back to sugar from corn syrup, an alternative and cheaper sweetener.", "Adverse weather significantly reduced beet sugar output in FY2009 and contributed to tight sugar supplies as FY2010 began.", "USDA projects a continued tight outlook at the end of FY2010 and also for FY2011, with ending stocks relative to demand at the low end of the range compared to earlier this decade.", "Reflecting this, the raw sugar futures price and the refined beet sugar spot price in April 2010 were 43% higher than year-ago levels. These prices were considerably above their support levels and 10-year market averages.", "Since early 2009, food manufacturers that use sugar have called on USDA to allow for additional sugar imports to head off sugar \"shortages\" and to restore supplies to more normal levels.", "Sugar crop growers and their processors maintain that the domestic market is adequately supplied, with the processing of the 2009 crops now complete.", "Though these contrasting views spotlight the issue of sugar availability, the debate has more to do with the future level of the price of sugar.", "Sugar processors seek to maintain their advantage in negotiating higher sales prices with users. Sugar users want lower refined sugar prices that are closer to the historical average.", "The debate over additional sugar imports centers around a provision in the 2008 farm bill that prescribes USDA's authority in administering the import quotas established to meet U.S. commitments under the World Trade Organization.", "It requires USDA at the beginning of each fiscal year to set the quotas for raw sugar and refined sugar at the minimum levels laid out in this obligation.", "The Secretary of Agriculture, however, is directed to increase imports before April 1 of any year if there is an \"emergency shortage of sugar\" due to war or a natural disaster.", "On April 23, 2010, USDA announced an increase in the raw sugar import quota.", "Free trade in sweeteners with Mexico now introduces considerable uncertainty as to how much sugar Mexico might export in any year to the U.S. market.", "This, in turn, complicates USDA's effort to administer the sugar program.", "Sugar processors advocate increased coordination between the U.S. and Mexican governments on sugar policies.", "Sugar users oppose their \"managed-trade proposal,\" arguing that it would result in inadequate domestic supplies and hurt U.S. jobs." ], "parent_pair_index": [ -1, 0, 0, 2, -1, -1, -1, 2, -1, 0, 0, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 5, 5, 5, 5 ] }
CRS_R44402	{ "title": [ "", "Introduction", "Politics", "Human Rights", "Regional Security", "The Economy and Development", "U.S. Relations and Aid", "Legislative Restrictions on Security Assistance", "Issues for Congress and Outlook" ], "paragraphs": [ "", "Rwanda has achieved a rare degree of political stability, public safety, and economic growth in a sub-region plagued by armed conflicts and humanitarian crises. Government programs to improve health, agricultural output, private investment, and gender equality have received international plaudits and donor support. Rw anda's development and security gains are particularly remarkable in the wake of the 1994 genocide, in which extremist members of the ethnic Hutu majority orchestrated a three-month killing spree targeting the minority Tutsi community, along with members of the tiny indigenous Twa ethnic group and Hutus who opposed the massacres. The ruling Rwandan Patriotic Front (RPF) seized power in mid-1994, stopping the genocide. Since then, President Paul Kagame has been widely viewed as the architect of Rwanda's development \"miracle\" and of its autocratic political model. He has repeatedly won reelection by wide margins, most recently in 2017 (see \" Politics \").\nThe United States and Rwanda have cultivated close ties since the mid-1990s, underpinned by U.S. aid in support of Rwanda's ambitious socioeconomic development initiatives and participation in international peacekeeping. Over the past decade, U.S. officials and some Members of Congress have continued to promote U.S.-Rwanda partnership on shared objectives, while voicing concerns regarding Rwanda's authoritarian political system and its periodic support for rebel groups in neighboring countries. Congress has held multiple hearings examining these and related issues, and has enacted restrictions on aid to Rwanda if it is found to be supporting rebel groups (see \" U.S. Relations and Aid \" ).\nIn late 2017, then Acting Assistant Secretary of State for Africa Donald Yamamoto testified to Congress that U.S.-Rwandan relations were \"close but complex,\" acknowledging democracy shortfalls and human rights concerns. President Trump met with President Kagame at the World Economic Forum in Davos, Switzerland, in January 2018, and expressed appreciation for bilateral economic ties, Rwanda's contributions to peacekeeping operations, and Kagame's pursuit of African Union (AU) institutional reforms as then-chairman of the institution. In line with the Administration's broad proposals to decrease foreign aid worldwide, it has advocated cuts to funding for Rwanda, including health and development aid. In 2018, President Trump also suspended Rwanda's trade benefits under the African Growth and Opportunity Act (AGOA, reauthorized via P.L. 114-27 ) in response to Rwanda's allegedly protectionist policies, in the context of the Administration's skepticism toward nonreciprocal trade preference programs.\nInternational perspectives on Rwanda tend to be polarized. Kagame's supporters assert that he is a visionary and that Rwanda represents an extraordinary post-conflict success story. To some, Rwandan voters' support for Kagame is easily explained: \"he has kept them from killing each other ... [and] has also given them a sense of hope and pride.\" Others argue that restrictions on political and civil rights may ultimately undermine Rwanda's hard-won stability, and that limits on civil liberties may mask ethnic, political, and social tensions. Given evident constraints on free expression, some observers argue that \"we simply don't know ... what Rwandans want from their political leaders.\" Some critics separately have questioned the reliability of Rwanda's development statistics—a key justification for donor aid. Critics also posit that the ruling party's reportedly extensive involvement in the economy may be stifling independent private sector growth. Kagame has dismissed external criticism as inaccurate, irrelevant, neocolonialist, and/or morally vacuous given the international community's failure to halt the genocide.", "The RPF-led government has pursued rapid economic development and social transformation while effectively suppressing political dissent and public discussion of ethnic identity. President Kagame, leader of the RPF and a former military intelligence figure and rebel commander, is widely viewed as the country's preeminent decision-maker. He first ascended to the presidency in an internal party election in 2000, and has won reelection with over 90% of the popular vote in every subsequent contest (in 2003, 2010, and 2017). An RPF-led coalition holds the majority of seats in parliament; nearly all remaining seats are held by parties that refrain from directly criticizing the RPF or Kagame. The State Department has noted concerns with aspects of each election conducted under RPF rule, such as apparent procedural irregularities, a lack of transparency in vote tabulation, media restrictions, and legal challenges, threats, or criminal prosecutions targeting opposition candidates and parties.\nPublic criticism of the government is rare; human rights advocates assert that \"years of state intimidation and interference\" have weakened the capacity of local civil society or media outlets to act as a check on state power. Over the years, political opponents have been jailed, fled the country, or died under murky circumstances. Laws criminalizing genocide ideology and denial, along with state security charges, have been wielded against opposition figures, journalists, and other government critics. Some researchers have described pervasive official surveillance and involvement in citizens' daily lives, part of an apparent effort to ensure rapid implementation of development initiatives, mobilize support for the RPF, suppress criminal activity, and monitor potential opposition activity, ethnic tensions, or security threats.\nKagame has defended Rwanda's political system as rooted in popular support, asserting that \"imposing a style of democracy without understanding the context, culture or norm of a country is ignorant.\" Rwandan officials generally reject allegations of abusing human rights, while asserting that restrictions on civil liberties are necessary to prevent ethnic violence in a fragile post-conflict setting. Some Rwandans, including journalists and civil society actors, agree.\nKagame would have been subject to a constitutional two-term limit on the presidency in 2017, but a new constitution approved in 2015 via referendum—with a reported 98% of the vote—exempted the sitting president, allowing him to run for a third term. He won with 99% of the vote. After Kagame's current term expires, the presidential term is to be shortened to five years per the new constitution; Kagame could then run for two more consecutive terms, thus potentially remaining in office until 2034. He has denied any intention to do so, stating that he is preparing Rwanda for an unspecified future leadership transition.\nTolerance of opposition voices seems to have increased slightly since Kagame's reelection in 2017, although a significant shift in the contours of Rwandan politics appears unlikely. Two prominent opposition figures were released from jail in 2018. Diane Rwigara, a vocal Kagame critic (and daughter of a well-known businessman and Tutsi genocide survivor) who was jailed on charges of forgery and inciting insurrection shortly after seeking to run for president in 2017, was acquitted following international advocacy on her behalf, including from some Members of Congress. Victoire Ingabire, who had sought to run against Kagame in 2010 and was serving a prison sentence for alleged genocide denial and seeking to form an armed group, received a presidential pardon. So did several other members of Ingabire's FDU-Inkingi party (\"United Democratic Forces-Pillar\"), which remains illegal. Several other FDU-Inkingi supporters remain in prison; others have been killed in unclear circumstances.\nAlso in 2018, the Democratic Green party, a relatively independent opposition movement (and not affiliated with Rwigara or Ingabire), won two seats in parliament after competing for the first time in legislative elections. The Green party was not granted legal registration in time to run candidates in the 2013 legislative vote; its presidential candidate, Frank Habineza, won less than 1% in the 2017 presidential vote. The party's deputy leader was killed in unclear circumstances prior to the 2010 presidential election, soon after the party was founded in 2009.\nThe RPF's political leadership appears to have narrowed from a diverse set of actors in the 1990s to an apparently small circle around the president. Over the years, various top RPF officials and military officers have faced criminal charges, some on national security grounds, or have fled the country. In 2010, several prominent RFP defectors formed an exiled opposition movement, the Rwandan National Congress (RNC). Some members have been the target of armed attacks or apparent assassinations in foreign countries, including several in South Africa. President Kagame has denied state involvement, while assailing the individuals in question as traitors.", "The State Department's 2018 human rights report on Rwanda cites forced disappearances, alleged extrajudicial killings, arbitrary detention, and torture by state security forces (\"including asphyxiation, electric shocks, mock executions\"), noting \"impunity\" involving civilian officials and some members of the security forces. The report also documents political prisoners, threats and violence against journalists, censorship, and \"substantial interference\" with freedoms of assembly and association, along with \"restrictions on political participation.\" It further finds that \"the government continued to monitor homes, movements, telephone calls, email, other private communications, and personal and institutional data,\" often using extrajudicial means and/or embedded informants.\nHuman Rights Watch has reported patterns of arbitrary detention and torture of Rwandans accused or suspected of supporting the RNC, Ingabire's political movement, or the Democratic Forces for the Liberation of Rwanda (FDLR), a militia founded in DRC by perpetrators of the genocide. The organization also has accused Rwandan security forces of killing petty criminals extra-judicially, allegations that Rwanda's National Commission for Human Rights (NCHR) has rejected. Rwanda has expelled international researchers working for Human Rights Watch; in 2018, a local employee was temporarily detained incommunicado.\nIn 2018, the government shuttered thousands of churches and dozens of mosques, citing safety violations or other regulatory concerns, and proposed stricter registration requirements for religious groups. One expert asserted that these moves targeted non-denominational places of worship (i.e., not affiliated with Roman Catholicism or established Protestant denominations) because they \"are harder to control because they don't report to a central hierarchy.\"", "Rwanda is a top peacekeeping troop contributor in Africa; U.N. officials and donors value its military professionalism and commitment to civilian protection. As chair of the AU in 2018, President Kagame also sought to bolster the financial sustainability of African-led stability operations. At the same time, Rwanda has a history of unilateral military intervention in DRC, and reportedly has periodically provided support to rebel groups in DRC and Burundi. Its reasons for doing so may reflect a mix of national security concerns (e.g., a desire to counter DRC-based armed groups led by individuals implicated in the 1994 genocide), ethnic solidarity with the Tutsi minority in Burundi and persecuted communities of Rwandan descent in DRC, and economic motivations linked to resource smuggling in DRC.\nIn 2012-2013, Rwanda faced acute international criticism and cuts to donor aid—including from the United States and European countries—for providing support to a DRC-based insurgent group known as the M23. The M23 originated as a rebellion among members of a previous Rwandan-backed armed group, and was the latest in a series of Rwandan-backed rebellions originating among communities of Rwandan descent in eastern DRC since in the late 1990s. In 2015 and 2016, reports suggested Rwandan involvement in the recruitment and training of Burundian refugees for a rebellion against the government of Burundi, again prompting donor criticism.\nCredible reports of direct Rwandan involvement in regional conflicts have since diminished, although the country's relations with DRC remain volatile. Tensions with Burundi also have endured, with Rwanda accusing Burundian authorities of stoking ethnic tensions while Burundi has accused Rwanda of espionage and interference. Relations with sometimes-ally Uganda also have soured in recent years. Rwandan officials, including President Kagame, have openly accused Uganda of backing Rwandan armed dissidents (apparently referring to the RNC) as well as the FDLR, while Ugandan officials have accused Rwanda of espionage.\nOngoing insecurity and illicit resource extraction in eastern DRC remain flashpoints for regional tensions and spillover of conflicts. In late 2018, U.N. DRC sanctions monitors reported that the RNC was mobilizing armed combatants in DRC's South Kivu province, with apparent Burundian support. Some researchers posit that Rwanda-Uganda friction is rooted in competition over access to DRC minerals; U.N. DRC sanctions investigators reported in 2018 that \"gold sourced in high-risk and conflict areas [of DRC] was exported illegally to Uganda and Rwanda.\"", "Donor aid, political stability, low corruption, and pro-investor policies have enabled high economic growth rates (4-9% annually) over the past decade. Rwanda remains one of the world's poorest countries, although it ranks higher than many other sub-Saharan African countries on the 2018 U.N. Human Development Index (at 158 out of 189 countries assessed). About 75% of Rwandans are engaged in agriculture, many for subsistence; the country is nonetheless reliant on food imports, in part due to having the highest population density in continental Africa.\nThe government seeks to transform the economy into one that is services-oriented and middle-income, launching programs to expand internet access, improve education, and increase domestic energy production. Key growth sectors include tourism, coffee, tea, tin mining, construction, and an emerging financial services sector. The government also aims to turn Rwanda into a regional trade, logistics, and conference hub. It has invested in the construction of new business class hotels and a convention center in Kigali, a planned new airport, and an expansion of the national airline RwandAir—which is pursuing U.S. federal approval for direct flights between Kigali and the United States. Much investment has been concentrated in Kigali, which has received international plaudits for its clean and safe streets.\nRwanda was ranked 29 out of 190 on the World Bank's 2019 Doing Business report, the only low-income country and one of only two African countries (along with Mauritius) in the top 50. Rwanda's continual improvements in the annual rankings reflect its efforts to reduce bureaucratic red-tape, protect property rights, improve access to credit, expand the supply of reliable electricity, and ensure contract enforcement. The State Department has nonetheless documented various challenges for foreign investors, including \"payment delays with government contracts,\" inconsistent adherence to incentives offered by the Rwanda Development Board, infringements on property rights, and \"competition from state-owned and ruling party-aligned businesses.\"\nHuman development gains since the genocide have been dramatic in relative terms. According to the World Health Organization (WHO), from 1990 and 2016, life expectancy increased from 48 to 66 years; the child (under five) mortality rate fell from 152 to 42 deaths per 1,000 live births; and the maternal mortality rate decreased from 1,300 to 290 deaths per 100,000 live births. Through a donor-backed national community-based health insurance system, Rwanda provides near-universal health coverage for basic primary care, with the cost fully or partially subsidized based on income level. As of 2015, about 39% of Rwandans reportedly lived below the poverty line, compared to 56% in 2006 and 78% in 1994. Some researchers have questioned the reliability of Rwanda's poverty statistics, noting that they are based on household-level survey data and may be subject to interference; the World Bank has rejected some of this criticism, asserting that Rwanda's official statistical methodology \"is technically sound.\"", "In 1998, President Bill Clinton delivered a speech in Kigali in which he expressed remorse for not having intervened more forcefully to end mass killings in 1994, and pledged that the United States would do better in the future. Those remarks arguably set the tone for a relationship defined, in part, by a sense of guilt among U.S. policymakers about the genocide and admiration for the RPF's role in stopping it. U.S. support for the RPF-led government has continued across successive Administrations and across partisan lines, with the executive branch and Congress working together to provide substantial aid to support Rwanda's development efforts and peacekeeper deployments. Yet, over the past decade, executive branch officials and some Members of Congress increasingly have criticized Rwanda's involvement in regional conflicts and expressed concern with its domestic political and human rights conditions.\nAfter meeting with President Kagame in Davos in January 2018, President Trump praised the United States' \"great relationships\" with Rwanda, including bilateral trade, and stated that \"the job they've done is absolutely terrific.\" In September 2017 congressional testimony, then Acting Assistant Secretary of State for Africa Yamamoto praised Rwanda's \"remarkable gains\" in health and development and characterized the country as \"a major contributor to regional peace and security,\" while asserting that \"Rwanda's record in the areas of human rights and democracy, while improved in some areas, remains a concern.\" He called on the government \"to take steps toward a democratic transition of power.\"\nRegarding Rwanda's 2017 presidential election, the State Department stated that \"we are disturbed by irregularities observed during voting and reiterate long-standing concerns over the integrity of the vote-tabulation process.\" In response to Member questions at the September 2017 hearing, Ambassador Yamamoto affirmed that \"we are unable to assess this election as free and fair.\" At his Senate confirmation hearing in late 2017, the U.S. Ambassador-designate to Rwanda described his four top policy goals as the following: continuing the United States' \"development partnership\" with Rwanda, promoting U.S. business and economic ties, supporting Rwanda's continued peacekeeping role, and advancing \"democratic ideals.\"\nPresident Trump suspended duty-free treatment of Rwandan apparel exports to the United States under AGOA in 2018, as noted above, citing Rwandan protectionist policies. The suspension came after the Administration initiated an out-of-cycle review of Rwanda's eligibility in 2017. In addition to concerns about trade barriers, Ambassador Yamamoto testified in 2017 that U.S. officials had also \"raised concerns ... regarding harassment of political opposition leaders and [non-governmental organizations] as well as restrictions on media freedom with the context of AGOA eligibility.\" The impact may be largely symbolic: in 2017, U.S. imports from Rwanda totaled $44 million, of which $5 million were under AGOA. U.S. exports to Rwanda totaled $64 million that year.\nU.S. bilateral aid to Rwanda aims to promote economic growth, food security, health, and military professionalism. The State Department has drawn on additional regionally- and centrally-managed funds to provide military aid to build Rwanda's peacekeeping capabilities, including under the African Peacekeeping Rapid Response Partnership (APRRP) initiative, launched under President Obama in 2014. (The Trump Administration has not requested new appropriations in support of APRRP, but has continued to implement funds allocated in prior years.) APRRP was conceived to complement the State Department's Global Peace Operations Initiative (GPOI), in which Rwanda also participates. The United States also provides humanitarian assistance for international organizations caring for Congolese and Burundian refugees in Rwanda.", "Successive Congresses have enacted foreign aid appropriations measures restricting certain types of U.S. military aid to Rwanda if it is found to be supporting rebel movements in neighboring countries. Citing such provisions, as well as the Child Soldiers Prevention Act of 2008 (CSPA, Title IV of P.L. 110-457 ), the Obama Administration suspended certain types of military aid—namely, Foreign Military Financing (FMF) and International Military Education and Training (IMET)—citing Rwandan support for rebels in DRC and, later, Burundi. Military aid in support of Rwanda's peacekeeping capabilities was exempted from such restrictions via a combination of legislative provisions (e.g., §1208[f] of P.L. 113-4 , the Violence Against Women Reauthorization Act of 2013, which excepts peacekeeping aid from child soldiers-related restrictions) and executive branch waivers. The executive-legislative branch interplay under the Obama and Trump Administrations (to date) is detailed below.\nFY2012-FY2013: The Obama Administration invoked a provision of the FY2012 appropriations act ( P.L. 112-74 , §7043(a) of Division I), extended into FY2013 via continuing resolutions, to suspend FMF for Rwanda, citing its support for the M23 rebellion in DRC. The provision stated that FMF could be made available for Rwanda or Uganda \"unless\" the Secretary of State had \"credible information\" that either government was supporting armed groups in DRC.\nFY2014: The Obama Administration continued to suspend FMF, consistent with a provision in that year's appropriations act ( P.L. 113-76 , §7042(l) of Division K) restricting such funds unless Rwanda was \"taking steps to cease\" support to certain armed groups in DRC. It also designated Rwanda under CSPA in connection with the M23's reported use of child soldiers, and applied that act's prohibition on various other forms of military aid, including IMET.\nFY2015: The appropriations act prohibited FMF for Rwanda unless the Secretary of State certified to Congress that the government was \"implementing a policy to cease\" support to armed groups in DRC ( P.L. 113-235 , §7042[l] of Division J). The Obama Administration had not requested FMF for Rwanda in its budget proposal, and none was provided. The State Department again designated Rwanda under CSPA, but President Obama waived the act's aid prohibitions, citing the end of the M23 insurgency—thus allowing IMET, for example, to resume.\nFY2016: The State Department did not designate Rwanda under CSPA, and that year's appropriations act ( P.L. 114-113 ) did not restrict security assistance for Rwanda. The Obama Administration did not request or provide FMF funds for Rwanda, in any case. IMET continued.\nFY2017: The Obama Administration (in mid-2016) designated Rwanda under CSPA in connection with its reported support for Burundian rebel groups' recruitment of child soldiers. President Obama waived CSPA restrictions on IMET and several other types of security aid, however, and no FMF funding was requested for Rwanda or provided. The appropriations act restricted certain types of IMET programs for any country in Africa's Great Lakes region unless the Secretary of State certified that it was \"not facilitating or otherwise participating in destabilizing activities in a neighboring country\" ( P.L. 115-31 , §7042(a) of Division J). The State Department provided some IMET funds for Rwanda, but once the act passed into law, did not support activities that would have been prohibited in such a scenario.\nFY2018 -FY2019 to date : Appropriations measures have continued to restrict certain types of IMET programs for any country in the Great Lakes region until the Secretary of State determines and reports that it is \"not facilitating or otherwise participating in destabilizing activities in a neighboring country, including aiding and abetting armed groups\" (most recently, P.L. 116-6 §7042(a) of Division F). The Trump Administration has not designated Rwanda under CSPA. It also has not requested or provided FMF for Rwanda.", "Congress has shaped U.S. policy and assistance to Rwanda through its authorization and appropriation of U.S. assistance, and through oversight and Member engagement. In 2012-2013, and again in 2015-2016, the application of legislative restrictions on U.S. security assistance—along with other donor criticism and aid suspensions—appeared to contribute to a decrease in Rwandan support for the M23 in DRC and may conceivably have dissuaded Rwanda from intervening more heavily in Burundi. Members may seek to derive lessons from this sequence of events as they consider pending appropriations bills and/or any future legislative proposals regarding U.S. aid to Rwanda. With regard to Rwanda's domestic conditions, questions remain around how the United States can best support the country's continued stability and growth, including whether continued U.S. support for Rwanda's development efforts can or should be premised on evidence of greater respect for political pluralism or individual liberties." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 2, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full", "h1_full", "", "h2_full", "", "h3_full h2_title", "h2_full", "h2_full" ] }	{ "question": [ "What is the current state of Rwanda?", "What led to the current state of Rwanda?", "What has Rwanda done recently that has improved its standing?", "What are the key concerns for Rwanda's future political stability?", "What has been President Paul Kagame's most recent political success?", "Why has President Paul Kagame been politically successful?", "How has President Paul Kagame defended his political actions?", "What is the overall political relationship between the United States and Rwanda?", "What is the current political relationship between Congress and the Rwandan government?", "What direct actions has Congress taken towards Rwanda?", "What has been the effect of Congress' actions towards Rwanda?", "What is President Trump's stance on Rwanda?", "How has the Trump Administration altered federal aid to Rwanda?", "How do the changes by the Trump Administration affect U.S. peacekeeping-related military assistance?", "How has the Trump Administration sanctioned Rwanda?" ], "summary": [ "Rwanda, a small landlocked country in central Africa's Great Lakes region, has seen rapid development and security gains since about 800,000 people—mostly members of the ethnic Tutsi minority—were killed in the 1994 genocide.", "The ruling Rwandan Patriotic Front (RPF) ended the genocide by seizing power in mid-1994 and has been the dominant force in Rwandan politics ever since.", "The Rwandan government has won donor plaudits for its efforts to improve health, boost agricultural output, encourage foreign investment, and promote women's empowerment.", "Yet, analysts debate whether Rwanda's authoritarian political system—and periodic support for rebel groups in neighboring countries—could jeopardize the country's stability in the long-run, or undermine the case for donor support.", "President Paul Kagame, in office since 2000, won reelection to another seven-year term in 2017 with nearly 99% of the vote, after the adoption of a new constitution that effectively exempted him from term limits through 2034.", "Kagame's overwhelming margin of victory may reflect popular support for his efforts to stabilize and transform Rwandan society, as well as a political system that involves constraints on opposition activity and close government scrutiny of citizen behavior.", "In response to external criticism, Kagame has generally denied specific allegations of abusing human rights while asserting that restrictions on civil and political rights are necessary to prevent the return of ethnic violence.", "The United States and Rwanda have cultivated close ties since the mid-1990s, underpinned by U.S. development aid and support for Rwanda's robust participation in international peacekeeping.", "Congress has helped shape U.S. engagement through its appropriation of foreign aid and other legislative initiatives, along with oversight and direct Member outreach to Rwandan officials. Over the past decade, successive Administrations and Congress have continued to support U.S. partnership with Rwanda on development and peacekeeping, while criticizing the government's human rights record and periodic role in regional conflicts.", "Congress has notably enacted provisions in aid appropriations legislation restricting U.S. military aid to Rwanda if it is found to be supporting rebel groups in neighboring countries. The Obama Administration temporarily applied such restrictions, along with others pursuant to separate child soldiers legislation, citing Rwandan support for rebels in the Democratic Republic of Congo (DRC) and Burundi.", "There have been fewer reports of Rwandan support for rebel groups in recent years.", "After meeting with President Kagame in early 2018, President Trump expressed appreciation for U.S.-Rwandan economic ties, Rwanda's contributions to peacekeeping, and Kagame's pursuit of African Union institutional reforms.", "In line with the Administration's proposals to decrease foreign aid worldwide, its FY2020 budget request would provide $117 million in bilateral aid to Rwanda, a 28% decrease from FY2018 levels.", "U.S. peacekeeping-related military assistance for Rwanda has drawn on regionally- and centrally-managed funds, and is not reflected in these totals.", "The Administration has also suspended Rwanda's eligibility for trade benefits under the African Growth and Opportunity Act (AGOA, reauthorized under P.L. 114-27), in response to alleged market barriers to U.S. exports of used clothing." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, -1, -1, -1, 1, 2, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
CRS_RS22517	{ "title": [ "", "The EU Accession Process1", "Turkey's Path to European Union Accession", "Current Status of Turkey's Accession", "New Agenda—Relabeled Approach", "Movement Toward New Negotiations", "Assessment", "U.S. Perspective" ], "paragraphs": [ "", "The European Union (EU) views enlargement as an historic opportunity to promote stability and prosperity throughout Europe. The criteria for EU membership require candidates to adopt political values and norms shared by the Union by achieving \"stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; a functioning market economy, as well as the capacity to cope with competitive pressure and market forces within the Union.\"\nUnder Article 49 of the Treaty on the European Union, any European country may apply for membership if it meets a set of criteria established by the Treaty. In addition, the EU must be able to absorb new members, so the EU can decide when it is ready to accept a new member.\nApplying for EU membership is the start of a long and rigorous process. The EU operates comprehensive approval procedures that ensure new members are admitted only when they have met all requirements, and only with the active consent of the EU institutions and the governments of the EU member states and of the applicant country. Basically, a country that wishes to join the EU submits an application for membership to the European Council, which then asks the EU Commission to assess the applicant's ability to meet the conditions of membership.\nAccession talks begin with a screening process to determine to what extent an applicant meets the EU's approximately 80,000 pages of rules and regulations known as the acquis communautaire. The acquis is divided into 35 chapters that range from free movement of goods to agriculture to competition. Detailed negotiations at the ministerial level take place to establish the terms under which applicants will meet and implement the rules in each chapter. The European Commission proposes common negotiating positions for the EU on each chapter, which must be approved unanimously by the Council of Ministers. In all areas of the acquis, the candidate country must bring its institutions, management capacity, and administrative and judicial systems up to EU standards, both at national and regional levels. During negotiations, applicants may request transition periods for complying with certain EU rules. All candidates receive financial assistance from the EU, mainly to aid in the accession process. Chapters of the acquis can only be opened and closed with the approval of all member states, and chapters provisionally closed may be reopened. Periodically, the Commission issues \"progress\" reports to the Council (usually in October or November of each year) as well as to the European Parliament assessing the progress achieved by a candidate country. Once the Commission concludes negotiations on all 35 chapters with an applicant, a procedure that can take years, the agreements reached are incorporated into a draft accession treaty, which is submitted to the Council for approval and to the European Parliament for assent. After approval by the Council and Parliament, the accession treaty must be ratified by each EU member state and the candidate country. This process of ratification of the final accession treaty can take up to two years or longer.\nThe largest expansion of the EU was accomplished in 2004 when the EU accepted 10 new member states. In January 2007, Romania and Bulgaria became EU members. Croatia formally joined the Union on July 1, 2013 bringing the Union to its current 28 member states. The EU has continued to support the enlargement process. Currently, there are five candidate countries; Montenegro, which was given candidate status in December 2010 and formally opened accession negotiations with the EU on June 19, 2012; Serbia which was granted candidate status in March 2012 and could begin actual negotiations by January 2014; Macedonia, which has a Stabilization and Association Agreement with the EU, but whose negotiations have been blocked by Greece and Bulgaria, and Turkey. Iceland, which began the accession process in July 2010 and opened and closed several chapters of the acquis has come under a new government which has reportedly told the EU Commission that it was no longer interested in pursuing membership in the Union.\nPrior to October 2009, in order for enlargement to continue, two barriers that existed had to be overcome. First, and although not explicitly stated, certain conditions established by the 2000 Treaty of Nice seemed to limit the EU to 27 members. In order for any other new country to be admitted to the Union, the Nice Treaty had to be amended or a new treaty ratified to allow further expansion of the Union. The Lisbon Treaty , which was agreed to in 2007 and took effect on December 1, 2009, permitted, among other things, future enlargement of the Union to continue. A second barrier to the current accession structure involves any candidate country whose accession could have substantial financial consequences on the Union as a whole. Under this provision, admission of such a candidate could only be concluded after 2014, the scheduled date for the beginning of the EU's next 7 year budget framework. Currently, only Turkey's candidacy would fall under this restriction although it is unlikely that Turkey would be admitted inot the Union within this 7-year timeframe.", "Turkey and the European Commission first concluded an Association Agreement (Ankara Agreement) aimed at developing closer economic ties in 1963. A key provision of that agreement was the commitment by Turkey to establish a customs union that would be applied to each EU member state. In 1987, Turkey's first application for full EU membership was deferred until 1993 on the grounds that the European Commission was not considering new members at the time. Although not technically a rejection of Turkey, the decision did add Turkey to a list, along with the United Kingdom, of nations to have been initially turned down for membership in the Union. In 1995, a Customs Union agreement between the EU and Turkey entered into force, setting a path for deeper integration of Turkey's economy with that of Europe's. In 1997, the Luxembourg EU summit confirmed Turkey's eligibility for accession to the EU but failed to put Turkey on a clear track to membership. The EU recognized Turkey formally as a candidate at the 1999 Helsinki Council summit but asserted that Turkey still needed to comply sufficiently with the EU's political and economic criteria before accession talks could begin.\nIn February 2001, the EU formally adopted an \"Accession Partnership\" with Turkey, which set out the priorities Turkey needed to address in order to adopt and implement EU standards and legislation. Although Ankara had hoped the EU would set a firm date for initiating negotiations at the December 2002 EU Copenhagen Summit, no agreement was reached. Two years later, 10 new member states, including a divided Cyprus, were admitted into the Union. In December 2004, and despite the fact that Turkey had still not met its obligations regarding the application of its customs union to the EU member states, the European Council stated unanimously that Turkey had made enough progress in legislative process, economic stability, and judicial reform to proceed with accession talks within a year. In the aftermath of the Council's decision, the European Parliament voted overwhelmingly to support the Council's decision to move forward with Turkey.\nAlthough projected by many to require at least 10 or more years to complete the accession, the question of Turkey's membership in the Union became a debating point during consideration of the Treaty for a European Constitution in the spring of 2005. Many observers suggested that one of the factors contributing to the defeat of the Treaty in France and the Netherlands was voter concern over continued EU enlargement and specifically over the potential admission of Turkey, which was considered by many as too large and too culturally different to be admitted into the Union.\nUnder a compromise formula agreed to by the Council, Turkey, before October 2005, would have to sign a protocol that would adapt the 1963 Ankara Agreement, including the customs union, to the 10 new member states of the Union, including the Republic of Cyprus. Turkey signed the Protocol in July 2005 but made the point that, by signing the Protocol, it was not granting diplomatic recognition to the Republic of Cyprus. Turkey insisted that recognition would only come when both the Greek and Turkish Cypriot communities on the island were reunited. Ankara further stated that Turkey would not open its seaports or airspace to Greek Cypriot vessels until the EU ended the \"isolation\" of the Turkish Cypriots by providing promised financial aid that at the time was being blocked by Cyprus and opened direct trade between the EU and the north. The decision by Turkey to make such a declaration regarding Cyprus immediately served to sour attitudes of many within the EU. In September 2005, the EU Council issued a rebuttal reminding Turkey that Cyprus was a full member of the EU, that recognition of all member states was a necessary component of the accession process, and that the EU and its member states \"expect full, non-discriminatory implementation of the Additional Protocol to all EU member states ... and that failure to implement its obligations in full will affect the overall progress in the negotiations.\"\nThe controversy over Turkey's accession continued until October 3, 2005, when, after a prolonged debate over the status of Cyprus and expressions of concern by some European member states over admitting Turkey at all, the EU Council agreed to a \"Negotiating Framework,\" and opened formal accession talks with Turkey. However, the language of the Framework included an understanding that the negotiations would be open-ended, meaning an outcome (eventual full membership) could not be guaranteed. This language was to become a significant rallying point for some European governments such as Germany, France, and Austria, which proposed that Turkey be given a \"privileged partnership\" or some type of closer relationship with Turkey but one which fell short of full membership in the Union.\nFor Turkey, 2006 became a difficult year in its relations with the EU even as formal negotiations between Brussels and Ankara began. The membership of Cyprus in the Union, despite the Greek Cypriot rejection of a U.N.-sponsored unification plan, and Turkey's public stance not to deal with the Greek Cypriot government, served to aggravate relations further and, in the opinion of some observers, may have contributed to the beginning of a change in attitude within Turkey and the EU toward each other. At the outset, Cyprus expressed its opposition to formally opening and closing the first of 35 negotiation chapters unless Ankara met its obligations to recognize all 10 new EU member states, including Cyprus. On June 16, 2006, the EU Presidency issued a statement that referred implicitly to Turkey's continued refusal to open its ports to Greek Cyprus as required by Turkey's customs union with the EU. The EU again asserted that Turkey's failure to \"implement its obligations fully will have an impact on the negotiating process.\"\nThe then-EU Enlargement Commissioner Olli Rehn warned Ankara that the resolution of the Cyprus issue was a central stumbling block in the accession talks and that a \"train crash\" was coming later in the year if Turkey did not resume implementing reforms and honoring its commitments in the Accession Agreement and the additional Protocol.\nIn Ankara, advocates for closer relations with the EU began to believe that European interest in Turkey was changing and that what should have been EU incentives to promote and encourage necessary reforms in Turkey had become conditions that many Turks felt were designed to discourage Turkey. As a consequence, many observers believe that the reform process in Turkey began to slow as a reassessment of the relationship with the EU began to take hold.\nIn September 2006, the European Parliament joined in the criticism of Turkey when the Committee on Foreign Affairs issued a progress report on Turkey's accession. The Parliament's findings suggested that reforms in Turkey had slowed, especially in the implementation of freedom of expression, protection of religious and minority rights, reform in law enforcement, and support for the independence of the judiciary, and urged Turkey to move forward. The Parliament also stated that \"recognition of all member states, including Cyprus, is a necessary component of the accession process and urged Turkey to fulfill the provisions of the Association Agreement and Additional Protocol.\" On September 14, 2006, then-Cyprus Foreign Minister George Lillikas suggested that without Turkey's compliance with its obligations, Cyprus would likely object to opening any further chapters of the acquis .\nOn November 29, 2006, the EU Commission issued its assessment of Turkey's accession negotiations. Although acknowledging that negotiations should move forward, the Commission noted that Turkey had not met its obligations toward Cyprus and recommended that the Council not take actions regarding the opening of any new chapters in the acquis . At the EU Summit in December 2006, a compromise was reached that averted the worst possible outcome but clearly enunciated a strong opinion against Turkey. Based on the recommendations of the EU Commission, the Council noted that Turkey had not fully implemented the additional Protocol to the Ankara Agreement and, more importantly, decided not to open negotiations on eight chapters of the acquis , or to provisionally close any chapters until the Commission had confirmed that Turkey had fully implemented its commitments under the Additional Protocol. The Council further required the Commission to report on Turkey's progress \"in its forthcoming annual reports, in particular 2007, 2008, and 2009.\" While the compromise decision prevented any dramatic action against Turkey, it did portend a slowing of the accession negotiations and, in the eyes of some Turkey skeptics, presented a deadline of sorts for Turkey to implement the Additional Protocol by December 2009, the final year of the Barosso Commission's term.\nBetween 2007 and 2011, the accession process muddled along with a mixed sense of direction and very little accomplishment. Turkey felt its EU aspirations had been dealt a serious blow with the EU decision to withhold negotiations on certain key chapters of the acquis until the Cyprus issue was resolved. In addition, the issue of Turkey's membership entered France's 2007 presidential election campaign, during which conservative candidate and then-Interior Minister Nicholas Sarkozy, in a campaign speech, stated that he felt Turkey should never become a member of the Union.\nDuring 2007, the EU agreed to open three additional chapters of the acquis and identify the benchmarks necessary to open 14 additional chapters should Turkey meet the requirements for doing so. By the end of the year, the EU Commission and Council in their annual accession progress reports noted some progress in the political reform process had been made but also pointed out areas where additional progress was needed. These areas included freedom of expression, the fight against corruption, cultural rights, and civilian oversight of the security forces. Both institutions also expressed regret that overall political reform had achieved limited progress and once again warned Turkey that it had not made any acceptable progress in establishing relations with Cyprus.\nProgress throughout 2008 continued to be negligible. However, despite ongoing internal political issues which polarized the political atmosphere in Turkey and the global economic crisis which began to consume the government's attention, six additional chapters of the acquis were formally opened by the EU. However, key chapters relating to energy, external relations, and security and defense matters had been held up by several EU member states, including France, although in the case of energy, France did propose to open this chapter during its 2008 Presidency of the EU Council.\nIn early 2009, Turkey in a sign of a renewed commitment to the accession process, announced the appointment of its first full-time EU accession negotiator, State Minister Egemen Bağış, a decision noted as a positive step by the EU Council. However, in March 2009 Turkey's accession process hit a political bump in the European Parliament. In a resolution on Turkey adopted by the Parliament, the members of Parliament noted with concern the \"continuous slowdown of the reform process\" and called on Turkey \"to prove its political will to continue the reform process.\" The resolution also stressed the need to reach a solution to the Cyprus question and called for Turkey to remove its military forces from the island. Despite the concerns expressed by the Parliament, in June 2009 the 11 th chapter of the acquis was opened, suggesting that Turkey was making some progress meeting the reform criteria.\nAs in all of their previous reports on the accession progress, the Commission, Council, and Parliament found positive issues that they could point to and noted in one year or another that they welcomed Turkey's continued commitment to the negotiation process, as well as advancements Turkey had made in judicial reform, civil-military relations, and cultural rights, relations with both the Kurds and Armenia, and its positive role in the Nabucco pipeline that the EU has sought to provide an alternative source for delivering natural gas to Europe.\nNevertheless, each assessment noted Turkey's shortcomings in the areas of freedom of expression and freedom of the press, respect for property rights, and in other areas. All three institutions continued to \"note with deep regret that Turkey, despite repeated calls, continues refusing to fulfill its obligations regarding the Additional Protocol and normalization of its relations with the Republic of Cyprus.\" The reports also noted that while Turkey has expressed public support for negotiations regarding a Cyprus solution, the EU expected Turkey to actively support the ongoing negotiations and was not satisfied that Turkey was fully engaged.\nWith little progress to point to, many Turkey skeptics in Europe had begun to suggest that the accession process for Turkey may have to be significantly altered. For instance, in an interview with Spanish news media in 2009, then-French Secretary of State for European Matters Pierre Lellouche reiterated his government's position that if Turkey failed to satisfy the requirements for membership or if the European Union's capacity for absorption did not permit it, alternatives should be considered. Although not specifically stating that the EU needed to prepare such alternatives by the end of 2009, Lellouche did state that \"we wonder whether it is not the time to begin reflecting on alternative paths [for Turkey] without interrupting the negotiations.\" This statement reflected France's (and perhaps others') continued opposition to full membership in the Union for Turkey and support for a then-to-be defined \"special relationship\" or \"privileged partnership,\" which Turkey stated it would reject. Similarly, on September 11, 2009, Cypriot Foreign Minister Markos Kyprianou stated that while Cyprus was \"a genuine supporter of Turkey's EU course,\" Cyprus was \"one of the strictest supporters who are not prepared to compromise the principles and values that the EU is founded upon just for the sake of a speedier accession of our neighbor.\"\nIn May 2010, the EU-Turkey Association Council, led by EU Enlargement Commissioner Stefan Füle and Turkey's chief negotiator for EU Affairs, Egemen Bağış met to discuss EU-Turkey relations. The EU welcomed the effort underway at the time to amend Turkey's constitution to strengthen democracy and rule of law but noted that more reform was needed in areas such as the fight against corruption, freedom of expression and of religion, and continued judicial reform.\nOn October 26, 2010, EU Commissioner Füle told an EU-Turkey Joint Parliamentary Committee meeting in Brussels that the outcome of Turkey's September constitutional reform referendum was a step towards EU accession. Füle said the EU's 2010 progress report on Turkey would mention positive steps taken by Turkey such as lifting restrictions on broadcasting in languages other than Turkish, furthering judicial reform, and improving fundamental rights, but it would also voice concern about Turkey's difficulties in guaranteeing freedom of expression, press, and religion.\nThe 2010 progress reports issued by the European Commission and Council once again provided less-than-ringing endorsements of Turkey's progress reading much like previous assessments. Nevertheless, Egeman Bağış, Turkey's chief EU negotiator called the reports the \"most positive and encouraging\" Turkey had ever received.\nThis attitude changed when the European Parliament adopted a resolution assessing Turkey's accession progress for 2010. The Parliament sharply criticized the government of Turkey for a lack of dialogue among the various political parties and noted the continued failure to implement the Additional Protocols. When the Parliament reserved its strongest criticism for the lack of press freedom in Turkey, a representative of the main Turkish opposition CHP party declared that \"the latest report is the toughest-worded document drafted since ... formal negotiations began in 2005.\" The tone of the resolution and debate in Parliament also provoked the anger of Turkish Prime Minister Erdogan, who stated that \"there was no balance in this report\" and suggested that the resolution was written by people who did not know Turkey.\nThe two rather bland assessments of Turkey's accession progress by the Commission and Council and the tough assessment made by the Parliament led some to conclude that \"Turkey's accession talks with the EU were heading for stalemate\" and that \"EU leaders have undermined support for accession in Turkey\"\nSome observers believed that the various Commission and Council assessments between 2006 and 2010 could have been the subject of very difficult internal debate due to a lack of consensus among the member states on how to respond to Turkey's shortcomings in the reform process and its continued failure to meet its customs union obligations toward Cyprus. However, in most instances while the debates have highlighted disappointment and frustration on the part of the EU, it does not appear that the debates in either institution had been difficult after all, and both the Commission and Council, perhaps for the sake of the ongoing negotiations on Cyprus, have been able to issue what they believed to be balanced reports giving credit to the Turks for some positive developments and offering criticisms where there were noted shortcomings.\nThroughout 2011 the accession negotiations with Turkey continued at a snail's pace, with talks for all practical purposes reaching a virtual political and technical stalemate. No new chapters of the acquis were opened in 2011 and very little progress had been achieved within the chapters already under negotiation. This lack of progress led Turkish Foreign Minister Davutoglu to state that the talks were at a bottleneck due to \"political blockages\" and Prime Minister Erdogan in May to complain that France and Germany [among others] \"are determined to have Turkey give up its interest in joining the EU.\"\nTurkey, for its part, was distracted in part due to a national election that was held in June 2011, with a deterioration in its relations with Israel and Syria, and with the on-going dilemma of Cyprus. In the elections, the AK Party of President Gul and Prime Minister Erdogan again emerged victorious solidifying the party's acceptance by the people and reaffirming support for the direction they were taking the country. The elections also gave Erdogan another five-year mandate to continue implementing the reform programs he had championed. Although the AKP had not won the super majority it had hoped for in the Parliament in order to guarantee the adoption of a new constitution, the AKP victory was thought to have paved the way for a new constitution and reform agenda by the end of 2012, goals not yet achieved.\nDuring the election campaign, as in the previous fall's referendum on constitutional reform, the EU and the accession process appeared to have been of little consequence, leading to further speculation that the Turkish leadership and general population were growing more ambivalent toward the EU as the catalyst for further domestic political reform and that membership in the Union may no longer be a necessary goal.\nDespite this growing view, in June, Prime Minister Erdogan announced the establishment of the European Union Ministry to take over coordination of Turkey's EU accession process. Egeman Bagis, Turkey's chief EU accession negotiator, was named the head the new ministry, signaling to the EU that Ankara still had an interest in EU membership even if it appeared that national enthusiasm was on the wane.\nDuring the summer of 2011, the Cyprus issue emerged again as a significant stumbling block for progress on Turkey's accession process. Greek Cypriots have long claimed that Turkey's influence over exactly what the Turkish Cypriots will accept as part of any final solution to the Cyprus problem has been the principal reason for the lack of any agreement. In July, fresh from receiving his new five-year mandate as a result of the June national elections in Turkey, Prime Minister Erdogan visited northern Cyprus on the occasion of the anniversary of Turkey's intervention in Cyprus in 1974. In a speech to Turkish Cypriots, Ergodan seemed to have hardened his views on a Cyprus settlement when he suggested that a negotiated solution had to be achieved by the end of 2011 or the island would remain split. In his speeches in the north, Erdogan also suggested that security and territorial concessions demanded of the Turkish Cypriots were not acceptable and that if, in his words, \"southern Cyprus\" were to assume the presidency of the EU Council on July 1, 2012, then Ankara would freeze its relations with the EU because it could not work with a presidency that it does not recognize. Erdogan's statements drew harsh criticism from all sectors of the Greek Cypriot political community. Reaction from some quarters of the EU was equally strong with European Parliament member and member of the Parliament's EU-Turkey Joint Parliamentary Committee Andrew Duff suggesting that Erdogan's comments were an appalling twist to Turkey's policy toward Cyprus.\nAn additional issue regarding Turkey and Cyprus arose in August when the Republic of Cyprus announced that in September it would begin drilling for natural gas in the Eastern Mediterranean in an area off the coast of southern Cyprus. Ankara blasted the decision as illegal, indicated that such a move could negatively affect the Cyprus negotiations, and suggested that it would increase its naval presence in the region. This again raised concerns within the EU, which called into question the implementation of Turkey's foreign policy initiative of \"no problems with its neighbors.\"\nNear the end of 2011, the European Commission and Council issued their annual assessment of Turkey's accession progress. Both stated that \"with its dynamic economy, important regional role and its contributions to EU's foreign policy and energy security, Turkey is a key country for the security and prosperity of the European Union ... that was already well integrated into the EU in terms of trade and foreign investment through the Customs Union.\" Continuing on a positive note, both acknowledged that the changes proposed in the constitutional referendum and the conduct of the June elections were positive signs and that Turkey had made progress on a number of fronts including civilian control of the military, financial services, competition policy, religious property and cultural rights, and in the judiciary. They also noted that the creation of the Ministry for EU Affairs was an \"encouraging signal.\" On the other hand, both reports repeated concerns over a number of issues where both felt not enough progress had been made including in the areas of freedom of expression, freedom of the media, women's rights, and freedom of religion. Both the Commission and Council expressed regret at statements by Prime Minister Erdogan that Turkey would freeze relations with the EU Presidency during the second half of 2012 when Cyprus would assume the Presidency. The Council also expressed its concerns over Turkey's threats directed at what the Council called Cyprus' right to explore and exploit their own natural resources, a reference to Cyprus' discovery of natural gas in the Cypriot Exclusive Economic Zone.\nNot surprisingly, the reaction from Ankara was swift and negative. Prime Minister Erdogan blasted the EU for \"slinging mud\" and claimed that \"the progress reports had once again shown the serious eclipse of reason at the EU.\" Perhaps showing both his frustration and contempt for the EU, Erdogan was reported to have suggested the EU itself was \"crumbling.\" Turkish Minister for EU Affairs Egemen Bağış claimed that the Commission's report zoomed in on the problem areas but ignored the real progress Turkey has made and that linking Turkey's membership to the Cyprus issue was a mistake. On the other side, Turkey's main opposition party, the CHP, reportedly praised the Commission's report and stated that the \"report shows democracy is not moving forward as the government claims.\"\nEarlier in November 2011, EU Minister Bağış had suggested that Turkey would not lose anything if no additional chapters of the acquis were to be opened during the Cypriot Presidency. It was reported that certain Turkish officials had indicated that due to the uncertainty of Turkey's EU membership, the government was reluctant to move forward with meeting required benchmarks in order to open the three remaining chapters of the accession acquis involving competition, social policy, and procurement. As a result, none were opened.\nDespite the less than positive assessments, one interesting issue arose when the Commission, in its assessment report, proposed to initiate a new relationship, or \"positive agenda\" with Turkey outside of the accession negotiations if Turkey followed through on its threats to avoid the Cypriot presidency of the EU beginning in July 2012.\nThe final piece of business regarding the 2011 assessment of Turkey's accession progress rested with the European Parliament. The Parliament's assessment reflected the earlier views of the Commission and Council. However, having in early 2011 considered an amendment calling on EU institutions to study the possibility of establishing a 'privileged partnership' with Turkey as an alternative to full EU membership, the Parliament expressed its support for the Commission's intension to develop a fresh agenda for EU-Turkey relations, stating that a positive agenda would build on the solid fundamentals of EU and Turkey relations and move the reform process forward. The resolution adopted by the Parliament noted, however, any new initiative should not replace the accession negotiations, but complement them in order to support reforms.", "", "As 2012 began, Turkey's accession negotiations with the EU had basically reached a political and technical stalemate with little anticipation of any additional chapters of the EU's rules and regulations known as the acquis communautaire being opened in the near term. In March 2012, Egemen Bağış, at the London School of Economics once again stated that Turkey would ignore the Republic of Cyprus' EU Presidency and apparently stated that \"Turkey has 52 years of relationship with the EU, thus, six months is not a long time for Turkey\" , referring to the length of the rotating presidency. These statements were not taken lightly both in the EU and in the Republic of Cyprus which was about to enter its own presidential election period in 2013 immediately following the Cyprus EU presidency meaning little, if any, progress was likely in Turkey's accession negotiations until possibly after a new government in the Republic was in place.\nThe EU Commission realized that the accession process itself would achieve little in 2012, especially if Ankara did carry out its threat to ignore at least the rotating EU presidency once Cyprus assumed that role on July 1. Not wanting to place relations with Turkey in a deep freeze until after the national elections in the Republic in early 2013, the Commission began to put into place the new initiative with Turkey that the Commission had proposed in its 2011 accession progress report.\nOn May 17, 2012, EU Commissioner for Enlargement and European Neighborhood Policy Štefan Füle and Turkish Minister for European Affairs Egemen Bağış announced the launch of the EU's new \"positive agenda\" with Turkey. Both stated that the \"positive agenda\" was intended to bring fresh dynamics into EU-Turkey relations. Commissioner Füle indicated that areas covered by the \"positive agenda\" would include legislative alignment, enhanced energy cooperation, visas, mobility and migration, Customs Union, foreign policy, political reforms, the fight against terrorism and increased participation in people-to-people programs, all issues included in the frozen chapters of the acquis . In launching the \"positive agenda\" both Commissioner Füle and Minister Bağış had gone to great lengths to insist that the new initiative was not intended to replace, but complement, the formal accession negotiations and to strengthen the reform process in Turkey.\nOn the other hand, to some the concept was described as essentially an \"institutional trick intended to circumvent the Cyprus EU Presidency,\" and that the technical discussions surrounding the \"agenda\" looked very much like an informal accession negotiation on issues included in those chapters of the acquis not yet opened. Still others saw the comprehensive nature of the \"agenda\" as perhaps a repackaging of the old 'privileged partnership' concept suggested by the French and others as early as 2009. The new \"agenda\" for some could eventually allow the EU and Turkey to achieve as close a relationship as desirable, for some a \"virtual membership,\" while potentially allowing them to walk away from the ultimate goal of Union membership having developed stronger political, economic, and social relations with Turkey in the meantime.\nTo become an actual EU member, Turkey would still have to comply with the much more detailed acquis no matter how extensive or successful the new \"agenda\" would have become. However, by changing its name, but not necessarily its goal, Turkey, which had previously rejected the \"privileged partnership\", seemed to have embraced the new \"agenda\" with the EU. On July 1, 2012, Turkish Prime Minister Erdogan, over the objections of EU officials, made good on his threat to freeze certain relations with the EU, including formal accession negotiations, which are normally overseen by the presidency, when Cyprus assumed the 6-month rotating presidency of the Council of the European Union. Erdogan's decision to actually ignore the EU presidency appeared to have been made with the understanding that since the \"positive agenda\" had been launched despite his threat, he had nothing to lose by suspending the accession talks for at least the next six months.\nOne consequence of the launch of the \"positive agenda,\" however, was its impact on the Cyprus settlement negotiations. It could be suggested that the Turkish Cypriots concluded that since the EU's action appeared to signal that Turkey's long-term relations with the EU may no longer be dependent on Turkey's contribution to any measurable progress on the Cyprus issue, despite what the annual EU Commission and Council progress reports say about the need for Turkey to play a constructive role in Cyprus, there was little incentive to continue the negotiations thus fulfilling Ankara's and the Turkish Cypriot's warning that July 1, 2012, was indeed the deadline to conclude an agreement over Cyprus or the talks could end. With no agreement in the works by July 1, Turkish Cypriot leader Eroglu could hardly object when the United Nation's Good Offices in Cyprus essentially declared their role in promoting the talks suspended.\nThe Cyprus presidency was launched on July 1, 2012 and formal accession negotiations between the EU and Turkey came to a halt. However, working groups established under the \"positive agenda\" began a series of informal negotiations which could not be affected by the Turkish refusal to deal with the Republic of Cyprus. Engagement between the EU and Turkey did continue throughout the last six months of 2012 especially with respect to visa liberalization where Turkey is the only EU candidate country which does not have a visa agreement with the EU. Both sides have stressed the importance of facilitating access to the European Union to Turkish business people, academics, students and representatives of civil society and both sides made the goal to harmonize and simplify visa requirements a priority.\nBeyond visa liberalization, it is unclear exactly what progress had been achieved under the \"positive agenda\" or how whatever advancements were made could be incorporated into the formal accession process in the future, whenever other chapters of the acquis are opened. It was also unclear at the time whether the \"positive agenda\" would end once the Cypriot EU presidency ended. Now that the EU and Turkey have resumed formal accession negotiations, including the opening of one new Chapter of the acquis in October 2013 it remains unclear whether the \"positive agenda\" framework will continue for those issues that fall under the chapters that will remain blocked by the Republic of Cyprus, France, and others.\nAs 2012 ended and with little movement on the accession front, the EU Commission in October issued its annual progress report on Turkey. In its report, the Commission, while offering a few positive conclusions, expressed its overall disappointment with Turkey's progress on a number of issues leading Ankara to express its disappointment with the \"biased\" and \"unbalanced\" Report. Turkey's continued refusal to extend diplomatic recognition to EU member Cyprus, or to open Turkey's sea and air ports to Cypriot shipping and commerce until a political settlement has been achieved on Cyprus as well as Turkey's position on the Cyprus EU presidency were again cited as problematic. On December 11, 2012, the European Council released its conclusions on enlargement. While the Council struck a more positive note regarding Turkey's importance to the EU, noted the implementation of the \"positive agenda,\" and listed several issues where the Council felt Turkey had made progress, it nevertheless repeated the shortfalls outlined in the Commission's earlier assessment, including what the Council felt was insufficient progress on freedom of the media, expression, and assembly and an overall lack of judicial reform. Interestingly, it was reported that the Turkish Foreign Ministry frustrated by what EU Minister Bağış has described as the \"skewed mentality in Europe,\" published its own first-ever progress report. The report was described as refuting many of the criticisms of Turkey's reform process found in the EU Commission's October progress report.", "In early February 2013, French Foreign Minister Laurent Fabius announced that the new government in Paris was favorably disposed to resuming the accession talks with Turkey and was prepared to lift its hold on opening at least one new chapter of the acquis —Chapter 22, Regional Policy. Even Germany and Cyprus seemed to have softened their views on resuming the negotiations although Cyprus felt Turkey needed to display a new attitude toward making significant contributions to the Cyprus unification talks once they resumed.\nTechnical discussions subsequently opened on Chapter 22 and it was agreed among the EU leadership that a new round of accession negotiations would begin in mid-June 2013.\nThe European Parliament, in a resolution adopted on April 18, 2013 , issued its annual progress report on Turkey which mirrored the views of both the Council and Commission on issues such as judicial reform, freedom of expression, the media, and assembly. The Parliament also reminded Turkey that ignoring the Republic of Cyprus' EU presidency and its attitude regarding Cyprus' exploration of its own natural resources was not consistent with the EU's demand that Turkey pursue \"good neighborly\" relations within its region.\nLike the Council and Commission, however, the Parliament seemed to send mixed messages regarding the Commission's \"positive agenda\" initiative. In Article 48 of its adopted resolution, the Parliament stated that \"the EU is based on the principles of sincere cooperation and mutual solidarity amongst all its members and has respect for the institutional framework ... \" [of the presidency of the Union]. At the same time, in Article 1of the resolution the EP commended the Commission and Turkey for implementing the \"positive agenda\" apparently forgetting the need for solidarity amongst member states (especially toward Cyprus) and respect for the institutional framework.\nIn early June 2013, as the resumption of the accession negotiations with Turkey approached, domestic turmoil rocked Turkey. Public protests over the future of Gezi park in central Ankara and the government's reaction precipitated a harsh response from Brussels over the use of force and the freedom of assembly and speech. A resolution was adopted on June 13 by the European Parliament expressing its \"deep concern at the disproportionate and excessive use of force by the Turkish police.\" Turkish officials responded with tough rhetoric toward the EU, including from Prime Minister Erdogan who said he \"did not recognize decisions made by the European Parliament.\"\nAfter two weeks of rather nasty verbal sparring, and Ankara's continued crackdown on the protestors, several EU member states, including Germany, threatened to press for the postponement of the upcoming accession talks, again provoking an angry response from Ankara, including comments by Turkey's EU Minister Bağış that some European countries should \"get lost\" if they decided not to open Chapter 22 or delay the start of the accession negotiations. Since neither side really wanted to end the accession process altogether or to further freeze the relationship despite mutual ill-feelings, the EU, in a face-saving decision for both sides, agreed to officially declare Chapter 22 open but to postpone the resumption of the accession negotiations until October 2013 after the social unrest in Turkey had subsided and after the German national elections had taken place.\nOn November 5, 2013, formal negotiations between the EU and Turkey resumed. Although the opening of Chapter 22 was seen as a symbolic victory for Turkey and a positive step by the EU, many observers maintain that opening new chapters of the acquis is less important than actually closing those chapters which had been opened and where the EU's criteria had been met demonstrating that the negotiations had been fruitful and the EU had been satisfied that a candidate state had taken a significant step closer toward membership. Thus, the real indicator of Turkey's march toward EU membership is not necessarily how many chapters have been opened but how many have been closed.\nOn October 19, 2013, the European Commission issued its annual assessment of the progress of the candidate countries, including Turkey. The Commission's report seemed more upbeat than previous versions restating Turkey's importance to the EU and offering a few positive conclusions including references to a new democracy proposal regarding tolerance for the wearing of headscarves, use of the Kurdish language in limited circumstances, and the lowering of the electoral threshold under which political parties could enter parliament, circulating in Ankara. However, the Commission expressed overall disappointment with Turkey's progress on a number of issues including its handling of the Gezi Park protests, freedom of expression and media freedom. The Commission again expressed concern over Turkey's continued refusal to extend diplomatic recognition to EU member Cyprus, and Turkey's position to basically ignore the Cyprus Presidency of the EU Council in the latter half of 2012.", "Relations between Turkey and the European Union have vacillated between support for and doubt over future membership on both sides, but not over the need for close relations. There is little doubt among most observers that over its first eight years, the EU accession process has been a major motivation behind Turkey's internal march toward reform and democratization. It has also been a factor in helping transform Turkey's economy and its political and military institutions, leadership, and political culture, both at the national and, in some respects, the local government level. And, it has helped forge a closer relationship between Europe and Turkey.\nEconomic ties between the EU and Turkey, despite the current problems within the Eurozone, have expanded over the past several years with nearly half of Turkey's exports flowing to Europe. Turkey's strong and growing economy offers a large and important market for European goods and services and will continue to do so for a long time. Turkish businesses are flourishing in parts of Europe and Turkey has become a magnate for foreign direct investment with much of that flowing from Europe. Turkey's role as an important energy hub and transit region for European energy supply diversification continues to grow as was recently seen with the decision to construct the Trans-Adriatic Pipeline (TAP) which will bring natural gas from Azerbaijan across Turkey, via the Trans-Anatolian Pipeline (TANAP), into Italy and parts of Europe.\nContinuing instability in Europe's southern neighborhood of North Africa and the Middle East suggest closer EU-Turkey relations although Turkey has been critical of what Ankara believes is the EU's lack of forceful policies toward the political situations in Egypt and Syria. The emerging activism in Turkey's foreign policy, begun in 2010 by Foreign Minister Ahmet Davutoglu with the intent of establishing Turkey as a more independent regional influence has led EU Enlargement Commissioner Füle and others to suggest that a \"strategic dialogue\" with Turkey on foreign policy should become a regular feature of the relationship. These examples reinforce the belief among many that both the EU and Turkey do need each other for a multitude of reasons.\nThe need for good neighborly relations, the current economic and financial crisis within the Eurozone and a continued healthy level of public skepticism or ambivalence toward EU enlargement to Turkey on the part of many Europeans, fueled by cultural and religious differences, however, continues to cloud European attitudes about Turkey, not as an important neighbor to Europe, economic partner, or regional foreign policy influence, but simply as a full-scale member of the Union. This attitude was highlighted in June when it was reported that German Chancellor Merkel's coalition partners, the Christian Democratic Union (CDU) and the Christian Social Union (CSU) included in their election manifesto that Turkey should not become a member of the European Union. A similar German view was recently expressed when an apparent policy paper developed by the advisors to Chancellor Merkel and her soon-to-be coalitions partners, the Social Democrats, seem to express support for further enhancing a \"privileged relationship\" with Turkey in lieu of full EU membership.\nIn addition, it appears that a growing number of Europeans have expressed concerns regarding what seems to some as a change in Turkey's political, economic, social, and religious orientation. In a 2013 article, Diba Nigar Goksel suggested that Europeans believe that \"Turkish public opinion polls reflect deepening cynicism about the EU and that the popularity of a [Turkish] leadership more keen on flaunting its affinity, solidarity, and close links to Muslim brothers than European friends exacerbates concerns that Turkey has an inherently non-European disposition.\nDespite these problems, a few EU member states, and in particular the EU Commission, still continue to publically express a desire to see Turkey's accession move forward.\nOn the other hand, it has been suggested that Europe's disinterest, skepticism or in the case of a few, outright opposition to Turkey's membership, along with the perceived EU foot-dragging in the accession negotiations have reinforced a growing ambivalence in Turkey about its future in the EU. Many observers have suggested that the AK Party's early embrace of the reforms required under the EU accession process was an attempt to help transform and legitimize the AK as a post-Islamist party. Many feel Turkey's leadership's goals were more about solidifying their own power and acceptance by the Turkish people than the long-term \"Europeanization\" of Turkey. Others point to the September 2010 constitutional referendum and the June 2011 national elections as cases in point. Despite statements by Prime Minister Erdogan and others that the proposed constitutional reforms would help bring Turkey into line with European norms, some observers believe that Turkey's EU aspirations were not central to any of the Turkish political parties' messages during the referendum campaign or the national elections and are not necessarily considerations in the writing of the new constitution.\nStill others have suggested that after eight years of accession negotiations and various iterations of reform, Turkey's citizenry have accepted an unprecedented amount of change. But some now believe that the reform process has slowed as EU membership may no longer be the desired end point for Turkey's leadership. For instance, writing in the Hurriyet Daily News , Semih Idiz commented that the EU Commission's 2011 progress report on accession, while performing as a mirror for Turkey, was more of a concern for Turkish bureaucrats and Eurocrats and that \"the EU is not something the majority of Turks look to with confidence or enthusiasm anymore.\" Further, he wrote that what drives Turkey's reform process today \"is its own pressing needs.\" Continuing on this theme, Idiz reported the 2012 Commission assessment was \"a report with no effect\" that has \"hardly created a stir among Turks.\" Reflecting a similar view, columnist Mehmet Ali Birand wrote that \"Europe is not on Turkey's agenda,\" that \"for the first time in 47 years the influence of the EU over Turkish politics has reached almost zero,\" and that \" today, Ankara does not pay attention to either the Council of Europe or the European Parliament.\" Idiz, in another article, also pointed out that during Prime Minister Erdogan's 2012 three hour speech to the AKP party congress, \"Turkey's EU perspective was not once mentioned.\"\nDespite what some have categorized as dynamic changes that have taken place in Turkey, driven in part by its EU aspirations, the EU accession process continues at a relatively slow pace (a pace some have called comatose). Supporters of Turkey's EU membership understand that actions taken, or not taken, by Turkey have made achieving that goal more difficult. Turkey's long-standing refusal to recognize EU member state, Cyprus, and its continued refusal to open its air and sea ports to Cypriot commercial operations as required under the Additional Protocol will remain major stumbling blocks to any forward progress, even as the accession negotiations restart. Turkey's decision to ignore the Cypriot rotating presidency of the EU Council in 2012 further exacerbated the problem as has Turkey's tough rhetoric and occasional naval presence in the Eastern Mediterranean as part of Ankara's response to the decision by the Republic of Cyprus to begin exploring for energy resources in the Eastern Mediterranean. The handling of the Gezi park protests in June also served to further alienate those in Europe who remain skeptical of Turkey's ability and willingness to meet the requirements established in all the chapters of the acquis .\nWith many in Ankara now believing it may no longer be necessary for Turkey to become a member of the EU in order to define Turkey or its place in the international community and with what appears to be a great deal of rhetoric but little real enthusiasm in Europe (except from the EU Commission) for Turkey as a full voting member of the club, observers have begun to question why both the EU and Turkey continue with the accession process at all.\nTurkey and its supporters have continued to argue that at least an enhanced dialogue with the EU should continue. Clearly, the EU can benefit from Turkey's position as an economic partner and as a key regional actor with respect to the greater Middle East, and that Turkey will continue to play a growing energy role for Europe as a gateway to the Caspian and Central Asian oil and gas supply system. Many Europeans share that view and point out that Turkey already plays an important role in defense and foreign policy matters with Europe, including through its membership in NATO although some seem concerned that foreign policy developments in Turkey have become, and could continue to be, increasingly detached from the EU. However, many European believe that while energy security and foreign policy are important elements for the EU, those issues comprise only two or three of the 35 chapters in the acquis , and Turkey must come into compliance with the requirements of the entire acquis . Turkey, for its part must rely on the European market for its goods and services and Europe's political good will and engagement for the longer term.\nNevertheless, and despite the doubts, Turkish leaders seem to have decided that at least for now they need to continue the accession process. This appeared to be the case when in a 2013 New Year's message Turkish President Gul stated that EU membership was still a priority and as the Turkish leadership pursued the resumption of negotiations and the opening of new chapters of the acquis . Some believe this approach is being used possibly as a hedge in the event Ankara's goal of becoming a regional leader and influence fails to take hold or that the Turkish people become concerned that the internal reform process, called into question by the Gezi park demonstrations and government reaction, will come to an end, which could impact Prime Minister Erdogan's future political plans.\nNeither Turkey nor the EU appear to be prepared to actually end the accession process, although it has been reported that Prime Minister Erdogan may have suggested that \"if they [EU] do not want Turkey in, they should say so ... and we will mind our own business and will not bother them.\" As the accession negotiations resume if both the EU and Turkey feel formal membership in the Union is no longer an EU obsession or in Turkey's best interest, both could seek a way to mutually agree to end the formal accession process. These attitudes would not necessarily end talks between the EU and Turkey as the \"positive agenda\" could be revitalized and used to draw Turkey and the EU closer to each other as \"privileged partners,\" or for Turkey, a \"virtual EU member.\"", "Although the United States does not have a direct role in the EU accession process, successive U.S. Administrations and many in Congress have continued to support EU enlargement, believing that it serves U.S. interests by spreading stability and economic opportunities throughout Europe. During the George W. Bush Administration, the United States had been a strong and vocal proponent of Turkish membership in the European Union. Early on, the Obama Administration continued the support of Turkey's EU membership aspirations. President Obama's statements in support of Turkey during his April 2009 visit to Ankara, restated more recently, and his assertion that Turkey's accession would send an important signal to the Muslim world reaffirmed the U.S. position.\nVocal U.S. support for Turkey's EU membership had caused some displeasure among some EU member states who felt that the United States did not fully understand the long and detailed process involved in accession negotiations, did not appreciate the debate within Europe over the long-term impact the admission of Turkey could have on Europe, and defined the importance of Turkey in too narrow a set of terms, generally related to geopolitical and security issues of the region. This latter view seems to be one held by countries such as France, Germany, Austria and others. Some Europeans also feel that putting Turkey's accession in terms related to the Muslim world suggests that anything short of full EU membership for Turkey would represent a rejection of Turkey by the West, and by association, a rejection of the Muslim world.\nNow, however, many in Europe have been somewhat relieved that the United States has scaled back its rhetoric and hope the United States will use its relationship with Turkey in more constructive ways for the EU. For instance, some Europeans feel that the United States should be more helpful in encouraging Turkey to move more rapidly on reforms and to comply with the Additional Protocol regarding Turkey's relations with Cyprus. When asked in an interview in June 2009 whether the United States could be more helpful on this point, former Assistant Secretary of State for Europe and Eurasia Philip Gordon demurred, saying that \"ultimately, this is an EU issue; we're not directly involved in it.... This is between the EU and Turkey.\" The United States believes that Turkey's membership in NATO has demonstrated that Turkey can interact constructively with an organization dominated by most of the same European countries that belong to the EU and play a positive role in foreign policy matters that impact Europe, whether it is the Europe of the EU or the Europe of NATO. However, the United States has been disappointed that it has not been able to use its influence to help shape a more constructive EU-Turkey relationship in an attempt to promote closer NATO-EU relations.\nAlthough some Members of Congress continue to support Turkey's EU accession, attitudes toward Turkey have changed somewhat and the vocal enthusiasm for Turkey's EU membership seems to have waned. While some Members of Congress have applauded Turkey for its stance on Iran's nuclear weapons program and its position on Syria, there have been expressions of concern in some congressional quarters over other Turkish foreign policy initiatives, particularly at one point towards Israel and continually toward Cyprus. However, these concerns do not appear likely to alter the views of those who support Turkey or for new EU approaches to relations with Turkey during the 113 th Congress." ], "depth": [ 0, 1, 1, 1, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "", "h2_full", "h0_title h1_title", "", "h0_full h1_full", "h0_full h3_full h2_full", "h3_full" ] }	{ "question": [ "What is France's current stance on Turkey's EU membership?", "What was the EU's reaction to France's actions?", "What was the end result of France's decision?", "How did the negative view of Turkey, in 2013, develop?", "What was Turkey's response towards EU criticism?", "What was the general attitude in the EU towards Turkish accession at the peak of the conflict?", "What was EU's final decision regarding Turkish accession talks?", "How does the Turkish populace view EU membership?", "Why do many Turks feel that EU membership is unnecessary?", "What is the current state of Turkey without EU membership?", "What is the European populace's general attitude towards Turkey?", "What is this report about?", "What is Congress' stance on Turkey as an ally?", "What is Congress' stance on Turkey in the EU?" ], "summary": [ "In February 2013, France, which has been part of a group in the EU that has expressed doubts about Turkey's EU membership, signaled that it was prepared to support opening at least one new chapter of the acquis (Chapter 22, Regional Policy) as a way to rejuvenate the accession talks.", "This step was supported by many EU member states, although some retained their doubts.", "Eventually, agreement was reached to open the first new chapter of the acquis in over three years and to resume the actual negotiations in June.", "In early June 2013 public protests in Turkey over the future of a park (Gezi) and the government's tough reaction precipitated a harsh response from Brussels and a resolution from the European Parliament expressing its \"deep concern at the disproportionate and excessive use of force by the Turkish police.\"", "Turkish officials responded with tough rhetoric toward the EU.", "After two weeks of rather nasty verbal sparring, and Ankara's continued crackdown on the protestors, several EU member states threatened to press for the postponement of the scheduled accession talks.", "Since neither side really wanted to end the accession process despite mutual ill-feelings, the EU agreed to open the new chapter but to postpone the resumption of the actual accession negotiations until October 2013 once the protests in Turkey subsided and after the national elections in Germany. The talks officially resumed on November 5, 2013.", "For many Turks, EU membership seems to have lost its appeal with some public opinion polls suggesting only 35% of Turks felt Turkey would join the EU.", "Many Turks seem to feel \"being European\" or gaining membership in the Union is no longer needed in order to secure Turkey's status or to have an otherwise normal partnership with Europe.", "Turkey's economy continues to thrive and Ankara continues to try to reposition and strengthen itself in its own neighborhood between secular Europe and the Islamist emergence in the Middle East.", "European support for Turkey, never really that strong among the average citizenry, now seems even more ambivalent.", "This report provides a brief overview of the EU's accession process and Turkey's path to EU membership.", "The U.S. Congress has had a long-standing interest in Turkey as a NATO ally and partner in regional foreign policy and energy security issues.", "Although some Members of Congress have expressed continued support for Turkey's membership in the EU, congressional interest and enthusiasm seems to have diminished recently." ], "parent_pair_index": [ -1, 0, 0, -1, -1, -1, 2, -1, 0, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 4, 4, 4, 4, 5, 5, 5 ] }
GAO_GAO-13-253	{ "title": [ "Background", "Climate Change Impacts in the United States", "Roles of the Five Key Federal Natural Resource Management Agencies and Climate Change Impacts to the Natural Resources They Manage", "Four of the Five Agencies Have Developed Climate Change Adaptation Strategies and Four of the Five Sites We Visited Have Taken Steps to Address Adaptation", "The Forest Service Has Set a Strategic Direction, Established a Performance Goal, and Provided Tools for National Forests to Address Climate Change Adaptation", "The Chugach National Forest Has Begun to Conduct a Climate Change Vulnerability Assessment", "The Agencies Have Begun Using Several Mechanisms to Collaborate and Have Prepared National Adaptation Strategies and Climate Assessments", "Federal Natural Resource Management Agencies Have Identified a Need to Collaborate on Climate Change Adaptation and Are Using Several Mechanisms to Do So", "Federal Natural Resource Agencies Have Collaborated on National Strategies to Address Climate Change Adaptation and Climate Assessments", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Department of Agriculture", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Climate change is having a variety of impacts on natural resources in the United States, including more severe drought and increased wildfires. The five key federal natural resource management agencies included in this review—the Forest Service, NOAA, U.S. Fish and Wildlife Service, National Park Service, and Bureau of Land Management—have unique roles and are facing a variety of management challenges related to climate change. Climate change is also altering assumptions that have been central to natural resource planning and management in the past and recent reports have highlighted the importance of establishing climate change planning in the federal government to help ensure it can continue to provide important services in a changing environment.", "According to the U.S. Global Change Research Program, changes in the climate have been observed in the United States and its coastal waters and will adversely affect aspects of the nation’s natural environment. As table 1 shows, changes in the climate—including warmer temperatures, changes in precipitation patterns, rising sea levels, and more intense storms—affect the natural environment in a number of ways including more severe drought, increased frequency of large wildfires, insect infestations, changed habitats, and possible loss of species that cannot survive in the changed conditions.\nAccording to a 2009 study by the U.S. Global Change Research Program, in areas where weather events become more intense and frequent with climate change, economic and social costs will increase. For example, insect pests are economically important stressors on forest ecosystems in the United States. Coupled with pathogens, they account for $1.5 billion in damage every year, according to the study. Changes in climate have contributed to major insect pest outbreaks in the United States over the past several decades because rising temperatures increase insect outbreaks in a number of ways, according to the study. For example, longer and warmer seasons allow some insects to develop faster, sometimes completing two life cycles instead of one in a single growing season, and warmer conditions also help expand the ranges of some insects. In addition, recreation and tourism are important to the economy and the quality of life for many people. In many communities, according to the study, recreation and tourism generate billions of dollars for regional economies through activities such as fishing, hunting, skiing, hiking, and diving and some of these economic benefits could be reduced or lost as a result of the impacts from climate change.\nPrecisely how and to what extent changes in the climate will affect particular federal lands and waters in the future is uncertain, but climate- related changes have already been observed on federally managed lands and waters. Moreover, some of these changes are expected to continue and increase in intensity, according to the U.S. Global Change Research Program.", "The Forest Service. The Forest Service’s mission is to sustain the health, diversity, and productivity of the nation’s forests and grasslands to meet the needs of present and future generations. The Forest Service manages 193 million acres of national forest and national grasslands. The nation’s 155 national forests and 20 national grasslands contain much of the nation’s terrestrial biodiversity and provide a range of ecosystem services. For example, national forests provide important habitat for many rare, threatened, and endangered species as well as timber and fresh water. The agency manages national forests for a variety of uses including recreation, timber harvesting, livestock grazing, mining, and wilderness protection. Wildfires, invasive species, and extreme weather events are among the critical stressors currently affecting national forests, and they are all expected to be exacerbated by climate change. According to a 2011 report by the Interagency Climate Change Adaptation Task Force, these impacts put at risk the many benefits Americans receive from forests. See figure 1 for a map of the National Forest System.", "The Forest Service, NOAA, the U.S. Fish and Wildlife Service, and the National Park Service have all developed a strategic direction for addressing climate change adaptation through a variety of planning documents. The agencies have also developed guidance, training, and other tools for managers to use in adapting to climate change. The one field location we visited for each agency has taken various steps to address climate change adaptation, such as conducting vulnerability assessments. The Bureau of Land Management has not developed a strategic direction for addressing climate change impacts, but it has taken some adaptation-related steps. Managers at the bureau field location we visited, absent direction from headquarters, have not taken steps to address climate change adaptation.", "In October 2008, the Forest Service developed a strategic framework for According to the framework, addressing responding to climate change.climate change adaptation must be a central priority for the agency because many ecosystem services provided by national forests—which include water for drinking and agriculture, as well as lumber and fiber for paper—may be lost or significantly altered if national forest ecosystems are left to adapt on their own. The framework also stated that management strategies based on historical or current conditions will need to be adjusted or replaced with approaches that support adaptation to changing conditions brought about by climate change. According to the framework, Forest Service natural resource managers will use current science to better understand and predict the impacts of climate change on natural resources, including plant and animal species. The agency will also use an iterative approach, according to the framework, meaning that natural resource managers are to modify their management actions, if needed, as new scientific information emerges. They also are to collaborate with partners—including private landowners and tribal entities—to share technical expertise and coordinate management actions across land ownership boundaries to more effectively address adaptation.\nIn February 2011, the Forest Service published a document, known as “the roadmap,” which identified actions that natural resource managers in national forests were already taking or could take to implement the strategic direction outlined in the agency’s strategic framework. According to the roadmap, ongoing actions that agency natural resource managers were already taking include collaborating with scientists to assess the vulnerability of key species to climate change and re- vegetating ecosystems that had been affected by fire or other major disturbances with plant species that are better adapted to current and future climates. Actions that natural resource managers could begin taking in the short term, according to the roadmap, include collaborating with partners to develop strategies for creating and protecting connected habitat by, for example, establishing corridors across private lands to allow species affected by climate change to migrate to landscapes to which they are better adapted. Longer-term actions include developing comprehensive strategies for maintaining and restoring the connectivity of habitats.\nThe Forest Service has also established a performance goal for national forests. In 2011, the Forest Service informed national forest managers that by 2015 they are expected to address at least one of the following three areas related to climate change adaptation: (1) assessing the vulnerability of key resources—such as the availability of clean and abundant drinking water from national forest watersheds—to the impacts of climate change, (2) reducing the vulnerability of key resources to climate change, and (3) monitoring and evaluating climate change impacts and the effectiveness of adaptation activities. To help track progress in achieving the goal, the Forest Service also directed each national forest to report annually on its status, plans, and actions for assessing vulnerabilities, reducing vulnerabilities, and monitoring and evaluating effectiveness. The agency also published guidance in 2011 to assist the national forests in preparing their annual reports, which are referred to as climate change performance scorecard reports. For example, regarding monitoring, the guidance provided examples of current national monitoring programs that could be used to track climate change impacts, as well as instructions on where to find additional information about such programs.\nIn addition, the agency has taken other steps to help national forests address adaptation. Specifically, in April 2012, the Forest Service finalized a new planning rule that includes climate change adaptation requirements. Also, in February 2013, the agency issued draft guidance outlining specific steps that forests can take to implement these requirements. Each national forest is governed by a land management plan—referred to as a forest plan—which must be revised at least every 15 years to guide its long-term natural resource management actions. The planning rule is intended to ensure, among other things, that forest plans will be responsive and can adapt to issues such as the challenges of climate change. The rule also requires that each national forest have a monitoring program that addresses climate change impacts. To help the forests translate the monitoring requirement into action, the draft agency guidance we reviewed stated, for example, that in developing their monitoring programs, the forests could consider monitoring types of vegetation that are likely to be among the first affected by climate change. According to the draft guidance, doing so could help natural resource managers in the forests to identify opportunities to assist those natural resources in adapting to climate change. Agency officials told us they plan to finalize the guidance by the end of 2013.\nThe Forest Service has also begun developing decision support tools to help its natural resource managers address climate change adaptation. For example, in 2012, the Forest Service issued the Climate Project Screening Tool, which was developed by agency scientists to help natural resource managers determine how, if at all, climate change considerations could impact decisions to proceed with, modify, or cancel proposed projects. The tool includes, for a variety of project types, examples of key questions natural resource managers might consider to address climate change adaptation. For example, on a proposed project to restore an aquatic species, managers might consider whether the species is likely to survive in the landscape if the waters continue to grow warmer as a result of climate change. The tool provides a template that natural resource managers can use to record climate change considerations in their decision-making process. Specifically, the template allows managers to document information about the proposed project, climate change trends and local impacts, their responses to key questions, and their decisions about whether or how to proceed with the project.\nThe Forest Service is also providing information and training to help natural resource managers address climate change adaptation. For example, the agency continues to update its Climate Change Resource Center—a publicly accessible web portal it developed as a reference for natural resource managers and decision makers who need information and decision support tools to address climate change adaptation in the national forests, among other purposes. The website includes peer- reviewed resources such as lectures on addressing climate change adaptation in natural resource management. In one of these lectures, for example, a Forest Service scientist discusses how agency scientists partnered with natural resource managers at the Olympic National Forest and Tahoe National Forest to address climate change adaptation at those forests, and what managers in other forests might learn from this effort.", "In 2011, Forest Service officials at the Chugach National Forest began conducting a vulnerability assessment to determine how key natural resources, communities, and economies in and around the national forest may be affected by climate change. The officials we spoke with at the forest said that the vulnerability assessment will help them determine which resources may have a natural capacity to adapt successfully to climate change and which resources may not. This is a change from August 2007, when we reported that, while officials at the Chugach National Forest recognized that climate change was harming some natural resources in the forest, they had not taken steps to incorporate climate change adaptation into planning and management in part because it was not an agency priority.Forest attributed the change to a number of factors, including the strategic direction provided by the Forest Service to address climate change adaptation. Figure 6 shows a map of the Chugach National Forest.", "The federal natural resource management agencies we reviewed recognize that there are limits to what they can accomplish on their own and therefore are also collaborating on climate change adaptation with, among others, each other, state and local government agencies, tribes, nongovernmental organizations, and other federal agencies. In addition, agencies have collaborated in developing reports that provide cross- cutting, national strategies for addressing climate change adaptation in the federal government and national climate assessments.", "Since 2007, key federal natural resource management agencies have identified a need to collaborate on climate change adaptation to leverage funding, staff, and resources; develop common goals; develop tools and strategies to inform landscape-scale planning and management decisions; facilitate information exchange among stakeholders; and avoid duplication. For example, the Forest Service included a collaboration goal in its October 2008 strategic framework for responding to climate change because the agency believes that collaborating with partners will be essential to address climate change across land ownership boundaries. According to the framework, the Forest Service manages 8 percent of all lands in the United States, but climate change impacts will extend across land ownership boundaries, and the Forest Service has a responsibility to work with others to address those impacts. The U.S. Fish and Wildlife Service also included a collaboration goal in its September 2010 climate change strategic plan because the agency believes collaboration is necessary to build shared scientific and technical capabilities, among other reasons.\nLandscape conservation cooperatives are one mechanism established since 2007 that enable federal agencies to collaborate in addressing climate change adaptation. At the direction of the Department of the Interior, the U.S. Fish and Wildlife Service began establishing the network of 22 cooperatives in fiscal year 2009. They provide a forum for federal agencies, including the U.S. Fish and Wildlife Service, National Park Service, Bureau of Land Management, Forest Service and NOAA, to work collaboratively with state and local government agencies, tribes, and nongovernmental organizations to address at a landscape level climate change impacts on wildlife, water, land, and cultural resources. As of February 2013, all 22 cooperatives have been established, but because some were established more recently, they are at different stages of development. The cooperatives are located throughout the United States and extend into Canada and Mexico. Figure 13 shows the locations of the cooperatives.\nSome landscape conservation cooperatives have begun taking actions to address climate change adaptation at the landscape level. For example, in August 2012, one cooperative, working with the nonprofit organization Nature Serve, hosted a 2-day workshop to develop climate change adaptation strategies for managed lands including the Sonoran and Mojave Deserts in the southwestern United States. Workshop participants included representatives from nonprofit organizations, universities, state agencies, and federal agencies including the U.S. Fish and Wildlife Service, Bureau of Land Management, and National Park Service. For major ecosystem types within the region, the participants identified “no-regrets” climate change adaptation management strategies they could take within 5 years, longer-term management strategies they could take further in the future, and priorities for research and monitoring to lower uncertainty around identified strategies. In addition, a cooperative has funded several projects to identify climate change impacts on a variety of species and their habitat. For example, in 2010, the cooperative funded a nonprofit organization to collaborate with partners, including federal agencies such as the U.S. Fish and Wildlife Service and the U.S. Geological Survey, to develop a plan and establish programs for long- term monitoring of wintering shorebirds in coastal California and northern Baja California, Mexico. This project was expected to, among other things, provide baseline information about these shorebirds to allow federal natural resource management agencies and others to identify changes as a result of climate change, according to the project proposal.\nAccording to Interior, the eight regional Climate Science Centers deliver basic climate change impact science to Landscape Conservation Cooperatives within their respective regions, including physical and biological research, ecological forecasting, and multi-scale modeling. Science centers will prioritize their delivery of fundamental science, data, and decision support activities to meet the needs of the cooperatives. This includes working with the cooperatives to provide climate change impact information on natural and cultural resources and to develop decision support tools for managers. adaptation at the department.providing scientific information, tools, and techniques that land, water, wildlife and cultural resource managers and other interested parties can apply to anticipate, monitor, and adapt to climate change and other stressors at regional and local scales. In June 2012, the science center for the Southwest collaborated with four cooperatives and other partners to host a climate summit to identify the climate-related science needs of tribes and other stakeholders. For example, participating tribal members identified a need to develop climate change vulnerability assessments for species and locations that are culturally significant to tribes, among other needs.\nThe science centers are responsible for The Interagency Land Management Adaptation Group is another collaborative mechanism established since 2007 by natural resource management agencies to address climate change adaptation in federal land management activities. The group was established in January 2012 and meets monthly as an informal network of high-level officials from federal land management and science agencies including the Bureau of Land Management, the U.S. Fish and Wildlife Service, the Forest Service, and the National Park Service. Key non-land management members include the Council on Environmental Quality, NOAA, and the U.S. Geological Survey. According to group documents, members have shared information on federal climate change adaptation-related programs and activities; identified gaps that need to be addressed in federal agency climate change adaptation planning and management; identified challenges that federal land management agencies encounter when attempting to address climate change adaptation; discussed potential policy changes; and explored opportunities for further collaboration. One of the challenges they identified was the difficulty in identifying past or ongoing climate change vulnerability assessments, which creates a potential for duplication of effort, according to documents developed by group members. To address this challenge, in January 2013, the group agreed to develop a web-based searchable database, which will contain climate change vulnerability assessments prepared by federal agencies. The U.S. Geological Survey has agreed to compile the assessments and make the information available to all resource managers working to develop climate change adaptation plans. The interagency adaptation group has also formed work groups to develop and guide national-level collaborative actions in key areas of interest, including options and best practices for conducting vulnerability assessments, as well as adaptation planning, monitoring, and training.\nFederal natural resource management agencies have also collaborated to support NOAA’s long-standing Regional Integrated Sciences and Assessments program, according to a program official. The program consists of 11 research teams that emphasize regional and local climate research and work with regional partners, such as NOAA’s Regional Climate Centers, to help inform climate change adaptation planning and management. For example, research team scientists provide information that decision makers can use to help understand the impacts of drought, understand climatic influences on wildfires, and assess climate impacts on air quality. Another function of the research teams is to develop tools that enable decision makers to take into consideration the potential impacts of climate change. For example, the Carolinas’ research team developed a climate change planning tool referred to as the Vulnerability and Consequence Adaptation Planning Scenarios that can be used by decision makers in coastal regions to determine potential climate change impacts and identify climate change adaptation actions.\nParticipating federal agencies include the U.S. Fish and Wildlife Service, the U.S. Geological Survey, and the Forest Service. Participating offices within NOAA include, among others, the National Marine Fisheries Service; the National Ocean Service; the Earth Systems Research Laboratory; the National Weather Service’s Climate Prediction Center; and the Climate Program Office’s Modeling, Analysis Predictions and Projections program and Climate and Societal Interactions program. The U.S. Geological Survey and the Forest Service were among the agencies that contributed funds to projects in the grants competition. interactions between climate and nonclimate stressors in marine environments; (2) evaluating the use of climate information by coastal managers and the effectiveness of adaptation actions; (3) advancing the development and application of approaches for assessing the vulnerability of public lands; and (4) improving ways of communicating climate information to water managers across multiple regions of the United States. NOAA developed the funding priorities collaboratively with the Department of the Interior’s Climate Science Centers and federal agencies, including the Agricultural Research Service, U.S. Army Corps of Engineers, Forest Service, and National Park Service. According to a Regional Integrated Sciences and Assessments program official, by setting priorities collaboratively, federal agencies can direct and leverage their resources and avoid potential duplicative or overlapping research projects.\nFederal natural resource management departments and agencies have also collaborated through the Interagency Climate Change Adaptation Task Force, which the President established in 2009. The task force is co-chaired by the Council on Environmental Quality, the Office of Science and Technology Policy, and NOAA, and includes representatives from more than 20 federal departments and agencies. In a 2010 report, the task force recommended a set of climate change adaptation policy goals and actions. For example, the task force recommended that federal agencies establish and implement adaptation action plans that address the challenges that climate change poses to their missions, operations, and programs. The task force also recommended that agencies address cross-cutting issues by developing, among other things, (1) a national action plan to strengthen climate change adaptation for freshwater resources; (2) a strategy for reducing the impacts of climate change on the nation’s fish, wildlife, and plant resources and their habitats; and (3) a strategic action plan for strengthening the resilience of coastal, ocean, and Great Lakes communities and ecosystems to climate change. In October 2011, the task force reported that federal agencies had made significant progress in addressing the goals outlined by the task force in 2010.", "National Fish, Wildlife and Plants Climate Adaptation Partnership. National Fish, Wildlife and Plants Climate Adaptation Strategy: Association of Fish and Wildlife Agencies, Council on Environmental Quality, U.S. Fish and Wildlife Service, Great Lakes Indian Fish and Wildlife Commission, and National Oceanic and Atmospheric Administration, (Washington, D.C.: 2012). committee, was released in March 2013. It was developed with input from a steering committee led by the U.S. Fish and Wildlife Service, NOAA, and the New York Division of Fish, Wildlife, and Marine Resources with officials from 11 additional federal agencies, 4 additional state fish and wildlife agencies, 2 intertribal commissions, and the White House Council on Environmental Quality. The strategy stated that fish, wildlife, and plant resources are already being affected by climate change and described projected future impacts. The strategy also outlined goals for addressing climate change adaptation for fish, wildlife, and plants as well as strategies for addressing these goals. For example, one goal is to conserve habitat to support healthy fish, wildlife, and plant populations and ecosystem functions in a changing climate. Strategies for addressing the goal include identifying areas that are likely to be resilient to climate change and taking steps to ensure that those areas are protected.\nNational Ocean Policy Implementation Plan. Federal natural resource management departments contributed to preparing this plan, which identifies actions federal agencies will take to bolster the ocean economy, improve ocean health, and provide better science, among other things. In July 2010, the President issued an Executive Order regarding stewardship of our oceans, coasts, and the Great Lakes.” The national ocean policy calls for management practices that will enhance the understanding of and capacity to respond to climate change and ocean acidification, among other things. The National Ocean Council, which includes the Secretaries of Agriculture, Commerce, the Interior, and the NOAA Administrator, published the implementation plan for the national ocean policy in April 2013. Among other things, the plan stated that federal agencies will enable and support efforts to understand, minimize, and adapt to the impacts of climate change, ocean acidification, sea-level rise, and extreme weather events, strengthening the resilience of coastal communities. For example, according to the implementation plan, federal agencies will offer tools and training courses on how to design and implement vulnerability assessments and develop assessments of coastal and ocean climate impacts in support of the National Climate Assessment.\nFederal agencies have also collaborated on national climate assessments, which analyze current trends in global change, both human-induced and natural, and project major trends for the subsequent 25 to 100 years. The Global Change Research Act of 1990 requires publication of a national climate assessment not less frequently than every 4 years—the first and second assessments were first published by the U.S. Global Change Research Program in 2000 and 2009, respectively. Thirteen federal agencies, including the Forest Service, U.S. Fish and Wildlife Service, National Park Service, and NOAA, contributed to the third assessment that was released as a draft for public comment in January 2013. The draft assessment provides information on climate change impacts and the status of climate change science, and it highlights ongoing climate change adaptation efforts, among other things. For example, the draft assessment states that, although substantial climate change adaptation planning is occurring at all levels of government, adaptation actions have been limited. According to the draft assessment, challenges to implementing adaptation actions include lack of resources and leadership, and difficulties in using climate change projections, which can be complex and difficult to apply to management decisions. To help ensure that natural resource managers and other decision makers have timely and relevant information, the draft assessment includes information on creating a sustained climate assessment process to more efficiently collect and synthesize climate change science. The draft assessment also states that climate change adaptation actions have rarely been evaluated for effectiveness because such actions have only recently begun to be initiated and comprehensive metrics for evaluating these actions have not been developed. The assessment is expected to be finalized by the end of 2013.", "We provided a draft of this report for review and comment to the Departments of Agriculture, Commerce, and the Interior. In its written comments, which are included in appendix I, the Department of Agriculture stated that the Forest Service agreed with our findings and will continue to engage in the collaborative efforts we identified to more efficiently and effectively address climate change adaptation.\nWe received general comments from the Departments of Commerce and the Interior. The Department of Commerce stated that it appreciated our efforts to identify the progress made by key natural resource management agencies to address climate change. It also said that climate change adaptation efforts will improve over time through review and evaluation processes, and our report contributes to that effort. The Departments of Commerce and the Interior also said they have other programs, field locations, and climate change adaptation-related activities that were not discussed in the report. By design, our report focused on specific programs, and we visited only one field location in each of the five agencies we examined. We acknowledge in the report that, while federal agencies have taken many different climate change adaptation actions, we focused on those actions that we determined were most relevant to the field location we visited at each agency. We also received technical comments from the Departments of Agriculture, Commerce, and the Interior, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of the report to the Secretaries of Agriculture, Commerce, and the Interior; the appropriate congressional committees; and other interested parties. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have questions about this report, please contact me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "", "", "", "In addition to the individual named above, Stephen Secrist, Assistant Director; Leo G. Acosta; Mark Braza; Frederick K. Childers; Elizabeth Curda; Keesha Egebrecht; Emily Hanawalt; Richard Johnson; Alison O’Neill; Jeanette Soares; and Kiki Theodoropoulos made key contributions to this report. Candace Carpenter; Brad Dobbins; Armetha Liles; and Janice Poling provided additional technical assistance." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full h2_full", "", "", "h0_full h2_title", "h0_full h2_full", "", "h0_title h2_full h1_full", "h0_full h1_full", "h1_full", "h0_full h3_full", "", "h0_title", "", "h0_full" ] }	{ "question": [ "How have organizations come together to address climate change?", "What is the Forest Service's plan for addressing climate change?", "What is the National Park Service's plan for addressing climate change?", "What is the Bureau of Land Management's future plan for addressing climate change?", "What have all four agencies developed in their efforts to adapt to climate change?", "How is the GAO indirectly encouraging climate change adaptation?", "What actions at the regional level are agencies taking to encourage climate change adaptation?", "What actions at the national level are agencies taking to encourage climate change adaptation?", "How did the Fish and Wildlife Service and NOAA address climate change adaptation in March 2013?", "What risks does climate change present?", "How can climate change's risks be mitigated?", "How has the GAO addressed climate change adaptation?", "What information on the federal natural resource management agencies does this report provide?", "How did the GAO generally evaluate the agencies’ climate change adaptation policies?", "How did the GAO directly evaluate the agencies’ climate change adaptation policies?" ], "summary": [ "Since 2007, the Forest Service, the National Oceanic and Atmospheric Administration (NOAA), the Fish and Wildlife Service, and the National Park Service have taken steps to establish strategic directions for addressing climate change adaptation.", "For example, the Forest Service developed a strategic framework document that established climate change adaptation as a central agency priority and another document, known as \"the roadmap,\" which identified actions that national forest managers were taking or could take to implement the direction outlined in the framework, including re-vegetating ecosystems that had been affected by fire with plant species that are better adapted to current and future climates.", "For example, the National Park Service is developing guidance for park-based climate change adaptation plans that includes steps such as identifying conservation targets and conducting vulnerability assessments.", "The Bureau of Land Management has not established a strategic direction for addressing climate change impacts but is planning to develop a high-level climate change adaptation strategy by the end of the summer 2013.", "These four agencies have also developed guidance, training, and other tools for managers to use in adapting to climate change.", "The federal natural resource management agencies GAO reviewed are collaborating on climate change adaptation.", "For example, agencies are collaborating through landscape conservation cooperatives, comprising public and private organizations working to define shared goals and provide science for conservation planning, among other things.", "In addition, agencies have collaborated in developing national strategies for addressing climate change adaptation in the federal government.", "For example, the Fish and Wildlife Service, NOAA, and others collaborated on a strategy, released in March 2013, for addressing climate change adaptation in managing fish, wildlife, and plants.", "Climate change poses a variety of threats to federally managed natural resources, such as forests and wildlife, including possibly more frequent and severe droughts and wildfires.", "Adaptation--adjustments in natural or human systems to a new or changing environment that exploits beneficial opportunities or moderates negative effects--can be used to help manage the risks to vulnerable natural resources.", "GAO was asked to review federal agencies' efforts to incorporate climate change adaptation into their natural resource planning and management since GAO last reported on this issue in 2007.", "This report examines (1) steps key federal natural resource management agencies--Forest Service, NOAA, Fish and Wildlife Service, National Park Service, and Bureau of Land Management--have taken since 2007 to address adaptation and (2) how these agencies have collaborated at the national level on adaptation since 2007.", "GAO analyzed the agencies' climate change adaptation guidance and planning documents and interviewed agency officials.", "GAO also visited one field location for each agency, selected using a nonprobability approach, so the results are not generalizable to all of the agencies' field locations." ], "parent_pair_index": [ -1, 0, 0, 0, 0, -1, -1, 1, -1, -1, 0, -1, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 7, 7, 7, 7, 0, 0, 0, 1, 1, 1 ] }
GAO_GAO-12-568	{ "title": [ "Background", "OPM and Labor Have Taken Steps to Implement the Executive Order, but Further Action Is Needed to Meet Hiring Goals", "OPM Helped Agencies Develop Plans to Employ More Individuals with Disabilities, Yet Many Plans Lacked Required Elements and Have Not Been Corrected", "OPM Has Yet to Fully Develop the Required Mandatory Training Programs", "OPM Tracks the Hiring of People with Disabilities, but Concerns about Data Quality Exist", "Labor Has Taken Steps to Develop Return-to-Work Strategies", "Selected Agencies Have Plans in Place to Hire and Retain Employees with Disabilities and Have Adopted Many Leading Practices", "Agencies Are Implementing Plans to Improve Hiring and Retention of Employees with Disabilities", "Agencies Have Taken Steps to Implement Leading Practices for Increasing Employment of Individuals with Disabilities", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Office of Personnel Management", "Appendix II: GAO Contacts and Staff Acknowledgments", "Contacts", "Acknowledgments", "Related GAO Products" ], "paragraphs": [ "Under the Rehabilitation Act, a person is considered to have a disability if the individual has a physical or mental impairment that substantially limits one or more major life activities. Existing federal efforts are intended to promote the employment of individuals with disabilities in the federal workforce and help agencies carry out their responsibilities under the Rehabilitation Act. For example, federal statutes and regulations provide special hiring authorities for people with disabilities. These include Schedule A excepted service hiring authority—which permits the noncompetitive appointment of qualified individuals with intellectual, severe physical, or psychiatric disabilities without posting and publicizing the position—and appointments and noncompetitive conversion for veterans who are 30 percent or more disabled. To qualify for a Schedule A appointment, an applicant must generally provide proof of disability and a certification of job readiness. Proof of disability can come from a number of sources, including a licensed medical professional, or a state agency that issues or provides disability benefits. The proof of disability document does not need to detail the applicant’s medical history or need for an accommodation.\nExecutive Order 13548 committed the federal government to many of the goals of an executive order issued a decade earlier, but went further by requiring federal agencies to take certain actions. For example, Executive Order 13548 requires federal agencies to develop plans for hiring and retaining employees with disabilities and to designate a senior-level official to be accountable for meeting the goals of the order and to develop and implement the agency’s plan. In addition, OPM and Labor have oversight responsibilities to ensure the successful implementation of the executive order (see table 1).\nFor the purposes of determining agency progress in the employment of people with disabilities and setting targeted goals, the federal government tracks the number of individuals with disabilities in the workforce through OPM’s Standard Form 256, Self-Disclosure of Disability (SF-256). Federal employees voluntarily submit this form to disclose that they have a disability, as defined by the Rehabilitation Act. For reporting purposes, disabilities are separated into two major categories: Targeted and Other Disabilities. Targeted disabilities, generally considered to be more severe, include such conditions as total deafness, complete paralysis, and psychiatric disabilities. Other disabilities include such conditions as partial hearing or vision loss, gastrointestinal disorders, and learning disabilities.\nFurther, Labor is given responsibilities in the executive order to improve efforts to help employees who sustain work-related injuries and illnesses return to work. In July 2010, the Protecting Our Workers and Ensuring Reemployment (POWER) Initiative was established, led by Labor. This initiative aims to improve agency return-to-work outcomes by setting performance targets, collecting and analyzing injury and illness data, and prioritizing safety and health management programs that have proven effective in the past.\n5 U.S.C. §8101, et seq.\nWorkers’ Compensation Programs (OWCP) reviews FECA claims and makes decisions on eligibility and payments.\nWe have completed a number of reviews that have identified steps that agencies could take to provide equal employment opportunity to qualified individuals with disabilities in the federal workforce. In July 2010, we held a forum that identified barriers to the federal employment of people with disabilities and leading practices to overcome these barriers. Participants said that the most significant barrier keeping people with disabilities from the workplace is attitudinal and identified eight leading practices that agencies could implement to help the federal government become a model employer: (1) top leadership commitment; (2) accountability, including goals to help guide and sustain efforts; (3) regular surveying of the workforce on disability issues; (4) better coordination within and across agencies; (5) training for staff at all levels to disseminate leading practices (6) career development opportunities inclusive of people with (7) a flexible work environment; and (8) centralized funding at the agency level for reasonable accommodations.\nGAO, Highlights of a Forum: Participant-Identified Leading Practices that Could Increase the Employment of Individuals with Disabilities in the Federal Workforce, GAO-11-81SP (Washington, D.C.: Oct. 5, 2010).", "", "OPM, in consultation with EEOC, OMB, and Labor, issued a memorandum in November 2010 to heads of executive departments and agencies outlining the key requirements of the executive order and what elements must be included in agency disability hiring plans. These elements include listing the name of the senior-level official to be held accountable for meeting the goals of the executive order and describing how the agency will hire individuals with disabilities at all grade levels and in various job occupations. The memorandum also described strategies that agencies could take to become model employers of people with disabilities, such as reviewing all recruitment materials to ensure accessibility for people with disabilities. To help implement the strategies, OPM contracted in December 2010 with a private firm to recruit and to manage a list of Schedule A-certified individuals from which federal agencies can hire.\nOPM received 66 agency plans for promoting the employment of individuals with disabilities, representing over 99 percent of the federal civilian executive branch workforce. OPM officials reviewed all the plans, recording whether they met criteria developed by OPM based on the executive order and its model strategies memorandum. OPM also identified and informed agencies about innovative ideas included in plans.\nIn reviewing the plans, OPM found that many agency plans did not meet one or more of its review criteria (see fig. 1). For example, OPM’s review found that 29 of the 66 agency plans did not include numerical goals for the hiring of people with disabilities. OPM also found that 9 of the 66 agency plans did not identify a senior-level official responsible for the development and implementation of the plan. Finally, only 7 of the 66 plans met all of the criteria; over half of the plans met 8 or fewer of the 13 criteria. However, OPM expected agencies to begin implementing their plans immediately, regardless of any unaddressed deficiencies.\nAgencies met some criteria more successfully than others. For example, OPM found that 40 of the 66 agency plans included a process for increasing the use of Schedule A to increase the hiring of people with disabilities. In contrast, 29 of the 66 agency plans provided for the quarterly monitoring of the rate at which employees injured on the job successfully return to work.\nOPM provided agencies with written feedback on plan deficiencies and strongly encouraged agencies to address them numerous times beginning in June 2011. However, 32 out of the 59 agencies with deficiencies in their plans had not addressed them as of April 2012. Specifically, in June 2011, OPM provided agencies with access to reviews of their plans, which identified deficiencies, through OMB’s Max Information System (MAX). According to OPM, in July 2011, a White House official told agency senior executives that they were required to address deficiencies in their plans. In October and November 2011, OPM provided agencies with a list of the deficiencies identified in their plans, and asked agencies to determine how their plans could be improved. In December 2011, OPM again told agencies they were strongly encouraged to review and address plan deficiencies and provided agencies with several examples of plans that met all of the criteria.\nThough the executive order does not specifically authorize OPM to require agencies to address plan deficiencies, it calls for OPM to regularly report on agencies’ progress in implementing their plans to the White House and others. In response to the executive order’s reporting requirement, OPM officials told us that they had briefed White House officials on issues related to agencies’ implementation of the executive order, but did not provide information on the deficiencies in all of the agency plans. In addition, OPM does not think that the federal government is on target to achieve the goals set in the executive order. While the executive order did not provide additional detail as to what information should be reported, providing information on the extent to which agencies’ plans have met OPM’s criteria would better enable the White House to hold agencies accountable for addressing plan deficiencies.", "In addition to reviewing agency plans, the executive order required OPM to develop mandatory training programs on the employment of people with disabilities for both human resources personnel and hiring managers, within 60 days of the executive order date. We have previously reported that training at all staff levels, in particular training on hiring, reasonable accommodations, and diversity awareness, can help disseminate leading practices throughout an agency and communicate expectations for implementation of policies and procedures related to improving employment of people with disabilities. Such policies and procedures could be communicated across the federal government with training on topics such as how to access and efficiently use the list of Schedule A- certified individuals, the availability of internships and fellowships, such as Labor’s Workforce Recruitment Program, and online communities of practice established to help officials share best practices on hiring people with disabilities, such as eFedlink.\nIn its November 2010 model strategies memorandum to heads of executive agencies, OPM stated that, in consultation with Labor, EEOC, and OMB, it was developing the mandatory training programs required by the executive order and that further information would be forthcoming. OPM officials told us in March 2012 that they are working with federal Chief Human Capital Officers (CHCO) to develop modules on topics such as using special hiring authority that will be available through HR University. Officials explained that they need to ensure that the training is uniform to ensure all personnel receive consistent information, and they expect the training modules to be ready by August 2012.\nAlthough it has yet to fully develop mandatory training programs, OPM has taken steps to train and inform federal officials about tools available to them. For example, OPM partnered with Labor, EEOC, and other agencies to provide elective training courses for federal officials involved in implementing the executive order on topics including: the executive order, model recruitment strategies, guidance on developing disability hiring plans, and return-to-work strategies. OPM also conducted training on implementation of the executive order in July 2011 specifically for senior executives accountable for their agencies’ plans. It also offers short online videos for hiring managers on topics such as Schedule A hiring authority. Further, other governmentwide training on employing people with disabilities exists. For example, Labor’s Job Accommodation Network offers online training on relevant issues like applying the Americans with Disabilities Amendments Act and providing reasonable accommodations. Moreover, the Department of Defense’s Computer/Electronic Accommodations Program offers online training modules to help federal employees understand the benefits of hiring people with disabilities.\nNevertheless, agency officials we interviewed told us that they would like to have more comprehensive training on strategies for hiring and retaining individuals with disabilities, confirming the need for OPM to complete the development of the training programs required by the executive order. For example, officials from one agency said that more training on the relationship between return-to-work efforts and providing reasonable accommodations is needed, while officials from another agency identified a need for increased awareness of the Schedule A hiring process.", "Executive Order 13548 requires OPM to implement a system for reporting regularly to the president, heads of agencies, and the public on agencies’ progress in implementing the objectives of the executive order. OPM is also to compile, and post on its website, governmentwide statistics on the hiring of individuals with disabilities. This is important because effectively measuring workforce demographics requires reliable data to inform decisions and to allow for individual and agencywide accountability.\nTo measure and assess their progress towards achieving the goals of the executive order, agencies and OPM use data about disability status that employees voluntarily self-report on the SF-256. OPM’s guidance to agencies for implementing the executive order explained that the data gathered from the SF-256 is crucial for agencies to determine whether they are achieving their disability hiring goals. Agencies also report these data to EEOC in an effort to identify and develop strategies to eliminate potential barriers to equal employment opportunities. According to the form, the data are used to develop reports to bring to light agency specific or governmentwide deficiencies in the hiring, placement, and advancement of individuals with disabilities. The information is confidential and cannot be used to affect an employee in any way. Only staff who record the data in an agency’s or OPM’s personnel systems have access to the information. According to draft data from OPM, as stated earlier, the government hired approximately 20,000 employees with disabilities during fiscal years 2010 and 2011.\nHowever, according to officials at OPM, EEOC, VA, Education, and SSA, accurately measuring the number of current and newly hired employees with disabilities is an ongoing challenge. While the accuracy of the SF- 256 data is unknown, agency officials and advocates for people with disabilities believe there is an undercount of employees with disabilities. For example, despite the safeguards in place explaining the confidentiality of the data, agency officials and advocates for people with disabilities told us that some individuals with disabilities may not disclose their disability status out of concern that they will be subjected to discrimination. Similarly, EEOC reported that some persons with disabilities are reluctant to self-identify because they are concerned that such disclosure will preclude them from advancement.\nAdditionally, some individuals may develop disabilities during federal employment and may not know how to or why they should update their disability status. We have reported that regularly encouraging employees to update their disability status allows agencies to be aware of any changes in their workforce. EEOC guidance recommends that agencies request that employees update their disability status every 2 to 4 years.\nAs previously noted, disabled veterans with a compensable service-connected disability of 30 percent or more may be noncompetitively appointed and converted to a career appointment under 5 U.S.C. § 3112. agency’s ability to establish appropriate policies and goals, and assess progress towards those goals.", "Labor has taken several steps toward meeting the requirements of the executive order to improve return-to-work outcomes for employees injured on the job, including pursuing overall reform of the FECA system. Specifically, Labor developed new measures and targets to hold federal agencies accountable for improving their return-to-work outcomes within a 2-year period. Agencies were expected to improve return-to-work outcomes by 1 percent for fiscal year 2011 and an additional 2 percent in each of the following 3 years over the 2009 baseline. In fiscal year 2011, the federal government had a cumulative return-to-work rate of 91.6 percent, almost 5 percent better than the target rate of 86.7 percent. Goals such as these are useful tools to help agencies improve performance. Labor is also researching strategies that agencies can use to increase the successful return-to-work of employees who have sustained disabilities as a result of workplace injuries or illnesses. The results of this study are expected to be released in September 2012.\nAnother Labor initiative is aimed at helping the federal government rehire injured federal workers who are not able to return to the job at which they were injured. OWCP initiated a 6-month pilot project in May 2011 to explore how Schedule A noncompetitive hiring authority might be used to rehire injured federal workers under FECA. As part of the project, OWCP provided guidance to claims staff, rehabilitation specialists, rehabilitation counselors, and employing agencies on the process of Schedule A certification and the steps it will take to facilitate Schedule A placements. According to Labor, the pilot identified obstacles to reemployment and provided input needed to determine whether such an effort can be expanded to other federal agencies. Identified obstacles included unanticipated questions from potential workers, such as if acceptance of a Schedule A designation would require a “probationary” period, and what impact acceptance of a Schedule A position would have on their retirement benefits. Of the 48 individuals Labor screened for Schedule A certification, 45 obtained certification, of whom 5 have been placed into federal employment.", "", "Each of the four agencies we reviewed submitted a plan for implementing the executive order as required. Only VA’s plan, as initially submitted, met all of OPM’s criteria for satisfying the requirements of the executive order (see table 2). Education and SSA revised their plans based on feedback from OPM. Specifically, Education’s revised plan states that Education will hire individuals with disabilities in all occupations and across all job series and grades. Education also clarified its commitment to coordinate with Labor to improve return-to-work outcomes through the POWER Initiative, and to engage and train managers on Schedule A hiring authority. Further, Education increased its goals for the percentage of job opportunity announcements that include information related to individuals with disabilities. SSA revised its plan to include goals and planned activities under the POWER Initiative, including quarterly monitoring of return-to-work successes under the program and a strategy for identifying injured employees who would benefit from reasonable accommodations and reassignment. OMB submitted its plan in March 2012 but, according to OMB officials, the agency has not received feedback from OPM.\nAgencies had positive views about the executive order’s requirement that they develop written plans to increase the number of federal employees with disabilities. In particular, Education, SSA, and VA said that the executive order provided an opportunity to further develop the written plans they already had in place for hiring and retaining employees with disabilities.\nAgencies were supportive of the goal of increasing the hiring and retention of federal employees with disabilities, and reported few challenges in implementing their plans to achieve this goal. Officials at all of the agencies we interviewed cited funding constraints as a potential obstacle to hiring more employees with disabilities. OMB officials also said that it was a challenge to identify individuals with the right skills and experience to fill their positions. For example, officials said that many of the candidates on OPM’s list of Schedule A-certified individuals have entry level skills and not the more advanced skills and experience that are required for positions at OMB. Agency officials cited no special challenges with respect to retaining employees with disabilities at their agencies.", "In October 2010, we reported on eight leading practices that could help the federal government become a model employer for individuals with disabilities. These practices, which are consistent with the executive order’s goal of increasing the number of individuals with disabilities in the federal government, have been implemented to varying degrees by the four agencies we contacted for this review.\nTop leadership commitment: Involvement of top agency leadership is necessary to overcome the resistance to change that agencies could face when trying to address attitudinal barriers to hiring individuals with disabilities. When leaders communicate their commitment throughout the organization, they send a clear message about the seriousness and business relevance of diversity management. Leaders at the agencies we talked with have, to varying degrees, communicated their commitment to hiring and retaining individuals with disabilities to their employees. Education has issued annual policy statements to its employees ensuring equal employment opportunity for all applicants and employees, including those with targeted disabilities, and officials told us that they routinely host events that address issues related to hiring and promoting equal employment opportunity. For example, in October 2008, Education hosted an event to encourage hiring individuals with disabilities and distributed a written guide about using Schedule A hiring authority to facilitate hiring individuals with targeted or severe disabilities, as well as disabled veterans. OMB officials said that it is briefing managers on the requirements of the executive order and that it planned to communicate the agency’s commitment to implementing the executive order to all staff in May 2012. SSA’s Commissioner announced his support for employing individuals with disabilities and encouraged employees to continue efforts to hire and promote these individuals in a March 2009 broadcast to all employees. VA said that the Secretary regularly communicates his commitment to hiring and retaining employees with disabilities through memorandums to all employees. In a September 2010 memorandum, the Secretary announced the agency’s goal of increasing the percentage of individuals with targeted disabilities that it hires and employs to 2 percent in fiscal year 2011.\nAccountability: Accountability is critical to ensuring the success of an agency’s efforts to implement leading practices and improve the employment of individuals with disabilities. To ensure accountability, agencies should set goals, determine measures to assess progress toward goals, evaluate staff and agency success in helping meet goals, and report results publicly. Education, SSA and VA’s disability hiring plans all include goals that will allow them to measure their progress toward meeting the goals of the executive order. Prior to the executive order, Education issued a Disability Employment Program Strategic Plan for fiscal years 2011-2013 that established goals related to reasonable accommodations, and recruitment and retention, and offered strategies for meeting these goals, as well as ways to track and measure agency progress. At SSA, accountability for results related to the executive order is included in the performance plan of the senior-level official responsible for implementing it. VA specifically holds senior executives accountable for meeting agency numerical goals by including these goals in their contracts. Additionally, VA senior executives’ contracts include a performance element for meeting hiring goals for individuals with targeted disabilities. OMB has not yet developed such goals.\nRegular surveying of the workforce on disability issues: Regularly surveying their workforces allows agencies to have more information about potential barriers to employment for people with disabilities, the effectiveness of their reasonable accommodation practices, and the extent to which employees with disabilities find the work environment friendly. To collect this information, agencies should survey their workforces at all stages of their employment, including asking employees to complete the SF-256 when they are hired, and asking relevant questions on employee feedback surveys and in exit interviews. VA officials said that they encourage new employees to complete the SF- 256, and SSA reminds all employees to annually review their human resource records and update or correct information, including disability data. In addition, all of the agencies we contacted survey employees to solicit feedback on a range of topics. However, only SSA and VA include a question on disability status or reasonable accommodations on these surveys. In addition, Education and SSA said that they routinely conduct exit surveys to solicit information from employees who separate from service about their reasons for leaving. While VA has an exit survey, officials said it is not consistently administered to all employees who separate. Education officials said that they have additional means of obtaining information about barriers for employees with disabilities. For example, senior managers hold open forums with staff, and employees can submit feedback to management through the agency’s Intranet. Education officials also reported that employees with disabilities have formed their own group to address access to assistive technology, which has helped Education to obtain improved technology, such as videophones. OMB officials said that their Diversity Council and Personnel Advisory Board provide forums for employees to discuss diversity issues, including those related to disabilities, and share them with senior leadership.\nBetter coordination of roles and responsibilities: Often the responsibilities related to employment of people with disabilities are dispersed, which can create barriers to hiring if agency staff defer taking action, thinking that it is someone else’s responsibility. Coordination across agencies can encourage agencies with special expertise in addressing employment obstacles for individuals with disabilities to share their knowledge with agencies that have not yet developed this expertise. All of the agencies we interviewed had, to some extent, coordinated within and across agencies to improve their recruitment and retention efforts. Specifically, each agency has a designated section 508 coordinator who assists the agency in ensuring that, as required by section 508 of the Rehabilitation Act, employees with disabilities have access to information and data that are comparable to that provided to those without disabilities. In addition, each agency has a single office or primary point of contact that is responsible for overseeing activities related to hiring and retaining employees with disabilities.\nOfficials at all of the agencies we talked to said their agencies engaged in one or more interagency efforts to address disability issues. All of these agencies participate in the CHCO Council, which facilitates sharing of best practices and challenges related to human capital issues, including those related to employees with disabilities. In addition, Education, OMB and SSA officials said that they work with state vocational rehabilitation agencies, which can help them identify accommodations that may be needed for new hires with disabilities. Education and SSA also participate in the Federal Disability Workforce Consortium, an interagency partnership working to improve recruitment, hiring, retention, and advancement of individuals with disabilities by sharing information on disability employment issues across government. SSA and VA have also participated in the Workforce Recruitment Program for College Students VA and Education have also worked together to assist with Disabilities; disabled veterans by providing unpaid work experience at Education, which may lead to permanent employment.\nManaged by Labor’s Office of Disability Employment Policy and the Department of Defense’s Office of Diversity Management and Equal Opportunity, this program is a recruitment and referral effort that connects federal sector employers nationwide with highly motivated college students and recent graduates with disabilities. said that the site is useful for seeing what other agencies are doing, and that they have also shared their own practices on the site.\nTraining for staff at all levels: Agencies can leverage training to communicate expectations about implementation of policies and procedures related to improving employment of people with disabilities, and help disseminate leading practices that can help improve outcomes. All of the selected agencies provide some training for staff at all levels on the importance of workforce diversity. They also require managers and supervisors to take training on hiring procedures related to individuals with disabilities, and the use of Schedule A hiring authority. In addition, VA requires employees at all levels to take training specifically devoted to the legal rights of individuals with disabilities. At Education, this training is required for managers and supervisors, while at SSA it is available but optional for all employees.\nCareer development opportunities: Opportunities for employees with disabilities to participate in work details, rotational assignments, and mentoring programs can lead to increased retention and improved employee satisfaction, and improve employment outcomes by helping managers identify employees with high potential. All of the agencies we interviewed provided special work details or rotational assignments for all employees; one reported having a program exclusively for those with disabilities. Specifically, Education uses Project SEARCH to provide internships for students with disabilities to help them become ready to work through on-the-job training. Education officials reported that some of these internships have led to permanent employment at Education.\nA flexible work environment: Flexible work schedules, telework, and other types of reasonable accommodations are valuable tools for the recruitment and retention of employees, regardless of disability status. Such arrangements can make it easier for employees with health impairments to successfully function in the work environment or facilitate an injured employee’s return to work. All of the agencies we interviewed provide flexible work arrangements, including flexible work schedules and teleworking. These agencies also make assistive technologies, such as screen reader software, available for employees with disabilities, which can facilitate their ability to take advantage of flexible work arrangements. Education, OMB, and SSA also offer all employees opportunities for job sharing.\nCentralized funding for reasonable accommodations: Having a central budget at the highest level of the agency can help ensure that employees with disabilities have access to reasonable accommodations by removing these expenses from local operational budgets and thus reducing managers’ concerns about their costs. Education, SSA, and VA use centralized funding accounts to pay for reasonable accommodations for employees with disabilities. At Education, a centralized fund is usually used to cover expenses related to providing readers, interpreters, and personal attendants. However, in cases where these services are needed on a daily basis, Education may require the operating unit to hire someone full-time and pay for this from their unit budget. OMB provides funding from its own budget to pay for reasonable accommodations, rather than receiving funding from the Executive Office of the President. OMB officials also told us that they also have been able to rely on the Department of Defense’s Computer/Electronic Accommodations Program to help provide reasonable accommodations for some of the employees. This program facilitates access to assistive technology and services to people with disabilities, federal managers, supervisors, and information technology professionals by providing a single point of access for executive branch agencies.", "As the nation’s largest employer, the federal government has the opportunity to be a model for the employment of people with disabilities. Consistent with the July 2010 executive order, OPM, Labor, and other agencies have helped provide the framework for federal agencies to take proactive steps to improve the hiring and retention of persons with disabilities.\nHowever, nearly 2 years after the executive order was signed, the federal government is not on track to achieve the executive order’s goals. Although federal agencies have taken the first step by submitting action plans to OPM for review, many agency plans do not meet the criteria identified by OPM as essential to becoming a model employer of people with disabilities. Though the executive order does not specifically authorize OPM to require agencies to address deficiencies, regularly reporting to the president and others on agency progress in addressing these deficiencies may compel agencies to address them and better position the federal government to reach the goals of the executive order.\nFurther, officials responsible for hiring at federal agencies need to acquire the necessary knowledge and skills to proactively recruit, hire, and retain individuals with disabilities. Agency officials we spoke with said more comprehensive training on the tools available to them, including the requirements of Schedule A hiring authority, is needed. While the mandatory training program remains in development, until it is fully developed and communicated to agencies, opportunities to better inform relevant agency officials on how to increase the employment of individuals with disabilities may be missed.\nFinally, concerns have been raised by stakeholders, including EEOC, OPM, and advocates for people with disabilities, about the reliability of government statistics on the number of individuals with disabilities in the federal government. Most of the concerns focus on the likelihood of underreporting given the reliance on voluntary disclosure, but the extent of the underreporting is unknown. Unreliable data hinder OPM’s ability to measure the population of federal workers with disabilities and may prevent the federal government from developing needed policies and procedures that support efforts to become a model employer of people with disabilities. Determining the accuracy of SF-256 data, for example, by examining the extent to which employees voluntarily disclose their disability status and reasons for nondisclosure, is an essential step for ensuring that OPM can measure progress towards the executive order’s goals.", "To ensure that the federal government is well positioned to become a model employer of individuals with disabilities, we recommend that the Director of OPM take the following three actions: 1. Incorporate information about plan deficiencies into its regular reporting to the president on agencies’ progress in implementing their plans, and inform agencies about this process to better ensure that the plan deficiencies are addressed. 2. Expedite the development of the mandatory training programs for hiring managers and human resource personnel on the employment of individuals with disabilities, as required by the executive order. 3. Assess the extent to which the SF-256 accurately measures progress toward the executive order’s goal and explore options for improving the accuracy of SF-256 reporting, if needed, including strategies for encouraging employees to voluntarily disclose their disability status. Any such strategies must comply with legal standards governing disability-related inquiries, including ensuring that employee rights to voluntarily disclose a disability are not infringed upon.", "We provided a draft of this report to Education, EEOC, Labor, OMB, OPM, SSA, and VA for review and comment. In written comments, OPM agreed with findings and recommendations identified in the report, and described actions being implemented in an effort to address them. To better ensure agencies address deficiencies identified in their disability hiring plans, OPM has begun notifying agencies that it plans to report remaining deficiencies to the president and on the OPM website by August 2012. With regard to the need to expedite the development of the mandatory training program, OPM, in coordination with partner agencies has identified training for hiring managers and supervisors, and Human Resource personnel. Finally, OPM stated that it is engaged in discussions with the White House and stakeholder agencies to better define questions on the SF-256 to increase response rates. OPM also said it plans to work with EEOC and Labor to develop guidance for agencies to encourage voluntary self-disclosure through annual re-surveying of the workforce and providing employees with the option to complete the SF-256 when they request a reasonable accommodation. OPM expects to complete these efforts by January 2013. While these actions may help improve the accuracy of the SF-256 data, we think taking steps to assess the accuracy of the data will enhance OPM’s efforts. For example, understanding the extent to which employees do not voluntarily self- disclose their disability status and the reasons why may help target the messages agencies can use to encourage voluntary self-disclosure. Without such an understanding, OPM and agencies may miss opportunities to increase the accuracy of the data collected on the SF- 256.\nEducation, EEOC, OMB, OPM, and SSA provided technical comments, which have been incorporated into the report as appropriate. Labor and VA had no comments.\nWe are sending copies of this report to Education, EEOC, Labor, OMB, OPM, SSA, and VA and to the appropriate congressional committees and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Yvonne Jones at (202) 512-2717 or JonesY@gao.gov, or Daniel Bertoni at (202) 512-7215 or BertoniD@gao.gov. Contact information for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II.", "", "", "Daniel Bertoni, (202) 512-7215, bertonid@gao.gov. Yvonne D. Jones, (202) 512-2717, jonesy@gao.gov.", "In addition to the contacts named above, Neil Pinney, Assistant Director; Debra Prescott, Assistant Director; Charlesetta Bailey; Benjamin Crawford; Catherine Croake; Karin Fangman; David Forgosh; Robert Gebhart; Michele Grgich; Amy Radovich; Terry Richardson; and Regina Santucci made key contributions to this report.", "Federal Employees’ Compensation Act: Preliminary Observations on Fraud-Prevention Controls. GAO-12-402. Washington, D.C.: January 25, 2012.\nCoast Guard: Continued Improvements Needed to Address Potential Barriers to Equal Employment Opportunity. GAO-12-135. Washington, D.C.: December 6, 2011.\nFederal Workforce: Practices to Increase the Employment of Individuals with Disabilities. GAO-11-351T. Washington, D.C.: February 16, 2011.\nHighlights of a Forum: Participant-Identified Leading Practices That Could Increase the Employment of Individuals with Disabilities in the Federal Workforce. GAO-11-81SP. Washington, D.C.: October 5, 2010.\nHighlights of a Forum: Actions that Could Increase Work Participation for Adults with Disabilities. GAO-10-812SP. Washington, D.C.: July 29, 2010.\nFederal Disability Programs: Coordination Could Facilitate Better Data Collection to Assess the Status of People with Disabilities. GAO-08-872T. Washington, D.C.: June 4, 2008.\nFederal Disability Programs: More Strategic Coordination Could Help Overcome Challenges to Needed Transformation. GAO-08-635. Washington, D.C.: May 20, 2008.\nHighlights of a Forum: Modernizing Federal Disability Policy. GAO-07-934SP. Washington, D.C.: August 3, 2007.\nEqual Employment Opportunity: Improved Coordination Needed between EEOC and OPM in Leading Federal Workplace EEO. GAO-06-214. Washington, D.C.: June 16, 2006.\nResults-Oriented Government: Practices That Can Help Enhance and Sustain Collaboration among Federal Agencies. GAO-06-15. Washington, D.C.: October 21, 2005." ], "depth": [ 1, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "h0_title h2_title", "h0_full h2_full", "h0_full", "h0_full", "", "h0_title h1_title", "h1_full", "h0_full h1_full", "h0_full h2_full", "h0_full", "h2_full", "", "", "", "", "" ] }	{ "question": [ "How has the executive order propelled agencies to help employees with disabilities?", "How has the OPM operated to address disability hiring?", "How has the OPM identified problems in plans to address disability hiring?", "How has the OPM worked with the White House to address flaws in the plans to address disability hiring?", "Why would providing information on deficiencies be beneficial for the White House?", "What is OPM still developing in terms of its mandatory training programs?", "What did agency officials say would be helpful in their efforts?", "How does OPM rely on employees as it is working to track and measure progress towards meeting the executive order’s goals?", "What are the concerns with needing voluntary disclosure?", "How have federal agencies addressed individuals with disabilities?", "What roadblocks hinder agencies plans for individuals with disabilities?", "How have the agencies vocalized their plans for individuals with disabilities?", "What does each agency have to ensure accessible information for employees with disabilities?", "What does VA hold senior managers accountable for?", "How has the federal government supported federal agencies concerning individuals with disabilities?", "What sort of training does each agency require?", "For what do centralized funding accounts pay?", "How did the federal government stance on employees with disabilities change in July 2010?", "What is the OPM's critique on the federal government and the executive order?", "How is the GAO asked to evaluate the implementation of the executive order?", "How is the GAO carrying out its evaluation of the implementation of the executive order?" ], "summary": [ "The Office of Personnel Management (OPM) and the Department of Labor (Labor) have taken steps to implement the executive order and help agencies recruit, hire, and retain more employees with disabilities.", "OPM provided guidance to help agencies develop disability hiring plans and reviewed the 66 plans submitted.", "For example, though 40 of 66 agencies included a process for increasing the use of a special hiring authority to increase the hiring of people with disabilities, 59 agencies did not meet all of OPM’s review criteria, and 32 agencies had not addressed plan deficiencies as of April 2012.", "In response to executive order reporting requirements, OPM officials said they had briefed the White House on issues related to implementation, but they did not provide information on deficiencies in all plans.", "While the order does not specify what information these reports should include beyond addressing progress, providing information on deficiencies would enable the White House to hold agencies accountable.", "OPM is still developing the mandatory training programs for officials on the employment of individuals with disabilities, as required by the executive order.", "Several elective training efforts exist to help agencies hire and retain employees with disabilities, but agency officials said that more information would help them better use available tools.", "To track and measure progress towards meeting the executive order’s goals, OPM relies on employees to voluntarily disclose a disability.", "Yet, agency officials, including OPM’s, are concerned about the quality of the data. For example, agency officials noted that people may not disclose their disability due to concerns about how the information may be used. Without quality data, agencies may be challenged to effectively implement and assess the impact of their disability hiring plans.", "The Department of Education (Education), Social Security Administration (SSA), Office of Management and Budget (OMB), and Department of Veterans Affairs (VA) submitted disability hiring plans, and have taken steps to implement leading practices for increasing employment of individuals with disabilities, such as demonstrating top leadership commitment.", "However, officials at these agencies cited funding constraints as a potential obstacle to hiring more employees with disabilities.", "In terms of leading practices, all four agencies have communicated their commitment to hiring and retaining individuals with disabilities and coordinated within or across other agencies to improve their recruitment and retention efforts.", "For example, each agency has a single point of contact to help ensure that employees with disabilities have access to information that is comparable to that provided to those without disabilities, and for overseeing activities related to hiring and retaining employees with disabilities.", "In addition, VA holds senior managers accountable for meeting hiring goals by including targets in their contracts.", "The executive order provided SSA, VA, and Education an opportunity to further develop existing written plans.", "Each agency requires training for managers and supervisors on procedures for hiring individuals with disabilities, and VA further requires that all employees receive training on the legal rights of individuals with disabilities.", "Education, SSA, and VA rely on centralized funding accounts to pay for reasonable accommodations.", "In July 2010, the president signed Executive Order 13548 committing the federal government to become a model employer of individuals with disabilities and assigned primary oversight responsibilities to OPM and Labor.", "According to OPM, the federal government is not on track to meet the goals of the executive order, which committed the federal government to hire 100,000 workers with disabilities over the next 5 years.", "GAO was asked to examine the efforts that (1) OPM and Labor have made in overseeing federal efforts to implement the executive order; and (2) selected agencies have taken to implement the executive order and to adopt leading practices for hiring and retaining employees with disabilities.", "To conduct this work, GAO reviewed relevant agency documents and interviewed appropriate agency officials. 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CRS_RL33578	{ "title": [ "", "Introduction", "Background", "Energy Tax Policy from 1918 to 1970: Promoting Oil and Gas", "Energy Tax Policy During the 1970s: Conservation and Alternative Fuels", "Energy Tax Policy in the 1980s: The \"Free-Market Approach\"", "Energy Tax Policy After 1988", "Energy Tax Incentives in Comprehensive Energy Legislation Since 1998", "Brief History of Comprehensive Energy Policy Proposals", "Energy Tax Action in the 107th Congress", "Energy Tax Action in the 108th Congress", "Energy Action in the 109th Congress", "The Energy Policy Act of 2005 (P.L. 109-58)", "The Tax Increase Prevention and Reconciliation Act (P.L. 109-222)", "The Tax Relief and Health Care Act of 2006 (P.L. 109-432)", "Current Posture of Energy Tax Policy", "Energy Tax Policy in the 110th Congress", "H.R. 5351", "H.R. 6049", "H.R. 6899", "Substitute Amendment of S. 3478", "The Economic Stabilization Act of 2008 (P.L. 110-343)", "Windfall Profit Tax Legislation", "Energy Tax Provisions in the Farm Bill (P.L. 110-234)", "For Additional Reading" ], "paragraphs": [ "", "Energy tax policy involves the use of the government's main fiscal instruments—taxes (financial disincentives) and tax subsidies (or incentives)—to alter the allocation or configuration of energy resources. In theory, energy taxes and subsidies, like tax policy instruments in general, are intended either to correct a problem or distortion in the energy markets or to achieve some social, economic (efficiency, equity, or even macroeconomic), environmental, or fiscal objective. In practice, however, energy tax policy in the United States is made in a political setting, being determined by the views and interests of the key players in this setting: politicians, special interest groups, bureaucrats, and academic scholars. This implies that the policy does not generally, if ever, adhere to the principles of economic or public finance theory alone; that more often than not, energy tax policy may compound existing distortions, rather than correct them.\nThe idea of applying tax policy instruments to the energy markets is not new, but until the 1970s, energy tax policy had been little used, except for the oil and gas industry. Recurrent energy-related problems since the 1970s—oil embargoes, oil price and supply shocks, wide petroleum price variations and price spikes, large geographical price disparities, tight energy supplies, and rising oil import dependence, as well as increased concern for the environment—have caused policymakers to look toward energy taxes and subsidies with greater frequency.\nComprehensive energy policy legislation containing numerous tax incentives, and some tax increases on the oil industry, was signed on August 8, 2005 ( P.L. 109-58 ). The law, the Energy Policy Act of 2005, contained about $15 billion in energy tax incentives over 11 years, including numerous tax incentives for the supply of conventional fuels. However, record oil industry profits, due primarily to high crude oil and refined oil product prices, and the 2006 mid-term elections, which gave the control of the Congress to the Democratic Party, has changed the mood of policymakers. Instead of stimulating the traditional fuels industry—oil, gas, and electricity from coal—in addition to incentivizing alternative fuels and energy conservation, the mood now is to take away, or rescind, the 2005 tax incentives and use the money to further stimulate alternative fuels and energy conservation. A minor step in this direction was made, on May 17, 2006, when President Bush signed a $70 billion tax reconciliation bill ( P.L. 109-222 ). This bill included a provision that further increased taxes on major integrated oil companies by extending the depreciation recovery period for geological and geophysical costs from two to five years (thus taking back some of the benefits enacted under the 2005 law). And currently, the major tax writing committees in both Houses are considering further, but more significant, tax increases on the oil and gas industry to fund additional tax cuts for the alternative fuels and energy conservation industries. These bills are being considered as part of the debate over new versions of comprehensive energy policy legislation in the 110 th Congress ( H.R. 6 ).\nThis report discusses the history, current posture, and outlook for federal energy tax policy. It also discusses current energy tax proposals and major energy tax provisions enacted in the 109 th Congress. (For a general economic analysis of energy tax policy, see CRS Report RL30406, Energy Tax Policy: An Economic Analysis , by [author name scrubbed].)", "The history of federal energy tax policy can be divided into four eras: the oil and gas period from 1916 to 1970, the energy crisis period of the 1970s, the free-market era of the Reagan Administration, and the post-Reagan era—including the period since 1998, which has witnessed a plethora of energy tax proposals to address recurring energy market problems.", "Historically, federal energy tax policy was focused on increasing domestic oil and gas reserves and production; there were no tax incentives for energy conservation or for alternative fuels. Two oil/gas tax code preferences embodied this policy: (1) expensing of intangible drilling costs (IDCs) and dry hole costs, which was introduced in 1916, and (2) the percentage depletion allowance, first enacted in 1926 (coal was added in 1932).\nExpensing of IDCs (such as labor costs, material costs, supplies, and repairs associated with drilling a well) gave oil and gas producers the benefit of fully deducting from the first year's income (\"writing off\") a significant portion of the total costs of bringing a well into production, costs that would otherwise (i.e., in theory and under standard, accepted tax accounting methods) be capitalized (i.e., written off during the life of the well as income is earned). For dry holes, which comprised on average about 80% of all the wells drilled, the costs were also allowed to be deducted in the year drilled (expensed) and deducted against other types of income, which led to many tax shelters that benefitted primarily high-income taxpayers. Expensing accelerates tax deductions, defers tax liability, and encourages oil and gas prospecting, drilling, and the development of reserves.\nThe oil and gas percentage depletion allowance permitted oil and gas producers to claim 27.5% of revenue as a deduction for the cost of exhaustion or depletion of the deposit, allowing deductions in excess of capital investment (i.e, in excess of adjusted cost depletion)—the economically neutral method of capital recovery for the extractive industries. Percentage depletion encourages faster mineral development than cost depletion (the equivalent of depreciation of plants and equipment).\nThese and other tax subsidies discussed later (e.g., capital gains treatment of the sale of successful properties, the special exemption from the passive loss limitation rules, and special tax credits) reduced marginal effective tax rates in the oil and gas industries, reduced production costs, and increased investments in locating reserves (increased exploration). They also led to more profitable production and some acceleration of oil and gas production (increased rate of extraction), and more rapid depletion of energy resources than would otherwise occur. Such subsidies tend to channel resources into these activities that otherwise would be used for oil and gas activities abroad or for other economic activities in the United States. Relatively low oil prices encouraged petroleum consumption (as opposed to conservation) and inhibited the development of alternatives to fossil fuels, such as unconventional fuels and renewable forms of energy. Oil and gas production increased from 16% of total U.S. energy production in 1920 to 71.1% of total energy production in 1970 (the peak year).", "Three developments during the 1970s caused a dramatic shift in the focus of federal energy tax policy. First, the large revenue losses associated with the oil and gas tax preferences became increasingly hard to justify in the face of increasing federal budget deficits—and in view of the longstanding economic arguments against the special tax treatment for oil and gas, as noted in the above paragraph. Second, heightened awareness of environmental pollution and concern for environmental degradation, and the increased importance of distributional issues in policy formulation (i.e., equity and fairness), lost the domestic oil and gas industry much political support. Thus, it became more difficult to justify percentage depletion and other subsidies, largely claimed by wealthy individuals and big vertically integrated oil companies. More importantly, during the 1970s there were two energy crises: the oil embargo of 1973, also known as the first oil shock, and the Iranian Revolution in 1978-1979, which focused policymakers' attention on the problems (alleged \"failures\") in the energy markets and how these problems reverberated throughout the economy, causing stagflation, shortages, productivity problems, rising import dependence, and other economic and social problems.\nThese developments caused federal energy tax policy to shift from oil and gas supply toward energy conservation (reduced energy demand) and alternative energy sources.\nThree broad actions were taken through the tax code to implement the new energy tax policy during the 1970s. First, the oil industry's two major tax preferences—expensing of IDCs and percentage depletion—were significantly reduced, particularly the percentage depletion allowance, which was eliminated for the major integrated oil companies and reduced for the remaining producers. Other oil and gas tax benefits were also cut back during this period. For example, oil- and gas-fired boilers used in steam generation (e.g., to generate electricity) could no longer qualify for accelerated depreciation as a result of the Energy Tax Act of 1978 (as discussed below).\nThe second broad policy action was the imposition of several new excise taxes penalizing the use of conventional fossil fuels, particularly oil and gas (and later coal). The Energy Tax Act of 1978 (ETA, P.L. 95-618 ) created a federal \"gas guzzler\" excise tax on the sale of automobiles with relatively low fuel economy ratings. This tax, which is still in effect, currently ranges from $1,000 for an automobile rated between 21.5 and 22.5 miles per gallon (mpg) to $7,700 for an automobile rated at less than 12.5 mpg. Chief among the taxes on oil was the windfall profit tax (WPT) enacted in 1980 ( P.L. 96-223 ). The WPT imposed an excise tax of 15% to 70% on the difference between the market price of oil and a predetermined (adjusted) base price. This tax, which was repealed in 1988, was part of a political compromise that decontrolled oil prices. (Between 1971 and 1980, oil prices were controlled under President Nixon's Economic Stabilization Act of 1970—the so-called \"wage-price freeze.\") (For more detail on the windfall profit tax on crude oil that was imposed from 1980 until its repeal in 1988, see CRS Report RL33305, The Crude Oil Windfall Profit Tax of the 1980s: Implications for Current Energy Policy , by [author name scrubbed].)\nAnother, but relatively small, excise tax on petroleum was instituted in 1980: the environmental excise tax on crude oil received at a U.S. refinery. This tax, part of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ( P.L. 96-510 ), otherwise known as the \"Superfund\" program, was designed to charge oil refineries for the cost of releasing any hazardous materials that resulted from the refining of crude oil. The tax rate was set initially at 0.79¢ ($0.0079) per barrel and was subsequently raised to 9.70¢ per barrel. This tax expired at the end of 1995, but legislation has been proposed since then to reinstate it as part of Superfund reauthorization.\nThe third broad action taken during the 1970s to implement the new and refocused energy tax policy was the introduction of numerous tax incentives or subsidies (e.g., special tax credits, deductions, exclusions) for energy conservation, the development of alternative fuels (renewable and nonconventional fuels), and the commercialization of energy efficiency and alternative fuels technologies. Most of these new tax subsidies were introduced as part of the Energy Tax Act of 1978 and expanded under the WPT, which also introduced additional new energy tax subsidies. The following list describes these:\nResidential and Business Energy Tax Credits. The ETA provided income tax credits for homeowners and businesses that invested in a variety of energy conservation products (e.g., insulation and other energy-conserving components) and for solar and wind energy equipment installed in a principal home or a business. The business energy tax credits were 10% to 15% of the investment in conservation or alternative fuels technologies, such as synthetic fuels, solar, wind, geothermal, and biomass. These tax credits were also expanded as part of the WPT, but they generally expired (except for business use of solar and geothermal technologies) as scheduled either in 1982 or 1985. A 15% investment tax credit for business use of solar and geothermal energy, which was made permanent, is all that remains of these tax credits. Tax Subsidies for Alcohol Fuels. The ETA also introduced the excise tax exemption for gasohol, recently at 5.2¢ per gallon out of a gasoline tax of 18.4¢/gal. Subsequent legislation extended the exemption and converted it into an immediate tax credit (currently at 51¢/gallon of ethanol ). Percentage Depletion for Geothermal . The ETA made geothermal deposits eligible for the percentage depletion allowance, at the rate of 22%. Currently the rate is 15%. §29 Tax Credit for Unconventional Fuels. The 1980 WPT included a $3.00 (in 1979 dollars) production tax credit to stimulate the supply of selected unconventional fuels: oil from shale or tar sands, gas produced from geo-pressurized brine, Devonian shale, tight formations, or coalbed methane, gas from biomass, and synthetic fuels from coal. In current dollars this credit, which is still in effect for certain types of fuels, was $6.56 per barrel of liquid fuels and about $1.16 per thousand cubic feet (mcf) of gas in 2004. Tax-Exempt Interest on Industrial Development Bonds. The WPT made facilities for producing fuels from solid waste exempt from federal taxation of interest on industrial development bonds (IDBs). This exemption was for the benefit of the development of alcohol fuels produced from biomass, for solid-waste-to-energy facilities, for hydroelectric facilities, and for facilities for producing renewable energy. IDBs, which provide significant benefits to state and local electric utilities (public power), had become a popular source of financing for renewable energy projects.\nSome of these incentives—for example, the residential energy tax credits—have since expired, but others remain and still new ones have been introduced, such as the §45 renewable electricity tax credit, which was introduced in 1992 and expanded under the American Jobs Creation Act of 2004 ( P.L. 108-357 ). This approach toward energy tax policy—subsidizing a plethora of different forms of energy (both conventional and renewable) and providing incentives for diverse energy conservation (efficiency) technologies in as many sectors as possible—has been the paradigm followed by policymakers since the 1970s. A significant increase in nontax interventions in the energy markets—laws and regulations, such as the Corporate Average Fuel Economy (CAFE) standards to reduce transportation fuel use, and other interventions through the budget and the credit markets—has also been a significant feature of energy policy since the 1970s. This included some of the most extensive energy legislation ever enacted.", "The Reagan Administration opposed using the tax law to promote oil and gas development, energy conservation, or the supply of alternative fuels. The idea was to have a more neutral and less distortionary energy tax policy, which economic theory predicts would make energy markets work more efficiently and generate benefits to the general economy. The Reagan Administration believed that the responsibility for commercializing conservation and alternative energy technologies rested with the private sector and that high oil prices—real oil prices (corrected for inflation) were at historically high levels in 1981 and 1982—would be ample encouragement for the development of alternative energy resources. High oil prices in themselves create conservation incentives and stimulate oil and gas production.\nPresident Reagan's free-market views were well known prior to his election. During the 1980 presidential campaign, he proposed repealing the WPT, deregulating oil and natural gas prices, and minimizing government intervention in the energy markets. The Reagan Administration's energy tax policy was professed more formally in several energy and tax policy studies, including its 1981 National Energy Policy Plan and the 1983 update to this plan; it culminated in a 1984 Treasury study on general tax reform, which also proposed fundamental reforms of federal energy tax policy. In terms of actual legislation, many of the Reagan Administration's objectives were realized, although as discussed below there were unintended effects.\nIn 1982, the business energy tax credits on most types of nonrenewable technologies—those enacted under the ETA of 1978—were allowed to expire as scheduled; other business credits and the residential energy tax credits were allowed to expire at the end of 1985, also as scheduled. Only the tax credits for business solar, geothermal, ocean thermal, and biomass technologies were extended. As mentioned above, today the tax credit for business investment in solar and geothermal technologies, which has since been reduced to 10%, is all that remains of these tax credits. A final accomplishment was the repeal of the WPT, but not until 1988, the end of Reagan's second term. The Reagan Administration's other energy tax policy proposals, however, were not adopted. The tax incentives for oil and gas were not eliminated, although they were pared back as part of the Tax Reform Act (TRA) of 1986.\nAlthough the Reagan Administration's objective was to create a free-market energy policy, significant liberalization of the depreciation system and reduction in marginal tax rates—both the result of the Economic Recovery Tax Act of 1981 (ERTA, P.L. 97-34 )—combined with the regular investment tax credit and the business energy investment tax credits, resulted in negative effective tax rates for many investments, including alternative energy investments, such as solar and synthetic fuels. Also, the retention of percentage depletion and expensing of IDCs (even at the reduced rates) rendered oil and gas investments still favored relative to investments in general.", "After the Reagan Administration, several major energy and non-energy laws were enacted that amended the energy tax laws in several ways, some major.\nRevenue Provisions of the Omnibus Reconciliation Act of 1990. President George H.W. Bush's first major tax law included numerous energy tax incentives: (1) for conservation (and deficit reduction), the law increased the gasoline tax by 5¢/gallon and doubled the gas-guzzler tax; (2) for oil and gas, the law introduced a 10% tax credit for enhanced oil recovery expenditures, liberalized some of the restrictions on the percentage depletion allowance, and reduced the impact of the alternative minimum tax on oil and gas investments; and (3) for alternative fuels, the law expanded the §29 tax credit for unconventional fuels and introduced the tax credit for small producers of ethanol used as a motor fuel. Energy Policy Act of 1992 ( P.L. 102-486 ). This broad energy measure introduced the §45 tax credit, at 1.5¢ per kilowatt hour, for electricity generated from wind and \"closed-loop\" biomass systems. (Poultry litter was added later.) For new facilities, this tax credit expired at the end of 2001 and again in 2003 but has been retroactively extended by recent tax legislation (as discussed below). In addition, the 1992 law (1) added an income tax deduction for the costs, up to $2,000, of clean-fuel powered vehicles; (2) liberalized the alcohol fuels tax exemption; (3) expanded the §29 production tax credit for nonconventional energy resources; and (4) liberalized the tax breaks for oil and gas. Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). President Clinton proposed a differential Btu tax on fossil fuels (a broadly based general tax primarily on oil, gas, and coal based on the British thermal units of heat output), which was dropped in favor of a broadly applied 4.3¢/gallon increase in the excise taxes on motor fuels, with revenues allocated for deficit reduction rather than the various trust funds. Taxpayer Relief Act of 1997 ( P.L. 105-34 ) . This law included a variety of excise tax provisions for motor fuels, of which some involved tax reductions on alternative transportation fuels, and some involved increases, such as on kerosene, which on balance further tilted energy tax policy toward alternative fuels. Tax Relief and Extension Act. Enacted as Title V of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ), it extended and liberalized the 1.5¢/kWh renewable electricity production tax credit, and renewed the suspension of the net income limit on the percentage depletion allowance for marginal oil and gas wells.\nAs this list suggests, the post-Reagan energy tax policy returned more to the interventionist course established during the 1970s and primarily was directed at energy conservation and alternative fuels, mostly for the purpose of reducing oil import dependence and enhancing energy security. However, there is an environmental twist to energy tax policy during this period, particularly in the Clinton years. Fiscal concerns, which for most of that period created a perennial search for more revenues to reduce budget deficits, have also driven energy tax policy proposals during the post-Reagan era. This is underscored by proposals, which have not been enacted, to impose broad-based energy taxes such as the Btu tax or the carbon tax to mitigate greenhouse gas emissions.\nAnother interesting feature of the post-Reagan energy tax policy is that while the primary focus continues to be energy conservation and alternative fuels, no energy tax legislation has been enacted during this period that does not also include some, relatively minor, tax relief for the oil and gas industry, either in the form of new tax incentives or liberalization of existing tax breaks (or both).", "Several negative energy market developments since about 1998, characterized by some as an \"energy crisis,\" have led to congressional action on comprehensive energy proposals, which included numerous energy tax incentives.", "Although the primary rationale for comprehensive energy legislation has historically been spiking petroleum prices, and to a lesser extent spiking natural gas and electricity prices, the origin of bills introduced in the late 1990s was the very low crude oil prices of that period. Domestic crude oil prices reached a low of just over $10 per barrel in the winter of 1998-1999, among the lowest crude oil prices in history after correcting for inflation. From 1986 to 1999, oil prices averaged about $17 per barrel, fluctuating between $12 and $20 per barrel. These low oil prices hurt oil producers, benefitted oil refiners, and encouraged consumption. They also served as a disincentive to conservation and investment in energy efficiency technologies and discouraged production of alternative fuels and renewable technologies. To address the low oil prices, there were many tax bills in the first session of the 106 th Congress (1999) focused on production tax credits for marginal or stripper wells, but they also included carryback provisions for net operating losses, and other fossil fuels supply provisions.\nBy summer 1999, crude oil prices rose to about $20 per barrel, and peaked at more than $30 per barrel by summer 2000, causing higher gasoline, diesel, and heating oil prices. To address the effects of rising crude oil prices, legislative proposals again focused on production tax credits and other supply incentives. The rationale was not tax relief for a depressed industry but tax incentives to increase output, reduce prices, and provide price relief to consumers.\nIn addition to higher petroleum prices there were forces—some of which were understood (factors such as environmental regulations and pipeline breaks) and others that are still are not so clearly understood—that caused the prices of refined petroleum products to spike. In response, there were proposals in 2000 to either temporarily reduce or eliminate the federal excise tax on gasoline, diesel, and other special motor fuels. The proposals aimed to help consumers (including truckers) cushion the financial effect of the price spikes. The Midwest gasoline price spike in summer 2000 kept interest in these excise tax moratoria alive and generated interest in proposals for a windfall profit tax on oil companies, which, by then, were earning substantial profits from high prices.\nDespite numerous bills to address these issues, no major energy tax bill was enacted in the 106 th Congress. However, some minor amendments to energy tax provisions were enacted as part of non-energy tax bills. This includes Title V of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ). Also, the 106 th Congress did enact a package of $500 million in loan guarantees for small independent oil and gas producers ( P.L. 106-51 ).", "In early 2001, the 107 th Congress faced a combination of fluctuating oil prices, an electricity crisis in California, and spiking natural gas prices. The gas prices had increased steadily in 2000 and reached $9 per thousand cubic feet (mcf) at the outset of the 107 th Congress. At one point, spot market prices reached about $30 per mcf, the energy equivalent of $175 per barrel of oil. The combination of energy problems had developed into an \"energy crisis,\" which prompted congressional action on a comprehensive energy policy bill—the first since 1992—that included a significant expansion of energy tax incentives and subsidies and other energy policy measures.\nIn 2002, the House and Senate approved two distinct versions of an omnibus energy bill, H.R. 4 . While there were substantial differences in the nontax provisions of the bill, the energy tax measures also differed significantly. The House bill proposed larger energy tax cuts, with some energy tax increases. It would have reduced energy taxes by about $36.5 billion over 10 years, in contrast to the Senate bill, which cut about $18.3 billion over 10 years, including about $5.1 billion in tax credits over 10 years for two mandates: a renewable energy portfolio standard ($0.3 billion) and a renewable fuel standard ($4.8 billion). The House version emphasized conventional fuels supply, including capital investment incentives to stimulate production and distribution of oil, natural gas, and electricity. This focus assumed that recent energy problems were due mainly to supply and capacity shortages driven by economic growth and low energy prices. In comparison, the Senate bill would have provided a much smaller amount of tax incentives for fossil fuels and nuclear power and somewhat fewer incentives for energy efficiency, but provided more incentives for alternative and renewable fuels. The conference committee on H.R. 4 could not resolve differences, so the bills were dropped on November 13, 2002.", "On the House side, on April 3, 2003, the Ways and Means Committee (WMC) voted 24-12 for an energy tax incentives bill ( H.R. 1531 ) that was incorporated into H.R. 6 and approved by the House on April 11, 2003, by a vote of 247-175. The House version of H.R. 6 provided about $17.1 billion of energy tax incentives and included $83 million of non-energy tax increases, or offsets. This bill was a substantially scaled-down version of the House energy tax bill, H.R. 2511 (107 th Congress), which was incorporated into H.R. 4 , the House energy bill of the 107 th Congress that never became law. After returning from the August 2003 recess, a House and Senate conference committee negotiated differences among provisions in three energy policy bills: the House and Senate versions of H.R. 6 , and a substitute to the Senate Finance Committee (SFC) bill—a modified (or amended) version of S. 1149 substituted for Senate H.R. 6 in conference as S.Amdt. 1424 and S.Amdt. 1431 .\nOn November 14, 2003, House and Senate conferees reconciled the few remaining differences over the two conference versions of H.R. 6 , which primarily centered on several energy tax issues—ethanol tax subsidies, the §29 unconventional fuels tax credit, tax incentives for nuclear power, and clean coal. On November 18, 2003, the House approved, by a fairly wide margin (246-180), the conference report containing about $23.5 billion of energy tax incentives. However, the proposed ethanol mandate would further reduce energy tax receipts—the 10-year revenue loss was projected to be around $26 billion. On November 24, Senate Republicans put aside attempts to enact H.R. 6 . A number of uneasy alliances pieced together to bridge contentious divides over regional issues as varied as electricity, fuel additives (MTBE), and natural gas subsidies, failed to secure the necessary 60 votes to overcome a Democratic filibuster before Congress's adjournment for the holiday season. This represented the third attempt to pass comprehensive energy legislation, a top priority for many Republicans in Congress and for President Bush.\nSenator Domenici introduced a smaller energy bill as S. 2095 on February 12, 2004. S. 2095 included a slightly modified version of the amended energy tax bill S. 1149 ; the tax provisions of S. 2095 were added to the export tax repeal bill S. 1637 , on April 5, 2004. The Senate approved S. 1637 , with the energy tax measures, on May 11. H.R. 4520 , the House version of the export tax repeal legislation, did not contain energy tax measures; they were incorporated into H.R. 6 .\nSome energy tax incentives were enacted on October 4, 2004, as part of the Working Families Tax Relief Act of 2004 ( P.L. 108-311 ), a $146 billion package of middle class and business tax breaks. This legislation, which was signed into law on October 4, 2004, retroactively extended four energy tax subsidies: the §45 renewable tax credit, suspension of the 100% net income limitation for the oil and gas percentage depletion allowance, the $4,000 tax credit for electric vehicles, and the deduction for clean fuel vehicles (which ranges from $2,000 to $50,000). The §45 tax credit and the suspension of the 100% net income limitation had each expired on January 1, 2004; they were retroactively extended through December 31, 2005. The electric vehicle credit and the clean-vehicle income tax deduction were being phased out gradually beginning on January 1, 2004. P.L. 108-311 arrested the phase-down—providing 100% of the tax breaks—through 2005, but resumed it beginning on January 1, 2006, when only 25% of the tax break was available. (For more information, see CRS Report RL32265, Expired and Expiring Energy Tax Incentives , by [author name scrubbed].)\nThe American Jobs Creation Act of 2004 ( P.L. 108-357 ), commonly referred to as the \"FSC-ETI\" or \"jobs\" bill, was enacted on October 22, 2004. It included about $5 billion in energy tax incentives.", "The 109 th Congress enacted the Energy Policy Act of 2005 ( P.L. 109-58 ), which included the most extensive amendments to U.S. energy tax laws since 1992, and the Tax Relief and Health Care Act of 2006, which extended the energy tax subsidies enacted under the 2005 Energy Policy Act (EPACT05).", "On June 28, 2005, the Senate approved by an 85-12 vote a broadly based energy bill ( H.R. 6 ) with an 11-year, $18.6 billion package of energy tax breaks tilted toward renewable energy resources and conservation. Joint Committee on Taxation figures released on June 28 show that the bill included about $0.2 billion in non-energy tax cuts and more than $4.7 billion in revenue offsets, meaning the bill had a total tax cut of $18.8 billion over 11 years, offset by the $4.7 billion in tax increases. The House energy bill, which included energy tax incentives totaling about $8.1 billion over 11 years, and no tax increases, was approved in April. This bill was weighted almost entirely toward fossil fuels and electricity supply. On July 27, 2005, the conference committee on H.R. 6 reached agreement on $11.1 billion of energy tax incentives, including $3 billion in tax increases (both energy and non-energy). The distribution of the cuts by type of fuel for each of the three versions of H.R. 6 is shown in Table 1 .\nOne way to briefly compare the two measures is to compare revenue losses from the energy tax incentives alone and the percentage distribution by type of incentive as a percent of the net energy tax cuts (i.e., the columns marked \"%\" divided by the dollar figures in row 11). The net revenue losses over an 11-year time frame from FY2005 to FY2015 were estimated by the Joint Committee on Taxation. The total revenue losses are reported in two ways. The absolute dollar value of tax cuts over 11 years and the percentage distribution of total revenue losses by type of incentive for each measure.\nTable 1 shows that the conference report provided about $1.3 billion for energy efficiency and conservation, including a deduction for energy-efficient commercial property, fuel cells, and micro-turbines, and $4.5 billion in renewables incentives, including a two-year extension of the tax code §45 credit, renewable energy bonds, and business credits for solar. A $2.6 billion package of oil and gas incentives included seven-year depreciation for natural gas gathering lines, a refinery expensing provision, and a small refiner definition for refiner depletion. A nearly $3 billion coal package provided for an 84-month amortization for pollution control facilities and treatment of §29 as a general business credit. More than $3 billion in electricity incentives leaned more toward the House version, including provisions providing 15-year depreciation for transmission property, nuclear decommissioning provisions, and a nuclear electricity production tax credit. It also provided for the five-year carryback of net operating losses of certain electric utility companies. A Senate-passed tax credit to encourage the recycling of a variety of items, including paper, glass, plastics, and electronic products, was dropped from the final version of the energy bill ( H.R. 6 ). Instead, conferees included a provision requiring the Treasury and Energy departments to conduct a study on recycling. The House approved the conference report on July 28, 2005; the Senate on June 28, 2005, one month later on July 28, 2005, clearing it for the President's signature on August 8 ( P.L. 109-58 ).\nFour revenue offsets were retained in the conference report: reinstatement of the Oil Spill Liability Trust Fund; extension of the Leaking Underground Storage Tank (LUST) trust fund rate, which would be expanded to all fuels; modification of the §197 amortization, and a small increase in the excise taxes on tires. The offsets total roughly $3 billion compared with nearly $5 billion in the Senate-approved H.R. 6 . Because the oil spill liability tax and the Leaking Underground Storage Tank financing taxes are imposed on oil refineries, the oil and gas refinery and distribution sector (row 2 of Table 1 ) received a net tax increase of $1,769 ($2,857-$1,088).", "After expanding energy tax incentives in the EPACT05, the 109 th Congress moved to rescind oil and gas incentives, and even to raise energy taxes on oil and gas, in response to the high energy prices and resulting record oil and gas industry profits. Many bills were introduced in the 109 th Congress to pare back or repeal the oil and gas industry tax subsidies and other loopholes, both those enacted under EPACT05 as well as those that preexisted EPACT05. Many of the bills focused on the oil and gas exploration and development (E&D) subsidy—expensing of intangible drilling costs (IDCs). This subsidy, which has been in existence since the early days of the income tax, is available to integrated and independent oil and gas companies, both large and small alike. It is an exploration and development incentive, which allows the immediate tax write-off of what economically are capital costs, that is, the costs of creating a capital asset (the oil and gas well).\nPublic and congressional outcry over high crude oil and product prices, and the oil and gas industry's record profits, did lead to a paring back of one of EPACT05's tax subsidies: two-year amortization, rather than capitalization, of geological and geophysical (G&G) costs, including those associated with abandoned wells (dry holes). Prior to the EPACT05, G&G costs for dry holes were expensed in the first year and for successful wells they were capitalized, which is consistent with economic theory and accounting principles. The Tax Increase Prevention and Reconciliation Act, ( P.L. 109-222 ), signed into law May 2006, reduced the value of the subsidy by raising the amortization period from two years to five years, still faster than the capitalization treatment before the 2005 act, but slower than the treatment under that act. The higher amortization period applies only to the major integrated oil companies—independent (unintegrated) oil companies may continue to amortize all G&G costs over two years—and it applies to abandoned as well as successful properties. This change increased taxes on major integrated oil companies by an estimated $189 million over 10 years, effectively rescinding about 20% of the nearly $1.1 billion 11-year tax for oil and gas production under EPACT05.", "At the end of 2006, the 109 th Congress enacted a tax extenders package that included extension of numerous renewable energy and excise tax provisions. Many of the renewable energy provision in this bill had already been extended under the Energy Policy Act of 2005 and were not set to expire until the end of 2007 or later.\nThe Tax Relief and Health Care Act of 2006 provided for one-year extensions of these provisions.", "The above background discussion of energy tax policy may be conveniently summarized in Table 2 , which shows current energy tax provisions—both special (or targeted) energy tax subsidies and targeted energy taxes—and related revenue effects. A minus sign (\"-\") indicates revenue losses, which means that the provision is a tax subsidy or incentive, intended to increase the subsidized activity (energy conservation measures or the supply of some alternative and renewable fuel or technology); no minus sign means that the provision is a tax, which means that it should reduce supply of, or demand for, the taxed activity (either conventional fuel supply, energy demand, or the demand for energy-using technologies, such as cars).\nNote that the table defines those special or targeted tax subsidies or incentives as those that are due to provisions in the tax law that apply only to that particular industry and not to others. Thus, for example, in the case of the oil and gas industry, the table excludes tax subsidies and incentives of current law that may apply generally to all businesses but that may also confer tax benefits to it. There are numerous such provisions in the tax code; a complete listing of them is beyond the scope of this report. However, the following example illustrates the point: The current system of depreciation allows the writeoff of equipment and structures somewhat faster than would be the case under both general accounting principles and economic theory; the Joint Committee on Taxation treats the excess of depreciation deductions over the alternative depreciation system as a tax subsidy (or \"tax expenditure\"). In FY2006, the JCT estimates that the aggregate revenue loss from this accelerated depreciation deduction (including the expensing under IRC §179) is $6.7 billion. A certain, but unknown, fraction of this revenue loss or tax benefits accrues to the domestic oil and gas industry, but separate estimates are unavailable. This point applies to all the industries reflected in Table 2 .", "Continued high crude oil and petroleum product prices and oil and gas industry profits, and the political realignment of the Congress resulting from the 2006 Congressional elections continued the energy policy shift toward increased taxes on the oil and gas industry, and the emphasis on energy conservation and alternative and renewable fuels rather than conventional hydrocarbons. In the 110 th Congress, the shift became reflected in proposals to reduce oil and gas production incentives or subsidies, which were initially incorporated into, but ultimately dropped from comprehensive energy policy legislation. In the debate over these two comprehensive energy bills, raising taxes on the oil and gas industry, by either repealing tax incentives enacted under EPACT05, by introducing new taxes on the industry, or by other means was a key objective, motivated by the feeling that additional tax incentives were unnecessary—record crude oil and gasoline prices and industry profits provides sufficient (if not excessive) incentives.\nIn early December 2007, it appeared that the congressional conferees had reached agreement on another comprehensive energy bill, the Energy Independence and Security Act ( H.R. 6 ), and particularly on the controversial energy tax provisions. The Democratic leadership in the 110 th Congress proposed to eliminate or reduce tax subsidies for oil and gas and use the additional revenues to increase funding for their energy policy priorities: energy efficiency and alternative and renewable fuels (i.e., reducing fossil fuel demand) rather than an energy (oil and gas) supply increase. In addition, congressional leaders wanted to extend many of the energy efficiency and renewable fuels tax incentives that either had expired or were about to expire.\nThe compromise on the energy tax title in H.R. 6 proposed to raise taxes by about $21 billion to fund extensions and liberalization of existing energy tax incentives. However, the Senate stripped the controversial tax title from its version of the comprehensive energy bill ( H.R. 6 ) and then passed the bill (86-8) on December 13, 2007, leading to the President's signing of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ), on December 19, 2007. The only tax-related provisions that survived were (1) an extension of the Federal Unemployment Tax Act surtax for one year, raising about $1.5 billion, (2) higher penalties for failure to file partnership returns, increasing revenues by $655 million, and (3) an extension of the amortization period for geological and geophysical expenditures from five to seven years, raising $103 million in revenues. The latter provision was the only tax increase on the oil and gas industry in the final bill. Those three provisions would offset the $2.1 billion in lost excise tax revenues going into the federal Highway Trust Fund as a result of the implementation of the revised Corporate Average Fuel Economy standards. The decision to strip the much larger $21 billion tax title stemmed from a White House veto threat and the Senate's inability to get the votes required to end debate on the bill earlier in the day. Senate Majority Leader Harry Reid's (D-Nev.) effort to invoke cloture fell short by one vote, in a 59-40 tally.\nSince then, the Congress had tried several times to pass energy tax legislation, and thus avoid the impending expiration of several popular energy tax incentives, such as the \"wind\" energy tax credit under Internal Revenue Code (IRC) §45, which, since its enactment in 1992, had lapsed three times only to be reinstated. Several energy tax bills have passed the House but not the Senate, where on several occasions, the failure to invoke cloture failed to bring up the legislation for consideration. Senate Republicans objected to the idea of raising taxes to offset extension of expiring energy tax provisions, which they consider to be an extension of current tax policy rather than new tax policy. In addition, Senate Republicans objected to raising taxes on the oil and gas industry, such as by repealing the (IRC) §199 deduction, and by streamlining the foreign tax credit for oil companies. The Bush administration repeatedly threatened to veto these types of energy tax bills, in part because of their proposed increased taxes on the oil and gas industry.", "Frustrated with the lack of action on energy tax legislation over the last two years, House Democrats introduced and approved several such bills, such as H.R. 5351 , which was approved by the House on February 27, 2008. House Speaker Pelosi and other Democrats sent President Bush a letter February 28, 2008, urging him to reconsider his opposition to the Democratic renewable energy plan, arguing that their energy tax plan would \"correct an imbalance in the tax code.\"", "As noted, several times the House had approved energy tax legislation, and several times in the Senate such legislation failed a cloture vote and thus could not be brought to the floor for debate. The latest was H.R. 6049 , the House tax extenders bill, which was approved by the House on May 21, 2008, but failed three cloture votes in the Senate.", "In the House, energy tax provisions were part of H.R. 6899 , House Democratic leadership's draft of broad-based energy policy legislation, the Comprehensive American Energy Security and Consumer Protection Act. Passed on September 16, 2008, the bill reverses the long-standing opposition of Democratic leaders to expanding oil and gas drilling offshore by allowing oil and gas exploration and production in areas of the outer continental shelf that are currently off limits, except for waters in the Gulf of Mexico off the Florida coast. Under the bill, states could allow such drilling between 50 and 100 miles offshore, while the federal government could permit drilling from 100 to 200 miles offshore. Revenue from the new offshore leases would be used to assist the development of alternative energy, and would not be shared by the adjacent coastal states. The bill also repeals the current ban on leasing federal lands for oil shale production if states enact laws providing for such leases and production. H.R. 6899 also enacts a renewable portfolio standard, a mandate or requirement that power companies must generate 15% of their energy from renewable sources by 2020.\nThe energy tax provisions in H.R. 6899 (Title XIII, the Energy Tax Incentives Act of 2008) are largely the same as those in H.R. 5351", "In the Senate, legislative efforts on energy tax incentives and energy tax extenders had centered around S. 3478 , the Energy Independence and Investment Act of 2008, a $40 billion energy tax bill offered by Finance Committee Chairman Max Baucus and ranking Republican Charles Grassley. Senate Majority Leader Harry Reid said on September 12 that S. 3478 was \"must-pass\" legislation. Reid told reporters the energy tax package, which includes extensions of tax incentives for renewable energy, should be prioritized even ahead of the broader energy policy bills being considered, and the rest of the non-energy tax extenders package. Reid said he hopes to bring the bill to the floor during the week of September 15, but noted that the schedule depends on whether Senate Republicans will agree to move to the legislation.\nAlthough most of the tax incentives in the bill are extensions of existing policy and are not controversial, the legislation would need to be paid for through new sources of revenue. One proposed offset—which had been previously blocked by some Republicans—would have completely repealed the IRC §199 manufacturing deduction for the five major oil and gas producers, raising $13.9 billion over 10 years. The bill also would have included a new 13% excise tax on oil and natural gas pumped from the Outer Continental Shelf, a proposal to eliminate the distinction between foreign oil-and-gas extraction income and foreign oil-related income, and an extension and increase in the oil spill tax through the end of 2017. In total, tax increases on the oil and gas industry would account for $31 billion of the $40 billion total cost of the legislation. The final major offset would have come from a requirement on securities brokers to report on the cost basis for transactions they handle to the Internal Revenue Service, a provision expected to raise about $8 billion in new revenues over 10 years.", "As noted above, some Republicans had, in the past, objected to the idea of raising taxes to offset extension of expiring energy tax provisions, which they consider to be an extension of current tax policy rather than new tax policy. In addition, some Senate Republicans have objected to raising taxes on the oil and gas industry, particularly by repealing the IRC §199 deduction. The Bush Administration threatened also to veto any energy tax bill that would increase taxes on the oil and gas industry. At this writing, it appears that inclusion of the §199 deduction repeal as an offset might preclude the energy tax bill from coming to the Senate floor—some believe that it would fail another cloture vote—so this provision might not survive the process.\nGiven continued Republican opposition (including a possible Presidential veto), and to avoid another legislative impasse—a failed cloture vote—Senators Baucus and Grassley released a scaled-down version of S. 3478 . This energy tax extenders package (i.e., the substitute of S. 3478 ) is a substitute amendment to the previously House-approved energy tax extenders bill H.R. 6049 ; is valued at nearly $17 billion, less than half the size of S. 3478 ; and is fully offset. The modified draft bill would also raise revenue by increasing the tax burden on the oil industry. Unlike the original version of S. 3478 , however, which would have repealed the §199 for major integrated oil companies completely, the substitute bill would freeze the value of the manufacturing deduction for all oil companies at 6%, the current rate. This modification is estimated to raise $4.9 billion over 10 years, about 2/3 less than complete repeal. Because of smaller tax increases, the bill's remaining provisions—measures to increase tax subsidies for renewable fuels and for energy efficiency—had to be cut back. Thus, the scaled-down bill drops the nuclear electricity production tax credit provision, scales back the §45 renewable electricity tax credit, and generally shortens the extension periods.\nThe substitute amendment of S. 3478 ( S.Amdt. 5633 ) was added to H.R. 6049 , which also includes an AMT patch, disaster tax relief, and extensions of (non-energy) individual and business tax provisions. It was passed by the Senate on September 23, by a vote of 93-2. There was only one change to the original Baucus/Grassley substitute version: Language extending a 10¢ per-gallon credit for small producers of alcohol fuels was eliminated in the final bill.\nFinally, H.R. 6049 , including the energy tax amendments approved by the Senate, were added to the economic stabilization legislation ( H.R. 1424 ) as Subdivision B, the Energy Improvement and Extension Act of 2008. On October 3, President Bush signed this legislation, the Economic Stabilization Act of 2008 ( P.L. 110-343 ), which includes $17 billion in energy tax incentives, primarily extensions of pre-existing provisions, but also including several new energy tax incentives: $10.9 billion in renewable energy tax incentives aimed at clean energy production, $2.6 billion in incentives targeted toward cleaner vehicles and fuels, and $3.5 billion in tax breaks to promote energy conservation and energy efficiency. The cost of the energy tax extenders legislation is fully financed, or paid for, by raising taxes on the oil and gas industry (mostly by reducing oil and gas tax breaks) and by other tax increases. The oil and gas tax increases comprise cutbacks in the IRC §199 manufacturing deduction for income attributable to oil and gas production, which will be frozen at 6% (rather than increasing to 9% as scheduled), reforming the foreign tax credit provisions, and by increasing the per-barrel tax rate on refinery crude oil under the Oil Spill Liability Trust Fund provisions.", "Over the past ten years, surging crude oil and petroleum product prices have increased oil and gas industry revenues and generated record profits particularly for the top five major integrated companies (also known as the \"super-majors\"): Exxon-Mobil, Royal Dutch Shell, BP, Chevron, and Conoco/Phillips. These companies, which reported a predominate share of those profits, generated over $100 billion dollars in profits on nearly $1.5 trillion of revenues in 2007. From 2003 to 2007, revenues increased by 51%; net income (profits) increased by 85%. Oil output for the five majors over this time period declined by over 2%, from 9.85 to 9.63 million barrels per day. Since oil industry income has been largely price driven, with no increase in output, and with little new production resulting from increased oil industry investment, many believe that a portion of the increased income over this period represents a windfall and unearned gain, i.e., income not earned by any additional effort on the part of the firms, but due primarily to record crude oil prices, which are set in the world oil marketplace.\nNumerous bills have been introduced in the Congress over this period to impose a windfall profit tax (WPT) on oil. Most of the bills were introduced in the 109 th and 110 th Congresses, after the enactment of the Energy Policy Act of 2005, which provided additional oil and gas industry tax incentives, on top of the industry's traditional tax subsidies. S. 3044 , for instance, would roll back $17 billion in existing tax breaks over 10 years for the largest oil companies and impose a 25% windfall profit tax on major oil companies; revenues would be earmarked to expanding renewable energy development. In general, an excise-tax based WPT, like the one in effect from 1980-1988, would increase marginal oil production costs, reduce domestic oil supply, and raise petroleum imports, making the United States more dependent on foreign oil, undermining goals of energy independence and energy security. By contrast, the income-tax based WPT would be more economically neutral (less distortionary) in the short-run: sizeable revenues could be raised without reducing domestic oil supplies, which means oil imports would not tend to increase. Neither the excise-tax based or income-tax based WPT are expected to have significant price effects: neither tax would increase the price of crude oil, which means that refined petroleum product prices, such as pump prices, would likely not tend to increase.\nIn lieu of these two types of WPT, an administratively simple way of increasing the tax burden on the oil industry, and therefore recouping some of the excess or windfall profits, particularly from major integrated producers, would raise the corporate tax rate, by, for instance repealing or reducing the domestic manufacturing activities deduction under IRC §199. This deduction is presently 6% of a firm's net income and is available generally to all domestic manufacturing businesses (service firms are excluded), including almost all oil firms. Repealing this deduction for the major integrated oil companies, and freezing it at 6% for the remaining qualifying oil companies is estimated by the Joint Committee on Taxation to generate about $10 billion over 10 years.\nFor an analysis of windfall profit legislation, see CRS Report RL34689, Oil Industry Financial Performance and the Windfall Profits Tax , by [author name scrubbed] and [author name scrubbed].", "It should also be mentioned that there are several, relatively small, energy tax provisions in the farm bill ( H.R. 2419 ), which was just recently enacted ( P.L. 110-234 ). These provisions, all intended to promote alternative and renewable fuels from agricultural resources.", "U.S. Congress, Senate Budget Committee, Tax Expenditures: Compendium of Background Material on Individual Provision , Committee Print, December 2006, 109 th Cong., 2 nd sess.\nU.S. Congress, Joint Tax Committee, \" Description of the Tax Provisions in H.R. 2776 , The Renewable Energy and Energy Conservation Tax Act of 2007, \" June 19, 2007 (JCX-35-07).\nU.S. Congress, Joint Tax Committee, \" Description of the Chairman ' s Modification to the Provisions of the Energy Advancement and Investment Act of 2007, \" June 19, 2007 (JCX-33-07).\nU.S. Congress, Joint Tax Committee, Description And Technical Explanation of the Conference Agreement of H.R. 6 , Title XIII, \" Energy Tax Policy Tax Incentives Act of 2005, \" July 27, 2005.\nCRS Report RS21935, The Black Lung Excise Tax on Coal , by [author name scrubbed].\nCRS Report RL33302, Energy Policy Act of 2005: Summary and Analysis of Enacted Provisions , by [author name scrubbed] et al. (pdf)\nCRS Report RL30406, Energy Tax Policy: An Economic Analysis , by [author name scrubbed].\nCRS Report RL30406, Energy Tax Policy: An Economic Analysis , by [author name scrubbed].\nCRS Report RL33763, Oil and Gas Tax Subsidies: Current Status and Analysis , by [author name scrubbed].\nCRS Report RS22558, Tax Credits for Hybrid Vehicles , by [author name scrubbed].\nCRS Report RS22322, Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary , by David L. Brumbaugh.\nCRS Report RL33305, The Crude Oil Windfall Profit Tax of the 1980s: Implications for Current Energy Policy , by [author name scrubbed].\nCRS Report RL34669, Side-by-Side Comparison of Energy Tax Bills in the House ( H.R. 6049 ) and Senate ( S. 3478 ), by [author name scrubbed].\nCRS Report RL34676, Side-by-Side Comparison of the Energy Tax Provisions of H.R. 6899 and the Proposed Substitute of S. 3478 , by [author name scrubbed].\nCRS Report RL34689, Oil Industry Financial Performance and the Windfall Profits Tax , by [author name scrubbed] and [author name scrubbed]." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 2, 2, 2, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title", "h0_full", "", "", "", "", "", "", "", "", "", "h0_full", "", "", "h0_full", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "How did the Energy Policy Act of 2005 affect energy tax policy?", "How did the Tax Relief and Health Care Act of 2006 affect these changes?", "What is the current energy tax structure?" ], "summary": [ "The 109th Congress enacted the Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush on August 8, 2005, provided a net energy tax cut of $11.5 billion ($14.5 billion gross energy tax cuts, less $3 billion of energy tax increases) for fossil fuels and electricity, as well as for energy efficiency, and for several types of alternative and renewable resources, such as solar and geothermal.", "The Tax Relief and Health Care Act of 2006 (P.L. 109-432), enacted in December 2006, provided for one-year extensions of these provisions.", "The current energy tax structure favors tax incentives for alternative and renewable fuels supply relative to energy from conventional fossil fuels, and this posture was accentuated under the Energy Policy Act of 2005." ], "parent_pair_index": [ -1, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1 ] }
GAO_GAO-13-277	{ "title": [ "Background", "Complexities of the Foreclosure Review Process and Limitations in Regulators’ Guidance and Monitoring May Have Hindered Achievement of Goals", "Size, Scope, and Complexity of the Foreclosure Review Process Posed Challenges", "Lack of Clarity in Regulators’ Sampling Guidance Could Have Limited the Usefulness of the Information Obtained from the Foreclosure Review Process", "Regulators’ Sampling Approach Hindered Their Ability to Monitor Achievement of a Review Goal", "Broad Guidance and Limited Monitoring of Inconsistencies Increased Risks of Different Treatment for Similar Borrowers", "The Foreclosure Review Highlighted the Importance of Planning and Monitoring Progress toward Goals", "Limited Communication Hindered Transparency for Individual Borrowers and the General Public", "Transparency on How Foreclosure Errors and Financial Harm Would Be Determined Was Generally Lacking", "Borrowers and the General Public Received Limited Information about the Progress of Reviews", "The Foreclosure Review Highlights the Importance of Communication to Transparency", "The Foreclosure Review Experience Could Offer Lessons for the Amended Consent Order Activities and Continuing Reviews", "Sound Planning of Project Design Features Is Key to Efficiency", "Monitoring Activities May Help Ensure Achievement of Goals", "Communication Is Key to Providing Transparency and Enhancing Public Confidence", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Office of the Comptroller of the Currency", "Appendix III: Comments from the Board of Governors of the Federal Reserve System", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Mortgage servicers are the entities that manage payment collections and other activities associated with mortgage loans. Servicing duties can involve sending borrowers monthly account statements, answering borrowers’ inquiries, collecting monthly mortgage payments, and maintaining escrow accounts for property taxes and insurance. In the event that a borrower becomes delinquent on loan payments, servicers also initiate and conduct foreclosures. Errors, misrepresentations, and deficiencies in foreclosure processing can result in a number of harms to borrowers ranging from inappropriate fees to untimely or wrongful foreclosure. A number of federal regulators share responsibility for regulating the banking industry in relation to the origination and servicing of mortgage loans. OCC has authority to oversee nationally chartered banks and federal savings associations. The Federal Reserve oversees insured state-chartered banks that are members of the Federal Reserve System, bank and thrift holding companies, and entities that may be owned by federally regulated depository institution holding companies but are not federally insured depository institutions.\nIn September 2010, allegations surfaced that several servicers’ documents accompanying judicial foreclosures may have been inappropriately signed or notarized. In response to this and other servicing issues, federal banking regulators directed servicers to complete self-assessments of their foreclosure processes. In addition, banking regulators conducted a coordinated on-site review of 14 of the largest mortgage servicers to evaluate the adequacy of controls over servicers’ foreclosure processes and to assess servicers’ policies and procedures for compliance with applicable federal and state laws. On the basis of their findings from the coordinated review, OCC, OTS, and the Federal Reserve issued in April 2011 formal consent orders against the 14 servicers under their supervision. To comply with the consent orders, each of the 14 servicers is required to, among other things: enhance its vendor management, training programs and processes, and compliance with all applicable federal and state laws, rules, regulations, court orders, and servicing guidelines. In addition, the consent orders required each servicer to retain an independent firm to review certain foreclosure actions on primary residences from January 1, 2009, to December 31, 2010. Third-party consultants were permitted to retain outside counsel to provide necessary legal expertise in completing the foreclosure review.\nThrough the foreclosure review, consultants were to identify borrowers who suffered financial injury as a result of errors, misrepresentations, or other deficiencies in foreclosure actions, and recommend remediation for harms suffered by borrowers, as appropriate. In general, the consent orders identified seven areas for consultants to review: (1) whether the servicer had proper documentation of ownership of the loan; (2) whether the foreclosure was in accordance with applicable state and federal laws; (3) whether a foreclosure sale occurred while a loan modification was under consideration; (4) whether nonjudicial foreclosures followed the terms of the loan and state law requirements; (5) whether fees charged to the borrower were permissible, reasonable, and customary; (6) whether loss-mitigation activities were handled in accordance with program requirements and policies; and (7) whether any errors, misrepresentations, or other deficiencies resulted in financial injury to the borrower. Servicers proposed third-party consultants to conduct the foreclosure reviews. After regulators reviewed the independence of proposed third-party consultants, servicers and third-party consultants submitted engagement letters outlining their foreclosure review processes to the regulators for their review and approval. OCC and the Federal Reserve posted approved engagement letters between the servicers and third-party consultants on their respective websites. Regulators also posted on their websites a financial remediation framework that provided examples of errors covered by the consent orders and the corresponding compensation or other assistance that consultants could recommend based on their findings.\nThe foreclosure review had two components: a process for eligible borrowers to request a review of their particular circumstances (referred to as the borrower outreach process) and a review of categories of files (referred to as the look-back review). The borrower outreach process was intended to complement the look-back review and help identify borrowers who may have suffered financial injury. The regulators required the servicers to inform borrowers who believed they might have been financially harmed due to inappropriate foreclosure that they could submit a request for review of their particular circumstances. The servicers conducted this outreach through advertising and direct mail. After several extensions, the final deadline for submission of these requests was December 31, 2012.\nFor the look-back review, the consent orders allowed third-party consultants to use statistical sampling techniques to select samples of files for review from various categories of loans, pursuant to regulators’ guidance and approval as well as 100 percent review of certain loan categories. Regulators established minimum sampling requirements for third-party consultants to conduct statistically valid sampling of the target population and expectations for additional sampling methods, if warranted, to identify as many harmed borrowers as possible for remediation. Bank examiners often use sampling methods to review the files of a financial institution’s operations. The use of sampling by examiners has been a regularly accepted practice and is commonly used as a means to review a bank’s files when a full review of all files is not practicable. OCC states in its handbook on sampling methodologies, which is geared toward sampling loan portfolios, that it is impractical or impossible for bank examiners to review all items or files when examining an area of a bank’s operations, especially if the volume of information is large. Examiners use sampling to identify a random subset of files to learn about the multitude of items from which those files are drawn. Upon drawing appropriate statistical inferences from this subset, they can state with a certain level of confidence that the inferences apply to the population as a whole. The benefits of using statistical sampling include the ability to generalize results to the sampled populations and to quantify uncertainty in estimates attributable to sampling.\nIn our prior report on the borrower outreach component of the foreclosure review, we found that regulators and servicers had gradually improved the communication materials for borrowers but that regulators could make further enhancements to the outreach efforts. First, we found that regulators did not consider best practices, such as using tests or focus groups, to assess the readability of the outreach materials and did not solicit input from consumer groups when reviewing initial communication materials. As a result, we reported that the materials at that time might have been too complex to be widely understood. Second, we found that, although the communication materials included information about the purpose, scope, and process for the foreclosure review and noted that borrowers may be eligible for compensation, the materials did not provide enough specific information about remediation, which best practices suggest could have encouraged more borrower responses. Third, we found that the outreach planning and evaluation targeted all eligible borrowers with limited analysis conducted to tailor the outreach to specific subgroups within the population. Therefore, we noted that some underrepresented borrowers may not have been apparent to regulators without further analysis of the characteristics of respondents compared to nonrespondents. To help ensure that all borrowers had a fair opportunity for review, we recommended that OCC and the Federal Reserve enhance the language on the foreclosure review website, include specific remediation information in the outreach, and require servicers to analyze trends in borrowers who have not responded and, if warranted, take additional steps to reach underrepresented groups.\nIn response to the recommendations that we made in our previous report, OCC and the Federal Reserve took steps to enhance the independent foreclosure review website and communication materials and conducted more targeted outreach. We determined that regulators implemented our first recommendation by including on the foreclosure review website a help sheet for the request-for-review form that provides tips in plain language, an explanation of key terms, and additional instructions to help borrowers fill out the form. In response to our second recommendation, OCC and the Federal Reserve publicly released a financial remediation framework and included ranges of potential payment amounts or categories in their communication materials and other outreach. For example, the regulators released 60-second radio and television advertisements stating that if consultants find errors, homeowners may be eligible for compensation or other remedies, such as refunding fees, stopping a foreclosure action, or making payments that could range from $500 to $125,000. In addition, at the regulators’ instruction, servicers included similar language on ranges of potential payment amounts or categories in other outreach materials. In response to our third recommendation, OCC and the Federal Reserve tailored their recent outreach actions to target communities based on audience characteristics, response data, and consumer research. Regulators included a wide range of minority media and a broad mix of media formats, including print advertisements, radio, television, and Internet. To tailor this outreach, a market analysis was completed to identify areas and ethnic groups with the greatest opportunity for increased awareness.\nOutreach materials also were made available in eight different languages. Regulators solicited numerous community groups for their input and assistance on the outreach and identified effective messengers by using leaders of community groups that represent minorities to deliver radio and television public service announcements.\nIn January 2013, OCC and the Federal Reserve issued joint press releases stating that they had reached agreements with 11 of the 14 mortgage servicing companies subject to the April 2011 consent orders to discontinue the foreclosure review conducted by third-party consultants and to provide almost $8.8 billion in cash payments and foreclosure- prevention assistance to borrowers. With this change in direction from the foreclosure review to an agreed-upon payment process, regulators and servicers moved away from identifying the types and extent of harm borrowers may have experienced and focused instead on assigning borrowers into categories based on objective criteria and issuing payments in what they expect will be a shorter amount of time than would have occurred under the foreclosure review. To explain their rationale for pursuing the agreements, OCC and Federal Reserve staff said they considered a variety of factors, including delays in payments to harmed borrowers, the total remediation payments expected to be made to borrowers, and costs of the reviews. Under the agreements, servicers will provide approximately $3.4 billion in direct payments to eligible borrowers.\nUsing a framework provided by regulators and characteristics of borrowers’ loans, servicers will categorize borrowers, and regulators will develop a distribution plan and direct a payment administrator to distribute cash payments. As a result, all borrowers who were eligible for foreclosure reviews under the consent orders are expected to receive payments ranging from hundreds of dollars up to $125,000, depending on the borrower’s category. Under the agreements, servicers will also provide approximately $5.4 billion in foreclosure-prevention assistance to borrowers, such as loan modifications. To the extent practicable, servicers are to prioritize such assistance for borrowers eligible for the foreclosure review. Eligible borrowers are expected to receive notice about the payments by the end of March 2013, whether or not they filed a request-for-review form, and borrowers will not need to take further action to be eligible for compensation. Nearly 4 million borrowers, or about 90 percent of the eligible borrower population, are covered by the servicers that signed the agreements. In late February 2013, regulators released amendments to the April 2011 consent orders that incorporated the provisions of the agreements. The amended orders are publicly available on the regulators’ respective websites. Consultants for the servicers that did not reach agreements with the regulators—Ally Financial (GMAC Mortgage), Everbank, and OneWest—continue their foreclosure review activities. More than 450,000 borrowers fall under the three servicers that do not have amended consent orders.\nIn April 2011, regulators entered into consent orders with 14 mortgage servicers. The consent orders require the servicers to conduct foreclosure reviews by engaging third-party consultants to review the servicers’ loan files to identify and remediate the financial injuries suffered by borrowers through errors, misrepresentations, or other deficiencies in their foreclosure processes in 2009 and 2010.\nIn January 2013, the regulators announced agreements in principle with 11 of the 14 servicers subject to the April 2011 consent orders. The parties agreed to replace the foreclosure review with a compensation framework that does not rely on determinations of whether borrowers suffered financial harm, instead requiring participating servicers to provide cash payments and foreclosure-prevention assistance to borrowers.\nIn February 2013, the regulators publicly released amended consent orders that formally replaced the requirements related to the foreclosure review for the servicers participating in the agreements.", "According to regulators, the goals of the foreclosure review were for consultants to identify as many harmed borrowers as possible, to treat similarly situated borrowers across all 14 servicers similarly, and to help restore public confidence in the mortgage market. However, regulators faced various challenges in accomplishing these goals.", "According to regulator staff and third-party consultants, coordinating the foreclosure review process was challenging because of the large number of actors directly involved in the review process and the large number of borrowers eligible for the review. Specifically, the foreclosure review process included 14 servicers; 14 third-party consultant teams from 7 different consulting and accounting firms, some with subcontractors; and more than 10 third-party law firms. Further, the reviews were overseen by local examination teams for OCC or the Federal Reserve as well as headquarters staff for both regulators. In addition, there were as many as 4.3 million borrowers whose files could have been reviewed. One examination team informed us that the size of the review population presented challenges beyond those that accompany a typical consent order. Another challenge examiners and consultants noted was that, due to the deadline extensions for borrowers to submit their requests-for- review, the volume of the file review work kept changing and the total number of files requiring review was unknown. The original deadline for requests-for-review was April 2012. Regulators reported that more than 160,000 borrowers had submitted requests-for-review as of April 30, 2012. The deadline was extended three times to December 31, 2012. Regulators reported that more than 510,000 requests were submitted and received as postmarked on or before the December 31, 2012 deadline. According to OCC, roughly 300,000 additional files were selected for review through the consultants’ look-back review process. OCC staff told us that more files likely would be selected if errors were found and consultants needed to conduct additional sampling to identify as many harmed borrowers as possible.\nThird-party consultants and law firms told us that the size of the loan files and the scope of the file review made the process complicated and time- consuming. Consultants from whom we obtained information told us that a typical loan file is large with many types of documents. For example, documents may include servicer notes on communication with the borrower, documents collected from the state foreclosure attorneys responsible for the foreclosure activities, records of fees charged and payments made, and, in many cases, documents assessing a borrower’s eligibility for loan modification and loss mitigation activities. Consultants told us that some files may contain as many as 50 documents, potentially comprising more than 2,000 pages. Consultants also stated that the reviews were challenging because they covered such a wide variety of complex issues, including different state foreclosure laws, federal laws and regulations, and guidelines for federal and servicers’ proprietary loan modification programs. To assess each of these areas, consultants developed a series of test questions—generally yes or no questions—to identify potential errors. The number of test questions used by third-party consultants to conduct the file reviews varied. For example, one consultant told us that they had approximately 2,600 test questions with more than 4,000 discrete steps, while another consultant told us they had 16,000 test questions. Further, third-party consultants from whom we obtained information stated that their reviewers spent as many as 50 hours to complete a full file review, although review times varied depending on the issue and type of review.\nOCC and the Federal Reserve stated that the uniqueness of each servicer’s borrower population and process for recording and storing information on borrowers’ loan files posed challenges for defining the review parameters and developing a uniform review structure for all the consultants. For example, Federal Reserve staff told us that servicers’ systems have different ways to identify borrowers who are current on a loan modification and that the systems have varying capabilities to provide information about the last payment received from a borrower. As a result, consultants had to take different approaches to identify borrowers with the same characteristics. In addition, Federal Reserve staff told us that servicers had different concentrations of loans in geographic areas and that, therefore, consultants might select samples differently based on these concentrations. For example, if a servicer did not have high numbers of foreclosures in a particular state, choosing a large sample of loans in that state would not have been appropriate. As a result, OCC and Federal Reserve staff said that it was not feasible to design one file review process that would apply to all servicers and that it was necessary for third-party consultants to tailor their file review processes, particularly the review questions used to conduct the file review, to the unique characteristics of a given servicer.\nFaced with various complexities and challenges that the foreclosure review posed, regulators told us that they issued guidance and took a number of oversight steps. First, the sections of the consent orders issued to servicers supervised by both OCC and the Federal Reserve outlining the purpose of the foreclosure review were nearly identical. According to OCC and Federal Reserve staff, the similarity in the consent orders was intended to ensure that the reviews covered the same issues and resulted in similar results for similarly situated borrowers. Consultants we interviewed said that they designed their reviews to address the issues as they were identified in the consent orders. Second, regulators issued guidance to third-party consultants to help frame the file review process and promote consistency in its implementation. Between May 2011 and October 2012, regulators issued 29 joint pieces of guidance to third-party consultants on various topics. For example, OCC and the Federal Reserve jointly issued a financial remediation framework that was designed to be a unifying factor among all the reviews by helping to ensure that similarly harmed borrowers received similar remediation. Regulator staff said that they issued guidance in response to similar questions they received from multiple consultants or examination teams, which oversaw the reviews at the local level. For example, one third-party consultant we interviewed said that the reviews of issues related to the Servicemembers Civil Relief Act (SCRA) would likely provide fairly consistent results for borrowers due, in part, to the clear guidance provided by regulators.\nIn addition to consistent consent orders and guidance, OCC and Federal Reserve staff implemented regular communication mechanisms to help foster consistency in the reviews. Regulators had a robust system of regular meetings involving third-party consultants, servicers, examination team staff overseeing the consultants’ work, and OCC headquarters and Federal Reserve Board staff to discuss challenges with the file review process and help promote consistency among the reviews. OCC and the Federal Reserve met with the parties both separately and as a group and received weekly status reports from the consultants. For example, regulator staff said that weekly calls with third-party consultants provided consultants with an opportunity to raise areas of inconsistency that they had identified. These calls were also used to disseminate new guidance and discuss comments on any pending guidance. According to third-party consultants and examination team staff we interviewed, these meetings were helpful for sharing information among the reviews, developing a similar understanding of the file review process, and discussing challenges consultants encountered in reviewing files that may have affected the consistency of the results for borrowers. In addition to meeting with consultants and servicers, OCC and Federal Reserve staff also held a separate weekly meeting, which included only headquarters staff of each regulator, to discuss new and emerging issues or requests for clarification on guidance that each regulator received from its respective local examination teams. In addition to the weekly calls, OCC headquarters staff and Federal Reserve Board staff visited each of the consultants to observe the file review processes.", "The April 2011 consent orders expressly allowed third-party consultants to use sampling techniques to identify harmed borrowers. According to regulator staff, the large number of loans in the review population as well as the complexity of the file review process made it difficult for consultants to review all the eligible loan files for errors. As a result, the review relied on sampling, a process of selecting units—in this case, foreclosure files—in a manner that regulators envisioned would allow consultants to identify patterns in errors. In May 2011 regulator-issued guidance on sampling, regulators expressly allowed third-party consultants to use sampling and noted that the consultants’ sampling methodologies should take into consideration public perception as well as the need to provide a high degree of certainty that borrowers who were financially harmed would be identified and obtain remediation.\nThe May 2011 guidance outlined broad parameters for how third-party consultants should approach the sampling methodology to identify harmed borrowers and support a consistent review, such that similarly situated borrowers would have similar results. As part of sampling, regulators anticipated that third-party consultants would segment the review population into loan categories as some loan categories had a potentially higher likelihood of errors. For example, the guidance identified some potential high-risk loan categories, including certain states, foreclosure law firms, and servicing or foreclosure processing activities (e.g., rescinded foreclosures or foreclosure that occurred after loan modification) that could be associated with a higher likelihood of servicing or foreclosure-related errors. Regulator staff stated that differences among the servicer’s loan portfolios and servicing practices made requiring specific loan categories for review inappropriate, with the exception of three categories in which regulators anticipated that consultants would identify a relatively large number of errors in the files. For these three categories—bankruptcies, SCRA loans, and agency- referred foreclosure cases—regulators required 100 percent review of files. The May 2011 guidance also indicated that consultants should be prepared to conduct a second stage of additional analysis of files with a certain number of servicing and foreclosure-related errors that were identified during the initial sampling.\nBased on our analysis of the sampling plans developed by third-party consultants, we found that the sampling methodologies used by consultants varied among the reviews.\nExpected population error rate. The sampling plans varied in their expected population error rate from 0 percent—that is, consultants expected to find few or no servicing or foreclosure processing errors in the sampled loan category—to 10 percent, with 8 of the 14 reviews assuming an error rate of zero, three assuming an expected population error rate of 3 percent, and three a rate of 10 percent.\nLoan category sample size. As a result of different expected population error rates, the plans varied in the size of the samples for analyzing various loan categories identified by the consultant. For example, some consultants selected approximately 100 loans in a sampled loan category for a review, and some consultants selected approximately 370 loans in the sampled loan categories.\nLoan categories. Based on our analysis, the loan categories used by consultants for their analysis varied from review to review. For instance, although all the consultants analyzed the files for errors related to loan modifications, some categorized loans by the loan modification program (e.g., Home Affordable Modification Program (HAMP) or proprietary) and others categorized loans for reasons modifications were denied.\nReview parameters: For similar loan categories, some consultants anticipated conducting 100 percent review of all files in that category whereas other consultants planned to sample files. For example, some third-party consultants planned to review all rescinded foreclosures, whereas others proposed reviewing a sample of those loans.\nAccording to regulator staff, differences in the sampling plans reflected differences in the size and characteristics of the servicers’ loan portfolios and data systems. Regulator staff explained that they reviewed each proposed sampling plan to help ensure it met the parameters outlined in the guidance and would result in statistically valid results. However, according to OCC staff, they recognized that some consultants had not fully implemented the sampling approach as expected, and OCC is taking steps to address these differences for one of the servicers that is not subject to an amended consent order and must continue its review.\nOur analysis of the May 2011 sampling guidance provided by regulators found that the guidance was ambiguous about a key parameter that affected consultants’ sampling methodologies and contributed to differences in those methodologies. Specifically, in their May 2011 guidance, regulators did not indicate whether consultants should explicitly set an expected population error rate or provide consultants with direction on the factors they should consider when setting an appropriate expected population error rate to determine the size of the sample used for their analysis. GAO’s Financial Audit Manual and the standards of the American Institute of Certified Public Accountants (AICPA) have found that a key element of effective sampling is the determination of an appropriate sample size based on specified precision and reliability levels and an expected population error rate or frequency of errors.\nRegulators’ May 2011 guidance on sampling specified that consultants should use 3 percent precision and 95 percent reliability levels to determine their sample size. According to regulator staff, these precision and reliability levels were selected to provide a high-level of confidence in the sampling results. However, the guidance did not specify an expected population error rate for consultants to use in determining sample size. Generally, the expected population error rate, like precision and reliability levels, is determined based on professional judgment and includes consideration of factors such as results of prior reviews and knowledge about any potential risks in servicing and foreclosure processing errors. According to regulators, they expected consultants to find errors in their sampled files, because the consent orders that required the foreclosure review process arose out of assessments conducted by regulators that identified the potential for servicing and foreclosure-related errors. Similar to the precision and reliability levels, there is a relationship between the expected population error rate and sample size needed to attain a specific precision level (margin of error), where the size of the sample generally expands as the expected population error rate approaches 50 percent. When an expected population error rate is not specified, it can be interpreted as implying that the error rate is low or even zero—that is, that few or no errors are expected to be found in the sample regardless of whether the expected population error rate of zero is appropriate for the sample goals. OCC staff told us that their handbook on sampling methodologies—a reference their staff use for sampling and one that both regulators suggested consultants consider in designing their sampling approaches—generally assumes few or no errors will be found in a sample.\nVariations among the sample sizes used to analyze the various loan categories identified by consultants result from differences in the consultants’ expected population error rates and led consultants to use different triggers to determine when to conduct additional analysis of an error or errors found in a loan category. As shown in figure 1, Consultant A would conduct additional analysis of their sampled loan categories if one or more errors were found. In contrast, Consultant B would conduct additional analysis only when five or more errors were found in their sampled categories. Both of these approaches use the precision and reliability levels specified in the May 2011 guidance, with an expected maximum threshold of a 3-percent error rate, but relied on different sampling approaches and different expected population error rates to calculate sample size. Therefore, with the same number of errors identified through file reviews, some consultants would conduct additional analysis and some would not. According to regulator staff, when errors were found, they expected consultants to conduct additional sampling of the loan category or to review all of the loans in that category. OCC staff explained that after approving the original sampling methodologies, they recognized that their review of the plans had missed some aspects and that consultants were using various expected population error rates to calculate sample size. OCC staff told us that they were considering steps to try and address these differences for one of the servicers that had not joined the agreements to end the foreclosure review. As a result of this variation, the reviews could have produced inconsistent results for similarly situated borrowers, thereby potentially limiting achievement of one of the goals of the foreclosure review process.\nOur analysis also found that the May 2011 guidance on sampling did not include a discussion of regulators’ expectations for reporting on sampling, and variations among the sampling plans would have limited the types of information that regulators could report. For example, the guidance did not specify if regulators expected consultants, based on their sampling methodology, to be able to provide information on the error rate for the servicer’s whole population of eligible borrowers or for certain characteristics, such as high-risk loan categories (e.g., states). Our analysis found that 1 of the 14 reviews explicitly designed samples that would potentially allow consultants to generate reliable estimates of the error rate for certain states. Other consultants may have been able to report counts of errors by state, but some consultants sampled as few as one or five cases per state, and the counts would not allow regulators to determine whether reported errors were relatively frequent or infrequent in specific states. As a result, regulators could not have reported results by state because some reviews did not have enough cases, selected in a generalizable manner, from individual states to report statistically reliable estimates. According to regulators, reporting error rates was not a consideration in developing the sampling approach outlined in the guidance; rather, the sampling methodology was intended to find as many harmed borrowers as possible. However, it would be feasible to develop sampling approaches that could both produce error rates and identify characteristics of harmed borrowers.\nSimilarly, differences in the loan categories analyzed by the third-party consultants would have limited regulators’ ability to easily aggregate results among the reviews or present comparable servicer-specific information. For example, differences in how consultants organized the loan modification category could have impeded regulators’ ability to aggregate the results of the loan modification analyses conducted by third-party consultants or to present equivalent information among the servicers to the public. In addition, these differences in the loan category definitions as well as other differences in the consultants’ sampling methodologies would have made it difficult for regulators to aggregate results to represent the full population of eligible loans. One consultant told us that they anticipated calculating an error rate based on the number of files reviewed compared to the number of files with errors. This method might have provided some information on errors, but could be subject to bias if the sample of loans reviewed were not representative of the population, regardless of whether the estimates from the samples were appropriately weighted for probability of selection or included appropriate confidence intervals to reflect sampling error. However, this information would not necessarily provide a statistically valid description of the extent of errors in the full population that regulators and other stakeholders would need to understand and assess the results.", "According to regulator staff, they expected consultants to continue reviewing files until as many harmed borrowers as possible were identified, a goal of the foreclosure review process. Regulator staff told us that if third-party consultants’ initial analyses of sampled loans identified errors within a loan category, consultants were expected to analyze the characteristics of loans with errors to identify any patterns and use this analysis as the basis for a second sampling phase or to review all the files in a loan category. Although not explicitly stated in the May 2011 guidance, according to OCC staff, additional analysis was warranted when the errors in the sampled loan category exceeded 3 percent with a 95 percent confidence level. Although the May 2011 guidance on sampling did not specify the characteristics to consider for this analysis, Federal Reserve staff told us that identifying the characteristics to include would require consultants to use their judgment and they anticipated it would include things like the loan category itself—such as an error related to a certain foreclosure attorney that might warrant additional review of other loans that had used the same attorney—or some other characteristic about the loan.\nAccording to a few consultants, they were considering characteristics such as the loan product or date of the loan modification solicitation or foreclosure sale, as potential characteristics. Regulators told us that based on the results of the consultants’ analyses of the initially sampled loans with errors, consultants were to develop a methodology—including conducting additional sampling or reviewing all files with those shared characteristics—to identify other loans that had similar characteristics that could have had similar errors to use as a basis for a second review phase. According to Federal Reserve staff, this process would have been iterative—where consultants would have found errors, analyzed those errors, resampled and then repeated the process until as many files with errors as possible had been found. Third-party consultants were expected to discuss the results of their initial file reviews, their analysis of error patterns, and their proposed approach for conducting additional file reviews with regulators prior to conducting additional reviews.\nOur analysis found that the regulators’ sampling approach did not include mechanisms to facilitate their oversight of the extent to which consultants would have reached as many harmed borrowers as possible. For example, the regulators’ sampling approach did not provide an objective method for regulators to use in determining if consultants had conducted sufficient reviews and could stop their review activities, except in those cases where there were few or no errors. As we described earlier, consultants were using different triggers of the number of errors to determine if additional analysis of loan categories was required. Without a mechanism for regulators to use in assessing the extent to which each consultant had found as many harmed borrowers as possible or to compare the review results among the consultants, assessing which consultants had done enough work to identify a sufficient portion of harmed borrowers and which consultants needed to conduct additional analysis would have been difficult for regulators. According to Federal Reserve staff, they anticipated that consultants would continue reviewing files until the sampling found no additional errors. However, unless a large majority of the population is examined for errors, reviewing files until sampling finds no more errors does not necessarily imply that all or most errors would be identified. OCC staff told us that at the time of the agreements that led to the amended consent orders, regulators were considering developing such mechanisms.\nAdditional sampling activities—specifically, the use of baseline samples— could have provided regulators with a mechanism to use in monitoring the extent to which consultants had identified as many harmed borrowers as possible. The Office of Management and Budget (OMB) standards for statistical surveys state that where sampling is used, it should include protocols to monitor activities and provide information on the quality of the analyzed data. A baseline sample could have been used to establish an estimate of the number of harmed borrowers among the servicer’s full population as part of their sampling methodology and would have provided an objective and consistent measure for regulators to use to gauge if a third-party consultant had identified a sufficient portion of harmed borrowers through their reviews. Specifically, regulators could have compared a statistically valid estimate of the number of harmed borrowers in the servicer’s total population of eligible borrowers with the number of harmed borrowers the consultant identified through file reviews. Discrepancies between the estimated number of harmed borrowers and the number found in the review would have helped to indicate the extent to which there may have been additional harmed borrowers who had not been identified. Without this type of comparison, regulators did not have an objective measure to help determine when a consultant had completed sufficient review of the servicers’ files.\nIn addition, the regulators’ sampling approach did not provide a clear mechanism for regulators to assess the extent to which consultants had identified the appropriate high- and low-risk loan categories to confirm that those categories were accurate and to signal if there were additional potential high-risk loan categories that had not been identified, but warranted additional sampling and review. As we noted earlier, the regulators’ sampling guidance suggested a number of high-risk loan categories consultants should consider in designing their sampling approach—such as rescinded foreclosure or foreclosures following loan modification—that were potentially associated with a higher likelihood of error and, depending on the servicer, warranted targeted sampling to verify the extent to which errors had occurred among the loans in those categories. However, there is evidence to suggest that other loan categories not included in the guidance, such as certain loan categories based on demographic characteristics may also be associated with higher likelihood of servicer errors. Without a mechanism to assess the accuracy and sufficiency of each consultant’s high- and low-risk loan categories, regulators would not have been able to assess the extent to which consultants were targeting the appropriate high- and low-risk categories to find as many harmed borrowers as possible.\nAn estimate of the overall error rate for the population—a rate that could have been generated using information from the baseline sample—could have been compared with the error rates consultants found for high- and low-risk loan categories to confirm that those categories were accurate and to signal if there were additional potential high-risk loan categories that had not yet been identified. OMB has suggested that where different characteristics are being compared, agencies should conduct additional testing to help ensure appropriate statistical conclusions are derived from the data. In our prior work we have used this type of statistical testing to compare the performance (such as error rate) in a total population with the performance for subgroups—such as loan categories—to help distinguish among those groups. This can be part of conducting an overall risk assessment of the population to enable users to better focus on high- and low-risk areas. Without a mechanism to gauge the extent to which high-risk loan categories had been identified, regulators could have had difficulty assessing whether the consultants’ proposed activities for additional analysis were targeted at the appropriate high-risk loan categories to identify as many harmed borrowers as possible.\nThe May 2011 sampling guidance did not include a requirement that consultants develop a baseline sample, but most consultants included one in their sampling methodology. According to regulator staff, they had not considered requiring consultants to include a baseline sample in their methodology because the purpose of sampling was to help find harmed borrowers by identifying concentrations of servicing and foreclosure- related errors as described in the consent orders, not to establish an error rate for the servicer. Our analysis found that most consultants included a baseline sample for the full review population in their sampling methodology. However, due to differences among the consultants’ baseline samples, the ability of regulators to use consultants’ baseline sampling results to assess consultants’ activities varies. For example, the samples were not designed to estimate actual population error rates and regulators’ guidance did not direct consultants to statistically test for differences in the servicer’s total eligible population and among high- and low-risk loan categories.\nOur analysis also found that the regulators’ approach to conducting repeated additional analyses to find as many harmed borrowers as possible potentially involved timeliness trade-offs. OMB’s standards for statistical analysis state that the sampling design should be appropriate to achieve the sampling goals; in this case regulator staff told us that the phase-one sampling was designed to identify patterns from among loans with errors to facilitate a second phase of analysis to find as many harmed borrowers as possible. Where the goal of sampling is to identify patterns from among loans with errors in a sample, using a larger sample size has the potential to provide more information to use in analyzing patterns and determining the appropriate next steps. For those consultants that used smaller sample sizes in their phase one analysis, for example, a sample size of 100 loans where one error would trigger additional analysis, finding patterns among the characteristics of those loans with errors may have been difficult in cases where there were few errors. As a result, these consultants may have had to conduct potentially time-consuming repeated sampling of certain loan categories where errors were found to find enough loans with errors to be able to analyze the findings and identify patterns that would have allowed them to conduct additional sampling or review. OCC staff told us that some consultants were considering using statistical modeling as part of their analysis of loans with errors to identify patterns from among those loans. However, in cases where the sample size is small and the number of loans with errors is small, the value of statistical modeling to identify patterns could be limited.\nAccording to Federal Reserve staff, due to concerns about the timeliness of the sampling process, regulators anticipated that they may have had to cut short the sampling process and provide remediation based on certain borrower profiles—that is, borrowers who shared characteristics associated with loans with a higher likelihood of error—without analyzing each of the loan files that shared that profile. In contrast, a larger phase one sample size designed with the goal of identifying patterns among errors may have provided consultants with more information on loans with errors to use as the basis for their additional analysis. In particular, this may have been valuable for loan categories with a relatively large number of loans—for example, our analysis found that in some cases a loan category had more than 10,000 loans and, for one review, as many as 50,000 loans—and having more information available to use when analyzing the results for these categories and determining next steps may have been helpful. Although a larger sample size does not guarantee a more timely review, a larger statistical sample may have provided additional opportunities for analysis even with a similar proportion of errors. In the case of the foreclosure review, where the goal was to use sampling to find as many harmed borrowers as possible by analyzing patterns from among loans with errors, larger sample sizes may have resulted in a more timely process and potentially may have identified harmed borrowers more quickly. According to regulators, they designed their sampling to have a low tolerance for errors so as to find as many harmed borrowers as possible.", "According to third-party consultants, regulators’ guidance did not address certain aspects of the foreclosure review and consultants had to use additional judgment and interpretation when applying certain guidance, increasing the risks of inconsistency among review results. Consultants also noted that regulators issued critical guidance throughout the review process and frequently updated guidance, which expanded the scope of the reviews and contributed to delays. For example, the Federal Reserve issued three clarifications of loan modification guidance and OCC provided seven responses to frequently asked questions on reviews of loan modifications. According to regulator staff, developing the foreclosure review process was intentionally iterative where they responded to the most immediate need and used their evolving knowledge to help refine the guidance. Consultants said that changes to guidance required them to develop new test questions, re-train reviewers, and redo file reviews. Although regulators issued numerous pieces of formal guidance and informally responded to specific questions about review procedures that examination teams or consultants raised, consultants said that some of the guidance issued was not specific, leaving room for their interpretation and potentially contributing to inconsistent interpretations.\nGuidance on fees: Guidance from regulators generally directed consultants to consider whether the fees servicers charged for actions such as property inspections or lawn care services were permissible under the terms of the loan, followed applicable state and federal law, and were reasonable and customary. However, regulators provided additional explanation in response to requests from consultants for clarification and guidance on defining the terms “reasonable” and “customary.” Consultants for 13 of the 14 reviews indicated that they used investor guidelines to determine if the fees charged were reasonable; however, one consultant told us consultants were using different versions of these guidelines. In some cases, consultants used additional methods to evaluate whether fees charged to borrowers were customary. For example, one consultant evaluated fees against a set of benchmarks created from multiple servicers’ actual fee charges, while others said they benchmarked only against the investor guidelines.\nGuidance on remediation: Although regulators issued guidance to consultants on how to determine the appropriate remediation for different financial harms, 4 out of the 13 remediation categories would have required consultants to make remediation determinations on a case-by-case basis, risking inconsistent treatment of borrowers. For example, consultants would have had to determine remediation on a case-by-case basis if they found that a servicer had initiated foreclosure or foreclosed on a borrower who was protected by federal bankruptcy law. Consultants reported taking a range of approaches to these case-by-case determinations, including awaiting further guidance, developing their own guidelines, or relying on recommendations from their third-party law firms. According to Federal Reserve staff, at the time of the agreements that led to the amended consent orders, regulators were considering options to provide additional guidance to consultants for work in these areas, including determining remediation amounts.\nGuidance on missing documentation: Guidance issued to consultants in March 2012 on how to determine whether a borrower suffered financial harm when key documents—such as documents that evidenced that foreclosure actions were taken or loan modification application documents—were missing indicated that consultants should treat those instances as errors on the part of servicers. However, this guidance noted that consultants should defer decisions on how to determine borrower remediation until regulators provided further guidance. In the absence of additional guidance, consultants indicated that they took a variety of approaches, including waiting to make remediation decisions, making preliminary considerations of whether the error might have caused financial harm, or working with their third-party law firm to review any applicable legal precedents. According to OCC staff, at the time of the agreements that led to the amended consent orders, they were planning to issue further guidance to consultants on remediation for borrowers with missing documents and they had informally provided additional direction about treatment of files with missing documents during their regular meetings with consultants.\nAccording to third-party consultants, regulators missed key opportunities to increase the likelihood of consistent outcomes for borrowers by not requiring development of common criteria or reference materials that served as the basis for the foreclosure review process. Third-party consultants and their respective law firms we interviewed told us that they each developed their own test questions used by their file reviewers to determine whether any errors or financial harm occurred. Consultants developed the test questions based on analyses of state foreclosure laws, loan modification guidelines, and bank policies, among other references. According to OCC staff, the state law references were fairly straightforward and they had confidence that the third-party consultants and law firms would provide fairly consistent interpretations. However, according to third-party consultants and law firms we interviewed, compiling these references and using them to develop review questions was challenging and time consuming and, in some cases, required judgment or interpretation of the laws or guidelines. For example, they noted that certain areas of relevant state law were unsettled and continued to evolve as courts issued decisions. In addition, representatives of law firms involved in the reviews told us that each firm developed its own list of state foreclosure requirements and often came to interpretations different from those of other law firms involved with the foreclosure review. Consultants also indicated that some law firms had different interpretations of which laws were applicable. According to OCC staff, the scope of the reviews was limited to federal and state laws, but several consultants reported that they reviewed servicers’ compliance with certain county- or court-level requirements, whereas other consultants said they generally did not include these requirements. Although OCC and Federal Reserve staff told us that law firms were selected for their independence and capacity to interpret these documents and make these types of decisions, with multiple law firms developing their own interpretations of the applicable laws and requirements, consultants may have based their test questions on different interpretations of laws, which could have hindered regulators’ ability to achieve one of their goals for the foreclosure review, similar treatment for similarly situated borrowers.\nOur analysis indicates that regulators missed another opportunity to standardize reference materials in the area of loss mitigation and loan modification requirements. Consultants noted challenges in compiling relevant loan modification program guidelines. For example, according to consultants, they had to compile requirements for multiple loan modification programs and representatives of one consultant we interviewed said that they had to compile requirements of 40 different loan modification programs that the servicer used during the 2009 to 2010 period. In addition to numerous different programs, the guidelines for a single program may have changed multiple times. One consultant noted that they had to track and apply 28 program changes the Department of the Treasury (Treasury) made to HAMP between 2009 and 2010. Our prior work on HAMP identified instances of servicers interpreting HAMP guidelines inconsistently, and a consumer advocacy group report noted similar challenges with servicers implementing HAMP according to the guidelines. In addition, several consultants from whom we obtained information told us that they had to make some judgment calls when interpreting regulatory guidance and program guidelines. For example, one consultant noted that HAMP guidelines were unclear in critical respects, particularly regarding the nature and extent of servicers’ obligations to notify borrowers about steps in the HAMP process. OCC staff said they were aware of Treasury’s HAMP guidance and other servicing guidelines and made an effort to make their guidance to consultants consistent with these materials. OCC and Federal Reserve staff also stated that certain staff members had general discussions with Treasury staff to understand the HAMP guidelines. Consultants we interviewed told us that they largely relied on their internal subject-matter experts to interpret the relevant guidelines and did not consult with program experts, such as Treasury staff who designed and developed HAMP. As a result, third-party consultants and law firms may have applied different interpretations of the legal or program requirements for the same programs to the reviews, and the use of different reference materials could have reduced the likelihood of achieving the goal of treating similarly situated borrowers consistently.\nRegulators took steps to monitor potential inconsistencies among the reviews, but these steps were limited and likely would have resulted in delays in providing remediation to borrowers. First, according to regulators, they closely monitored weekly reports provided by consultants to identify any differences in their progress that may have indicated some inconsistency in the foreclosure review processes. These initial reports included information on the number of mailings; requests for review; and high-level counts of file reviews started, in process, and completed and the number of files with borrower harm, but they did not include information on the specific types of errors identified in the reviews or the test criteria used to review files. Therefore, the usefulness of the reports for identifying inconsistencies was limited. According to OCC staff, they planned to begin requiring consultants to report on additional information, such as the types of errors associated with financial harm found in the reviews and proposed remediation amounts, which would have helped identify inconsistencies among reviews.\nSecond, OCC and Federal Reserve staff said that they would identify potential inconsistencies among the reviews by having staff from one examination team assist with another team’s oversight of the foreclosure review, but these rotations among the staff were not systematically organized and did not include rotations across regulators. Further, some examination team members we interviewed said that they had participated in one or two reviews for other servicers, but examiners overseeing reviews at a larger servicer noted that they were unable to participate in multiple reviews because of time constraints. In addition, OCC and the Federal Reserve did not provide the examination team members conducting these rotations with guidance on the types of issues to consider in assessing inconsistencies. This unsystematic approach limited the extent to which regulators would have been able to identify trends or inconsistencies.\nThird, according to regulators, they reviewed some test questions but did not compare them across reviews to identify inconsistencies. OCC staff acknowledged that inconsistencies were inherent in the foreclosure review because of the large number of actors and decision points and the subjective nature of some of the decisions consultants had to make. Similarly, Federal Reserve staff told us that inconsistencies among reviews were inevitable due to differences among the servicers’ policies, procedures, and systems, including their loan modification and loss mitigation programs. Regulator staff said they had planned to conduct assessments of the extent of inconsistencies affecting the outcomes for borrowers across the reviews after the reviews and recommendations for remediation were completed. However, conducting such an assessment after the reviews were completed could have resulted in delays in remediation because third-party consultants may have needed to change their file review questions and redo file reviews if regulators identified inconsistencies. In addition, regulators would have had to wait until all consultants had completed their reviews to conduct such an assessment. Consultants reported that they had estimated completing their reviews in different time periods and an OCC official estimated that the reviews would not have been completed until 2014.", "Our analysis of the foreclosure review process identified challenges in regulators’ planning for the foreclosure review. These challenges underscored the importance of the following three aspects of planning and monitoring: (1) identifying the type and amount of information to report as final results during the design of data analysis; (2) consulting with stakeholders; and (3) assessing how well the reviews were tracking their goals of identifying as many harmed borrowers as possible, achieving consistent reviews for borrowers, and helping to restore public confidence in the mortgage market.\nAs described earlier, variations among the 14 sampling methodologies used by third-party consultants for analysis of loan files limited the types of information that regulators would have been able to report. According to regulator staff, they did not want to make final decisions on the types of information they may have needed for public reporting before they had seen the preliminary results from the file reviews. OMB has found that in designing data analysis activities, including sampling, agencies should consider the types of data they need to collect to be able to report useful information on the results of their activities to the intended audience. The resulting sample design should have these data output requirements built into the structure. GAO’s internal control standards state that producing reliable and relevant data is important for oversight and management, including oversight provided by Congress. In addition, our prior work has found that public reporting of results can be important for strengthening public confidence in a process, and the data analysis strategy should be designed to include information that can be reported publicly. Providing useful and relevant public reporting of the review results also was a key element in renewing public confidence in the mortgage servicing market, a goal of the foreclosure review process.\nHowever, regulators were limited in what they would have been able to report because they did not plan for reporting in the design of the reviews.\nAs described earlier, the scope of the foreclosure review was broad and regulators experienced challenges in issuing guidance on the wide variety of complex issues covered by the reviews, resulting in delays in completing file reviews and potentially contributing to inconsistencies in the file review process. Regulators may have been able to better define the scope of activities and issue more complete guidance prior to commencing the foreclosure review process, thereby potentially reducing the number of revisions to the scope or guidance, by consulting with organizations directly responsible for or familiar with particular aspects of the review before initiating the foreclosure review process. For example, although regulators consulted with Treasury staff for their technical expertise on the HAMP requirements during their development of the loan modification and loss mitigation guidance, regulators did not have the benefit of additional consultations with Treasury compliance officials and discussions with other agencies responsible for overseeing federal loan modification and loss mitigation programs to help them more clearly define the programs covered by the consent order requirements and the elements to consider in assessing servicers’ evaluation of loan modification and loss mitigation activities—areas where regulators issued clarifying guidance to third-party consultants. Regulators issued additional guidance to clarify that the review of HAMP and proprietary loan modification programs should include programs overseen by the U.S. Department of Housing and Urban Development, U.S. Department of Agriculture, and U.S. Department of Veterans Affairs.\nIn addition, regulators did not consult with community groups, such as national organizations representing housing counselors that have worked with individual borrowers on their loan modification and loss mitigation applications. These consultations might have provided input on challenges specific servicers and borrowers experienced with the range of loss mitigation and loan modification activities which could have assisted in identifying high-risk loan categories or program elements to consider. For example, our prior work surveying housing counselors found that while assisting borrowers with HAMP applications, counselors experienced challenges with servicers, including missing documentation, lengthy decision-making processes, and miscalculations of borrowers’ incomes. Our prior work that establishes generally accepted project planning practices identified consulting with stakeholders as one of seven generally accepted practices. In addition, our internal control standards have found that consulting with external stakeholders can have a significant impact on the achievement of goals. In contrast to the process used to develop the loan modification and loss mitigation guidance, OCC and the Federal Reserve consulted with consumer groups while developing the remediation framework. In addition, they consulted with the U.S. Department of Justice in developing the foreclosure review guidelines related to SCRA. Although this consultation occurred later in the process after third-party consultants had begun SCRA reviews, one consultant cited the guidance that resulted from the consultations as evidence of a strong practice that helped promote consistent results among the reviews.\nAs we described earlier, regulators’ sampling approach did not include mechanisms that would allow them to objectively measure the extent to which consultants were on track to identify as many harmed borrowers as possible. Similarly, as we previously described, regulators had a limited process in place to identify inconsistencies among consultants’ file review processes that could have affected results for borrowers. OCC and Federal Reserve staff told us that they were aware of some areas where there may have been inconsistencies, but according to Federal Reserve staff these areas would not have led to significant differences. However, in the absence of mechanisms to systematically monitor consistency, regulators did not have the information to verify their understanding or identify areas of the review with an increased likelihood of inconsistency.\nOur prior work has identified using intermediate activities or measures to assess progress toward intended results as an effective management practice to understand the extent to which activities are on track to reach stated goals. We have also identified practices that can help agencies successfully implement the Government Performance and Results Act and related results-oriented management initiatives, such as establishing activities during program planning and design to monitor performance toward these goals and using intermediate activities to analyze the gap between where the performance is and where it needs to be to achieve desired outcomes. We found that such activities can help management target areas in need of improvement and select appropriate methodologies to realize that improvement. In the absence of systematic processes to monitor the extent to which the foreclosure review was progressing toward its goals, regulators did not have an early warning mechanism to help identify problem areas where interventions, such as the issuance of clarifying guidance or other support, might have helped reorient activities and address concerns.", "Regulators publicly released information on the foreclosure review process beyond what is typically disclosed in connection with a consent order, including engagement letters between servicers and consultants and some guidance provided to the consultants. By law, federal banking regulators must disclose any formal enforcement actions entered into under the Federal Deposit Insurance Act. On a case-by-case basis, banking regulators may consider the release of information beyond the mandatory disclosures.", "In an effort to promote transparency in the foreclosure review process, OCC and the Federal Reserve publicly disclosed some information related to the April 2011 consent orders. For example, in November 2011, OCC released redacted engagement letters between the servicers under its jurisdiction and the consultants contracted to conduct the foreclosure review. With the exception of one servicer, the Federal Reserve released by February 2012 redacted engagement letters for servicers under its jurisdiction. OCC and the Federal Reserve also released the remediation framework for consultants to use that provided examples of situations in which compensation or other remediation is required for financial injury due to servicer errors, misrepresentations, or other deficiencies.\nDespite these disclosures, some stakeholders perceived gaps in key information about how the file reviews were conducted. Regulators released documents, such as the redacted engagement letters and remediation framework, which generally described the design and intended outcomes of the foreclosure review, but they did not disclose the more detailed guidance and tests consultants relied on to perform their reviews. As previously discussed, third-party consultants developed thousands of test questions to determine error and harm, and regulators issued a number of guidance documents to promote consistency among the reviews and clarify issues raised by consultants, such as how consultants were to construct their sample populations and how to address issues related to borrowers covered by SCRA. Although regulators released their remediation framework and provided answers to frequently asked questions on remediation categories and calculations, they did not release any additional guidance documents nor did they publicly disclose consultants’ test questions, which according to OCC, contained proprietary and supervisory information.\nTo increase the transparency and credibility of the foreclosure review for borrowers, policy makers, and the public, among other stakeholders, consumer groups recommended that regulators release such information. According to consumer groups, without such information, the public would have questions and doubts about how the reviews were executed. OCC and the Federal Reserve staff said that they considered releasing additional guidance to the public, but both regulators refrained from doing so because of concerns that releasing detailed information risked disclosure of confidential or proprietary information. Moreover, test questions developed by consultants were numerous and complex, and Federal Reserve staff stated that review processes were too dissimilar to provide a comprehensive summary.", "Borrowers who requested reviews under the foreclosure review process initially received limited information about the status of their individual file review. Borrowers received a letter acknowledging their request was received, but some did not receive updates until almost a year after the outreach program was launched, when they received a letter informing them of the continuing nature of the review. In letters to OCC and the Federal Reserve, consumer groups indicated that these borrowers were frustrated by the lack of information on their particular file review. Eligible borrowers could submit requests as early as November 2011. According to OCC staff, borrowers who submitted an accepted request-for-review through June 30, 2012 received a status update letter in September 2012. OCC staff said that the letters communicated to borrowers that their requests were being reviewed but that the results of the review might not be available for several more months. They said that the letters also provided a brief summary of the foreclosure review process, an Internet link to the interagency remediation framework, and notice of other help available through nonprofit organizations approved by the Department of Housing and Urban Development. Regulators indicated that additional status letters would be sent to borrowers with outstanding requests-for- review. Before the regulators halted the foreclosure review, draft letters to be sent to borrowers on the results of their file reviews were in development. However, regulators were still uncertain about specific information they would require be shared with both borrowers who would receive remediation and those who would not. Regulators have acknowledged the importance of transparency, but when announcing the agreements that led to the amended consent orders, they had not yet determined what information to convey beyond that which was included in their press releases and public websites, nor had they determined whether additional information would be provided to borrowers who submitted a request-for-review.\nDuring the foreclosure review process, OCC released two interim reports that provide the public with information on the organization and conduct of the file review process and preliminary results, such as the number of requests-for-review received, for institutions it supervises. The OCC reports—issued in November 2011 and June 2012—summarized the status of actions taken to correct deficiencies in mortgage servicing and foreclosure processing identified in the April 2011 consent orders, including activities related to the foreclosure review. For example, the June 2012 report included the number of files selected for review, the number of requested reviews, and the number of reviews completed, among other items. These reports, according to OCC, were intended to build transparency in the process. The Federal Reserve did not issue interim reports on the foreclosure review process for institutions it supervised. According to Federal Reserve staff, they did not do so because they determined that their public release of servicers’ action plans provided sufficient information about how servicers were addressing the requirements of the consent orders and their public release of servicers’ engagement letters provided sufficient information about how the foreclosure review would be conducted. Prior to the announcement of the agreements that led to the amended consent orders and ended the foreclosure review for most servicers, OCC staff told us they had planned to release a final report on the results of the foreclosure review. After the agreements were announced, Federal Reserve staff indicated they expected to publish additional relevant information related to the foreclosure review and the agreements. However, as of February 2013, regulators had not decided what specific information will be made available on the work conducted under the foreclosure review prior to the agreements.", "While OCC and the Federal Reserve acknowledged the importance of transparency in the foreclosure review process, the absence of timely and useful communications at certain stages of the process—for individual borrowers as well as the general public—hindered transparency and undermined public confidence in the processes and results. In a December 2011 letter to consultants, OCC noted the importance of public confidence in the foreclosure review process. According to the Federal Reserve, the agency endorsed OCC’s letter. However, as previously discussed, regulators did not publicly release detailed information that described how consultants were to determine errors and remediation, and borrowers and the general public received limited information about the status of the reviews. As a result, consumer groups raised concerns about the level of transparency of the foreclosure review process and indicated that the absence of public information undermined credibility and public confidence in the process.\nOur internal control standards state the importance of relevant, reliable, and timely communications within an organization as well as with external stakeholders. As illustrated in Treasury’s implementation of the Troubled Asset Relief Program (TARP), external communications can include posting information on its website and regular, public reporting. Our previous work on TARP described the importance of public reporting as a means to improve transparency and address potential questions of whether similarly situated borrowers are being treated fairly. For example, Treasury periodically issued public reports on the progress and performance of its TARP housing programs. These reports have provided information to a range of stakeholders, including Congress and the general public. Similarly, consumer groups recommended that regulators provide regular, public reports on the progress and findings of the foreclosure review to increase transparency. Consumer groups also suggested that regulators provide additional information to address transparency-related issues for borrowers eligible for remediation through the foreclosure review. For example, they indicated that borrowers should have had access to information about the status of the review of their file and receive a thorough explanation of how decisions were reached. In addition, they recommended that the review guidelines issued by the regulators be made public, similar to Treasury’s release of guidance for HAMP. According to consumer groups, these actions, among others, could have increased the public’s understanding of the reviews and allowed borrowers to ensure their files were properly reviewed. The foreclosure review, unlike TARP and TARP-funded programs such as HAMP, was not a government program. However, as OCC described, it was part of a larger set of government-directed actions in response to the housing and mortgage crises. More publicly disclosed information about processes and regular reporting about the status of the reviews would have increased transparency and thereby public confidence in the reviews, given that one of the goals regulators articulated for the foreclosure review was to restore public confidence in mortgage markets.", "The foreclosure review revealed three key lessons that could help inform regulators’ implementation of the amended consent orders: (1) designing project features during the initial stages of the process to influence the efficiency of file reviews, (2) monitoring progress to better ensure the goal of achieving intended results, and (3) promoting transparency to enhance public confidence. These key lessons on planning and implementation could help contribute to an effective process for distributing direct payments and other assistance as prescribed by the amended consent orders between servicers and regulators. In addition, these lessons could inform the foreclosure review process that is continuing for the servicers that did not reach agreements with regulators.", "The foreclosure review experience suggests that a planning process to determine key project features, such as guidance and necessary data elements, for activities conducted under the amended consent orders could lessen the risk of changes to the planned activities, future delays, or rework. Our work on designing evaluations, including financial audits, has found that systematic and comprehensive planning enhances the quality, credibility, and usefulness of the results and contributes to a more effective use of time and resources. We found that one of the first steps in designing a review should be to define the purpose and scope of the review, including defining what data will be collected and what comparisons will be made. In addition, evaluation questions should be clear and specific, and should use terms that can be defined and measured so that the purpose and scope are readily understood and feasible. Our prior work establishing a lessons-learned process also has found that assessing and using lessons learned from previous experience can provide a powerful method of ensuring that beneficial information is factored into the planning and work processes of future activities. Key practices of assessing lessons learned include collecting and analyzing information on prior activities and applying that information to future activities.\nAs the foreclosure review experience suggests, some implementation challenges were inevitable due to the unprecedented nature of the review. Nevertheless, the broad and expanding scope of the reviews and delays in defining key concepts could have been mitigated by more advanced planning from regulators, resulting in more efficient and effective reviews. The April 2011 consent orders provide a general description of the scope of the file reviews consultants were to conduct. According to third-party consultants, these parameters resulted in a broad review scope that generally covered all instances of noncompliance with applicable law and servicing guidelines as they related to the post-default residential mortgage loan borrower experience, including instances of noncompliance that resulted in financial harm to borrowers requiring remediation. Regulators may have missed opportunities to potentially narrow and refine the project scope—for example, through earlier definition of a harmed borrower or agreement on errors not resulting in remediation that may not have warranted additional review. Changes to guidance also expanded the scope of the reviews. For example, as we noted previously, changes to loan modification guidance contributed to an expanded scope for those reviews and delays in completing the work, including, in some cases, redoing file reviews.\nAccording to regulator staff, developing the file review process was iterative; they learned as the reviews progressed, and regulators used that knowledge to help refine the review process. In our work on designing evaluations and audits, we recognize that a review process can be iterative and that the scope and activities of the review may change as work progresses and data limitations or new information arise. Nevertheless, conducting a planning process that involves all stakeholders provides an opportunity to examine preliminary information and pilot-test processes and procedures to help further define the scope of potential activities and hedge against the risk of future changes. In addition, assessing lessons learned by using project critiques and discussions with key participants and stakeholders—such as local examination team staff, third-party consultants and law firms, and external groups—could identify the root causes of strengths and weaknesses of the foreclosure review that could apply to the amended consent order activities. According to regulator staff, they are meeting with examination staff and third-party consultants to discuss challenges with the servicers’ data that may make it difficult for servicers to determine borrowers’ direct payment amounts under the amended consent orders. OCC staff also said that they had discussions with other federal agencies and consumer advocacy groups before announcing the agreements that led to the amended consent orders.\nAs regulators prepare to implement the amended consent orders and compensate borrowers, they may encounter delays and inconsistencies similar to those associated with the foreclosure review if they miss opportunities to make key project planning decisions. Regulators told us that they anticipated borrowers would be contacted by the end of March 2013 and that they also expected the issuance of checks to begin in April. However, regulators still need to make some key decisions about these activities in order to meet their goal of beginning borrower payments in April 2013, and clear guidance in several areas will facilitate the process.\nAccording to regulator staff, prior to contacting borrowers each servicer will assign borrowers to direct payment categories. OCC staff said that the servicers were instructed to use objective data and definitions and guidance from regulators in placing borrowers in the categories and that the examination teams would use the guidance provided to servicers to conduct their validation process. Regulator staff said that they agreed that clear guidance on the categorization and file review process and validation by examination teams are tools that will help the servicers and examination teams navigate this complex process.\nIn most cases, servicers, with regulators’ approval, have engaged the third-party consultants to review borrowers’ files in two categories (SCRA and foreclosed borrowers who were not in default) to determine whether borrowers experienced those specific types of harm. According to one third-party consultant, at the time of the agreements that led to the amended consent orders, consultants were waiting on additional guidance from regulators to complete aspects of these reviews.\nIn addition, regulators have not yet determined payment amounts for the different categories of borrowers. Regulator staff said that they could not make these decisions until servicers had completed their categorization process and regulators knew the number of borrowers in each category to allow them to divide up the total payment amount among the borrowers.\nRegulators also have not determined what to do with any funds that might be left because borrowers refused payments, did not cash their checks, or could not be located. According to regulators, any remaining funds will not be returned to the servicers.\nFurther, regulators told us that the agreements specify that over the next 2 years servicers are required to take loss mitigation and foreclosure prevention actions for which each servicer will earn credit toward fulfilling a specified obligation. These activities will provide assistance to borrowers covered under the consent orders and other borrowers. Regulator staff said they provided a list of eligible activities to servicers and advised them to prioritize borrowers covered under the consent orders for assistance. However, according to OCC staff, they did not provide servicers with criteria for identifying borrowers to whom they will offer mortgage assistance, which would help ensure that eligible borrowers have a consistent opportunity to be considered for these funds.\nWithout assessing past lessons learned and making decisions on key features of the amended consent order activities in advance, regulators risk having to implement changes in the planned activities or publicly announced timelines, which could decrease the efficiency of the process to distribute direct payments and other assistance.", "The foreclosure review experience suggests that regulators’ process for monitoring third-party consultant, servicer, and examination team activities, including holding regular meetings and reviewing weekly progress reports, could provide a useful model for monitoring activities under the amended consent orders. According to regulators, examination teams will play a critical role in overseeing servicer activities under the amended consent orders, including testing and validating the results of the servicers’ categorization of borrowers. Regularly collecting and reviewing information on the activities and approaches of the examination teams could provide an opportunity to identify challenges and take steps to address them as the activities progress. Similarly, instituting a process to monitor the progress of the servicers’ loan categorization and track the payment administrator’s distribution of payments could help regulators assess the extent to which they are on target to reach their goal of providing notification to borrowers about their payment by the end of March 2013. OCC staff said that they continue to hold regular meetings with the servicers and examination teams to answer questions and share ideas. In addition, OCC staff told us that they intend to conduct site visits with each servicer, review servicers’ draft categorizations, and implement a reporting mechanism to oversee servicers’ activities under the amended consent orders.\nRegulators’ experience with the foreclosure review suggests that identifying comparative oversight mechanisms to promote consistency could help achieve consistent results among key actors. As discussed earlier, regulators had limited and unsystematic centralized control mechanisms to monitor consistency among the foreclosure review processes and did not have the information to assess the implications of any differences. According to regulators, achieving consistent results for borrowers, so that similarly situated borrowers receive similar payment amounts, is a goal of the amended consent orders, as it was of the foreclosure review process. OCC staff stated that the direct payments provided under the amended consent orders will likely be more consistent than what would have occurred under the foreclosure review because servicers are using a standard framework and objective criteria to categorize borrowers and all borrowers in a particular category will receive the same payment amount. According to regulator staff, the categorization instructions provided to servicers, regular meetings with servicers and examination teams, site visits, and examination team verification processes will provide opportunities to review and discuss the results of each servicer’s categorization of borrowers. However, whether there is a similar process that will compare results across OCC and Federal Reserve supervised servicers is unclear. Furthermore, to what extent regulators will assess the implications of any inconsistencies among the reviews that consultants are continuing to conduct for the servicers that did not sign agreements with regulators is unknown.\nApplying lessons from the foreclosure review process and our internal control standards to the amended consent order activities would suggest that mechanisms to centrally promote consistency and monitor agreement activities could help achieve consistent results for borrowers. GAO’s internal control standards state that agencies should take steps to comprehensively identify and analyze program operations to determine if risks exist to achieving goals—such as risks to the regulators’ goal of providing similar results for similarly situated borrowers. In our prior work, we found that using a horizontal review mechanism is an option to help mitigate risks of inconsistent results for activities conducted by multiple entities. For example, comparing servicer decision-making processes, including any criteria used by the servicers to categorize borrowers, could identify any potential differences and the extent to which these differences may result in different direct payment decisions for similarly situated borrowers. Similarly, mechanisms to provide clear and specific guidance—such as guidance on testing and validation of servicer activities—for local examination teams to use in their oversight of individual servicer activities could help regulators to more easily monitor and compare servicer activities and the results for borrowers among the reviews. Without using mechanisms to centrally monitor the consistency of servicers’ activities to categorize borrowers, regulators may risk delays in providing direct payments to borrowers and inconsistent results. In addition, without monitoring potential inconsistencies in the foreclosure reviews that are continuing for servicers that are not party to the amended consent orders, regulators will not have the information to assess whether those servicers’ borrowers are being treated consistently.", "Lessons from foreclosure review activities conducted to date suggest that developing and implementing an effective communication strategy that includes public reporting goals could enhance the transparency of the activities under the amended consent orders. GAO’s internal control standards state the importance of relevant, reliable, and timely communications within an organization as well as with external stakeholders. As a means to strengthen communication with external stakeholders and improve transparency and accountability, our work on TARP has underscored the importance of a communication strategy. Moreover, our prior work on organizational transformation demonstrates that public and private-sector leaders view establishing a communication strategy as especially crucial in the public sector, where policymaking and program management demand transparency and stakeholders are concerned not only with what results are to be achieved, but also with which processes are to be used to achieve those results. In addition, as previously discussed, public reporting is also a mechanism for external communication that can enhance transparency. Experiences with current government initiatives that are aimed at assisting struggling homeowners and involve institutions and mortgage-related issues similar to those of the foreclosure review also highlight the benefits of regular performance reporting. Specifically, periodic reports on the performance of and participation in TARP programs and scheduled reports on servicers’ compliance with requirements of the National Mortgage Settlement are intended to promote transparency and build public confidence. Because the foreclosure review and the subsequent activities under the amended consent orders—like TARP and the National Mortgage Settlement—are part of the larger governmental response to the housing and mortgage crises, a communication strategy which incorporates plans for periodic public reporting may enhance transparency in the distribution of direct payments and other assistance and help restore confidence in the mortgage market.\nRegulators announced the agreements that led to the amended consent orders without a clear communication strategy. As such, what information will be provided to individual borrowers and the general public about processes, progress, and results of activities under the amended consent orders is unclear. Although OCC and the Federal Reserve have provided some information on the amended consent orders and have plans to release additional information, regulators have not made key decisions on communicating directly with individual borrowers and the extent to which they will report on activities related to the amended consent orders and continuing foreclosure reviews. Regulators provided limited information on the amended consent orders through press releases and updates on their websites, among other ways. For example, OCC and the Federal Reserve issued joint press releases announcing the agreements and related amended consent orders, and OCC and the Federal Reserve posted answers to frequently asked questions on their websites on the agreements that led to the amended consent orders.\nIn addition, regulators plan to release information about the distribution plan after payment amounts are determined, but staff did not describe plans to release additional information about the procedures servicers are using to categorize borrowers. As of January 2013, OCC staff said that they planned to release two public reports, one in April 2013 to discuss the direct payment process, and one in the summer of 2013 to discuss the foreclosure review results of servicers not covered under the amended consent orders. OCC staff told us, however, that they have not decided on the specific content of these reports. As of February 2013, the Federal Reserve also plans to issue public reports about servicers’ activities under the amended consent orders and the results of the foreclosure reviews at servicers not subject to the amended consent orders. Regulators had not decided what, if any, information will be made available on the results of the work conducted under the foreclosure review prior to the agreements. Further, OCC and Federal Reserve staff told us they had not made decisions about the form and specific content of communications, if any, directly to individual borrowers.\nWhile the amended consent orders terminate the foreclosure review for most of the servicers, transparency of past and current efforts continues to be important to stakeholders, including Congress and consumer groups. In particular, members of Congress have expressed concerns about the lack of public reporting on the foreclosure review and a lack of information about how the amounts of payments and other assistance in the amended consent orders were determined. In addition, consumer groups expressed concerns about transparency and urged regulators to take additional steps to increase transparency and public confidence in the implementation of the amended consent orders, including robust data collection and reporting. In the absence of a clear communication strategy to direct external communications, including public reporting and direct communication with individual borrowers, regulators face risks to transparency and public confidence similar to those experienced in the foreclosure review process.", "The foreclosure review was intended to identify as many harmed borrowers as possible, ensure that similarly situated borrowers received similar results, and help restore public confidence in the mortgage market. Ultimately, the complexity of the foreclosure reviews and limitations in regulators’ guidance and monitoring of the foreclosure review challenged their ability to achieve the stated goals. OCC and the Federal Reserve took a number of steps to foster consistency of this unprecedented review, including issuance of nearly identical consent orders and joint issuance of guidance documents for third-party consultants. However, other efforts related to guidance and monitoring may have exacerbated the challenges and complexities inherent in the process. In particular, existing guidance on sampling was ambiguous, leading to inconsistent sampling methodologies used by consultants, and did not include key oversight mechanisms to facilitate assessment of the extent to which consultants had identified as many harmed borrowers as possible. In addition, regulators’ limited monitoring of consistency of the consultants’ sampling methodologies and review processes increased risks that similarly situated borrowers would receive different results. As a result, the regulators risked not achieving the intended goals of identifying as many harmed borrowers as possible and treating similarly situated borrowers similarly, and this remains a challenge for the servicers continuing the foreclosure review. Our prior work has identified practices, such as assessing progress toward goals and designing such monitoring during the planning stage of a project, as effective management practices. In addition, OMB has found that in planning data analysis activities, such as sampling, agencies should take necessary steps to ensure that they have collected the appropriate data from which to draw conclusions. Assessing the review processes of the continuing reviews for consistency and implementing a mechanism to assess the sufficiency of additional sampling activities could help mitigate risk of similarly situated borrowers receiving different results and facilitate oversight of the extent to which consultants have reached as many harmed borrowers as possible.\nAlthough the regulators have terminated activity related to the foreclosure review for the servicers with amended consent orders, the foreclosure review process offers an opportunity for the regulators to leverage this experience to help ensure that similar difficulties are better addressed in future efforts. In general, identifying, assessing, and using lessons learned can help ensure that beneficial information is factored into the work processes of future activities, among other things. Therefore, consideration of lessons from the foreclosure review activities, such as advance design of data analysis activities and assessment of inconsistencies in the file review processes, is one way to help regulators improve the clarity of their guidance and ensure effective monitoring of progress toward results for the activities under the amended consent orders and the three remaining servicers still subject to the foreclosure review requirement that will cover 450,000 eligible borrowers. Specific activities include the following.\nSound planning and additional oversight mechanisms can enhance project design and help ensure achievement of program goals. Our internal control standards on monitoring, risk assessments, and consultations with stakeholders, as well as generally accepted project management practices for agencies to use in implementing the Government and Performance Results Act and related management initiatives, emphasize the importance of planning, monitoring, and assessing lessons learned. Assessing the strengths and weaknesses of the foreclosure review process by using project critiques and discussions with key participants and stakeholders—such as local examination team staff, third-party consultants, law firms, and external groups—could help ensure better design and more efficient implementation of activities under the amended consent orders. As such, consideration of lessons from the foreclosure review processes would enhance the design, implementation, and oversight of the activities under the amended consent orders.\nThe foreclosure review activities to date also highlight the importance of effective communication. We found that limited communication with individual borrowers and the general public hindered transparency and public confidence in the reviews. Further, regulators announced agreements that led to the amended consent orders and ended the foreclosure review with 11 servicers without a clear communication strategy, and the information that will be provided to borrowers and the general public remains unclear. Our internal control standards state the importance of external communication, and our key practices in implementing transformations that were identified by public and private sector leaders underscore the importance of a communication strategy. As such, the development and implementation of an effective communication strategy could enhance regulators’ efforts to ensure transparency and public confidence in the results of the foreclosure review as well as processes to implement the activities under the amended consent orders.", "We are making three recommendations to the regulators: (1) To better ensure that the goals of the foreclosure review are realized for servicers that are not subject to amended consent orders, we recommend that the Comptroller of the Currency and the Chairman of the Board of Governors of the Federal Reserve System, as appropriate, improve oversight of sampling methodologies and mechanisms to centrally monitor consistency, such as assessment of the implications of inconsistencies on remediation results for borrowers in the remaining foreclosure reviews. (2) To better ensure that the goals of the amended consent orders related to the distribution of direct payments and other assistance are realized, we recommend that the Comptroller of the Currency and the Chairman of the Board of Governors of the Federal Reserve System identify and apply lessons from the foreclosure review process, such as enhancing planning and monitoring activities to achieve goals, as they develop and implement the activities under the amended consent orders. (3) To better ensure transparency and public confidence in the activities under the amended consent orders and results of the continuing foreclosure reviews, we recommend that the Comptroller of the Currency and the Chairman of the Board of Governors of the Federal Reserve System develop and implement a communication strategy to regularly inform borrowers and the public about the processes, status, and results of the activities under the amended consent orders and continuing foreclosure reviews.", "We requested comments on a draft of this report from OCC and the Federal Reserve. OCC and the Federal Reserve provided written comments that are presented in appendixes II and III, respectively. The regulators also provided technical comments, which we have incorporated into the report, as appropriate. In commenting on the report, OCC and the Federal Reserve both identified actions that they have taken or planned to implement the recommendations.\nSpecifically, OCC stated that it plans to continue to ensure that its sampling guidance is used in the continuing reviews and that the agency plans to monitor for consistency. As we discussed in the report, developing and using objective measures to monitor and assess consistency among the continuing reviews is also important. With respect to the second recommendation, OCC stated that it plans to apply lessons learned from the foreclosure review to the activities under the amended consent orders. In response to the third recommendation, OCC noted that it recognized the importance of providing additional information to the public about the processes, status, and results of the continuing reviews and activities under the amended consent orders. As such, OCC said it plans to issue at least two public reports, as we noted in the draft report.\nThe Federal Reserve stated that it plans to continue to coordinate with OCC to provide consistent guidance during the continuing reviews. As we discussed in the report, developing and using objective measures to monitor and assess consistency among the continuing reviews is important. With respect to the second recommendation, the Federal Reserve stated that it has expanded its planning and monitoring efforts during the course of the foreclosure review and plans to continue to devote resources to planning and monitoring as it implements the amended consent orders. In responding to the third recommendation, the Federal Reserve outlined a number of steps that it and OCC are taking to communicate about the continuing foreclosure reviews and activities under the amended consent orders. These steps, such as developing a letter to explain why borrowers are receiving a payment and updating borrowers covered under the continuing reviews who submitted a request-for-review, will help provide information to affected borrowers. Moreover, the Federal Reserve and OCC said that they have committed to providing public reports that detail the implementation of the agreements. They also said that they anticipate these reports will include information about the findings of completed reviews, the number of requests for review, and the status of other activities under the consent orders.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.", "The objectives of this report were to assess: (1) challenges to the achievement of the goals of the foreclosure review, (2) the extent of transparency in the foreclosure review process, and (3) lessons that could be useful for activities under the amended consent orders and continuing reviews. The scope of our work was limited to the foreclosure review at the 14 servicers that are subject to the April 2011 consent orders. We were in the process of reviewing various aspects of the foreclosure review when the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) announced agreements with 11 of the 14 servicers to discontinue the foreclosure review and replace it with a broad payment process.\nTo assess challenges to achieving the goals of the foreclosure review process, we identified three areas of the review process to use as a basis for our analysis. Specifically, we analyzed consultants’ application of guidance to conduct the reviews and recommend remediation; consultants’ development of test questions related to loan modifications, state foreclosure laws, and fee reasonableness; and consultants’ sampling methodologies for selecting files to review. Based on our prior work on the foreclosure review, these were areas we identified as particularly challenging for ensuring consistent reviews. To obtain information on consultants’ development of test questions and application of regulatory guidance, we reviewed the guidance and conducted site visits and in-person interviews with five consultant engagement teams. To identify third-party consultants to interview, we selected consultants that were engaged to conduct reviews for servicers that are overseen by each regulator. In addition, we selected consultants engaged by servicers with a range in sizes of eligible population for the review, including some of the largest servicers. During the site visits we also observed demonstrations of the file review process and systems. In addition, we obtained responses to a standardized questionnaire from all of the consultants. We compared consultants’ processes for compiling reference materials, developing test questions, and applying guidance. We reviewed documents regulators used to monitor the file reviews, such as status reports and meeting agendas. We also interviewed regulator staff and examination teams on steps taken to promote and assess consistency in the reviews and the effects of any differences. To obtain information on third-party consultants’ sampling plans, we used a data collection instrument created by our statisticians. We analyzed information contained in engagement letters between the servicers and consultants for the sampling parameters consultants used to select files. We confirmed key observations of our analysis in interviews and site visits with officials responsible for developing the sampling plans at five third- party consultant engagement teams, interviews with regulator staff, and through examination teams that reviewed the plans. In addition, we obtained information on consultants’ plans for additional analytical methods and confirmed other observations of our analysis through a standardized written questionnaire to consultants. We compared the information and these parties’ actions to criteria such as the regulators’ standard practices, stated goals for the foreclosure review, and our internal control standards. In addition, we reviewed our prior work on the Troubled Asset Relief Program (TARP), Home Affordable Modification Program, and reports where we established criteria on lessons-learned procedures, generally accepted project management practices, and effective management practices. We also referred to our sampling standards and several other references on sampling standards from OCC, the American Institute of Certified Public Accountants (AICPA), and the Office of Management and Budget (OMB). We considered these practices applicable to the foreclosure review because they concern the use of data from samples to draw inferences about the populations from which the samples are drawn. To further evaluate and asses the sampling plans, we also compiled a list of common sampling terms based on the work cited above, as well as other analyses, and vetted the definitions for these terms internally with our methodological staff, including staff responsible for sampling procedures related to financial audits and program audits. Any data we obtained on the number of borrowers in the scope of the reviews or the status of the reviews were used for background purposes only and were not used to support our findings and conclusions. As such, we obtained information from regulator staff and the data administrator about how the data were obtained and compiled, but we did not assess the reliability of the data.\nStatistical sampling can be a powerful tool for drawing inferences about populations when a full census of cases is infeasible. Well designed and executed samples allow researchers to make estimates of population characteristics and to specify uncertainty due to sampling error associated with those estimates. Parameter estimates and associated measures of precision (such as confidence intervals or margins of error) are developed from the sample data using estimation formulas consistent with the sampling plan actually used. For example, if the sample design were complex (such as using differing probabilities of selection for different portions of the population) and if estimation formulas for simple random sampling were used to produce estimates, those estimates and the associated confidence intervals would likely be incorrect. Additionally, estimates projected to a population of interest may be subject to bias when a sample fails to cover the population of interest, such as when the list used for sampling (the sampling frame) excludes relevant units or when data from only a portion of the sample are collected.\nThe design of an appropriate sample is intricately linked with the goals of the sample. These goals can include the importance of establishing the estimate within a narrow confidence interval, the need to conduct statistical testing against a threshold or for differences, the ability to make estimates to subpopulations, and the desire to report specific results. A sample that is designed to test against a specified tolerance level may use different sample sizes and a different approach to statistical testing than a sample that is designed to estimate the level of an attribute in the population. Some uncertainty is implicit in sampling as a tradeoff for such factors as the cost and time required to examine all of the data. However, according to AICPA guidelines, sampling is inappropriate if there is no tolerance for risk of possible erroneous decisions as a result of examining only a sample of the data.\nFor example, figure 2 demonstrates that these two consultants interpreted the “precision” requirement differently. Consultant A interpreted precision as being the threshold for the tolerable error rate, whereas Consultant B interpreted this as requiring a margin of error within plus or minus 3 percentage points of the estimate. Because Consultant A is testing against a threshold using the methodology specified in the OCC handbook on sampling methodologies (based on a Poisson distribution), it uses the upper bound of its one-sided 95 percent confidence interval to draw inferences about whether the population error rate is less than an established threshold value. Consultant B, in contrast, uses a two-sided 95 percent confidence interval because it is developing point estimates. Although both consultants achieve the 95 percent reliability and 3 percent precision guidance from regulators, the consultants’ different approaches to sampling resulted in different sample sizes and different decision rules for when additional sampling or full review of a population would be required, even when the same number, or even proportion, of errors are found in the sample. For example, if 2 errors were found in Consultant A’s sample, one could conclude with 95 percent confidence that the error rate in the population was below 6.3 percent and that the 3 percent precision threshold had not been met. Additional sampling would be required in this case. If 2 errors were found in Consultant B’s sample, one could conclude with 95 percent confidence that the error rate in the population is between 0.1 and 1.9 percent and no additional sampling would be required. If the proportion of errors in Consultant B’s sample was similar to Consultant A’s at approximately 2 percent, or 8 errors, one could conclude with 95 percent confidence that the error rate in the population was between 1 and 4.3 percent, a much narrower estimate than that from Consultant A.\nNeither of the samples illustrated in figure 2 was designed with the goal of estimating the number of harmed borrowers in the population. However, had samples of this size been drawn with the purpose of estimating the number of harmed borrowers, the width of the two-sided 95 percent confidence intervals around each estimate would vary. Assuming a population size of 100,000 cases and a binomial distribution, and that each loan with an error corresponds to one harmed borrower, samples similar to those in figure 2 would result in different ability to concisely estimate the number of harmed borrowers. If two errors were found in a sample of 100 files, a 95 percent confidence interval for the estimated number of harmed borrowers in the population would run between approximately 240 and 7,040 borrowers. For a sample of 370 cases, a similar proportion of errors (8 errors in a sample of 370) would result in a 95 percent confidence interval around the estimated number of harmed borrowers between approximately 940 and 4,220, a much narrower confidence interval. To effectively use a baseline sample from the full population of loans to monitor whether the foreclosure reviews have identified the majority of harmed borrowers would require setting a realistic expected error rate to calculate sample size and establishing guidelines for an appropriate margin of error around the estimate to ensure that sample estimates were sufficiently precise to meet regulators’ goals.\nTo assess the extent of transparency in the foreclosure review process, we reviewed press releases and documents from regulators related to the foreclosure review. In particular, we reviewed what documents related to the consent orders were available on the regulators’ websites, such as speeches by agency officials, engagement letters, outreach materials, and press releases, and analyzed the content of these documents. We compared this documentation against agency policies on public disclosure of enforcement action information and our previous work on transparency in government programs, such as our work on TARP to identify any similarities and differences. Further, we reviewed reports and summary documentation from the National Mortgage Settlement and interviewed the monitor of the settlement to provide the context of a current example of a large-scale settlement involving similar stakeholders and issues similar to those of the foreclosure review. We also conducted interviews with regulator staff, selected third-party consultants, and consumer groups.\nTo identify lessons learned that might be useful for the activities under the amended consent orders, we compared our findings from the first two objectives with the processes and goals regulators outlined for the activities under the amended consent orders and identified areas with similar challenges. We reviewed press releases on the agreements and amended consent orders from the regulators and interviewed regulator staff about the goals and rationale for the agreements and their plans for designing and implementing the activities under the amended consent orders. We also reviewed our internal control standards, our prior work identifying key practices during agency transformations, our prior work covering TARP and other government programs and agencies, and documents related to the National Mortgage Settlement. In particular, we focused on information in these reports on project design, oversight of progress, and communication with stakeholders. Although the foreclosure review and the activities under the amended consent orders are not government programs, we considered the steps identified in this work as applicable because planning, monitoring, and communication are key principles of any effective process.\nWe conducted this performance audit from July 2012 through March 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "In addition to the contact named above, Karen Tremba (Assistant Director), Bethany M. Benitez, John Karikari, Charlene J. Lindsay, Patricia MacWilliams, Marc Molino, Jill Naamane, Anna Maria Ortiz, Robert Rieke, Jennifer Schwartz, Andrew Stavisky, Sonya Vartivarian, James Vitarello, and Monique Williams made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "h0_title h3_title", "h0_full", "h3_full", "h0_full", "h0_full", "", "h1_title", "h1_full", "h1_full", "", "h0_title h2_title", "h2_full", "h0_full", "h2_full", "h0_full h2_full h1_full", "", "", "h3_full h2_full", "", "", "", "", "" ] }	{ "question": [ "By what factors was the OCC and Federal Reserve review impeded?", "Why was coordination difficult?", "To what extent are the results of the reviews useful?", "How was the guidance given less than ideal?", "Why may the amount of information released by regulators be a cause for concern?", "How are regulators attempting to promote transparency?", "How did stakeholders respond to these actions?", "What other methods have regulators considered in expanding transparency?", "What activities did the foreclosure review cover?", "What lessons can be learned from this review?", "Why is reviewing these lessons important?", "How will regulators assess the results of the reviews?", "What do GAO standards indicate regarding communication/reporting?", "Why is a clear strategy to guide communications so important?", "How has the foreclosure review been overseen?", "How were loan files reviewed?", "How will this review affect borrowers?", "What does this report address?", "How did GAO collect data for this report?" ], "summary": [ "Complexity of the reviews, overly broad guidance, and limited monitoring for consistency impeded the ability of the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) to achieve the goals of the foreclosure review--to identify as many harmed borrowers as possible and ensure similar results for similarly situated borrowers.", "Regulators said that coordinating among foreclosure review participants was challenging, and consultants said that the reviews were complex.", "In spite of regulators' steps to foster consistency, broad guidance and limited monitoring reduced the potential usefulness of data from consultants and increased risks of inconsistency.", "For example, GAO found that guidance was revised throughout the process, resulting in delays. Other guidance did not specify key sampling parameters for the file reviews and regulators lacked objective monitoring measures, resulting in difficulty assessing the extent of borrower harm.", "Although regulators released more information than is typically associated with consent orders, limited communication with borrowers and the public adversely impacted transparency and public confidence. In addition, OCC released two interim progress reports.", "To promote transparency, regulators released redacted engagement letters and guidance on remediation.", "However, some stakeholders perceived gaps in key information and wanted more detailed information about how the reviews were carried out.", "Regulators stated they considered publicly releasing additional information, but expressed concerns that releasing detailed information risked disclosure of confidential or proprietary information.", "The foreclosure review activities to date highlight key lessons related to planning, monitoring, and communication.", "GAO's prior work shows that assessing and using lessons learned from previous experience can benefit the planning of future activities. The foreclosure review produced lessons in advanced planning and establishing mechanisms to monitor progress toward goals.", "Without assessing and applying relevant lessons learned, regulators might not address challenges in the continuing reviews or similar challenges in activities under the amended consent orders. In particular, regulators announced the agreements that led to the amended consent orders without a clear communication strategy.", "Although the regulators plan to release reports on the results of the amended consent orders and the continuing foreclosure reviews, neither regulator had made decisions about what information to provide to borrowers.", "GAO's internal control standards and best practices indicate that an effective communication strategy and timely reporting can enhance transparency and public confidence.", "Absent a clear strategy to guide regular communications with individual borrowers and the general public, regulators face risks to transparency and public confidence similar to those experienced in the foreclosure review.", "Since April 2011, OCC and the Federal Reserve had been overseeing the foreclosure review, a requirement of consent orders entered into by 14 mortgage servicers.", "This undertaking involved a review of loan files by thirdparty consultants to identify errors in servicing and foreclosure practices.", "In January 2013, the regulators announced agreements with 11 of the servicers that replaced the reviews with a broad payment process to compensate borrowers in a more timely manner.", "This report addresses: (1) challenges to the achievement of the goals of the foreclosure review, (2) transparency of the process, and (3) lessons that could be useful for carrying out activities under the amended consent orders and continuing reviews.", "GAO analyzed third-party consultants' sampling plans, reviewed regulatory guidance and other documents, and interviewed representatives of third-party consultants and law firms, consumer groups, and regulators." ], "parent_pair_index": [ -1, 0, 0, 2, -1, 0, 1, 1, -1, 0, 1, 0, 3, 4, -1, 0, -1, -1, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 0 ] }
CRS_RL34170	{ "title": [ "", "Overview: Instability in Yemen", "Latest Developments: The Unravelling of Yemen's Transition?", "The Houthi Crisis", "U.S. Policy in Yemen in Flux", "Iranian Involvement in Yemen", "Al Qaeda in the Arabian Peninsula (AQAP)", "U.S. Counterterrorism Policy in Yemen", "Evaluating U.S. Counterterrorism Policy in Yemen: Is it a Model?", "Domestic Politics: Disunity and Separatism", "The Houthis", "The Southern Movement", "The Economy, Sustainable Development, and International Aid", "The Impact of Oil", "Attacks Against Oil and Natural Gas Pipelines", "Current Economic and Fiscal Conditions", "International Aid", "U.S. Policy Toward Yemen", "U.S. and International Sanctions", "Executive Action", "U.S. Foreign Assistance to Yemen", "Economic Aid", "Humanitarian Aid", "Military and Other Security Aid", "Possible Aid Restrictions", "Yemeni Detainees at Guantanamo Bay", "Appendix. Country Background" ], "paragraphs": [ "", "The Republic of Yemen remains a country of concern to U.S. policy makers. Although Yemen itself is a resource-poor nation, it is strategically located next to Saudi Arabia ( Figure 1 ), one of the world's major oil producers, and the Bab al Mandab strait, through which commercial oil tankers carry an estimated 3.4 million barrels per day (3.5% to 4% of the global oil supply). Yemen's 1,184-mile coastline abuts the Red Sea and the Gulf of Aden across from the Horn of Africa, which until recently had been a major area of Somalia-based piracy.\nFor more than a decade, U.S. officials and Members of Congress have been concerned with the threat of terrorism emanating from Yemen and directed against the United States. Yemen is home to Al Qaeda in the Arabian Peninsula (AQAP), an affiliate of Al Qaeda (AQ). The U.S. Department of Homeland Security considers AQAP to be the AQ affiliate \"most likely to attempt transnational attacks against the United States.\" To date, the terrorist group has unsuccessfully attempted to target the United States at least three times (in 2009, 2010, and 2012) using concealed explosive devices designed to destroy commercial aircraft or detonate inside parcel packages. The intelligence services of Saudi Arabia helped disrupt two of these plots.\nIssues such as terrorism and Yemen's political stability are tied to broader questions regarding the country's long-term economic and environmental viability. According to the 2014 United Nations Human Development Index, Yemen ranks 154 out of 187 countries. Its poverty has been exacerbated by the quadrupling of its population over the last 30 years. Agricultural development has been decimated by water shortages, political strife, and lack of investment, making the country dependent on food imports for up to 90% of basic staples. In May 2014, the World Food Program estimated that 10 million Yemenis out of a total population of 25 million could be categorized as either severely food insecure or close to it.\nSuch dire socio-economic prospects, combined with Yemen's proximity to both Africa and Arab Gulf states, have made it a global transit and destination point for migrants and refugees. Each year, thousands of asylum-seekers and economic migrants from Somalia, Ethiopia, and Eritrea make what can be a perilous journey to Yemen, where they either remain or seek passage to the wealthier Gulf monarchies. At the same time, at least a million Yemenis work abroad, and expatriate remittances provide a major boost to the local economy. Particularly for Saudi Arabia, the number of Yemeni laborers working in the kingdom is an apparent source of trepidation. In recent years, Saudi authorities have begun deporting more and more Yemeni workers, thus exacerbating bilateral tensions.", "Hopes for progress and stability arising from Yemen's 2011-2012 political transition have been eroding throughout 2014 and early 2015. Before that, the Obama Administration and other observers considered Yemen to be one of the few relative Arab Spring \"success stories\"; the government had new leadership (President Hadi) and had managed to bring all the nation's political factions together under the rubric of the National Dialogue Conference (NDC) in an attempt to reach consensus on governance. However, in Yemen no one group, including the central government, has a monopoly on armed force; various actors can act as \"spoilers\" to disrupt the system in pursuit of their own interests ( Figure 2 ); and that dynamic played out throughout 2014.\nWhen the NDC concluded in early 2014, Yemen's political transition was still several key steps from completion; a constitution had yet to be drafted, so a referendum on its approval had yet to be held, and subsequent presidential and parliamentary elections were still on hold. After two years of transition and with the prospect of several more, many observers were concerned that momentum would shift from President Hadi to those opposed to the internationally backed transition process—namely former president Saleh and his Houthi allies who sought to redraw Yemen's internal boundaries more to their favor.\nWithin weeks of the National Dialogue Conference's conclusion, the Houthi movement, a Zaydi revivalist political and insurgent movement in the north that has been at war with the government on-and-off since 2004, launched another military offensive against various tribal allies of President Hadi. Their campaign has continued, culminating in the summer 2014 takeover of the capital Sana'a and other parts of Yemen. Their battlefield successes have created a new balance of power, and this evolving political dynamic may challenge outside powers, such as the United States, to reassess how they can exert influence inside Yemen in pursuit of their national security interests, such as counterterrorism.", "In 2014 and early 2015, the Houthis have disrupted the political transition that the United States and Saudi Arabia orchestrated three years ago and have threatened to intensify Yemen's internal conflicts. This allegedly has been done with the support of former president Ali Abdullah Saleh or tribes aligned with him (see below). Houthis took over the capital and forced the central government to sign a cease-fire deal which gave the movement veto power over the selection of cabinet ministers. Moreover, the movement's military maneuvers have sparked internal uprisings elsewhere: southern Yemenis have renewed calls for independence and threatened to secede. AQAP has called for new Sunni Arab recruits to wage holy war against the Houthis, whom they regard as \"Shia heretics.\"", "With the Houthis in control of the capital and pressing their own political process forward, most observers expect the movement to meet significant resistance in the coming weeks and months ahead. Opposition to the Houthi takeover could come from their erstwhile partner, former president Saleh, Sunni tribes in the oil-producing province of Marib, Saudi Arabia, AQAP, and tribal/political movements such as Islah whom the Houthis defeated months earlier. The status and loyalties of various Yemeni military brigades positioned throughout the country is unclear, and it is possible that some of these units could engage the Houthis or, at a minimum, remain on the sidelines.\nWith the anticipation of further domestic unrest, the United States has closed its Embassy and relocated U.S. government personnel. Many U.S. policy makers have been concerned with the safety of remaining U.S. personnel in Yemen, particularly after a January 19 incident at a checkpoint in the capital during which Houthi gunmen shot multiple rounds at an Embassy armored vehicle. No casualties or serious injuries were reported.\nThe Defense Department claims that counterterrorism cooperation continues and U.S. Special Operations forces remain in Yemen, but that recent political instability has certainly affected overall U.S. counterterrorism capabilities. Nevertheless, multiple media reports suggest that the United States has carried out three drone strikes against AQAP targets since President Hadi's resignation on January 22.\nOverall, the United States and others in the international community have not formally recognized recent Houthi declarations and attempts to form a government, maintaining that President Hadi remains the legitimate president of Yemen. The United States has insisted that all parties adhere to previous internationally-brokered agreements, such as the 2011 Gulf Cooperation Council transition plan and the September 2014 Peace and National Partnership Agreement.\nDespite the Houthis' recent advances, the international community, including the United States, does maintain a significant degree of leverage over the Houthis. International aid, particularly grants from Saudi Arabia, have helped fund the central government, allowing thousands of Yemeni public workers to receive salaries. As of February 2015, Saudi Arabia has suspended its payments to Yemen, and if the Houthis continue to unilaterally dictate the terms of the country's political process, they may find it difficult on their own to finance Yemen's national budget. If Yemen's economy collapses as the result of a government breakdown, then the United States and other European nations would, however, most likely continue to support humanitarian aid to those in most in need.", "Since Iran backs state and non-state actors in sectarian conflicts throughout the Middle East, many analysts believe that the recent Houthi-driven crisis in Yemen may benefit the Iranian regime. For years, Yemeni leaders have claimed that Iran meddles in Yemeni affairs by supporting secessionist movements at odds with its rival Saudi Arabia. Many analysts long considered these claims to be exaggerated, aimed at attracting more Western attention and Gulf Arab financial aid. However, in recent years, there have been U.S. reports detailing allegedly increased Iranian activity in Yemen. In a War Powers letter to Congress, President Obama noted that in January 2013:\nA U.S. Navy warship with Yemeni Coast Guard personnel aboard entered Yemeni territorial waters, at the invitation of the Government of Yemen, to assist the Government of Yemen in intercepting and inspecting a vessel suspected of smuggling contraband into Yemen. Upon boarding and searching the vessel, a combined U.S. and Yemeni team discovered various conventional weapons and explosives, apparently of Iranian origin, concealed within the vessel. The vessel was escorted to Aden and turned over to the Yemeni Coast Guard on January 30, 2013.\nAn unnamed U.S. official reportedly said in 2012 that Iranian smugglers backed by the Quds Force (an elite unit of Iran's Revolutionary Guard Corps) used small boats to ship AK-47s, rocket-propelled grenades and other arms to replace older weapons used by Houthi rebels in the north. In the south, Ali Salim al Beidh, the leader of the secessionist Southern Mobility Movement, has boasted publicly of his movement's willingness to accept assistance \"from any regional actor\"—a formulation widely interpreted to refer to Iran. Moreover, Hezbollah has reportedly provided financial aid and media training to southern Yemeni leaders in exile in Beirut, Lebanon.\nMany analysts are now comparing the Houthis in Yemen to Hezbollah in Lebanon in terms of their aspirations to form a \"state within a state.\" One Houthi spokesman cautioned against taking this comparison too far:\nWhat we have in common with Iran or Hezbollah [because the comparison was also made between the so-called Houthis' takeover of Sanaa and the Hezbollah takeover of Beirut in May 2008] or Hamas and Islamic Jihad, is that we have a common stand vis-a-vis Israel and the United States and we will cooperate with any political actor in the region who stands in the face of the U.S. regional designs. But to grasp the complexities of the situation in Yemen, we should only look in Yemen for answers and not in Tehran or Lebanon for that matter.\nAs the Houthis continue to consolidate their gains in Yemen, Iranian officials have become more outspoken in support of the group. According to one account, Ali Akbar Velayati, a spokesman for Iran's Supreme leader Ayatollah Ali Khamenei, said \"the Islamic Republic of Iran supports the rightful struggles of Ansarullah [the Houthis] in Yemen, and considers the movement part of the successful Islamic Awakening.\"", "According to U.S. officials, AQAP, a U.S.-designated Foreign Terrorist Organization (designated in 2010) operating in Yemen, remains the Al Qaeda affiliate \"most likely to attempt transnational attacks against the United States.\" AQAP has attempted on several occasions to bomb U.S. commercial aircraft and indoctrinate what the intelligence community refers to as \"homegrown violent extremists\" or HVEs. To date, there is public information on three AQAP attempted attacks or disrupted plots against the United States homeland, including:\na failed bomb attack against Northwest Airlines Flight 253 on Christmas Day 2009; a failed attempt (disrupted by Saudi intelligence) to ship explosive parcel packages to Jewish sites in Chicago in October 2010; and a disrupted bomb plot (disclosed in May 2012), in which AQAP provided a concealed explosive device to a Saudi double agent who subsequently turned the device over to authorities.\nIn addition to hatching transnational terrorist plots against the \"far enemy\" (the United States), AQAP is also focused on seizing territory from the Yemeni government (\"the near enemy\") and attacking neighboring Saudi Arabia. Since 2011, it has waged an Islamist insurgency in the country's remote southern provinces under the banner of a militia known as Ansar al Sharia (in English: Partisans of Sharia, or Islamic law). The group was most militarily successful in 2011, when infighting among elites in the capital distracted the central government from halting AQAP advances in the south. Since the government recaptured urban areas formerly under AQAP control in 2012, the group has continued to fight in other provinces, most recently in the province of Hadramawt.\nOverall, political and economic conditions in the provinces that formerly made up South Yemen (particularly the provinces of Abyan, Shabwa, Aden, and Hadramawt) offer fertile ground for AQAP's insurgency to grow ( Figure 3 ). In the south, the central government has a limited presence and disaffection is widespread, due in part to a lack of investment in the area. Politics are complex, with the interests of tribes, southern secessionists, local officials, and AQAP militants overlap in some areas and clashing in others. Yemenis who have returned from the battlefields of Afghanistan, Iraq, and Syria are interspersed with the population and seek young recruits in areas where tribal authority may have eroded. Though at times the government has succeeded in turning local actors against AQAP, the overall prospects for uprooting the group entirely in the foreseeable future remain slim. Although AQAP has not repeated its earlier successes at seizing territory, it is still able to harass government and tribal-allied forces, using tactics such as car bombings, kidnappings, and assassinations.", "For the United States, Yemen presents formidable counterterrorism challenges. Central government power has eroded and AQAP has evolved into both a transnational terrorist group and a domestic insurgency. In turn, press reports suggest that the United States has been forced to expand the mission and scope of reported covert operations in Yemen, from the sole pursuit of a few high value targets to a broader counterinsurgency effort in Yemen's remote provinces. U.S. airstrikes in Yemen, acknowledged by President Obama in his May 2013 speech at National Defense University, reportedly have increased markedly (according to various open source tracking) since political unrest began in 2011, and since AQAP created its Ansar al Sharia (AAS) militia.\nMultiple reports suggest that the Administration has been wary both of characterizing its air operations in Yemen as war, and of becoming entangled in Yemeni domestic politics and counter-insurgency operations in remote areas of the country, where it is difficult to distinguish friend from foe. John Brennan, the Director of the Central Intelligence Agency (CIA) and one of the leading architects of U.S. policy in Yemen, has at times expressed the difficulty of limiting the scope of U.S. air operations while also responding to the terrorist threat on the ground. In 2012 remarks at the Council on Foreign Relations, Brennan said:\nSo while we have aided Yemen, the Yemeni government, in building their capacity to deal with an AQAP insurgency that exists on the ground there, we're not involved in working with the Yemeni government in terms of direct action or lethal action as part of that insurgency....But where we get involved on the counterterrorism front is to mitigate those threats, those terrorist threats....We're not going to sit by and let our fellow Americans be killed. And if the only way that we can prevent those deaths from taking place is to take direct action against them, we will do so.\nThe Obama Administration has argued that it has the legal authorities, under both U.S. and international law, to conduct military operations against AQAP. Administration officials have repeatedly said that the United States is in \"an armed conflict with al Qaeda, as well as the Taliban and associated forces,\" and that P.L. 107-40 , the 2001 Authorization for Use of Military Force (or AUMF), enables it to target AQAP. According to General Counsel for the Department of Defense Stephen W. Preston:\nThe U.S. military currently takes direct action (capture or lethal operations) under the AUMF outside the United States and areas of active hostilities in the following circumstances: First, in Yemen, the U.S. military has conducted direct action targeting members of al-Qa'ida in the Arabian Peninsula (AQAP), which is an organized, armed group that is part of, or at least an associated force of, al-Qa'ida. The determination that the AUMF authorizes the use of force against AQAP is based on information about both AQAP's current and historical connections to al-Qa'ida and the fact that AQAP has repeatedly launched attacks against the United States, including the December 2009 \"underwear bomber\" attack and the 2010 \"printer cartridge\" attack. In addition, AQAP continues to plan and attempt attacks against U.S. persons, both inside and outside Yemen.", "After nearly five years of heightened U.S. military involvement in Yemen, ranging from apparent airstrikes against militants to the training and equipping of select Yemeni security forces, President Obama identified U.S. counterterrorism policy in Yemen as a \"model\" that can be applied elsewhere, such as in Iraq and Syria. Examples of presidential statements in 2014 include the following:\nRemarks by the President on the Situation in Iraq , June 19, 2014 – \"You look at a country like Yemen—a very impoverished country and one that has its own sectarian or ethnic divisions—there, we do have a committed partner in President Hadi and his government. And we have been able to help to develop their capacities without putting large numbers of U.S. troops on the ground at the same time as we've got enough CT, or counterterrorism capabilities that we're able to go after folks that might try to hit our embassy or might be trying to export terrorism into Europe or the United States. And looking at how we can create more of those models is going to be part of the solution in dealing with both Syria and Iraq. But in order for us to do that, we still need to have actual governments on the ground that we can partner with and that we've got some confidence are going to pursue the political policies of inclusiveness. In Yemen, for example, a wide-ranging national dialogue that took a long time, but helped to give people a sense that there is a legitimate political outlet for grievances that they may have.\" Statement by the President on ISIL (Islamic State in Iraq and the Levant), September 10, 2014 – \"But I want the American people to understand how this effort will be different from the wars in Iraq and Afghanistan. It will not involve American combat troops fighting on foreign soil. This counterterrorism campaign will be waged through a steady, relentless effort to take out ISIL wherever they exist, using our air power and our support for partner forces on the ground. This strategy of taking out terrorists who threaten us, while supporting partners on the front lines, is one that we have successfully pursued in Yemen and Somalia for years. And it is consistent with the approach I outlined earlier this year: to use force against anyone who threatens America's core interests, but to mobilize partners wherever possible to address broader challenges to international order.\"\nEvaluating the strengths and/or shortcomings of various aspects of U.S. counterterrorism policy in Yemen may have important implications for future U.S. policy and military operations both in Yemen and elsewhere. Yet, it is difficult to assess Administration CT policy in Yemen absent consensus on what the end goals are in the broader U.S. fight against Islamist extremism. Unanswered is whether the United States seeks to contain the transnational terrorist threat in Yemen, or to eliminate it entirely.\nProponents of the current U.S. approach assert that the United States has had some success in degrading AQAP's leadership without incurring American casualties and while maintaining broad international support. According to one analyst, \"Yemen so far has worked....It's not stable. It's not clear what direction it is moving in, but the U.S. has exercised considerable influence there.\" Critics argue that any apparent U.S. successes scored against AQAP are partial or illusory; after five years, the terrorist group has not been defeated, it continues to plot attacks at home and abroad, and moreover, the threat has morphed from a handful of individuals to a broader movement that requires a much larger military response than is currently under consideration. According to one analyst, \"This effort in Yemen is more focused on the leaders, and not necessarily helping the Yemenis defeat the insurgency....This approach in one sense is effective in containing and mitigating; it's not effective in defeating.\" Others suggest that Yemen's internal politics are so divisive and its long-term socio-economic prospects are so bleak, that it would seem that the United States may have to be militarily active there indefinitely in order to address an environment arguably enabling transnational terrorism.\nFinally, many observers suggest that because many U.S. military activities in Yemen may be classified, it is difficult to publicly assess whether U.S. CT efforts there can truly be considered a model. An extensive and transparent government-sponsored cost-benefit analysis of U.S. drone strikes in Yemen may not exist. According to one report, \"The costs of drone strikes—both human and financial—are difficult to measure, but the benefits are perhaps even harder to quantify. It is nearly impossible to assess whether drone strikes in Yemen—or elsewhere—are achieving US counterterrorism objectives since the drone program is shrouded in such secrecy.\"\nFactors to consider when evaluating U.S. counterterrorism policy in Yemen may include the following:\nMinimal U.S. Civilian Casualties . Since Yemeni and Saudi militants merged to form AQAP in 2009, no U.S. civilians have been killed by a direct AQAP terrorist attack in the continental United States. However, the late Yemeni-American cleric and AQAP terrorist Anwar al Awlaki either directly motivated or indirectly inspired others to commit terrorist attacks on U.S. soil, such as the mass killing at Ford Hood, Texas, in November 2009 and, reportedly, the Boston bombings in 2013. In addition to directly targeting the U.S. homeland, AQAP continues to publish its online English-language magazine, dubbed \"Inspire,\" in the hopes of indoctrinating more homegrown violent extremists to commit acts of terrorism on American soil. Minimal U.S. Military/Government Casualties . Since AQAP's inception in 2009 and subsequent U.S. lethal and non-lethal action to counter it, there have been no publicly reported killings of U.S. military personnel in Yemen. Proponents of the Obama Administration's policy in Yemen claim that the United States is able to effectively counter AQAP using a \"light footprint\" strategy which relies on minimal \"boots on the ground,\" thereby reducing the risk of incurring casualties. Nonetheless, AQAP apparently continues to target American and other diplomatic personnel in Yemen. Having assessed heightened risk, the U.S. State Department has ordered a reduction of U.S. government personnel from Yemen. In May 2014, two U.S. Embassy officers killed two armed Yemeni s who allegedly were attempting to kidnap them.Success in Degrading AQAP's Leadership . Since 2009, apparent U.S. strikes have degraded AQAP's leadership, including the 2013 killing of the group's second-in-command, Saudi national Said al Shihri. However, several high value targets remain at large, and the U.S. Department of State's Rewards for Justice Program is offering rewards totaling up to $45 million for information leading to the locations of eight key leaders of AQAP including: Nasir al Wuhayshi (leader), Qasim al Rimi (military commander), Othman al Ghamdi (fundraiser), Ibrahim Hassan Tali al Asiri (bombmaker), Shawki Ali Ahmed Al Badani (plotted against U.S. Embassy in Sana'a in 2013), Jalal Bala'idi (regional commander), Ibrahim al Rubaysh (propagandist and recruiter), and Ibrahim al Banna (chief of security) ( Figure 3 ). Host Country Approval . Since President Hadi assumed office in 2012, he has permitted the United States to conduct airstrikes on Yemeni territory. In a 2012 interview with the Washington Post , Hadi remarked that \"Every operation, before taking place, they take permission from the president.\" In December 2013, Yemen's Foreign Minister Abu Bakr al Qirbi said that drone strikes were a \"necessary evil\" and a \"very limited affair\" that happens in coordination with the Yemeni government. Proponents of the use of unmanned air strikes in Yemen suggest that drone warfare is not only safer for U.S. forces but less politically complicated for the U.S. and Yemeni governments, since it obviates the need to discuss how either party might detain and/or extradite terrorist suspects. However, in late 2013, after an alleged errant U.S. strike against a Yemeni wedding party killed more than a dozen innocent civilians, Yemen's parliament passed a non-binding resolution calling for an end to U.S. drone strikes in Yemen. International Support . Since taking office, President Obama has attempted to increase multilateral participation in addressing global conflicts, including Yemen. In conjunction with Arab Gulf States such as Saudi Arabia, the United States and other countries have worked through the United Nations to buttress President Hadi's Administration. The United Nations Security Council has passed three resolutions (UNSCRs 2014, 2140, and 2051), including UNSCR 2140 that could impose sanctions on anyone threatening the stability of Yemen. The United States and Great Britain also helped form the Friends of Yemen Group, a multilateral forum of 24 concerned countries that was launched at a January 2010 conference in London in order to raise funds for Yemen's development and increase donor coordination. The \"Forever War\"? President Obama himself has openly addressed the dilemma in countering violent extremist groups, stating \"We cannot use force everywhere that a radical ideology takes root; and in the absence of a strategy that reduces the wellspring of extremism, a perpetual war—through drones or Special Forces or troop deployments—will prove self-defeating, and alter our country in troubling ways.\" Yet in the case of Yemen, though U.S. policy makers have articulated strategies to help Yemen stabilize both politically and economically in the long term, few public officials claim that such efforts are sufficient given the country's political, geographic, and religious divisions. Yemen's Commitment to Fighting Terrorism may be Fickle. Although most analysts would agree that President Hadi has been a committed U.S. partner, he or other future leaders may not always be inclined to cooperate with the United States against transnational terrorism. His predecessor, Saleh, adeptly used the terrorism issue as a means to secure international support and legitimacy for his rule, and he placated domestic jihadist groups when it was politically expedient to do so. While there is a dearth of reliable polling on Yemeni public opinion, anecdotal evidence suggests that cooperation with the United States is often viewed as unpopular, given repeated civilian casualties from air strikes, the continued U.S. incarceration of Yemenis at Guantanamo Bay, Cuba, and a perceived lack of financial support from the international community. Government Corruption and Mismanagement is Pervasive. Some observers note that while President Hadi himself may be viewed positively in the United States, there is widespread skepticism over the government's ability writ large to effectively provide services and security to the general population. In February 2014, AQAP successfully freed 19 of its militants from a central prison in the capital, despite warnings from prison officials to government officials that a planned AQAP prison break was imminent. Partner Ground Force Capacity is Lacking . Although President Hadi has removed former Saleh family members from the heads of Yemen's various security agencies, the military still remains divided and, according to the U.S. State Department, \"The military and security restructuring process, intended to unify the command structure of the armed forces, remained incomplete, with front-line units often poorly trained or poorly equipped to counter the threat posed by AQAP.\" The government relies heavily on what are called \"Popular Committees,\" armed non-state militias, to hold territory and conduct local law enforcement. Though members of these militias receive salaries, according to one expert, \"they have limited capacity to cope with the deteriorating situation\" and their members have been targeted by AQAP and its associated armed movement. Partner Air Force Capacity is Limited. According to multiple reports, Yemen's Air Force is woefully underequipped; its planes cannot fly nighttime missions due to lack of navigational instruments; its Soviet-era MiG 29 fighter jets do not carry precision-guided munitions necessary for targeted strikes; and, according to Jane's , \"there were reports that levels of serviceability had declined alarmingly, with a substantial number of aircraft and helicopters being grounded as unsafe for flight.\" Yemen can deploy both fixed and rotary wing aircraft for troop transportation purposes, but it is difficult to see how the Yemeni Air Force could conduct operations against remote targets without U.S. support. According to the Wall Street Journal , \"American officials in the past have said that without the U.S. drone program, AQAP would overrun parts of Yemen.\" Collateral Damage and Backlash A gainst the United States . Critics of U.S. airstrikes in Yemen argue that targeted killings sometimes kill innocent civilians, thereby fueling popular anger against the United States and increasing the popularity of terrorist groups like AQAP. Others note that some Yemenis have \"offered qualified support for the strikes, casting them as the best of a slate of bad options.\" In summer 2014, the Washington Post reported that the Yemeni government had compensated families of those killed or injured by an alleged U.S. drone strike in December 2013.", "Yemen has formally been unified since 1990, though functionally much power remains vested in non-state actors. According to one expert on Yemen, \"Since the rise of Islam, if not well before, the idea of Yemen as a natural unit has been embedded in literature and local practice. Unified power has not.\" Presently, Yemen is riven by regional, sectarian, and tribal fissures. Peripheral political and armed movements are constantly challenging the center. However, whereas in the past, regional strife in Yemen may have been of minimal consequence to the United States, today these conflicts threaten to exacerbate the terrorism threat, creating a multitude of armed conflicts that groups such as AQAP may exploit. Internal turmoil diverts Yemeni government attention and resources, thereby reducing both its will and capacity to counter transnational terrorism.", "As mentioned above, for a decade, the Houthi family, a prominent Zaydi religious clan that claims descent from the prophet Muhammad, have led an armed revolt against the central government and clashed with northern tribes and AQAP. The family seeks to redress historical grievances committed against Zaydis, expand their political base in their home province of Sa'da and beyond, and counter Saudi Arabian \"Wahhabi\" or \"Salafi\" influence in Yemen, including Saudi-sponsored proselytizing in Sa'da. More recently, the Houthis have been opposed to President Hadi's efforts through the National Dialogue Conference to create six federal regions in Yemen, whereby Sa'da would be absorbed into a region tied to the capital.", "For years, southern Yemenis have been disaffected because of their perceived second-class status in a relatively recently unified state from which many of their leaders tried to secede during the civil war in 1994. After the 1990 unification, power sharing arrangements were established, but in practice, north and south were never fully integrated, and the civil war effectively left then- President Saleh and his allies unwilling to consider further compromise. Largely as a result, southern Yemen's political and economic marginalization gradually worsened.\nCivil unrest in Yemen's southern governorates reemerged in 2007, when past civil servants and military officers from the former People's Democratic Republic of Yemen (PDRY, or South Yemen) began protesting low salaries and the lack of promised-pensions. That started as a series of demonstrations against low or non-existent government wages but turned into a broader \"movement\" channeling popular southern anger against the government based in Sana'a.\nThe key demands of south Yemenis include equality, decentralization, and a greater share of state welfare. Many southerners reportedly have felt cut off from services and jobs and see persistent infiltration of central government influence in their local area. Southerners have accused the government of selling off valuable southern land to northerners with links to the regime and have alleged that revenues from oil extraction, which takes place mostly in the south, disproportionately benefit northern provinces. In addition, commerce in the once prosperous and liberal port city of Aden has deteriorated, as most business must now be conducted in the capital of Sana'a.\nIn 2009, former southern secessionist leader and vice president Ali Salim al Beidh (alt. sp. Bid or Beidh) announced that he was resuming his political activities after nearly two decades in exile in Oman. He then declared himself leader of the southern separatist movement (known as the Southern Mobility Movement, or SMM) and called for the resurrection of the PDRY. He has many supporters, but there are enough rivals to his claimed mantle of leadership to keep the SMM divided and, therefore, less effective in its stance against the government. Bidh currently is in exile in Beirut, Lebanon, but occasionally broadcasts recorded messages on southern Yemeni television.\nThe SMM has resisted attempts through either the now-concluded National Dialogue Conference (NDC) and by President Hadi himself to create six federal regions in Yemen. The NDC called for Aden and the Hadramawt to be the south's new two federal regions, with the remaining four to be northern, while the capital Sana'a would have a special status. The SMM eventually abandoned the NDC in protest, charging that northerners were driving its agenda. Southerners who support federalism believe in a two-federal region plan dividing the country between north and south and within the southern portion, between eastern (Aden) and western (Hadramawt) sub-regions.\nSoutherners have held demonstrations calling on the United Nations to recognize the right of southerners to self-determination. Most international actors with prominent influence in Yemen, especially the United States and Saudi Arabia, publicly support Yemen's continued unity.", "", "The discovery and production of oil in the Arabian Peninsula has profoundly affected Yemen's economic history—perhaps not always for the better. In the 1960s, North and South Yemen were among the least developed countries outside of post-colonial sub-Saharan Africa. Their economies were essentially agrarian. However, as oil wealth transformed neighboring Saudi Arabia in the early 1970s through the mid-1980s, millions of Yemeni male laborers migrated to the kingdom, and their remittances increased national incomes several fold. There are estimates that 30% to 40% of Yemeni male laborers worked in Saudi Arabia at that time, supporting nearly half the population. However, while remittances from the oil boom drove incomes higher, the influx of cash did not stimulate long-term growth; instead, consumer spending rose and labor shortages ensued, making it difficult to reinvest capital in economically productive sectors. In 1990, Saudi Arabia expelled hundreds of thousands of Yemeni laborers in retaliation for Yemen's support for Saddam Hussein during the first Gulf War, and while Yemeni workers still remain in the kingdom, their remittances no longer have the same impact on national incomes as decades earlier.\nYemen itself became an oil producer in the mid-1980s, though at far more modest levels than Saudi Arabia due to smaller domestic reserves. Since then, royalties from oil production have replaced remittances as the country's primary source of foreign exchange; however, hydrocarbon production also has not spurred long-term growth. Instead, former president Saleh used the country's limited oil funds to buy tribal loyalties, expand Yemen's bureaucracy with patronage jobs, and depress energy prices. The subsidization of fuel for the masses and private industry has encouraged oil smuggling on the black market. Although the former president was a shrewd political operator before Yemen began substantial production of oil, his exploitation of the country's natural resources helped solidify his rule for 22 years.\nFuture leaders of Yemen could confront a public budget bereft of hydrocarbon-generated revenue. According to the U.S. Energy Information Administration (EIA), oil production last peaked in 2001 at 440,000 barrels per day (bpd); in early 2014, the country was producing less than a quarter of that (100,000 bpd). Revenue from hydrocarbon production accounts for nearly all of Yemen's exports and up to 50% of government revenue, yet most economists predict that, barring any new major discoveries, Yemen will deplete its modest oil reserves at some point between 2017 and 2021.", "Yemen's main oil export pipeline is informally called the Marib (alt. sp. Ma'arib, Maarib) pipeline. The 272-mile pipeline begins at a refinery in Marib province (east of the capital) and extends westward through difficult highland terrain until it reaches the Red Sea oil terminal of Ras Isa ( Figure 4 ). Its capacity ranges between 70,000 and 90,000 barrels per day (bpd). Because of its financial importance as the main conduit for the country's oil exports, the pipeline is frequently attacked by independent tribesmen or tribes allied with former president Saleh. Yemen's natural gas pipeline, which leads to its liquefied natural gas (LNG) terminal at Balhaf in the Gulf of Aden, also is frequently attacked. In 2012, LNG production was halted for nearly six months due to sabotage, damaging both exports and domestic electricity production generated from gas-fired power plants.\nAlthough Yemen's domestic production and export of oil have dropped for a number of reasons (lack of investment, theft, natural depletion of wells, lack of new exploration), sabotage has been a significant factor in the decline. In 2013, Yemen exported 124,000 bpd; a decade earlier it was exporting more than 350,000 bpd. According to the U.S. Energy Information Administration (EIA), \"The combination of declining production in its mature fields and frequent attacks on its energy infrastructure has left Yemen's oil sector in poor shape. In 2013, there were at least 10 attacks on Yemen's oil and natural gas pipeline system, and some industry sources estimate closer to 24 attacks. In 2012, there were more than 15 attacks, and oil exports were completely offline for most of the first half of the year.\"\nYemen's Oil Ministry estimates that sabotage has cost the government billions of dollars in import replacement and repairs. In December 2013, the ministry claimed that sabotage had cost the government $4.75 billion over a two-year period between March 2011 and March 2013. The government said that bombings against the Marib pipeline alone had cost the government about $400 million in lost revenue for the first quarter of 2014. According to one report, in 2013 Yemen spent more on oil imports ($2.93 billion) than it earned from oil sales at home and abroad ($2.66 billion).", "Globally, Yemen ranks in the bottom fifth of countries ranked by per capita gross domestic product. Its economy declined sharply amidst political unrest in 2011 and is slowly recovering; however, according to the International Monetary Fund (IMF), \"the fledgling economic recovery remained insufficient to make a dent in unemployment and poverty.\" The IMF signed a $554 million lending facility agreement with the Yemeni government in September with the expectation that Yemen would curtail fuel subsidies. However, recent nation-wide conflict coupled with a possible restoration of subsidies calls into question the government's commitment to structural economic reform.\nYemen has been facing a balance-of-payments crisis due to its annual budget deficit. It requires at least $1.6 billion a year in external aid to help cover its fiscal gap. According to the Economist Intelligence Unit , the IMF loan was conditional on raising other sources of funding from the World Bank, the Arab Fund, and Saudi Arabia. As of July 2014, Yemen's foreign currency reserves were only $5.2 billion, enough to secure only a few months of food and fuel imports absent replenishment.", "Humanitarian conditions for millions of Yemenis continue to deteriorate. The IMF estimates that Yemen has some of the highest poverty (54%) and youth unemployment rates (35%) in the world. According to the latest figures from the United Nations, approximately 60% of the entire Yemeni population is in need of humanitarian aid, and 44% of the population has been designated as \"food insecure.\" International aid agencies consider Yemen one of the most food-insecure countries in the world.\nSince taking office, President Obama has indicated that the United States cannot be solely responsible for Yemen's development and security. In order to increase donor coordination and widen the scope of support, the United States and Great Britain helped form the Friends of Yemen Group, a multilateral forum of 24 concerned countries that was launched at a January 2010 conference in London.\nTo date, total pledges by the Friends of Yemen equal $8 billion, of which an estimated $2.6 billion has been disbursed, including $1 billion in Saudi Arabian deposits at Yemen's Central Bank. The IMF notes that donors have earmarked funds for capital spending and humanitarian needs rather than cash assistance to help the government deal with its deficit. It remains unclear exactly how and within what time frame the funds will be disbursed to the Yemeni government. Disbursement of international aid also is related to concerns regarding domestic corruption. The Yemeni government, economy, and tribal and military elites are intertwined in a patronage system that makes reform efforts difficult. Control over state resources provides power brokers with authority and creates channels of influence and obligation that, if upset, could prove politically disruptive. Yemen was ranked 167 of 177 countries in Transparency International's 2013 corruption perception index.\nAlthough the Friends of Yemen process indicates some degree of international support for Yemen's development, Saudi Arabia is, by far, Yemen's most important economic benefactor. Saudi Arabia has long sought to shape political and security conditions in Yemen as a means of preventing threats from emerging on the kingdom's southern flank. The Saudi royal family has general concerns that a united Yemen, which is more populous than its northern neighbor, could one day challenge Saudi hegemony on the Arabian Peninsula. In the more immediate term, Saudi Arabia seeks to prevent Yemen-based terrorists from conducting attacks inside the kingdom, and Houthi rebels from establishing a semi-autonomous Iran-aligned Zaydi theocracy in northern Yemen.", "The United States seeks a stable, unified Yemen that is no longer home to transnational terrorist groups targeting Western or Saudi interests; however, whether or not the United States and the broader international community have the will or means to achieve this goal is an open question. A modern, politically unified Yemen has only been in existence for 24 years, and in many respects unity has been more aspirational than functional. The United States government has committed itself to furthering Yemen's unity while supporting the devolution of some power from the capital to the provinces. The convening of the 2013-2014 National Dialogue Conference, which the United States supported, was an attempt to foster reform through a Yemeni-driven process that addressed issues such as federalism, resource sharing, and restructuring of the armed forces. In September 2014, a State Department spokesperson said:\nWe call on all parties, to participate peacefully in Yemen's transition process, which offers a historic opportunity to build an inclusive system of governance that ensures a stable and prosperous future for all Yemenis. The United States remains firmly committed to supporting President Hadi and all Yemenis in this endeavor and to our enduring partnership with the Yemeni government to counter the shared threat from al-Qa'ida in the Arabian Peninsula.\nHowever, as regional revolts have recently jostled the country's political order, U.S. and international efforts to support an orderly transition of power are unraveling. At a time when the constitutional drafting process remains incomplete following the 2011-2012 political transition, Yemen is trending more toward dissolution than unity, a pattern that may raise questions about the overall focus of U.S. policy. Houthi rebels and southern separatists almost certainly do not consider the transition process to serve their interests, but rather those of traditional northern Yemeni elites. The U.S. State Department has called on the Houthis to \"cease efforts to take territory by force,\" to turn over \"all medium and heavy weapons to the State,\" and to abide by a September 21, partially U.S.-brokered cease-fire. However, despite U.S. condemnations of Houthi unilateralism, at this juncture, the actions of separatist movements—rather than the international community—appear to be driving the terms of Yemen's delicate transition.", "", "On May 16, 2012, President Obama issued Executive Order 13611, which sanctions individuals who threaten the \"peace, security, or stability of Yemen,\" and those who threaten to disrupt Yemen's political transition. From May 2012 to November 2014, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) had not sanctioned any Yemeni under E.O. 13611. However, on November 10, 2014, two days after the issuing of targeted United Nations sanctions under UNSCR 2140 (see below), OFAC designated three individuals, including former President Saleh and two Houthi leaders, as Specially Designated Nationals.\nIn general, it is uncertain what kind of impact U.S. sanctions will have in deterring individuals from disrupting Yemen's transition. In most cases, possible targets of U.S. sanctions are unlikely to have substantial assets under U.S. jurisdiction. Broader international sanctions, such as those created under UNSCR 2140, may have a greater impact. According to one Yemeni journalist discussing the possibility of sanctioning former president Saleh, \"[sanctions] could affect thousands of people, worth millions of dollars,\" however, it would be less potent against the Houthis, who \"don't have bank accounts, and they don't travel, so sanctions on them will have no influence in any way, at least in the next couple of years.\"", "In annual foreign operations legislation, Congress does not typically earmark aid to Yemen, but the Administration makes country-specific requests for congressional consideration. After the passage of a foreign operations appropriations bill, federal agencies allocate funds to Yemen across multiple aid accounts. They then submit a country allocation report (653a Report) to Congress for review. Unlike countries or entities (such as Israel, Egypt, Jordan, and the Palestinians) that generally receive much larger amounts of U.S. assistance from two or three main accounts, Yemen receives U.S. aid in any given fiscal year from as many as 17 different aid programs managed by multiple agencies, including the Department of State, USAID, and the Department of Defense ( Table 1 ).\nThe State Department reports that the United States committed more than $142 million in assistance to Yemen in FY2014, in addition to $256 million in FY2013 and more than $356 million in FY2012. CRS can account for most but not all of these allocations. Program details are available in congressional aid obligation notification documents provided to the authorizing and appropriating committees of jurisdiction.", "Yemen receives U.S. economic aid from multiple accounts, the largest of which are typically the Economic Support Fund (ESF) account, the Development Assistance (DA) account, and the Global Health Child Survival (GHCS) account. The State Department and USAID, in partnership with relevant Yemeni government ministries and local NGOs, channel funds from these accounts into various democracy assistance, global health, education, economic development, and humanitarian aid programs. U.S. democracy assistance supports programs to update Yemen's national voter registry, reform the judicial system, and empower women to participate in civic life. U.S.-funded global health programs seek to increase Yemenis' access to fresh water, improve nutrition, and expand the delivery of basic healthcare. Education programs are focused on improving school facilities, student attendance, reading skills, and teacher training. USAID funding for economic development supports micro-finance projects, market access for Yemeni agricultural products, and vocational training.", "In FY2013 and FY2014, the United States provided over $180.9 million in humanitarian aid to Yemen. These funds were provided to international aid organizations from USAID's Office of Foreign Disaster Assistance (OFDA), USAID's Food for Peace (FFP), and the U.S. Department of State's Bureau of Population, Refugees, and Migration (State/PRM). The United States is by far the largest single contributor of humanitarian aid to Yemen on record, with its assistance nearly double the amount contributed by the next largest donor (European Commission).", "U.S. military and other security assistance to Yemen comes from both State Department-managed accounts (FMF, NADR, INCLE, IMET) and Department of Defense-managed accounts (Section 1206). The United States provides Yemen's conventional armed forces modest amounts of FMF grants mainly to service aging and outdated equipment. The Defense Department's 1206 \"train and equip\" fund has become the major source of overt U.S. military aid to Yemen. Section 1206 Authority is a Department of Defense account designed to provide equipment, supplies, or training to foreign national military forces engaged in counterterrorist operations. In general, 1206 aid aims to boost the capacities of Yemen's air force, its special operations units, its border control monitoring, and coast guard forces. 1206 funds have supported the Yemeni Air Force's acquisition of transport and surveillance aircraft. Since FY2006, Yemen has received a total of $401.326 million in Section 1206 aid.", "The following is a list of existing statutes that could restrict U.S. assistance to Yemen under various conditions.\nControl of Armed Forces by Terrorist Organization. P.L. 113-76 , the FY2014 Omnibus Appropriations Act, states that \"None of the funds appropriated by this Act for assistance for Yemen may be made available for the Armed Forces of Yemen if such forces are controlled by a foreign terrorist organization, as designated pursuant to section 219 of the Immigration and Nationality Act.\" Child Soldiers . The Child Soldiers Prevention Act of 2008 seeks to restrict certain U.S. military assistance to countries known to recruit or use child soldiers in their armed forces, or that host non-government armed forces that recruit or use child soldiers. The President may waive aid sanctions in cases where the continuation of aid would promote U.S. national interests superseding anti-trafficking policy goals. On September 30, 2013, President Obama issued a full waiver to Yemen. CRS Report RL34317, Trafficking in Persons: U.S. Policy and Issues for Congress , by [author name scrubbed] and Liana Rosen. Human T rafficking . Pursuant to the Victims of Trafficking and Violence Protection Act of 2000 (TVPA, Division A of P.L. 106-386 ), the United States may restrict non-humanitarian, nontrade-related foreign aid from certain governments that do not show progress in eliminating severe forms of trafficking in persons. The President may waive this restriction and has done so in the case of Yemen, most recently for FY2015. Budget Transparency . Direct government-to-government assistance, including aid to Yemen's central government, could be restricted under provisions in recent annual appropriations measures that pertain to the transparency of a recipient nation's national budget (see Section 7031 of P.L. 113-76 ). The Obama Administration has waived these restrictions, stating that continued assistance is in the U.S. national interest.", "The continued U.S. incarceration of Yemeni prisoners in Guantanamo Bay, Cuba, has long been a source of tension in U.S.-Yemeni relations. The Yemeni government has sought to repatriate and rehabilitate Yemenis detained at Guantanamo; however, U.S. officials have indicated concern that the Yemeni government, due to public pressure from Islamists, would be unable to properly detain and/or monitor returnees, some of whom may pose security threats. The Obama Administration suspended repatriations to Yemen after the December 25, 2009, failed airline bomb attack by AQAP. In May 2013, President Obama stated his intention to close the detention facility and lift the moratorium against repatriating Yemenis. Amongst the 149 prisoners there, at least 86 are Yemeni nationals, of whom 58 have been cleared to return to Yemen and are expected to be transferred on a case-by-case basis. Some Yemeni prisoners were on hunger strikes to alert the public of their situation, and an estimated 17 Yemeni prisoners were reportedly force-fed by prison authorities.", "Located at the southwestern tip of the Arabian Peninsula, Yemen struggles with the lowest per capita GDP in the Arab world ($2,300) for its population of 24.7 million people. The country's rugged terrain and geographic isolation, strong tribal social structure, and sparsely settled population have historically made it difficult to centrally govern (or conquer). This has promoted a relatively pluralistic political environment, but also has hampered socioeconomic development. Outside of the capital of Sana'a, tribal leaders often exert more control than central and local government authorities. A series of Zaydi Islamic dynasties ruled parts of Yemen both directly and nominally from 897 until 1962. The Ottoman Empire occupied a small portion of the western Yemeni coastline between 1849 and 1918. In 1839, the British Empire captured the Arabian Sea port of Aden near the country's southern tip. The British held Aden and some of its surrounding territories until 1967.\nThe 20 th century political upheavals in the Arab world driven by anti-colonialism and Arab nationalism tore Yemen apart in the 1960s. In the north, a civil war pitting royalist forces backed by Saudi Arabia against a republican movement backed by Egypt ultimately led to the dissolution of the Yemeni Zaydi Imamate and the creation of the Yemen Arab Republic (YAR). In the south, a Yemeni Marxist movement became the primary vehicle for resisting the British occupation of Aden. Communist insurgents eventually succeeded in establishing their own socialist state (People's Democratic Republic of Yemen or PDRY) that over time developed close ties to the Soviet Union and supported what were then Palestinian and Marxist terrorist organizations. Throughout the Cold War, the two Yemeni states frequently clashed, and the United States assisted the YAR, with Saudi Arabian financial support, by periodically providing it with weaponry.\nBy the mid-1980s, relations between North and South Yemen improved, aided in part by the discovery of modest oil reserves. The Republic of Yemen was formed by the merger of the formerly separate states of North Yemen and South Yemen in 1990. Ali Abdullah Saleh, a former YAR military officer and ruler of North Yemen (from 1978 to 1990) became president of the newly unified state in 1990. However, Yemen's support for Iraq during Operation Desert Storm in 1991 crippled the country economically, as Saudi Arabia and other Gulf states expelled an estimated 850,000 expatriate Yemeni workers and the United States cut off ties to the newly unified state. In 1994, government forces loyal to then President Saleh put down an attempt by southern-based dissidents to secede. Many southerners still resent what they perceive as northern political, economic, and cultural domination of the country.\nYemen under Saleh and Relations with the United States\nUnder Saleh's rule, political power gradually coalesced around his immediate family, whose members filled key posts in various security services. Corruption was rampant, and the country remained the poorest in the Arab world and one of the most destitute nations on earth. Saleh managed to stay in power for over four decades, but the country's long-term structural resource and economic challenges worsened during his rule.\nDuring Saleh's presidency, U.S.-Yemeni relations were constantly strained by a lack of strong military-to-military ties and commercial relations, general Yemeni disapproval of U.S. policy in the Middle East, and U.S. distrust of Yemen's commitment to fighting terrorism. Since Yemen's unification, the United States government has been primarily concerned with combating Al Qaeda and similar terrorist groups inside Yemen. Al Qaeda's attack in 2000 against the USS Cole , coupled with the attacks of September 11, 2001, a year later officially made Yemen a place of significant concern in the \"war on terror.\"\nDuring the early years of the George W. Bush Administration, bilateral relations improved under the rubric of the war against Al Qaeda, although Yemen's lax policy toward suspected terrorists and U.S. concerns about corruption and governance led to limits on U.S. support. Saudi Arabia's forceful campaign against Al Qaeda in the Arabian Peninsula drove militants to seek refuge in Yemen in the middle of the decade, compounding Yemen's struggle with terrorism. In 2009, the Obama Administration initiated a major review of U.S. policy toward Yemen. That review, coupled with the attempted airline bombing over Detroit on Christmas Day 2009, led to a new U.S. strategy toward Yemen, referred to as the National Security Council's Yemen Strategic Plan. This strategy is essentially three-fold, focusing on combating AQAP in the short term, increasing development assistance to meet long-term challenges, and marshalling support for global efforts to stabilize Yemen.\nYemen and the \"Arab Spring\"\nAs unrest spread across the Arab world in 2011, a youth-led popular demonstration movement challenged President Saleh's rule in Yemen. First inspired by Tunisia's Jasmine Revolution and then galvanized by the overthrow of Egyptian President Hosni Mubarak, a student protest movement managed over the course of several months to maintain nation-wide demonstrations and attract broad popular support that called for Saleh to step down from power. Seeing an opportunity to displace the president and his family, Saleh's rivals from within the political and military elite, such as the powerful Al Ahmar family and the Commander of the First Armored Division, General Ali Mohsin (defected on March 21, 2011), joined opposition demands for the president's resignation. What began as a popular revolt against a longtime ruler ultimately evolved into a confrontation between competing elites for executive power.\nThis confrontation turned violent in mid-2011, as street battles erupted in Sana'a and other cities between forces loyal to Saleh and supporters of his opponents. As political rivals openly fought in the capital, government forces were recalled from outlying provinces to protect the regime, leaving a security vacuum in areas known to harbor Islamist militants and other separatists. Soon, militias associated with Al Qaeda in the Arabian Peninsula seized territory in one southern province. Concerned that the political unrest and resulting security vacuum were strengthening terrorist elements, the United States, Saudi Arabia, and other members of the international community attempted to broker a political compromise.\nSaleh was able for several months to resist international attempts to broker his managed departure, in spite of a bombing attack that nearly killed him and forced his temporary exile to Saudi Arabia. However, a combination of greater international pressure, as exemplified by the passing of United Nations Security Council Resolution (UNSCR) 2014 (which reaffirmed UN support for a political settlement as soon as possible), defections from his loyalist security forces, and their mounting losses on the ground to rival tribal militias, seem to have led him to conclude that his political position had become untenable. In early November 2011, some European Union member states had begun to openly threaten sanctions, including asset freezes against the President and his family, if Saleh did not adhere to UNSCR 2014.\nYemen's Tenuous Transition\nOn November 23, 2011, after 11 months of protests and violence that claimed over 2,000 lives, Saleh signed on to a U.S.-backed, Gulf Cooperation Council (GCC)-brokered transition plan. As part of the plan and in return for his resignation, Saleh and his family were granted immunity from prosecution and the former president was able to retain his role as head of the General People's Congress (GPC), the former ruling party.\nAfter a 90-day transition period, Yemen held a presidential \"election\" in February 2012 with one consensus candidate on the ballot—former Vice President Abed Rabbo Mansour al Hadi. Al Hadi received 6.6 million votes and, on February 25, 2012, was inaugurated as president. After the election, attention shifted toward the next phases of the GCC plan: the convening of a national dialogue; the redrafting of the constitution; the holding of a constitutional referendum; the development of an electoral law; and the holding of parliamentary and/or presidential elections.\nIn January 2014, after ten months of talks, Yemen's National Dialogue Conference, a forum that was backed by the United Nations for the purpose of reaching broad national consensus on a new political order, officially concluded without agreement between northern and southern politicians on how to organize a new federal system of democratic governance. The conference brought 565 representatives from Yemen's various political groups together to reach agreement on thorny political issues, such as power sharing between northern and southern regions, among other things. Tensions, including some linked to the previous existence of two separate Yemeni states from the 1960s to 1990, appear to linger as a result of a number of political and identity-based differences.\nThe conference, which was supposed to end four months earlier according to the official transition timeline, concluded with President Hadi forming a committee (which he will lead) to determine whether Yemen should be divided into two or six federal regions. Southern Yemenis favor a two-region system, believing it will put them on more equal footing with the traditionally more politically dominant north while securing their access to a larger share of Yemen's oil resources, which are located in the south.\nYemen's entire political transition was to end in February 2014, but at the conclusion of the National Dialogue, participants supported a presidential decree extending President Hadi's term by another year, presumably at least until February 2015. According to Jamal Benomar, the United Nations Special Adviser on Yemen, \"The old regime is still very deep and some elements feel that they have been induced to give up a lot....They have a lot of resources and believe they can turn back the clock. The gains achieved in this transition could easily evaporate.\" Yemeni legislators and other politicians have yet to write a new constitution, hold a public referendum on its approval, write a new electoral law, and hold presidential and parliamentary elections. In sum, Yemen's transition could take several additional years." ], "depth": [ 0, 1, 1, 2, 3, 2, 1, 2, 3, 1, 2, 2, 1, 2, 2, 2, 2, 1, 2, 3, 2, 3, 3, 3, 3, 2, 3 ], "alignment": [ "h0_title h1_title", "h1_full", "h0_title", "h0_full", "", "", "h1_title", "h1_full", "h1_full", "", "", "", "", "", "", "", "", "h0_title h1_title", "", "", "", "", "", "", "", "h0_title h1_title", "h0_full h1_full" ] }	{ "question": [ "Under what circumstances did President Ali Abdullah Saleh agree to the GCC-brokered plan?", "How was the transition plan executed?", "Under what circumstances did President Hadi assume the presidency?", "Under what circumstances did President Hadi vacate the presidency?", "To what extent is Al Qaeda in the Arabian Peninsula a threat to the U.S.?", "How has the U.S. attempted to counteract Al Qaeda there?", "How may U.S. policy in Yemen be re-used in the Obama Administration?", "To what extent are policies from Yemen applicable to other situations?", "How stable is Yemen?" ], "summary": [ "On November 23, 2011, after eleven months of protests and violence that claimed over 2,000 lives, then-President Ali Abdullah Saleh of Yemen signed on to a U.S.-backed, Gulf Cooperation Council (GCC)-brokered transition plan.", "In line with the plan, Yemen held a presidential election in February 2012 with one consensus candidate on the ballot—former Vice President Abed Rabbo Mansour al Hadi.", "President Hadi took office in February 2012 shortly after his election.", "He resigned on January 22, 2015, and is under house arrest, surrounded by fighters from the Houthi movement.", "Many Administration officials have declared that Al Qaeda in the Arabian Peninsula, the Yemen-based terrorist organization that has attempted several attacks on the U.S. homeland, presents the most potent threat among Al Qaeda's remaining affiliates.", "In recent years, the Administration and Congress have committed greater resources to counterterrorism and stabilization efforts there.", "Amid debate over the accomplishments and objectives of U.S. military and intelligence operations in Yemen, President Obama has suggested that U.S. policy in Yemen may inform U.S. policy in other cases, such as the military campaign against the Islamic State Organization in Iraq and Syria.", "It is unclear whether and how lessons from Yemen's specific situation might apply in other contexts.", "Many analysts assert that Yemen is or is becoming a failed state and safe haven for Al Qaeda operatives for a variety of reasons and as such is likely to remain an active theater for U.S. counterterrorism operations for the foreseeable future." ], "parent_pair_index": [ -1, 0, 1, 1, -1, 0, -1, 2, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 2, 2 ] }
CRS_R45547	{ "title": [ "", "Introduction", "Trends in U.S. Assistance to Latin America and the Caribbean", "Trump Administration's FY2019 Foreign Assistance Budget Request5", "Foreign Assistance Categories and Accounts7", "Major Country and Regional Programs", "Inter-American Foundation", "Legislative Developments", "Implications for U.S. Policy", "Aid Transitions", "Changes in Security Cooperation", "Potential Decline in U.S. Influence" ], "paragraphs": [ "", "Foreign assistance is one of the tools the United States employs to advance U.S. interests in Latin America and the Caribbean. The focus and funding levels of aid programs change along with broader U.S. policy goals. Current aid programs reflect the diverse needs of the countries in the region (see Figure 1 for a map of Latin America and the Caribbean). Some countries receive the full range of U.S. assistance as they struggle with political, socioeconomic, and security challenges. Others have made major strides in consolidating democratic governance and improving living conditions; these countries no longer receive traditional U.S. development assistance but typically receive some U.S. support to address security challenges, such as transnational crime.\nCongress authorizes and appropriates foreign assistance to the region and conducts oversight of aid programs and the executive branch agencies charged with managing them. The Trump Administration has proposed significant reductions in foreign assistance expenditures to shift resources to other budget priorities. The Administration also is reassessing the objectives of U.S. foreign assistance efforts, including those in Latin America and the Caribbean. However, Congress would have to approve any shifts in aid funding levels or priorities.\nThis report provides an overview of U.S. assistance to Latin America and the Caribbean. It examines historical and recent trends in aid to the region; the Trump Administration's FY2019 budget request for aid administered by the State Department, the U.S. Agency for International Development (USAID), and the Inter-American Foundation; and FY2019 foreign aid appropriations legislation. It also analyzes how the Administration's efforts to scale back assistance could affect U.S. policy in Latin America and the Caribbean.", "The United States has long been a major contributor of foreign assistance to countries in Latin America and the Caribbean. Between 1946 and 2017, the United States provided the region with more than $88 billion ($181 billion in constant 2017 dollars) of assistance. U.S. assistance to the region spiked in the early 1960s following the introduction of President John F. Kennedy's Alliance for Progress, an anti-poverty initiative that sought to counter Soviet and Cuban influence in the aftermath of Fidel Castro's 1959 seizure of power in Cuba. After a period of decline, U.S. assistance to the region increased again following the 1979 assumption of power by the leftist Sandinistas in Nicaragua. Throughout the 1980s, the United States provided considerable support to Central American governments battling leftist insurgencies to prevent potential Soviet allies from establishing political or military footholds in the region. U.S. aid flows declined in the mid-1990s, following the dissolution of the Soviet Union and the end of the Central American conflicts (see Figure 2 ).\nU.S. foreign assistance to Latin America and the Caribbean began to increase once again in the late 1990s and remained on a generally upward trajectory through 2010. The higher levels of assistance were partially the result of increased spending on humanitarian and development assistance. In the aftermath of Hurricane Mitch in 1998, the United States provided extensive humanitarian and reconstruction assistance to several countries in Central America. The establishment of the President's Emergency Plan for AIDS Relief in 2003 and the Millennium Challenge Corporation in 2004 also provided a number of countries in the region with new sources of U.S. assistance. In addition, the United States provided significant assistance to Haiti in the aftermath of a massive earthquake in 2010.\nIncreased funding for counternarcotics and security programs also contributed to the rise in U.S. assistance. Beginning with President Bill Clinton and the 106 th Congress in FY2000, successive Administrations and Congresses provided substantial amounts of foreign aid to Colombia and its Andean neighbors to combat drug trafficking in the region and end Colombia's long-running internal armed conflict. Spending received another boost in FY2008, when President George W. Bush joined with his Mexican counterpart to announce the Mérida Initiative, a package of U.S. counter-drug and anti-crime assistance for Mexico and Central America. In FY2010, Congress and the Obama Administration split the Central American portion of the Mérida Initiative into a separate Central America Regional Security Initiative (CARSI) and created a similar program for the countries of the Caribbean known as the Caribbean Basin Security Initiative (CBSI).\nU.S. assistance to Latin America and the Caribbean began to decline again in FY2011. Although the decline was partially the result of reductions in the overall U.S. foreign assistance budget in the aftermath of the U.S. recession, it also reflected changes in the region. Due to stronger economic growth and more effective social policies, the percentage of people living in poverty in Latin America fell from 45% in 2002 to 30% in 2017. Some nations, such as Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay, are now in a position to provide technical assistance to other countries in the region. Other nations, such as Bolivia and Ecuador, have expelled U.S. personnel and opposed U.S. assistance projects, leading to the closure of USAID offices. Collectively, these changes have resulted in the U.S. government concentrating foreign assistance resources in fewer countries and sectors. Aid levels have rebounded since FY2014, largely due to a renewed focus on Central America in response to recent migration trends, but appropriations remain below the FY2008-FY2013 average.", "The Trump Administration requested $1.1 billion for Latin America and the Caribbean through foreign assistance accounts managed by the State Department and USAID in FY2019. That amount would have been $581 million, or 34%, less than the estimated $1.7 billion of assistance Congress appropriated for the region in FY2018 (see Table 1 ). The Administration also proposed eliminating the Inter-American Foundation—a small, independent U.S. foreign assistance agency that promotes grassroots development in Latin America and the Caribbean—and consolidating its programs into USAID. The proposed reductions for the region were slightly greater than the 28% reduction proposed for the global foreign aid budget. Congress ultimately did not adopt many of the Administration's proposed cuts (see \" Legislative Developments ,\" below).", "About $515.9 million (46%) of the Administration's proposed FY2019 foreign aid budget for Latin America and the Caribbean was requested through a new Economic Support and Development Fund (ESDF). The ESDF foreign assistance account would have consolidated aid that currently is provided through the Development Assistance (DA) and Economic Support Fund (ESF) accounts to support democracy, the rule of law, economic reform, education, agriculture, and natural resource management. Whereas the DA account is often used for long-term projects to foster broad-based economic progress and social stability in developing countries, the ESDF account, like the ESF account, would focus more on countries and programs that are deemed critical to short-term U.S. security and strategic objectives. The FY2019 request included $296.4 million (36%) less funding for the ESDF account than was provided to the region through the DA and ESF accounts combined in FY2018.\nAnother $151.4 million (14%) of the Administration's FY2019 request for the region would have been provided through the two Global Health Programs (GHP) accounts. This amount includes $119.2 million requested through the State Department GHP account for HIV/AIDS programs and $32.2 million requested through the USAID GHP account to support maternal and child health, nutrition, and malaria programs. Under the FY2019 request for the region, funding for the State Department GHP account would have declined by $17.5 million (13%) and funding for the USAID GHP account would have declined by $31.2 million (49%) compared with the FY2018 estimate.\nThe remaining $442.9 million (40%) of the Administration's FY2019 request for Latin America and the Caribbean would have supported security assistance programs, including the following:\n$390 million requested through the International Narcotics Control and Law Enforcement (INCLE) account for counter-narcotics and civilian law enforcement efforts and projects intended to strengthen judicial institutions. INCLE funding for the region would have declined by $152.2 million (28%) compared with the FY2018 estimate. $21.9 million requested through the Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR) account, which funds efforts to counter global threats, such as terrorism and proliferation of weapons of mass destruction, and humanitarian demining programs. NADR funding would have declined by $1.7 million (7%) compared with the FY2018 estimate. $11.1 million requested through the International Military Education and Training (IMET) account to train Latin American and Caribbean military personnel. IMET funding would have declined by $1.5 million (12%) compared with the FY2018 estimate. $20 million requested through the Foreign Military Financing account to provide U.S.-made defense equipment to Colombia. FMF funding would have declined by $66 million (77%) compared with the FY2018 estimate.", "The Trump Administration's FY2019 foreign assistance request would have reduced funding for nearly every country and regional program in Latin America and the Caribbean (see Table 2 ). Some of the most notable reductions that the Administration proposed are discussed below.\nThe FY2019 request included $435.5 million to continue the U.S. Strategy for Engagement in Central America, which would have been a $191 million (30%) cut compared with the FY2018 estimate. The strategy is designed to address the underlying conditions driving irregular migration from the Central America to the United States by promoting good governance, economic prosperity, and improved security in the region. The request included $252.8 million for CARSI (-21%), $45.7 million for El Salvador (-21%), $69.4 million for Guatemala (-42%), $65.8 million for Honduras (-18%), and $1.8 million combined for Belize, Costa Rica, and Panama (-82%). It did not include any democracy assistance to support civil society groups in Nicaragua; such assistance totaled $10 million in FY2018.\nColombia would have remained the single largest recipient of U.S. assistance in Latin America and the Caribbean under the Administration's FY2019 request; however, aid would have fallen to $265.4 million—a $125.8 million (32%) reduction compared with the FY2018 estimate. Colombia has received significant amounts of U.S. assistance to support counternarcotics and counterterrorism efforts since FY2000. The FY2019 request included funds to support implementation of the Colombian government's peace accord with the Revolutionary Armed Forces of Colombia (FARC); it sought to foster reconciliation within Colombian society, expand state presence to regions historically under FARC control, and support rural economic development in marginalized communities. The request also included funds to support Colombia's drug eradication and interdiction efforts.\nHaiti, which has received high levels of aid for many years as a result of its significant development challenges, would have remained the second-largest recipient of U.S. assistance in the region in FY2019 under the Administration's request. U.S. assistance increased significantly after a massive earthquake struck Haiti in 2010 but has gradually declined from those elevated levels. The Administration's FY2019 request would have provided $170.5 million to Haiti to improve food security, increase economic opportunity, promote good governance, and address health challenges (particularly HIV/AIDS). This would have been a $13.9 million (8%) cut compared with the FY2018 estimate.\nMexico would have received $78.9 million of assistance under the FY2019 request, which would have been a $73.8 million (48%) cut compared with the FY2018 estimate. Mexico traditionally had not been a major U.S. aid recipient due to its middle-income status, but it began receiving larger amounts of counternarcotics and anti-crime assistance through the Mérida Initiative in FY2008. The Administration's FY2019 request for Mexico included funds to strengthen the rule of law; secure borders and ports; and combat transnational organized crime, including opium poppy cultivation and heroin production.\nThe FY2019 request included $36.2 million for the CBSI, which would have been a $21.5 million (37%) cut compared with the FY2018 estimate. The CBSI funds maritime and aerial security cooperation, law enforcement capacity building, border and port security, justice-sector reform, and crime prevention programs in the Caribbean.", "In addition to the proposed reductions to State Department and USAID-managed assistance for the region, discussed above, the Trump Administration's FY2019 budget request proposed eliminating the Inter-American Foundation (IAF) and consolidating its programs into USAID. The IAF is an independent U.S. foreign assistance agency established through the Foreign Assistance Act of 1969 ( 22 U.S.C. §290f ). Congress created the agency after conducting a comprehensive review of previous assistance efforts and determining that programs at the government-to-government level had largely failed to promote social and civic change in the region despite fostering economic growth. With annual appropriations of $22.5 million in recent years, the IAF provides grants and other targeted assistance directly to the organized poor to foster economic and social development and to encourage civic engagement in their communities. The IAF is active in 20 countries in the region—including eight countries in which USAID no longer has a presence—and has focused particularly on migrant-sending communities in Central America since 2014.\nThe Trump Administration asserted that merging the IAF's small grants programs into USAID would \"better integrate them with USAID's existing global development programs, more cohesively serve U.S. foreign policy objectives, and increase organizational efficiencies through reducing duplication and overhead.\" The FY2019 request included $3.5 million to conduct an orderly IAF closeout and $20 million under USAID's Latin America and Caribbean Regional program to continue providing small grants to poor and remote communities throughout the region (see Table 3 ). Opponents of the merger noted that Congress specifically created the IAF as an alternative to other U.S. agencies. They argued that USAID would not be able to maintain the IAF's distinct model and flexibility, which have allowed it to invest in innovative projects and work with groups that otherwise would be unable or unwilling to partner with the U.S. government.", "On February 15, 2019, nearly four and a half months into the fiscal year, President Trump signed into law the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). Division F of the act—the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019—includes funding for foreign assistance programs in Latin America and the Caribbean. The measure was preceded by three short-term continuing resolutions ( P.L. 115-245 , P.L. 115-298 , and P.L. 116-5 ), which funded foreign assistance programs at the FY2018 level, and a 35-day lapse in appropriations from December 22, 2018, to January 25, 2019. Although the House and Senate Appropriations Committees had approved their FY2019 foreign assistance appropriations measures ( H.R. 6385 and S. 3108 , respectively) in June 2018, neither bill received floor consideration prior to the end of the 115 th Congress.\nP.L. 116-6 and the accompanying joint explanatory statement do not specify foreign assistance appropriations levels for every Latin American and Caribbean nation. Nevertheless, the amounts designated for key U.S. initiatives in Central America, Colombia, and Mexico significantly exceed the Administration's request (see Table 4 ).\nCentral America. According to the joint explanatory statement, the act provides $527.6 million to continue implementation of the U.S. Strategy for Engagement in Central America. That amount is $92 million more than the Administration requested but $99 million less than Congress appropriated for the initiative in FY2018. Unlike previous years, the measure provides the Secretary of State with significant flexibility to decide how to allocate the funds among the nations of the region. The joint explanatory statement notes that the Secretary of State should take into account the political will of Central American governments, including their demonstrated commitment to implement reforms \"to reduce illegal migration and reduce corruption and impunity.\"\nColombia. The act provides \"not less than\" $418.3 million for Colombia, which is nearly $153 million more than the Administration requested and $27 million more than Congress appropriated in FY2018. The joint explanatory statement notes that the additional funding for FY2019, appropriated through the INCLE account, is intended to \"bolster Colombia's drug eradication and interdiction efforts and enhance rural security.\"\nMexico . According to the joint explanatory statement, the act provides $162.7 million for Mexico. That amount is nearly $84 million more than the Administration requested and $10 million more than Congress appropriated for Mexico in FY2018. The additional funding for FY2019 is intended to support security and rule-of-law efforts, such as \"programs to assist the Government of Mexico in securing its borders and reducing poppy cultivation and heroin and synthetic drug production.\"\nVenezuela. The act provides \"not less than\" $17.5 million for programs to promote democracy and the rule of law in Venezuela. The joint explanatory statement notes that the legislation also includes assistance for Venezuelan refugees and migrants who have been forced to leave the country.\nInter-American Foundation. The act provides $22.5 million for the IAF, which is the same amount Congress appropriated for the agency in FY2018. The joint explanatory statement designates an additional $10 million, appropriated through the DA account, as a transfer to the IAF to carry out programs in Central America.", "The Trump Administration's efforts to scale back U.S. foreign assistance could have significant implications for U.S. policy in Latin America and the Caribbean in the coming years. In particular, they could accelerate U.S. efforts to transition countries in the region away from traditional development assistance and toward other forms of bilateral engagement. They also could result in the Department of Defense (DOD) taking on a larger role in U.S. security cooperation with the region. Moreover, many argue the Administration's proposed foreign assistance cuts, combined with other U.S. policy shifts and the region's growing economic ties with other countries, such as China, could contribute to a relative decline in U.S. influence in Latin America and the Caribbean.", "Over the past three decades, many Latin American and Caribbean countries have made major strides in consolidating democratic governance and improving living conditions for their citizens. As nations have achieved more advanced levels of development, the U.S. government has reduced the amount of assistance it provides to them while attempting to sustain long-standing relationships through other forms of engagement. Budget cuts often have accelerated this process by forcing U.S. agencies to refocus their assistance efforts on fewer countries. In the mid-1990s, for example, budget constraints compelled USAID to close its field offices in Argentina, Belize, Chile, Costa Rica, and Uruguay. Similarly, budget cuts in the aftermath of the 2007-2009 U.S. recession contributed to USAID's decision to close its field offices in Guyana and Panama.\nThe Trump Administration's desire to reduce foreign assistance funding could contribute to a new round of aid transitions. The FY2019 budget request would have zeroed out traditional development assistance for Brazil, Jamaica, and Nicaragua, and would have reduced it significantly for several other countries in the region. Although it appears as though many of those reductions were not enacted in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), the Administration may push for further cuts in the coming years. The Administration's National Security Strategy, released in December 2017, asserts that the United States \"will shift away from a reliance on assistance based on grants to approaches that attract private capital and catalyze private sector activity.\" Likewise, USAID has begun to reorient all of its country partnerships around the concept of \"self-reliance,\" placing a greater emphasis on supporting countries' abilities to plan, finance, and implement solutions to their own development challenges.\nSome development experts caution that such transitions should be done in a strategic manner to ensure that partner countries are able to sustain the progress that has been made with past U.S. investments and to prevent ruptures in bilateral relations that could be exploited by competing powers or compromise U.S. interests. These experts argue that successful transitions require careful planning and close coordination across the U.S. government, as well as with partner-country governments, local stakeholders, and other international donors. In their view, a timeline of three to five years, at a minimum, is necessary for the transition process.\nA decision to no longer appropriate new foreign aid funds for a given country would not necessarily lead to an abrupt end to ongoing U.S. assistance programs. In recent years, Congress has appropriated most aid for Latin America and the Caribbean through foreign assistance accounts that provide the State Department and USAID with up to two fiscal years to obligate the funds and an additional four years to expend them. As a result, U.S. agencies often have a pipeline of previously appropriated funds available to be expended on assistance programs.\nIf aid transitions do occur, the United States could remain engaged with its partners in the region in several ways. As large-scale development programs are closed out, the U.S. government could use smaller, more nimble programs, such as those managed by the IAF, to maintain its presence in remote areas and continue to build relationships with local leaders. As grant assistance is withdrawn, the U.S. government could help partner countries mobilize private capital by entering into trade and investment agreements or by providing loan guarantees and technical assistance through the newly authorized U.S. International Development Finance Corporation (IDFC). As former aid recipients look to share their development expertise with other nations, the U.S. government could enter into trilateral cooperation initiatives to jointly fund and implement programs in third countries that remain priorities for U.S. assistance.\nCongress has demonstrated an interest in influencing the pace and shape of aid transitions. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) directed the USAID Administrator to submit a report to Congress describing the conditions and benchmarks under which aid transitions may occur, the actions required by USAID to facilitate such transitions, descriptions of the associated costs, and plans for ensuring post-transition development progress. The report, submitted in October 2018, notes that USAID has selected 17 publicly available, third-party metrics to help the agency assess the relative self-reliance of every country. If, after taking into account additional country-specific information, the agency determines a country is ready to transition, USAID is to begin an in-depth, consultative assessment process to consider potential models for continued partnership. The results of that process are to inform an implementation plan that will lay out the activities, resources, and sequencing needed to ensure a successful transition. Jamaica is one of two countries worldwide that USAID is using to test the new strategic transition process.\nCongress could require USAID to provide additional information as the agency continues to develop its framework for strategic transitions and moves forward with the pilot project in Jamaica. For example, in the 115 th Congress, H.R. 6385 would have required the USAID Administrator to regularly consult with Congress and development stakeholders on \"efforts to transition nations from assistance recipients to enduring diplomatic, economic, and security partners.\"", "The Trump Administration's approach toward Latin America and the Caribbean has focused heavily on U.S. national security objectives. For example, the Administration described the FY2019 foreign assistance request for the region as an effort to \"break the power of transnational criminal organizations and networks; shut down the illicit pathways used to traffic humans, drugs, money and weapons; and address the underlying causes that contribute to outmigration.\" The Administration's FY2019 budget proposal, however, would have reduced State Department-managed security assistance to the region (INCLE, NADR, IMET, and FMF) by 33% compared with the FY2018 estimate.\nSome analysts have noted that any cuts to State Department-managed security assistance programs in Latin America and the Caribbean could be offset by increased support from DOD. Congress has authorized DOD to provide a wide range of security assistance to foreign nations (referred to as security cooperation by DOD) including many activities that overlap with those traditionally managed by the State Department. For example, 10 U.S.C. §333 authorizes DOD, with the concurrence of the State Department, to train and equip foreign security forces for counterterrorism operations, counter-weapons of mass destruction operations, counter-illicit drugs operations, counter-transnational organized crime operations, and maritime and border security operations, among other purposes.\nGiven the number of security challenges the United States faces around the globe, however, it is unclear whether DOD would devote increased funding to security cooperation in Latin America and the Caribbean. As a result of a provision (10 U.S.C. §381) enacted as part of the National Defense Authorization Act for FY2017 ( P.L. 114-328 ), DOD is required to submit formal, consolidated budget requests for security cooperation efforts, including the specific countries or regions where they are to take place, \"to the extent practicable.\" For FY2019, DOD requested $55.1 million for security cooperation in the areas of responsibility of U.S. Northern Command and U.S. Southern Command, which encompass the Latin American and Caribbean region. That amount would be slightly less than the estimated $58.6 million DOD obligated for security cooperation in the region in FY2018. Both of those figures exclude funds for drug interdiction and counter-drug activities, which account for the vast majority of DOD security cooperation funding for Latin America and the Caribbean. In FY2017 (the most recent year for which data are available), DOD obligations for drug interdiction and counter-drug activities in the region totaled $210.8 million.\nThe exclusion of drug interdiction and counter-drug activities and the lack of country-by-country data in DOD's FY2019 security cooperation request make it difficult to assess the scope of DOD's planned activities in the region and the extent to which those activities may overlap with State Department security assistance programs. This lack of information may hinder congressional efforts to establish budget priorities and shape the relative balance of U.S. assistance in Latin America and the Caribbean. It also may weaken Congress's ability to incentivize policy changes in recipient nations as State Department-managed assistance withheld to comply with legislative conditions could be replaced with less transparent DOD support. DOD asserts that \"in the long-term\" it intends to include \"some budgeting figures by country.\" Congress could use legislation to clarify the breadth of information it expects to receive from DOD in its annual security cooperation budget requests.", "Although the relative importance of foreign assistance in U.S. relations with Latin American and Caribbean nations has declined since the end of the Cold War, the U.S. government continues to use assistance to advance key policy initiatives in the region. In recent years, U.S. assistance has supported efforts to reduce illicit drug production and end the long-running internal conflict in Colombia, combat transnational organized crime in Mexico, and address the root causes that drive unauthorized migration to the United States from Central America. This assistance has enabled the U.S. government to influence partner countries' policies, including the extent to which they dedicate resources to activities that they otherwise may not consider top priorities.\nSome analysts and Latin American officials view the Administration's efforts to cut foreign aid as part of a broader trend of U.S. disengagement from the region. They note that President Trump withdrew from the Trans-Pacific Partnership trade agreement and imposed tariffs on several Latin American nations, has been slow to fill diplomatic posts in the region, and was the first U.S. president in 25 years to skip the triennial Summit of the Americas. They contend that this has created a leadership vacuum in the region that other powers have begun to fill. For example, some analysts warn that China, which has provided more than $140 billion in state-backed finance to Latin American and Caribbean nations since 2005, has begun to leverage its significant commercial ties into other forms of power that could come at the expense of the United States. Others note that it may not be a zero-sum game and that the region's increased ties with China do not necessarily portend a loss of U.S. influence.\nResearch suggests that foreign aid can influence perceptions of U.S. leadership, which have declined significantly in Latin America and the Caribbean over the past two years. In 2018, 31% of the region approved of \"the job performance of the leadership of the United States,\" an 18-point decline compared to 2016. Consistently high disapproval ratings could constrain Latin American and Caribbean leaders' abilities to support Trump Administration initiatives and conclude agreements with the United States.\nMany in Congress also have expressed concerns that significant foreign assistance cuts could weaken U.S. influence around the world. In H.Rept. 115-829 , for example, the House Appropriations Committee asserted that \"the magnitude of the reductions proposed for United States diplomatic and development operations and programs in the fiscal year 2019 request would be counterproductive to the economic and security interests of the nation and would undermine our relationships with key partners and allies.\" Similarly, in S.Rept. 115-282 , the Senate Appropriations Committee asserted that the \"proposed reduction to the International Affairs budget…reinforces the perception that the United States is retreating from its preeminent role as the world's superpower.\" These concerns may have influenced Congress's decision not to adopt many of the Administration's proposed foreign assistance cuts for FY2019.\nAppendix A. U.S. Foreign Assistance to Latin America and the Caribbean by Account and Country or Regional Program: FY2017\nAppendix B. U.S. Foreign Assistance to Latin America and the Caribbean by Account and Country or Regional Program: FY2018 Estimate\nAppendix C. U.S. Foreign Assistance to Latin America and the Caribbean by Account and Country or Regional Program: FY2019 Request" ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 1, 1, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "", "h1_full", "", "", "", "", "h0_title h2_full h1_title", "h1_full", "h2_full", "h0_full" ] }	{ "question": [ "Why does the United States provide aid to Latin American and Caribbean nations?", "How have U.S. strategic interests differed historically?", "How has the Trump Administration aimed to change U.S. foreign aid?", "How did the Trump Administration request aid for Latin America and the Caribbean?", "How does this amount compare to the FY2018 assistance?", "What funding would the FY2019 proposal cut?", "How would the proposal affect foreign assistance agencies?", "How significant are the attempts to scale back U.S. aid?", "How might this affect the operations of U.S. agencies in the region?", "How might the changes affect the division of assistance between different agencies?", "How will this reduction affect the U.S. influence in the region?" ], "summary": [ "The United States provides foreign assistance to Latin American and Caribbean nations to support development and other U.S. objectives.", "U.S. policymakers have emphasized different strategic interests in the region at different times, from combating Soviet influence during the Cold War to promoting democracy and open markets since the 1990s.", "The Trump Administration has sought to reduce foreign aid significantly and refocus U.S. assistance efforts in the region to address U.S. domestic concerns, such as irregular migration and transnational crime.", "For FY2019, the Trump Administration requested $1.1 billion for Latin America and the Caribbean through foreign assistance accounts managed by the State Department and the U.S. Agency for International Development (USAID).", "That amount would have been $581 million, or 34%, less than the estimated $1.7 billion of U.S. assistance the region received in FY2018.", "The proposal would have cut funding for every type of assistance and nearly every Latin American and Caribbean nation.", "The Trump Administration also proposed eliminating the Inter-American Foundation—a small, independent U.S. foreign assistance agency that promotes grassroots development in the region—and consolidating its programs into USAID.", "The Administration's efforts to scale back U.S. assistance could have significant implications for U.S. policy in Latin America and the Caribbean.", "Faced with potential cuts, U.S. agencies could accelerate efforts to transition countries in the region away from traditional development assistance toward other forms of bilateral engagement.", "Reductions in State Department-managed security assistance could lead to the Department of Defense taking on a larger role in U.S. security cooperation.", "Moreover, many argue that reductions in foreign aid, combined with other policy shifts, could contribute to a relative decline in U.S. influence in the region." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, 0, -1, 0, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 2, 2, 2, 2, 3, 3, 3, 3 ] }
CRS_RL33947	{ "title": [ "", "Introduction", "Background", "Juvenile Justice History", "The First Juvenile Courts", "Early Federal Government Efforts", "The Juvenile Justice and Delinquency Prevention Act (JJDPA)", "Concentration of Federal Efforts", "Coordinating Council on Juvenile Justice and Delinquency Prevention", "Annual Report", "State Formula Grants", "JJDPA Formula Grant Mandates 41", "State Plan Components", "Formula Grant Allocation", "Core Mandates", "Juvenile Delinquency Prevention Block Grants", "Part E: Developing, Testing, and Demonstrating Promising New Initiatives and Programs (Challenge Grants)", "Title V Incentive Grants for Local Delinquency Prevention Programs", "Juvenile Accountability Block Grants", "Purpose Areas", "Eligibility Requirements", "JABG Allocation", "Issues for Congress", "Rehabilitation Versus Accountability", "Expanding or Modifying the JJDPA Core Mandates", "Juvenile Delinquency Prevention Block Grant", "Overlap in Grant Programs", "Coordination of Federal Efforts", "Oversight of Juvenile Justice Grants67" ], "paragraphs": [ "", "Administering justice to juvenile offenders has largely been the domain of the states, and as a result of this the laws that pertain to juvenile offenders can vary widely from state to state. There is no federal juvenile justice system. Although the federal government does not play a direct role in administering juvenile justice, in the 1960s, the federal government began establishing federal juvenile justice agencies and grant programs in order to influence the states' juvenile justice systems. The Juvenile Justice and Delinquency Prevention Act (JJDPA) of 1974 created many of the federal entities and grant programs that continue to operate today, including the Office of Juvenile Justice and Delinquency Prevention (OJJDP) and the State Formula Grants Program. Over the ensuing decades, the JJDPA has been modified a number of times, broadening the mandate of the agencies it created and adding to the grant programs it established.\nThis report analyzes the current federal legislation that influences the state juvenile justice systems. Although the report provides some background information on the evolution of juvenile justice in the United States, the main focus of the report is the major federal legislation that impacts state juvenile justice systems, including the JJDPA. As the major provisions of the JJDPA expired in FY2007 and FY2008, several issues pertaining to its reauthorization may be of concern to Congress, including, but not limited to, the following:\nShould the core mandates associated with the state formula grants be expanded or modified? Are the current grant programs effective? Is there adequate oversight over states' use of federal grant funding? Is there sufficient coordination occurring at the federal level? Should the federal approach to juvenile justice focus on rehabilitation, accountability, or both philosophies?\nThe original JJDPA and its major revisions through the end of the 109 th Congress, when it was most recently reauthorized, are addressed in Appendix A and Appendix B .", "Juvenile justice in the United States has been predominantly the province of the states and their localities. The first juvenile court in America was founded in 1899 in Cook County, Illinois. Twenty-five years later, all but two states had enacted legislation establishing a separate juvenile court system for young offenders. The mission of these juvenile courts was to attempt to turn young delinquents into productive adults rather than merely punishing them for their crimes. This led to marked procedural and substantive differences between the adult and juvenile court systems in the states, including a focus on the offenders and not the offenses, and on rehabilitation instead of punishment.\nThe federal government began to play a role in the states' juvenile justice systems in the 1960s and 1970s. In the Juvenile Delinquency and Youth Offenses Control Act ( P.L. 87-274) , Congress provided funds for state and local governments, through the Department of Health, Education, and Welfare (HEW), to conduct demonstration projects to research improved methods for preventing and controlling crime committed by juveniles. In 1968, Congress passed additional legislation to provide direct assistance to state and local governments and to train juvenile justice personnel. To receive funding, states were required to designate a single agency to take the lead in improving delinquency prevention and control programs. Also in 1968, Congress for the first time placed juvenile justice grant authority within the purview of the Department of Justice (DOJ).\nDespite these congressional efforts to provide assistance to the states as they attempted to rein in juvenile crime, juvenile arrests for violent crimes increased by 216% between 1960 and 1974. This increase in juvenile violent crime outstripped the growth in the juvenile population; the under-18 population grew from 47 million in 1950 to 70 million in 1970—an increase of only 49%. It seemed apparent that the technical assistance and financial aid that Congress had provided the states was not enough to address the growing problem of juvenile crime, and many commentators maintained that there was a need for a distinct federal entity to manage the federal government's response to juvenile delinquency. In 1974, Congress addressed the issue by passing the first comprehensive piece of juvenile justice legislation, the JJDPA. The JJDPA created a number of grant programs and established a new federal agency within DOJ—OJJDP—to oversee these grant programs and to coordinate the federal government-wide response to juvenile delinquency.\nIn the 1980s, many states responded to the public perception that juvenile crime was increasing by passing more punitive laws for juvenile offenders. Some of these laws removed certain types of juvenile crimes from the juvenile court system altogether, mandating that they be handled by the adult criminal system instead. Other laws instituted mandatory sentences for juvenile offenders convicted of certain crimes. This movement toward punishing juveniles and away from working to rehabilitate them accelerated in the 1990s, with all but three states passing laws that modified or removed traditional juvenile court confidentiality agreements, all but five states passing laws easing the transfer of juveniles into the adult criminal justice system, and a majority of states passing laws expanding sentencing options for juveniles. During this period, more punitive measures were incorporated into the accepted federal funding streams for juvenile justice programs through a series of revisions to the JJDPA. These revisions are described in Appendix A and Appendix B .", "", "The early criminal justice system in America did not include a separate juvenile justice system. The colonists brought the British criminal justice system with them to the new world. This system included forced apprenticeship for poor and neglected children. If a juvenile committed a crime, they were first warned, shamed, or given corporeal punishment and then returned to the community. If a child committed a major criminal act, however, they were treated and tried as adults. Trials and punishment were largely based on the offender's age; anybody over the age of seven was subject to a trial in criminal court. These early American laws had three fundamental features: establishing local control of the justice system, giving families the responsibility (and legal liability) for their children's actions, and distinguishing between deserving and undeserving poor people.\nThe first juvenile court in the United States was established in Chicago in 1899. By 1925, all but two states had established separate juvenile justice systems. The Juvenile Court of Chicago was based on the British doctrine of parens patriae , or the notion of the state acting in the nature of a parent. This doctrine was used to explain the state's interest in distinguishing between adults and children in its dispensation of justice. Because children are not fully imbued with developmental or legal capacity, the parens patriae doctrine held that the government could provide protection and treatment for children whose parents were not providing adequate care or supervision. The Juvenile Court of Chicago became the model for the various state juvenile justice systems that followed it. Its key features were the definition of a juvenile as a child under the age of 16; the separation of children and adults in correctional institutions; the establishment of special, informal procedural rules, including the elimination of indictments, pleadings, and jury trials; the provision of probation officers to monitor juveniles released into the community; and the prohibition of the detention of children below the age of 12 in a jail or police station.\nAlthough delinquency among children was punished, key elements of the juvenile justice system as it was originally conceived were the welfare of the child and the concept that delinquent children could be transformed into productive citizens through treatment. This benevolent mission was clearly stated in most laws that established juvenile justice systems, and led to substantial procedural and substantive differences between juvenile and adult criminal justice systems in the states. For example, juvenile court intake considered extra-legal factors—such as the child's home situation—as well as legal factors when deciding whether to bring a case to trial, and had the discretion to handle cases informally.\nAdditionally, these early juvenile courts did not incorporate the procedural due process protections afforded adult criminal defendants, which were deemed unnecessary as a result of the court's benevolent mission. Attorneys for the state and the youth being tried were not considered essential to the system's operation, especially in less serious cases, and judges had a broad range of dispositions at their disposal that were tailored to the best interests of the child. Judges' dispositions became part of a treatment plan for the juvenile, and this treatment continued until the juvenile was considered cured or became an adult at age 21.\nIn 1914, the practice of diversion , or the official halting of formal criminal proceedings against a juvenile offender, was established with the creation of the Chicago Boy's Court. The goal of diversion was to provide treatment for juveniles outside of the formal juvenile justice system. To this end, the juvenile court in Chicago released juveniles to the supervision and authority of various community service agencies, who evaluated the youth's behavior and reported back to the Court. If the evaluation was satisfactory to the judge, the court officially discharged the juvenile without any formal record of the proceedings.\nBy 1930, only the federal government continued to treat children who were charged with a crime as adults. This situation led the U.S. Attorney General to recommend that juveniles charged with violating federal laws be returned to their home state's juvenile justice system, a proposition that Congress agreed with.", "The earliest federal government involvement in juvenile delinquency occurred in 1909, when the White House held a Conference on the Care of Dependent Children. The goal of this conference was to share information about needy children across the United States and to emphasize the immediate need for action. This conference led directly to the creation of the U.S. Children's Bureau in 1912. The Children's Bureau was authorized to investigate and report on all aspects of child welfare, including the juvenile justice system. In 1936, the Children's Bureau began providing the first federal subsidy program that provided child welfare grants to states. These grants were used to care for a wide array of at-risk youth, including juvenile delinquents.\nThe first major federal legislation addressing juvenile delinquents was enacted in 1938. The Federal Juvenile Delinquency Act of 1938 (FJDA) left the state juvenile justice systems as the preferred alternative for juveniles arrested for violating federal laws, but gave the Attorney General the discretion to charge a juvenile as an adult and allowed for federal juvenile proceedings if both parties agreed to it.\nIn 1951, Congress amended the FJDA with the Federal Youth Corrections Act. This act afforded juvenile offenders tried as adults in the federal system special rehabilitation outcomes. Apart from this revision, however, the FJDA remained essentially unchanged for 35 years until Congress passed major Juvenile Justice reform measures in the 1970s. In 1951, Congress also established the Juvenile Delinquency Bureau within HEW. The bureau's placement within HEW can be seen as a reflection of the early governmental focus on the treatment of juvenile delinquents and the prevention of delinquency, rather than on punishment.\nIn the 1950s and 1960s, however, many observers began to question the juvenile courts' ability to successfully rehabilitate delinquents. While the system's basic goal of rehabilitating juveniles through individually tailored plans was not in question, professionals in the field grew concerned about the growing numbers of juveniles being institutionalized for treatment purposes. This concern was reflected in a series of Supreme Court rulings during the 1960s that required that juvenile court procedures become more formal in order to afford juveniles legal protections comparable to those afforded adults in criminal courts.\nThe landmark Supreme Court ruling of this period, In re Gault , concluded that hearings that could result in the institutionalization of children must afford the juveniles being tried the right to notice and counsel, the right to question witnesses, and the right to protection from self-incrimination. Although the Court did not include the right to appellate review in its decision, it encouraged the states to afford juveniles that protection as well.\nCongress responded to the increasing public awareness of juvenile crime by passing the Juvenile Delinquency and Youth Offenses Control Act of 1961. This act authorized HEW to provide grants totaling $10 million annually, for three years, to states, local government entities, and private nonprofit agencies to fund demonstration projects that focused on improving the methods used to prevent and control juvenile crime. The projects funded through this initiative were focused on urban inner-cities that had the highest juvenile delinquency rates at the time.\nIn 1968, Congress took two further actions that affected federal funding for juvenile justice. The first was the Juvenile Delinquency Prevention and Control Act, which provided grant funding to the states and local government entities for the training of juvenile court personnel. These grants were to be administered by HEW. The second was the Omnibus Crime Control and Safe Streets Act, which, among other things, involved DOJ in juvenile justice for the first time through the Law Enforcement Assistance Administration (LEAA), which was created in Title I of the act. LEAA was to serve as a clearinghouse for channeling federal funding to state and local law enforcement agencies, giving states incentives to establish planning agencies, and funding a wide variety of programs ranging from education and research to local crime control initiatives.\nBy the early 1970s, consensus began to form around the idea that the federal government's efforts to address juvenile justice were unfocused and underfunded. The House Committee on Education and Labor in particular questioned the effectiveness of the Juvenile Delinquency Prevention and Control Act of 1968 and levied a number of criticisms at the way HEW implemented the act:\nThe HEW administered program, during its first three years, was disappointing because of delay and inefficiency. A director of the Youth Development and Delinquency Prevention Administration was not appointed for over 18 months. Less than a third of the $150 million authorized for fiscal years 1968 through 1971 was appropriated. Furthermore, only half of the funds that were appropriated were actually expended. The funds were generally spent on underfunded, unrelated, and scattered projects. Weakness in program administration, the dominance of the Law Enforcement Assistance Administration, and inadequate funding contributed to reasons for a lack of total success.\nDisappointed with the way the 1968 act was implemented, consensus began to form within Congress around the idea of creating a new federal entity to oversee the federal government's juvenile justice efforts. As the Juvenile Delinquency Prevention and Control Act's authorization was expiring in 1974, Congress moved to replace it with a more comprehensive piece of legislation.", "The JJDPA was first passed by Congress in 1974 and was most recently reauthorized in 2002 by the 21 st Century Department of Justice Appropriations Authorization Act. Authorization for its main provisions expired in FY2007 and FY2008. This section analyzes the JJDPA as it stands today.\nBy 1974, strong momentum had developed in the public, academic, and governmental arenas toward the idea that the juvenile justice system needed to focus on preventing juvenile delinquency, deinstitutionalizing youth already in the system, and keeping juvenile offenders separate from adult offenders. Congress responded to this growing consensus by passing the Juvenile Justice and Delinquency Prevention Act of 1974. The JJDPA had three main components:\nit created a set of institutions within the federal government that were dedicated to coordinating and administering federal juvenile justice efforts; it established grant programs to assist the states with setting up and running their juvenile justice systems; and it promulgated core mandates that states had to adhere to in order to be eligible to receive certain grant funding.\nAlthough the JJDPA has been amended several times over the past 40 years, it continues to feature the same three components. As it was passed in 1974, the JJDPA focused the federal government's efforts largely on preventing juvenile delinquency and on rehabilitating juvenile offenders. Subsequent revisions to the act placed emphasis on influencing states to expand the use of sanctions and accountability measures through some existing grant programs, as well as adding new grant programs to the act's purview. The latest reauthorization of the JJDPA, enacted by P.L. 107-273 , made several changes to the act, including consolidating various separate grant programs and modifying the language of some of the core mandates. Appendix A details the original JJDPA; Appendix B details the JJDPA's major subsequent revisions and includes a summary of the specific changes enacted by its last reauthorization.", "The original JJDPA established OJJDP within DOJ's Law Enforcement Assistance Administration (LEAA) as the new clearinghouse for the federal government's efforts to influence states' juvenile justice systems. Subsequent revisions to the JJPDA designated OJJDP as a stand-alone office within DOJ and directed the Administrator to report directly to the Attorney General. Today, the JJDPA grants the Administrator of OJJDP a broad authority to coordinate the federal government's activities relating to the treatment of juvenile offenders, including programs that focus on prevention, diversion, training, treatment, rehabilitation, evaluation, research, and improvement of the states' juvenile justice systems. The Administrator is charged with developing objectives, priorities, strategies, and long-term plans concerning the treatment and handling of juvenile offenders by federal agencies and by the states, and overseeing the implementation of these plans. Thus, the Administrator of OJJDP is, by statute, the lead individual in the U.S. federal government charged with developing and implementing policies that govern the treatment of juvenile offenders by federal agencies and the federal government's efforts to influence the states' juvenile justice systems.", "The original JJDPA established an independent organization known as the Coordinating Council on Juvenile Justice and Delinquency Prevention (Coordinating Council) to coordinate the federal government's juvenile delinquency programs. The Coordinating Council was to be composed of representatives from a broad range of federal agencies who \"exercise significant decision making authority in the Federal agency involved.\" Subsequent revisions to the JJDPA expanded the number of agencies represented on the Coordinating Council.\nToday, the Coordinating Council is an independent organization within the federal government charged with coordinating all federal juvenile delinquency programs, all federal programs that deal with unaccompanied minors, and all federal programs relating to missing and exploited children. The Coordinating Council is composed of the heads of all the federal agencies that touch on these broad areas, including the Attorney General, the Secretary of Health and Human Services, the Secretary of Labor, the Secretary of Education, the Secretary of Housing and Urban Development, the Administrator of OJJDP, the Director of the Office of National Drug Control Policy, the Chief Executive Officer of the Corporation for National and Community Service, and the Commissioner of Immigration and Naturalization (now the Commissioner of U.S. Immigration and Customs Enforcement). In addition to these standing members, the Coordinating Council is composed of nine other members, of which three are appointed by the President, three are appointed by the Speaker of the House, and three are appointed by the majority leader of the Senate. These nine members are to be juvenile justice practitioners who are not officers or employees of the U.S. government, and they are to serve one- to three-year terms. The Attorney General acts as the Chairman of the Council, and the Administrator of OJJDP serves as the Vice Chairman of the Council.\nIn essence, the role of the Coordinating Council is to coordinate the overall federal government policy and development of objectives and priorities for federal programs dealing with juvenile delinquency and unaccompanied minors. As a function of this, the Coordinating Council is charged with examining how the various programs in the federal government are operating and to report to Congress on the degree to which federal agency funds are being used for purposes consistent with the core mandates required in the state plans. The Council is also charged with reviewing why federal agencies take juveniles into custody and to make recommendations for how to improve the federal government's practices and facilities for detaining juveniles.", "Starting in 1988, Congress required OJJDP to produce an annual report to Congress on the agency's operations. This report, by statute, must summarize and analyze the most recent data available to the federal government concerning the detention of juveniles, describe the activities funded by OJJDP and the activities of the Coordinating Council, identify the extent to which each state complies with the core mandates and their state plan requirements, and evaluate the effectiveness of federal juvenile delinquency programs in reducing the incidences of delinquency and violent crime among juveniles.", "The original JJDPA authorized OJJDP to make formula grants to states, which can be used to fund the planning, establishment, operation, coordination, and evaluation of projects for the development of more effective juvenile delinquency programs and improved juvenile justice systems. Although this grant program has been modified through the intervening years, it remains in place today as one of the core components of the federal approach to influencing states' juvenile justice systems. Authorization for this program expired in FY2007, but it has continued to receive appropriations.\nFunds are allocated annually among the states on the basis of relative proportion of the population under the age of 18. However, the JJDPA sets minimum amounts that can be provided to the states depending on the total appropriation for the State Formula Grants Program, which are outlined in Table 1 . No more than 10% of the state's allocation can be used for administrative expenses, including creating the state juvenile justice plans and disbursing the grant funds. Additionally, funds used for administrative expenses must be matched by state or local funds. The JJDPA authorizes \"such sums as may be necessary\" through FY2007 to carry out the State Formula Grants Program.", "To receive formula grant funding through the JJDPA, states are required to formulate plans for the administration of juvenile justice within their jurisdiction and to submit yearly reports to OJJDP concerning their progress in implementing the programs being funded. The JJDPA stipulates a list of components that must be included in state plans, funding constraints for how the state formula grants can be apportioned, and four core mandates that must be adhered to in order to receive funding.", "To receive state formula grant funding, states must submit a juvenile justice plan to OJJDP. Should the state fail to do so, or if the Administrator determines that the state's plan does not meet the requirements elucidated in 42 U.S.C. §5633 (a), OJJDP can make the formula grant funding available to local public and private nonprofit agencies within the state for use in activities that help the state meet the four core mandates. The following plan components are required of all states receiving funding:\nStates must designate an agency to supervise the administration of the juvenile justice plan and show that this agency has the legal authority to implement the plan. States must also consult with local government entities as they formulate the plan. States must provide for an advisory group of 15 to 33 members that participate in the development and review of the state's juvenile justice plan. States must provide for the analysis of juvenile delinquency issues within their jurisdiction, including a description of the services provided to address the issues and performance goals and priorities for the implementation of these services. States are also directed to formulate a plan for providing gender-specific services, a plan for providing juvenile justice services in rural areas, and a plan for providing needed mental health services to juveniles.", "The JJDPA places several restrictions on how the funding received through the state formula grant program can be allocated within the states and territories. At least two-thirds of the funds received through the formula grant program must be passed through to units of local government, including Indian tribes and local private agencies. Private agencies must have first applied to a local unit of government for funding and been turned down before being eligible for formula grant funding, and all expenditures must be consistent with the state's plan. Funding must be distributed equitably throughout the state, including rural areas.\nAdditionally, at least 75% of the funds provided to the state must be used for a wide array of juvenile justice related programs, including, but not limited to\ncommunity based alternatives to incarceration; counseling, mentoring, and training programs within the juvenile justice system as well as similar community based programs and services, including aftercare and after-school programs; comprehensive juvenile justice and delinquency prevention programs that assist the coordination of service provision among the various players involved; providing services to address child abuse and neglect; expanding the use of probation offices; programs that address the relationship between juvenile delinquency and learning disabilities, and programs that help juveniles and their families overcome language barriers; projects designed to deter juvenile gang members from participating in illegal activities, including those that promote their involvement in lawful activities; substance and drug abuse prevention and treatment programs, including mental health programs; programs that focus on positive youth development for at-risk youth and juvenile offenders; programs that focus on strengthening families and providing them assistance to ensure juveniles have a nurturing home environment; programs that provide mental health services to juveniles at every stage of the juvenile justice process; and programs that encourage juvenile courts to develop a continuum of post-adjudication restraints that bridge the gap between probation and detention in a juvenile correctional facility.", "The original JJDPA included two core requirements, or mandates, that states had to adhere to in order to receive formula grant funding. Subsequent revisions to the JJDPA expanded the list of core mandates to the four that exist today:\nDeinstitutionalization of status offences (DSO). Juveniles who are charged with or who have committed an offense that would not be a crime if committed by an adult, and juveniles who are not charged with any offenses, are not to be placed in secure detention or secure correctional facilities. Juveniles are not to be detained or confined in any institution in which they would have contact with adult inmates. Additionally, correctional staff that work with both adult and juvenile offenders must have been trained and certified to work with juveniles. Juveniles are not to be detained or confined in any jail or lockup for adults, except for juveniles who are accused of non-status offenses. These juveniles may be detained for no longer than six hours as they are processed, waiting to be released, awaiting transfer to a juvenile facility, or awaiting their court appearance. Additionally, juveniles in rural locations may be held for up to 48 hours in jails or lockups for adults as they await their initial court appearance. Juveniles held in adult jails or lockups in both rural and urban areas are not to have contact with adult inmates, and any staff working with both adults and juveniles must have been trained and certified to work with juveniles. Disproportionate minority contact (DMC). States are required to show that they are implementing juvenile delinquency prevention programs designed to reduce—without establishing or requiring numerical standards or quotas—the disproportionate number of minorities confined within their juvenile justice systems.\nFailure to adhere to these requirements will result in a 20% reduction of funding for each of the four mandates with which the state is not in compliance. Additionally, the state will be ineligible for future funding unless the state agrees to spend 50% of the allocated funding to achieving compliance with whichever mandate it is noncompliant with; the Administrator of OJJDP determines that the state has achieved \"substantial compliance\"; or the state has demonstrated an \"unequivocal commitment to achieving full compliance with such applicable requirements within a reasonable time.\"", "In addition to the formula grants, the JJDPA also authorizes OJJDP to make grants available to carry out projects designed to prevent juvenile delinquency. The 21 st Century Department of Justice Appropriations Authorization Act folded several pre-existing grant programs into the Juvenile Delinquency Prevention Block Grant program and authorized \"such sums as may be necessary\" for this purpose through FY2007. As a result of this consolidation, purpose areas that may be funded through the block grant program comprise a wide array of services, treatments, and interventions, including, but not limited to the following:\nProjects that provide treatment to juvenile offenders and at risk juveniles who are victims of child abuse or neglect, or who have experienced violence at home, at school, or in their communities. Additionally, the program can fund projects providing treatment and services to the families of these juveniles. Educational projects or support services for juveniles that focus on encouraging juveniles to stay in school; aiding in the transition from school to work; helping identify juveniles who have learning difficulties and disabilities both in school and in the juvenile justice system; encouraging new approaches to preventing school violence and vandalism; developing locally coordinated policies among education, juvenile justice, and social service agencies; and providing mental health services. Projects that expand the use of probation officers, especially for programs that permit nonviolent juvenile offenders to remain at home instead of being placed in an institution, and to ensure that juveniles complete the terms of their probation. Counseling, training, and mentoring programs, particularly for juveniles residing in low-income and high-crime areas. Community based projects and services aimed at reducing juvenile delinquency, including literacy and social service programs. Drug and alcohol abuse treatment programs. Postsecondary education and training scholarship programs for low income juveniles residing in neighborhoods with high rates of poverty, violence, and drug related crimes. Projects that establish an initial intake screening and evaluation of juveniles taken into custody, both to determine the likelihood that the juvenile will commit crimes in the future and to provide the appropriate interventions to prevent future crimes. Projects designed to prevent juveniles from participating in organized criminal gangs.\nGrant funding is allocated to the eligible states based on the proportion of their population that is under the age of 18. To become eligible for these grants, states must submit an application assuring that no more than 5% of the grant will be used for administrative, evaluation, and technical assistance costs and that federal grant funding will supplement, and not supplant, state and local juvenile delinquency prevention efforts. Additionally, the state must have submitted a plan. This grant program has not received appropriations to date; rather the annual appropriation for OJJDP continues to follow the previous structure, and funds have been appropriated in each subsequent fiscal year for some of the grant programs that were repealed in 2002. The authorization for this program expired in FY2007.", "The Challenge Grants program was originally added in 1992 and was modified by the 21 st Century Department of Justice Appropriations Authorization Act, which authorized \"such sums as may be necessary\" to carry out the program through FY2007. It replaced the Demonstration Programs grant that had been created by the original JJDPA (see Appendix A and Appendix B for more information on the prior grant programs). The Challenge Grants program authorizes OJJDP to make discretionary grants to state, local, and tribal governments and private entities to carry out programs that will develop, test, or demonstrate promising new initiatives that may prevent, control, or reduce juvenile delinquency. The Administrator is charged with ensuring that these grants are apportioned in such a way as to ensure an equitable geographical distribution of these projects throughout the United States. The program is currently unauthorized, and it last received appropriations in FY2010.", "The Incentive Grants for Local Delinquency Prevention (Title V) program authorizes OJJDP to make discretionary grants to the states that are then transmitted to units of local government in order to carry out delinquency prevention programs for juveniles who have come into contact with, or are likely to come into contact with, the juvenile justice system. Unlike the other grant programs within the JJDPA, which are authorized through FY2007, the 21 st Century Department of Justice Reauthorization Act authorized \"such sums as may be necessary\" for the Title V grant program through FY2008. The program is currently unauthorized, but has continued to receive appropriations.\nActivities that can be funded through the Title V Incentive Grants for Local Delinquency Prevention program include the following:\nalcohol and substance abuse prevention services; educational programs; child and adolescent health (as well as mental health) services; recreational programs; leadership programs; programs that teach juveniles that they are accountable for their actions; job or skills training programs; and other \"data-driven evidence based prevention programs.\"\nAs it reviews the grant applications that it receives, OJJDP is to give priority to programs that\ninclude plans for service and agency coordination (including co-location of services); coordinate and collaborate with the Delinquency Prevention Block Grant recipients in the state; include innovative ways to involve the private sector in delinquency prevention activities; help states develop or enhance state-wide subsidy programs for early intervention and prevention of juvenile delinquency; and develop data-driven prevention plans and utilize evidence-based prevention strategies (including conducting program evaluations to determine the impact and effectiveness of the programs being funded).\nLocal government entities are eligible for funding if they are in compliance with the state plan requirements, and if they have submitted to the state's advisory group a three-year comprehensive plan outlining their plans for investing in delinquency prevention activities and for coordinating services delivered to at-risk juveniles and their families. Funding to local government entities is disbursed by the state, and these grants are conditioned on a 50% match by either the local entity or the state.\nThus, the JJDPA includes four major grant programs within its purview: the State Formula Grant program, the Delinquency Prevention Block Grant program, the Challenge Grant program, and the Title V Incentive Grants for Local Delinquency Prevention program. The first three grant programs, located within Title II of the act, were authorized through FY2007. The Title V grant program was authorized through FY2008. While these grant programs differ slightly, they each provide funding for a wide array of juvenile delinquency prevention purposes. The State Formula Grant program and the Delinquency Prevention Block Grant program feature long lists of detailed purpose areas that overlap. Conversely, the Challenge Grant and the Title V grant programs feature broadly written purpose areas that provide more discretion to OJJDP in their administration. Although this report does not include appropriations data, it is important to note that the appropriators have not funded the Delinquency Prevention Block Grant since its inception. Instead, the appropriators have continued to fund some of the grant programs repealed in 2002 either as stand-alone appropriations or as carve-outs within the Title V grant program. This issue will be discussed in greater detail in the \" Issues for Congress \" section of this report.", "The Juvenile Accountability Block Grant (JABG) program was originally created by the FY1998 DOJ Appropriations Act ( P.L. 105-119 ) and was appropriated each subsequent fiscal year. However, the JABG program was codified by the 21 st Century Department of Justice Reauthorization Act ( P.L. 107-273 ) in Subtitle A of Title II of the act. As such it falls outside the scope of the JJDPA, but nevertheless comprises a significant component of the federal government's approach to juvenile justice.\nThe JABG program authorizes the Attorney General to make grants to states and units of local government to strengthen their juvenile justice systems and foster accountability within their juvenile populations. The program focuses resources on holding juveniles accountable for their actions and building up the juvenile justice system in the states. It also essentially signifies the high-water mark of the federal government's movement away from an emphasis on rehabilitating juveniles and toward the idea that juveniles need to be punished for their crimes; indeed, the only core mandate of the JABG program is that states must begin to implement a system of graduated sanctions in order to be eligible for funding.\nAs originally codified, the JABG program authorized funding for 16 accountability-based purpose areas, including, but not limited to, implementing graduated sanctions; building or operating juvenile correction or detention facilities; hiring juvenile court officers, including judges, probation officers, and special advocates; and hiring additional juvenile prosecutors. The act also authorized a separate Tribal Grant program within the JABG appropriation to fund accountability-based measures aimed at strengthening the tribal juvenile justice systems. The JABG program was last authorized in 2006 by P.L. 109-162 , which added a purpose area to the original 16 areas and authorized JABG at $350 million a year through FY2009. The program is currently unauthorized, and last received appropriations in FY2013. The Administration has nonetheless continued to request funding for this program annually.", "As currently comprised, the program authorizes funding for 17 accountability based purpose areas, including, but not limited to\nimplementing graduated sanctions; building or operating juvenile correction or detention facilities; hiring and training juvenile court officers, including judges, probation officers, special advocates, juvenile prosecutors, and detention or corrections personnel; supporting prosecutorial initiatives aimed at curbing drug use, violence, and gangs; establishing juvenile drug courts and gun courts; establishing juvenile records and information sharing systems between the courts, schools, and social service agencies to keep better track of repeat offenders; using risk and needs assessments to facilitate effective early interventions for mental health and substance abuse issues; accountability-based school safety initiatives; establishing and improving pre-release and post-release programs to help juveniles reintegrate into the community; and restorative justice programs that emphasize the moral accountability of an offender toward their victims and the affected community.", "The JABG program awards grants to the states; most of this funding is then sub-granted to units of local government. States and local entities must provide information about the activities that will be carried out with the grant funding and the criteria that will be used to assess whether the programs were effective (including the extent to which evidence-based practices were utilized). Additionally, states and local governments must provide assurances that the they are working toward implementing laws effecting the use of graduated sanctions for juvenile offenders.\nAs mentioned, the implementation of graduated sanctions is the only core mandate associated with the JABG program. These graduated sanctions should, at a minimum, ensure that\nsanctions are imposed on juvenile offenders for each delinquent offense they commit; sanctions escalate in intensity with each subsequent more serious offense; there is enough flexibility to tailor sanctions and services to each individual juvenile offender; and appropriate consideration is given when handing out sanctions to the victims of the crime and public safety in general.\nStates are allowed to participate in the program if their graduated sanctions are discretionary rather than mandatory, but must require each juvenile court in its jurisdiction to submit an annual report concerning the extent to which graduated sanctions were implemented and the reasons for which graduated sanctions were not applied. This information should be collected by units of local government and reported to the states, which in turn report it to the Attorney General. Eligible states and units of local government are also required to establish and convene an advisory board that is charged with recommending a coordinated enforcement plan for the use of the JABG funds awarded. The board is to include, where appropriate, members of the state or local police, the prosecutors office, the juvenile court, the probation office, the education system, the social service system, a nonprofit victim advocacy organization, and a nonprofit religious or community group.", "Of the total amount appropriated for the JABG program, each state is automatically allocated 0.5%. The remaining 75% of the JABG funding is then allocated to the states in accordance to the ratio of their population of juveniles under the age of 18 to the overall population of juveniles under the age of 18 in the United States that fiscal year. The states must pass along not less than 75% of the funds they receive to units of local government, unless the state can demonstrably certify that their overall juvenile justice costs are more than 25% of the aggregate amount of juvenile justice expenditures in the state (i.e., the states expenditures plus all the units of local government expenditures) that fiscal year and that they have consulted with as many units of local government as practicable regarding their expenditures. States are required to pass along the funding to units of local government according to a formula that is based on the ratio of the local government's juvenile justice costs and the juvenile violent crimes committed in their jurisdiction to the overall juvenile justice costs and juvenile violent crimes in the state.\nThe Attorney General is authorized to make grants directly to specially qualified units of local government if the states do not qualify or apply for JABG funding. In these cases, the Attorney General is authorized to reserve up to 75% of that states allocation to make grants directly to units of local government that meet the funding requirements outlined above. Lastly, the Attorney General is authorized to use the average amount allocated by the states to their units of local governments as the basis for the amounts awarded to these specially qualified units of local government.\nOf the total amount awarded to a state or a unit of local government, only 5% can be used to pay for administrative costs. Funds awarded under JABG cannot be used to supplant existing funding but must instead be used to increase the amount of funding that would otherwise be available to the state juvenile justice systems. The federal share of the activities funded through a JABG grant cannot exceed 90%, except for JABG funds used to construct juvenile court or detention facilities in which case the federal share is not to exceed 50%.", "Congress may choose to consider the JJDPA's reauthorization because its major provisions expired at the end of FY2007 and FY2008. Similarly, the JABG expired at the end of FY2009, and Congress may also consider its reauthorization. As Congress debates reauthorizing funding for juvenile justice programs, it faces the same issues that have revolved around the juvenile justice system for more than 30 years:\nWhat is the appropriate federal role in an arena that has predominantly been the province of the states? What is the appropriate federal response to juvenile violence and juvenile crime? Should federal efforts to influence the states' juvenile justice systems focus on the rehabilitation of juvenile offenders, on holding juvenile offenders accountable for their actions, or some combination of both? Are the grant programs as currently comprised the best way to support juvenile justice efforts in the states?\nThe following section provides a more detailed examination of these potential issues.", "As previously noted, the fundamental tension within the juvenile justice system over the past 40 years has been the relationship between rehabilitating juveniles and holding them accountable for their actions. To some extent, this is an arbitrary distinction in that the system has included both rehabilitative and accountability based programs. Nevertheless, over the years the juvenile justice system trended away from rehabilitation. Instead, it increasingly incorporated measures that emphasize holding juveniles accountable for their actions. For example, during the 1990s, 47 states and the District of Columbia enacted laws that made their juvenile justice systems more punitive. As a result, juvenile justice can be conceptualized as a continuum that stretches philosophically from the rehabilitative idea that juveniles are wayward youth who can be taught to mend their ways and become contributing members of society to the accountability end of the spectrum which holds that juveniles must be taught to take responsibility for their actions through punishment (often in the form of graduated sanctions).\nThe federal juvenile justice system can thus be viewed as a pendulum that swings between these two poles; for some time, it was swinging away from rehabilitation and toward accountability through the addition of graduated sanctions to the JJDPA's findings and the requirement that states implement graduated sanctions in order to be eligible for JABG funding. Congress may consider whether the federal government, through its grant programs, should be focusing on rehabilitating juveniles, holding them accountable for their actions, or some combination of both of these philosophies. As mentioned, authorization for the JABG expired at the end of FY2009, and it has not received funding since FY2013. As the JABG program was seen as favoring the accountability end of the spectrum, some may question whether the juvenile justice pendulum is now swinging back toward the rehabilitation end.", "The federal government has attempted to influence the states' juvenile justice systems through the core mandates that states must comply with in order to be eligible for JJDPA state formula grant funding. In essence, the federal government has used grant funding as a carrot to effectuate changes in the way that states house and treat their juvenile offenders. The last modification of a core mandate occurred with the JJDPA's last reauthorization in 2002, when the disproportionate minority contact language was modified to preclude OJJDP from using numerical benchmarks in its implementation. A possible issue for Congress to consider is whether to modify or expand the existing core mandates.\nProponents of expanding the core mandates could point to the fact that the mandates have been effective in inducing states to promulgate detention standards that focus on minimizing the contact between juvenile offenders and adults and in deinstitutionalizing status offenses. Opponents of expanding the mandates, however, could point to the relative ineffectiveness of the disproportionate minority contact mandate; most states continue to detain minorities at a higher rate than their percentage of the state's juvenile population and the language has been weakened over the years to ensure that OJJDP does not require states to meet quotas in order to adhere to the mandate. Should Congress choose to expand the core mandates, policy options could include\nrequiring states to ensure that their delinquency prevention programs are based on solid scientific evidence such as randomized control trials, requiring states to show the effectiveness of their programs aimed at reducing the disproportionate minority contact of offenders in the juvenile justice system or requiring that states take measurable steps to reduce this disparity, expanding the number and quality of programs available for female juveniles, or requiring states to implement mental health and substance abuse screening and treatment for juveniles.", "Since the JJDPA was reauthorized in 2002, there appears to have been some disparity between the authorizing legislation and the structure of the appropriations for some juvenile justice grant programs. As previously noted, this last reauthorization eliminated a number of small grant programs and consolidated most of their purpose areas into the Juvenile Delinquency Prevention Block Grant. However, the annual appropriation for OJJDP continues to follow the previous structure, and funds have been appropriated in each subsequent fiscal year for some of the grant programs that were repealed in 2002. The current disconnect between the authorization and the appropriation could present a challenge for OJJDP. Given this inconsistency, OJJDP employees must spend some percentage of their time reconciling the differences between the authorization and the appropriation; this may not represent the best investment of OJJDP staff time.\nAdditionally, because the eligibility requirements and funding mechanisms of the old grant programs and the new block grant program are different, this disparity between the authorization and the appropriation likely represents a challenge to the states and units of local government as they apply for funding. A potential issue for Congress as it reauthorizes the JJDPA includes whether the Juvenile Delinquency Prevention Block Grant should be implemented as it was authorized, whether it should be modified, or whether it should be broken up again into its component grant programs to better reflect what has been occurring with the appropriation.", "The current grant programs within the JJDPA overlap in a variety of ways. The State Formula Grant and the Delinquency Prevention Block Grant programs, for example, both feature a wide array of purpose areas elucidated in legislative language that are largely similar. For example, both grant programs include purpose areas for\ncounseling, mentoring, and training programs; community based programs and services; after school programs; education programs; programs that expand the use of probation officers; substance and drug abuse prevention programs; mental health services; gang-involvement prevention programs; and coordinating local service delivery among the different agencies involved.\nAdditionally, the Delinquency Prevention Block Grant, the Challenge Grants, and the Title V Incentive Grants for Local Delinquency Prevention Programs all include language allowing OJJDP to provide funding for additional programs not included in the specific purpose areas identified. A potential issue for Congress could include whether the current overlap within the juvenile justice grant programs is appropriate. Possible policy options could include altering the current grant programs to target funding for specific activities in each grant program or consolidating the different grant programs into one large program.\nThe creation of new grant programs could be an alternative to modifying or consolidating the existing grant programs. Creating grant programs that are tailored to specific activities (e.g., gang-prevention, restorative justice, mentoring, mental health treatment, etc.) could provide dedicated funding streams to activities that may not otherwise receive funding if they must compete for funding in a broader grant program. However, there are limited federal resources in the juvenile justice arena, and these resources have decreased over the past several years. Adding grant programs without also increasing funding may take resources away from the current programs. A possible issue for Congress involves whether the existing grant programs are adequate, whether the existing grant programs should be modified, or whether new grant programs should be enacted.", "The juvenile population comes into contact with a wide variety of federal programs overseen by a number of different agencies. Under current law, the Administrator of OJJDP has a broad mandate to coordinate the federal government's overall response to juvenile offenders and juvenile delinquency prevention, including federal programs that focus on prevention, diversion, training, treatment, rehabilitation, evaluation, research, and improvement of the states' juvenile justice systems. Additionally, the Coordinating Council was established to help the various agencies involved in dealing with and providing treatment for juveniles better coordinate their efforts.\nSome overlap exists within the federal government concerning programs that offer services for juveniles. For example, a growing body of evidence points to the relationship between child abuse or other forms of mistreatment and juvenile delinquency or other delinquent behavior such as youth violence. This has led to a duplication of efforts within many federal agencies and what may sometimes be a considerable overlap in the funding opportunities available to states and local entities. An example of this overlap is the body of federal funding available for youth violence prevention. There are a multitude of federal programs throughout the government that deal with youth violence's causes, its effects, and its ramifications. The amount of coordination that is occurring between the departments on these issues remains an open question.", "In debating the current state of federal juvenile justice grant programs and the potential reauthorization of the JJDPA, there have been questions surrounding the oversight of these programs. Specifically, questions involve accountability of grantees receiving funding, adequacy of existing regulations and guidance, and strength of the current compliance monitoring process.\nSome have questioned whether the JJDPA has sufficient metrics in place for OJJDP to effectively monitor states' compliance with the state formula grants four core mandates. Of these four mandates, many view the \"disproportionate minority contact,\" or DMC, requirement as the most challenging and difficult-to-monitor mandate. According to this mandate, states are required to show that they are implementing juvenile delinquency prevention programs designed to reduce—without establishing or requiring numerical standards or quotas—the disproportionate number of minorities confined within their juvenile justice systems. OJJDP has given guidance to states on how to identify and comply with the DMC requirement. However, some have suggested that the DMC core mandate be strengthened to include a requirement that states make measurable progress toward reducing racial and ethnic disparities in their juvenile justice systems. If policymakers evaluate that OJJDP is not adequately enforcing the DMC core requirement, they may debate whether to exercise additional oversight over OJJDP's enforcement of the requirement or whether to amend the DMC requirement itself.\nThere have also been concerns that OJJDP may not adequately enforce states' adherence to the JJDPA's core requirements as a foundation for receiving State Formula Grant funding. There are a number of factors that might contribute to this. For instance, states may not fully report non-compliance to OJJDP, OJJDP's compliance monitoring process may not have the capacity to accurately detect noncompliance, or OJJDP may not enforce the core requirements as a basis for states receiving funding. Should Congress take up the reauthorization of the JJDPA, policymakers may debate whether or how to amend the act to ensure transparency and states' compliance with the core mandates as a condition of receiving funding.\nAppendix A. The Juvenile Justice and Delinquency Prevention Act (JJDPA) of 1974\nThe Juvenile Justice and Delinquency Prevention Act (JJDPA) was first passed by Congress in 1974 and was most recently reauthorized in 2002 by the 21 st Century Department of Justice Appropriations Authorization Act. Its provisions are currently authorized through FY2007. This appendix will analyze the original JJDPA.\nThe original JJDPA had three main components: it created a set of institutions within the federal government that were dedicated to coordinating and administering federal juvenile justice efforts; it established grant programs to assist the states with setting up and running their juvenile justice systems; and it promulgated core mandates that states had to adhere to in order to be eligible to receive grant funding. As it was passed in 1974, the JJDPA focused largely on preventing juvenile delinquency and on rehabilitating juvenile offenders.\nFederal Government Entities Established\nThe JJDPA established a range of federal government entities charged with overseeing the federal government's juvenile justice efforts that continue to exist today. In addition to establishing the first federal agency dedicated to the promulgation of juvenile justice, the act established a series of institutions aimed at increasing the federal government's coordination of juvenile delinquency programs and of programs that affect juveniles generally.\nThe Office of Juvenile Justice and Delinquency Prevention (OJJDP)\nTitle II, Part A of the original JJDPA established OJJDP within DOJ's Law Enforcement Assistance Administration (LEAA) as the new clearing house for federal juvenile justice efforts. The act established the Office of the Assistant Administrator of OJJDP, who is charged with overseeing the Office and coordinating the federal government-wide juvenile justice efforts under the direction of the Administrator of the LEAA. The act endowed the Administrator with a series of powers, including the authority to require other federal entities with juvenile delinquency programs to submit information and reports to OJJDP, and charged the new entity with administering the programs that were created by the act. The act also directed the Administrator to implement the overall policy and develop the objectives and priorities for all federal juvenile delinquency activities as well as \"all activities relating to prevention, diversion, training, treatment, rehabilitation, evaluation, research, and improvement of the juvenile justice system of the United States.\" The LEAA Administrator, acting through the OJJDP Assistant Administrator, was thus given a broad mandate to oversee and coordinate not just the new agency's activities but all federal activities relating to the treatment of juveniles. OJJDP was required to present Congress with an annual report of its activities and of the federal government's overall juvenile delinquency programs.\nCoordinating Council on Juvenile Justice and Delinquency Prevention (Coordinating Council)\nThe act established an independent organization known as the Coordinating Council on Juvenile Justice and Delinquency Prevention to coordinate the federal government's juvenile delinquency programs. The Coordinating Council was to be comprised of representatives from a broad range of federal agencies who \"exercise significant decision making authority in the Federal agency involved,\" including the Attorney General, Secretary of Health, Education, and Welfare, the Secretary of Labor, Director of the Special Action Office for Drug Abuse Prevention, Secretary of Housing and Urban Development, or their respective designees. Additionally, the Coordinating Council was to include the Assistant Administrator of OJJDP and the Deputy Assistant Administrator of the National Institute for Juvenile Justice and Delinquency Prevention. The Coordinating Council was to meet a minimum of six times per year and was to report its activities as part of OJJDP's annual report.\nAdvisory Committee on Juvenile Justice and Delinquency Prevention (Advisory Committee)\nThe act established an Advisory Committee composed of 21 individuals who were to be appointed by the President to serve in an advisory capacity. These individuals were to be experts in the fields of juvenile delinquency prevention or treatment; juvenile justice administration; or community based programs and private voluntary organizations. The majority of the Advisory Committee was to be drawn from the private sector and at least one-third of the members were to be younger than 26 at the time of their appointment. The members were to serve without compensation and to meet no less than four times a year. The Advisory Committee was charged with making recommendations to the Administrator of OJJDP concerning the planning, policies, priorities, operations, and management of all juvenile delinquency programs within the federal government.\nThe National Institute for Juvenile Justice and Delinquency Prevention (National Institute)\nThe act created the National Institute to coordinate the collection, preparation, and dissemination of data regarding the treatment and control of juvenile offenders. The National Institute was charged with serving as a clearing house for all information relating to juvenile delinquency and with conducting and encouraging research on juvenile delinquency. The National Institute was also charged with training juvenile justice practitioners from every level of government and the private sector who were connected with the treatment and control of juvenile offenders. The National Institute was endowed with the power to request other federal agencies to supply the data and statistics that were necessary for its mission, and to reimburse these agencies for the expenses associated with these requests.\nFederal Grant Programs for Juvenile Justice\nIn addition to creating entities charged with overseeing and developing the juvenile delinquency prevention programs within the federal government, the JJDPA created two main grant programs that were aimed at helping states build up and manage their juvenile justice systems and prevent juvenile delinquency. Additionally, the JJDPA created a grant program aimed at helping states handle runaway youth.\nFormula Grant Program\nThe first federal grant program established by the JJDPA was a formula grant program for states and local governments. This formula grant program was broadly aimed at helping states improve their juvenile justice systems by providing funding that could be used to assist in the planning, establishing, operating, coordinating, and evaluating of juvenile delinquency programs. Funding under this grant program was to be allocated to states based on their relative populations of people under the age of 18, and no state was to receive less than $200,000. To receive funding under this grant program, the states were required to submit plans for how they were going to disburse the funding. The state plans were to describe a series of steps that states were to take in order to be eligible for funding, including the creation of juvenile justice entities within the state systems. States were required to pass along two-thirds of the funding to local government programs, unless granted a waiver by the Administrator, and 75% of the funds expended by the states were to be \"used for advanced techniques in developing, maintaining, and expanding programs and services designed to prevent juvenile delinquency, to divert juveniles from the juvenile justice system, and to provide community based alternatives to juvenile detention and correctional facilities.\"\nIn addition to these restrictions on how the money was to be spent, the JJDPA established two core mandates that states had to adhere to in order to receive funding. The first of these mandates required states to ensure that juveniles who had committed offenses that would not be crimes if they were committed by an adult (known as status offenses) not be placed in juvenile detention or correctional facilities. This has become known as the deinstitutionalization of status offenders. The second mandate required states to ensure that juveniles were not detained or confined in any institution in which they would have regular contact with adults in the criminal justice system.\nPrevention and Treatment Programs Grant\nThe act authorized the Administrator to make grants to and enter into contracts with public and private agencies, organizations, institutions, and individuals that focused on delinquency prevention and treatment. The act authorized the Administrator to enter into these grants and contracts to, among other things, develop and implement new approaches and methods for juvenile delinquency programs; develop and maintain community based alternatives to institutionalization; develop and implement programs that diverted juveniles from the traditional correctional system; improve the delivery of services to delinquents and to at-risk youth; and implement programs aimed at keeping students in school.\nDemonstration Programs Grant\nThe JJDPA also created a discretionary grant program aimed at supporting \"innovative approaches to youth development and the prevention and treatment of delinquent behavior.\" Grants under this program could be awarded to any state or local government agency, as well as nonprofit organizations, and were to last one year. The overarching goal of the program was to foster innovation in youth development.\nAppendix B. Subsequent Revisions to the JJDPA\nBetween 1974 and 2001, there were a number of laws enacted that modified the JJDPA in some manner. This appendix will outline the main changes that were made to the JJDPA over the past three decades.\nThe Juvenile Justice Amendments of 1980 ( P.L. 96-509 )\nIn 1980, Congress made three major changes to the JJDPA and reauthorized the act through FY1984. One of the major changes enacted by P.L. 96-509 was the streamlining of the juvenile justice apparatus within DOJ; whereas the JJDPA placed OJJDP underneath the Law Enforcement Assistance Administration (LEAA) and gave the LEAA Administrator authority over the agency, under the new act's provisions the Administrator of OJJDP reported directly to the Attorney General. In essence, this gave OJJDP a measure of independence and removed the filter between the administrator of OJJDP and the Attorney General. Despite this, however, OJJDP remained administratively within LEAA. Another major change made to the JJPDA was the creation of a new core mandate that states were to adhere to in order to receive funding under the formula grant program: the removal of juveniles from adult jails and lockups. P.L. 96-509 also began the process of shifting the JJDPA's focus away from rehabilitation and towards sanctions, including language that called for OJJDP to focus additional attention on the problem of juveniles committing serious crimes by paying special attention to sentencing and adding resources to the juvenile court system.\nThe act also made a series of minor modifications to the Coordinating Council, the Advisory Committee, and the National Institute aimed at increasing the coordination of federal juvenile justice efforts and at including the perspective of juveniles into the process. Among the changes made to the JJPDA, the act allowed 7.5% of OJJDP's overall appropriation to be used for the concentration of federal juvenile delinquency efforts, and it added the Director of the Bureau of Prisons, the Commissioner of the Bureau of Indian Affairs, the Commissioner for the Administration for Children, Youth, and Families, and the Director of the Youth Development Bureau to the Coordinating Council. The act directed the Advisory Committee to include at least five individuals younger than 24 years of age, at least two of whom should have been or continue to be under the jurisdiction of the juvenile justice system, and to contact and seek regular input from juveniles currently under the jurisdiction of the juvenile justice system.\nThe main alteration made by the act was the new requirement that states stop detaining or confining juveniles in any jail or lockup for adults in order to be eligible for the state formula grant. The act did, however, allow for the temporary detention of juveniles accused of serious crimes in such facilities where no existing acceptable alternative placement was possible, subject to the promulgation of regulations by the Administrator. Failure to achieve compliance with this mandate within five years would terminate a state's ability to receive funding unless the Administrator determined that the state was in substantial compliance with the requirements. Substantial compliance was defined as a state's achieving the removal of not less than 75% of juveniles from adult jails and lockups, and making an unequivocal commitment to achieving full compliance within two additional years.\nThe act also expanded the scope of the Prevention and Treatment Programs Grant to include programs that were aimed at removing juveniles from adult jails and lockups, and provided that at least 5% of the funding available under this grant program be allocated to the Virgin Islands, Guam, American Samoa, the Trust Territory of the Pacific Islands, and the Commonwealth of the Northern Mariana Islands.\nThe Juvenile Justice, Runaway Youth, and Missing Children's Act Amendments of 1984 Act ( P.L. 98-473 )\nP.L. 98-473 reauthorized the JJDPA through FY1988 and formally elevated OJJDP to a stand-alone office within DOJ under the general authority of the Attorney General. Another major change made to the JJDPA by this act was the expansion of the Prevention and Treatment Programs Grant program. The act dedicated 15% to 25% of the overall funding for state formula grants to this program, and expanded the number of purpose areas that this discretionary grant could be used for, including, but not limited to, community based alternatives to detention; diversion mechanisms including restitution and reconciliation projects; advocacy activities aimed at improving services; programs that strengthen families; prevention and treatment programs; developing a national education program aimed at reducing juvenile delinquency; developing programs aimed at fostering youth employment; and developing programs aimed at keeping youths in school. At least 30% of the funding available under this program was to be apportioned to private nonprofit agencies and institutions.\nThe Amendments to the Juvenile Justice and Delinquency Prevention Act of 1988 ( P.L. 100-690 )\nIn 1988, Congress reauthorized the JJDPA through FY1992. Among other things, the act required OJJDP to publish a comprehensive plan of the activities it would undertake each year in the federal register. It also required OJJDP to prepare an annual report each fiscal year providing a detailed summary and analysis of the national trends in juvenile justice, including the numbers and types of offenses with which juveniles were being charged; the rate at which juveniles were being taken into custody; the extent to which states were complying with their state plan requirements; and OJJDP and the Coordinating Council's activities. The act also required states, as part of their plans, to include information on their efforts to end the disproportionate confinement of minority youth in their detention systems, and it raised the minimum funding allocations available for states under the formula grant program. The act also directed OJJDP to include technical assistance as a purpose area for each of its grant programs and for the National Institute. The act modified the Prevention and Treatment Programs Grant program by deleting language inserted by P.L. 98-473 that required 15% to 25% of the formula grant funding be allocated to this program and by expanding the number and types of considerations required to approve applications for funding.\nGang Prevention Grant\nP.L. 100-690 also established a new grant program under Part D of Title II of the JJDPA aimed at funding prevention and treatment programs for juvenile gang members. The new discretionary grant program authorized the Administrator to make grants to public and private agencies and organizations. The new grant program identified 10 broad purpose areas aimed at reducing the numbers of juveniles joining gangs and providing treatment for juveniles convicted of gang-related criminal activities.\nThe Juvenile Justice and Delinquency Prevention Amendments Act of 1992 ( P.L. 102-586 )\nP.L. 102-586 reauthorized the JJDPA through FY1996. The main change enacted by this act was the elevation of disproportionate minority confinement to core mandate status. States that were not in compliance with this requirement within three years of the act's passage would no longer be eligible for formula grant funding. However, states that had shown \"substantial compliance\" with the requirement would be eligible for funding for two additional years. The act created a number of new grant programs within Title II of the JJDPA, including grants for community-based gang intervention, for state challenge activities, for juvenile victims of child abuse, and for mentoring. The act also added a new Title V to the JJDPA establishing a new program, the Incentive Grants for Local Delinquency Prevention Program.\nThe act also modified the composition of the Coordinating Council. In addition to the leaders (or their designated representatives) of the various federal agencies with a stake in the juvenile justice system, the Coordinating Council was to include nine individuals working in the field of juvenile justice who were not federal employees. They were to be appointed without regard to political affiliation. Three members were to be appointed by the President, three by the Speaker of the House, and three by the majority leader of the Senate.\nFollowing is a description of the various grant programs that were implemented by the 1992 revision to the JJDPA.\nCommunity Based Gang Intervention Grant\nThe act slightly modified the discretionary gang prevention grant authorized within Part D of Title II of the JJDPA by P.L. 100-690 , renaming it the Gang-Free Schools and Communities Grant. The act also created a new grant program, the Community-Based Gang Intervention Grant. The new grant program authorized the Administrator to make grants to public and private nonprofit agencies, organizations, and institutions to reduce the participation of juveniles in gangs by engaging the community. The grant allowed funding to be provided for coordinating mechanisms such as regional task-forces, as well as for a variety of prevention and accountability measures. For example, on the accountability side the grant authorized funding for graduated sanctions, including the expanded use of a wide variety of interventions such as probation, mediation, restitution, community service, intensive supervision, electronic monitoring, and bootcamps, among others. On the prevention side the program authorized funding for, among other things: treatment for juvenile gang members; prevention and treatment services for substance abuse by juveniles; and services to prevent juveniles from coming into contact with the juvenile justice system again as a result of gang-related activity.\nState Challenge Activities Grant\nThe act created another new grant program under Part E of Title II of the JJDPA, the State Challenge Activities Grant (Challenge Grant). The Challenge Grant program allowed the Administrator to designate up to 10% of a state's formula grant for this new grant program. The act defined a challenge activity as a program that is aimed at, among other things, developing policies to provide services for juveniles in the juvenile justice system; increasing community-based alternatives to detention; developing programs that replaced traditional training schools with secure settings; developing programs that prohibited gender bias within the state's juvenile justice system and ensured that female juveniles had access to a full range of services, including treatment for physical or sexual assault and education in parenting; and increasing aftercare services for juveniles coming out of placement.\nJuvenile Victims of Child Abuse Grant\nThe act created a third new grant program under Part F of Title II of the JJDPA for Juvenile Victims of Child Abuse. This program enabled the Administrator to enter into grants with public agencies and private nonprofit organizations to provide treatment for juvenile offenders who are victims of child abuse and neglect; provide transitional services, including individual, group, and family counseling; and carry out research on juvenile child abuse issues associated with these grants.\nJuvenile Mentoring Grant\nThe act created a fourth new grant program under Part G of Title II of the JJDPA for juvenile mentoring programs. These grants could be awarded to local educational agencies (in partnership with public or private agencies) to establish and support mentoring programs. Mentoring programs eligible for funding included programs designed to link at-risk youth with responsible adults; promote personal and social responsibility; increase educational participation; discourage the use of drugs and violence; discourage participation in gangs; and encourage participation in community service and other community activities. Grant funding could not be used to directly compensate mentors (apart from reimbursement for incidental expenses) or support litigation of any kind, among other things.\nBoot Camp Grants\nThe act created a fifth new grant program under Part H of Title II of the JJDPA to fund the establishment of up to 10 military-style boot camps in one or more states. These boot camps were to provide highly regimented schedules involving discipline, physical training, work, and drill, and to include educational and counseling services. States receiving funding under this program would be required to provide for post-release supervision and after-care services for the juveniles participating in their boot camps.\nIncentive Grants for Local Delinquency Prevention Programs (Incentive Grants)\nThe act created a new Title V within the JJDPA for Incentive Grants aimed at creating delinquency prevention programs at the local level. The grants would be allocated by state and passed along by each state's advisory group (as created under the state plan stipulations) to local government entities. Funding could be used to provide recreation services, tutoring and remedial education, job skills, mental health services, substance abuse services, leadership development services, and programs that teach juveniles accountability for their actions. States were required to provide a 50% match for the grants and be in compliance with the core mandates in Title II in order to receive funding under this program.\nThe 21 st Century Department of Justice Appropriations Authorization Act of 2002 ( P.L. 107-273 )\nP.L. 107-273 in 2002 represents the last major revision to the JJDPA. The act reauthorized OJJDP, which had remained unauthorized since FY1997 but which had been appropriated annually, through FY2007. The act also made some significant revisions to the JJDPA, most notably repealing all of the new grant programs in Title II created by P.L. 102-586 and consolidating their purpose areas within the Juvenile Justice and Delinquency Prevention Block Grant.\nAmong other things, the act amended the state plans section of the JJDPA and modified the disproportionate minority confinement core mandate provision. The revision to the core mandate directed the states to address the problem of disproportionate minority confinement, but stated that the states were not required to meet numerical quotas or standards in order to receive formula grant funding. The act also mandated that states enact policies requiring that individuals who work with both juveniles and adults in detention facilities be certified and trained to work with juveniles. In addition, the act added a number of additional stipulations to the state plans, including, among other things,\nthat states notify appropriate public agencies within 24 hours of a child's apprehension for a status offense; that states specify up to 5% of their formula grant funding for incentive grants to reduce probation officer case loads; and that states establish systems and policies to incorporate child protective services records into juvenile case files and to ensure that child welfare records are available to the court.\nIf states failed to comply with any of the four core mandates they would have their formula grant funding reduced by not less than 20% for each mandate with which they were not in compliance. Additionally, states would be ineligible to receive any formula funding unless they agreed to spend 50% of the funding they received on achieving compliance with whichever core mandate they were non-compliant with, unless the Administrator determined that the state had achieved substantial compliance with the mandate.\nJuvenile Delinquency Prevention Block Grant\nPerhaps the major structural change enacted by P.L. 107-273 was the elimination of the series of grant programs that had been created within Title II of the JJDPA: the Gang-Free Schools and Communities Grant; the Community Based Gang Intervention Grant; the States Challenge Activities Grant; the Juvenile Victims of Child Abuse Grant; the Juvenile Mentoring Grant; and the Boot Camps Grant. In their stead, the act created a Juvenile Delinquency Prevention Block Grant aimed at funding programs that reduced juvenile delinquency that incorporated most of the general purpose areas that had been eligible for funding under the previous grant programs. Included under this broad umbrella were 25 purpose areas that run the gamut of juvenile delinquency prevention, including, but not limited to, treatment programs; counseling programs; educational programs; programs that expanded the use of probation officers; community-based programs; drug-prevention programs; and gang-prevention programs." ], "depth": [ 0, 1, 1, 1, 2, 2, 1, 2, 3, 3, 2, 3, 4, 4, 4, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "", "h0_full h1_full", "", "", "", "h2_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "h1_full", "", "", "", "h2_full h1_title", "h2_full h1_full", "h1_full", "h2_full", "", "", "h1_full" ] }	{ "question": [ "How is juvenile justice in the United States administered?", "How were juvenile court systems established?", "What was the mission of the early juvenile courts?", "What was the aim of the JJDPA?", "How did subsequent revisions affect the act?", "To what extent did Congress follow the lead of the states?", "How were juvenile justice systems revised towards the end of the 20th century?", "What was the purpose of JABG?", "How has the aim of juvenile justice changed?", "How has the JJDPA fared since FY2007?", "What policy issues are associated with reauthorization?", "How has JABG authorization fared since FY2009?", "What issues are affecting the reauthorization of JABG?" ], "summary": [ "Juvenile justice in the United States has predominantly been the province of the states and their localities.", "The first juvenile court in America was founded in 1899 in Cook County, Illinois, and, by 1925, all but two states had established juvenile court systems.", "The mission of these early juvenile courts was to rehabilitate young delinquents instead of just punishing them for their crimes; in practice, this led to marked procedural and substantive differences between the adult and juvenile court systems in the states, including a focus on the offenders and not the offenses, and rehabilitation instead of punishment.", "As it was passed in 1974, the JJDPA focused largely on preventing juvenile delinquency and on rehabilitating juvenile offenders.", "Subsequent revisions to the act added sanctions and accountability measures to some existing federal grant programs, and new grant programs to the act's purview.", "In altering the JJDPA to include a greater emphasis on punishing juveniles for their crimes, Congress has essentially followed the lead of the states.", "During the 1980s and 1990s, most states revised their juvenile justice systems to include more punitive measures and to allow juveniles to be tried as adults in more instances.", "In 1997, Congress created the Juvenile Accountability Block Grant (JABG), allowing the Attorney General to make grants to states and units of local government to strengthen their juvenile justice systems and foster accountability within their juvenile populations.", "Juvenile justice in general has thus moved away from emphasizing the rehabilitation of juveniles and toward a greater reliance on sanctioning them for their crimes.", "Authorization for the JJDPA's main provisions expired at the end of FY2007 and FY2008, but its major programs have continued to receive appropriations. Congress may choose to consider the JJDPA's reauthorization.", "Policy issues associated with its reauthorization include what the best federal response to juvenile violence and juvenile crime should be; whether the system should focus on the rehabilitation of juvenile offenders or on holding juvenile offenders accountable for their actions; and whether the grant programs as currently comprised represent the best way to support juvenile justice efforts in the states.", "Similarly, authorization for the JABG expired at the end of FY2009.", "One of the issues surrounding its potential reauthorization involves whether grant program purpose areas should be modified, expanded, or clarified." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, -1, -1, -1, -1, 0, -1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-19-464	{ "title": [ "Background", "Indian Tribes and Tribal Land Types", "Agricultural Activity on Tribal Lands", "Agricultural Credit and the Farm Credit System", "Limited Data Are Available on Agricultural Credit Needs of Indian Tribes and Their Members", "Data on Agricultural Credit Needs for Tribes and Their Members Are Limited", "Stakeholders See Potential for Growth of Agricultural Activity on Tribal Lands That Could Require Access to Credit", "Stakeholders Reported That Tribes and Their Members Face Multiple Barriers to Obtaining Agricultural Credit on Tribal Lands", "Land Tenure Issues May Present Hurdles to Obtaining Agricultural Credit", "Administrative Process Delays May Deter Lenders and Borrowers", "Lenders Reported Having Legal Concerns about Recovering Collateral Involving Tribal Lands", "Potential Borrowers May Need Assistance with Loan Readiness", "Barriers Have Limited Commercial Lending on Tribal Lands", "FCS Laws Allow for Lending on Tribal Lands, and Some FCS Associations Reported Lending to Tribes or Tribal Members", "FCS Laws Allow for Lending on Tribal Lands", "Some FCS Associations Reported Lending to Indian Tribes or Their Members, and Selected Associations’ Outreach to These Populations Included Education", "Lending", "Outreach", "Stakeholders Discussed Lender Partnerships, Loan Guarantees, and Other Options to Improve Agricultural Credit Access on Tribal Lands", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgements" ], "paragraphs": [ "", "As of May 2019, the federal government recognized 573 Indian tribes as distinct, independent political communities with certain powers of sovereignty and self-government, including power over their territory and members. The tribes can vary greatly in terms of their culture, language, population size, land base, location, and economic status. As of the 2010 U.S. Census, about 21 percent, or 1.1 million, of all American Indians lived on tribal lands.\nTribal lands include many land types (see table 1). According to BIA, the federal government holds about 46 million acres in trust for tribes (tribal trust land) and more than 10 million acres in trust for individual Indians (individual trust land).\nSome tribes also have reservations. According to BIA, there are approximately 326 Indian land areas in the United States administered as federal Indian reservations (including reservations, pueblos, rancherias, missions, villages, and communities). The land within the reservation may include a mixture of tribal trust land, individual trust land, restricted fee land, allotments, and land without trust or restricted status (that is, fee- simple land), which may be owned by tribes, individual Indians, or non- Indians.", "Agricultural producers (farmers, ranchers, or producers or harvesters of aquatic products) on tribal lands can be individual tribal members, the tribe itself, or non-Indians who lease the land from the tribe or Indian owner. According to USDA’s 2012 Census of Agriculture, about 75 percent of farms and ranches on 76 selected Indian reservations were operated by agricultural producers that identified as American Indian or Alaska Native (see table 2). On these reservations, Indian producers held 61 percent of total farm and ranch acreage. However, the total market value of agricultural products sold from Indian-operated farms and ranches was just over a tenth of that of non-Indian operated farms and ranches on the 76 selected reservations.\nIn 2011, USDA, which operates several agricultural programs targeted to traditionally underserved populations, settled a class action lawsuit brought by Native American farmers and ranchers for $760 million (Keepseagle v. Vilsack). The lawsuit alleged that USDA discriminated against Native Americans in its farm loan and farm loan servicing programs. In 2018, $266 million of the remaining settlement proceeds were used to establish the Native American Agriculture Fund. The Fund will begin awarding grants in 2019 to fund the provision of business assistance, agricultural education, technical support, and advocacy services to Native American farmers and ranchers.", "Like other businesses, agricultural producers generally require financing to acquire, maintain, or expand their farms, ranches, or agribusinesses. Types of agricultural loans as categorized by their purpose or maturity may vary by lender but generally include the following:\nShort-term loans. These loans are used for operating expenses and match the length and anticipated production value of the operating or production cycle. They are typically secured by the product (crops or livestock).\nIntermediate-term loans. These loans are typically used to finance depreciable assets such as equipment, which serves as the loan collateral. The loan terms usually range from 18 months to 10 years.\nLong-term loans. These loans are used to acquire, construct, and develop land and buildings with terms longer than 10 years. They are secured by real estate and may be called real estate loans.\nSeveral types of lenders provide credit to U.S. agricultural producers. According to USDA’s Economic Research Service, in 2017, FCS and commercial banks provided most agricultural credit in the United States, with respective market shares of 40 and 41 percent. USDA’s Farm Service Agency—a lender that focuses on assistance to beginning and underserved farmers and ranchers and also guarantees the repayment of loans made by other lenders—provided 3 percent, and the remainder was provided by individuals, life insurance companies, and other lenders.\nFCS is a government-sponsored enterprise, established in 1916 to provide sound, adequate, and constructive credit to American farmers and ranchers. FCS is regulated by FCA, an independent federal agency.\nFCS’s statutory mission includes being responsive to the needs of all types of creditworthy agricultural producers, and in particular, young, beginning, and small farmers and ranchers. According to FCA, FCS is not statutorily mandated to focus on providing financial opportunities to any other group.\nFCS lends money to eligible agricultural producers primarily through its 69 lending associations (FCS associations), which are funded by its four banks (FCS banks). All are cooperatives, meaning that FCS borrowers have ownership and control over the organizations. As of 2017, FCS had approximately $259 billion in loans outstanding, of which 46 percent were long-term real estate-based loans; 20 percent were short- and intermediate-term loans (such as for farm equipment or advance purchases of production inputs); and 16 percent were for agribusiness activities, such as agricultural processing and marketing.\nFCS associations are not evaluated under the Community Reinvestment Act, which requires certain federal banking regulators to assess whether financial institutions they supervise are meeting the credit needs of the local communities. FCS receives certain tax exemptions at the federal, state, and local level.", "", "Little data exists on the credit needs of tribes and their members. One measure of unmet credit needs is the difference between the amount applied for and the amount received. However, we could not determine the amount of agricultural credit that Indian tribes and their members applied for or received. These data were limited in part because federal regulations historically have prohibited lenders from asking about the race of applicants for nonresidential loans, including agricultural loans.\nAdditionally, even if data were available, the unmet need could be greater than that indicated by information on those who may have applied for and did not receive credit. Four tribal stakeholders and experts told us that tribal members may choose not to apply for agricultural credit because they were directly discouraged by loan officers, had problems completing paperwork, or had heard of other tribal members being denied loans.\nTwo tribal agricultural experts told us that on some level, the agricultural credit needs of Indian tribes and their members are the same as other agricultural producers’ credit needs. In particular, tribal stakeholders and experts told us that the tribal members need short-term loans for operating expenses and intermediate-term loans for equipment. One difference between the agricultural credit needs of tribal members and other producers is that tribal members may have a greater unmet need for long-term loans, which are typically secured by real estate, because of difficulties in using tribal lands as collateral, as discussed later in this report.\nCredit needs vary based on the type of operation or borrower.\nType of operation. Some tribal stakeholders we interviewed told us that members of their tribes were more likely to participate in ranching than farming, partly because farming has higher start-up costs. For example, one tribal agricultural expert told us a rancher can start with a few head of cattle and grow the herd over time, but a beginning farmer may need to purchase equipment. Additionally, several tribal stakeholders told us that land on their reservations was more suitable for ranching than farming.\nType of borrower. Some tribes have agricultural businesses, which have credit needs different from those of individual tribal members, according to experts and BIA officials we interviewed. For example, they may be greater or more complex. According to an expert and a tribal stakeholder, established agricultural businesses likely would be able to receive credit from commercial lenders because they have more resources to pledge as collateral or stronger credit histories. Additionally, if a tribe has other profitable businesses, it likely will have less difficulty obtaining credit or financing agriculture with those other resources than those without such resources.\nAccording to tribal stakeholders, experts, and BIA officials we interviewed, tribal members who obtain agricultural credit likely receive it from USDA’s Farm Service Agency, other USDA programs, or Native CDFIs. Some tribal members receive agricultural credit from local private lenders, but they are typically larger, more established borrowers. One expert told us that tribal members who are smaller or beginning agricultural producers and cannot access commercial banks instead may borrow money from family members. A 2017 report found that Native business owners were less likely than other business owners to obtain start-up capital from banks.\nSome experts we interviewed cited Native CDFIs as growing providers of agricultural credit to tribal members. A 2014 survey of 41 Native CDFIs— credit unions, community banks, and loan funds—found more than 40 percent provided credit and training to farmers and ranchers. In total, these CDFIs made almost $6 million in agricultural loans annually. However, Native CDFIs are limited in how much agricultural credit they can provide. In the 2014 survey, 56 percent of the Native CDFIs that made agricultural loans reported not having enough capital for such loans, with a total unmet need of at least $3 million in the previous year. One Native CDFI we interviewed said its agricultural loans averaged about $100,000 per borrower, and another said its operating loans were about $50,000–$75,000 and its intermediate-term loans about $100,000.", "Selected literature we reviewed and interviews with some tribal stakeholders found that tribes have a growing interest in agriculture, motivated by concerns over tribal members’ access to food, health, and employment opportunities.\nFood access. A 2014 USDA study found that about 26 percent of individuals in tribal areas lived within 1 mile of a supermarket, compared to about 59 percent of all Americans.\nHealth. According to the Centers for Disease Control and Prevention, American Indians and Alaska Natives have higher rates of obesity and diabetes than white Americans.\nEmployment. A 2014 Interior report found that, on average, only about 50 percent of Native American adults in tribal statistical areas were employed either full or part-time.\nTwo commissioned reports on tribal agriculture say that Indian tribes’ vast land base represents an untapped opportunity for tribes to increase agricultural production, including growing their own healthful foods and economic development. But, as previously discussed, for reservations featured in USDA’s 2012 Census of Agriculture, non-Indian producers received a large share of the agricultural revenue. Additionally, the agricultural products grown on tribal lands typically do not feed tribal members and instead are sold into the general agriculture commodity system.\nFurthermore, these reports and experts we interviewed noted that the growth of agriculture on tribal lands could require access to credit. For example, one tribal agriculture expert told us some tribes are interested in transitioning to “value-added” agriculture, which aims to help the community that produces raw agricultural materials capture the value of the products as they progress through the food supply chain (for example, by processing crops they grow or transitioning to more profitable products, such as organic). Value-added agriculture initiatives might require building facilities or acquiring more expensive inputs, and tribes likely would need financing to support these initiatives. According to some experts and a study we reviewed, if tribes and their members cannot access affordable credit, it could limit the growth of these initiatives.", "Tribes and their members face several barriers to obtaining agricultural credit, including land tenure issues, administrative challenges, lenders’ legal concerns, and loan readiness issues. As a result, there is limited commercial lending on tribal lands.", "Ten tribal stakeholders and experts we interviewed cited difficulties in using tribal lands as collateral as a barrier to obtaining credit because of federal laws or other constraints.\nTribal trust and restricted fee lands. Federal law generally prohibits lenders from obtaining an ownership interest in tribal trust and restricted fee lands. As a result, tribes are not able to use their 46 million acres of tribal trust or restricted fee lands as collateral for a loan. However, tribes can lease such lands to other parties, including a tribal business or tribal member who wishes to use the land for agricultural purposes (lessees). These lessees can then pledge their “leasehold interest” in the lands as collateral for a loan, but may face challenges in doing so. For example, in general, leases of tribal trust and restricted fee lands must be approved by BIA and comply with its leasing regulations, which stipulate that agricultural leases generally have a maximum term of 10 years. While BIA generally allows leased tribal trust and restricted fee lands to be subject to a leasehold mortgage, three tribal stakeholders and experts we interviewed said that BIA’s maximum term for agricultural leases often was insufficient for obtaining an agricultural loan.\nIndividual trust and restricted fee lands. Unlike tribal trust and restricted fee lands, the owners of individual trust and restricted fee lands can use these lands as collateral for a loan with permission of the Secretary of the Interior. However, many tracts of individual trust and restricted fee lands are allotments with fractionated ownership. According to nine tribal stakeholders and experts we interviewed, fractionated land is a barrier to agricultural activity and obtaining credit. Fractionated land occurs when an allottee dies without a will and ownership is divided among all the heirs, but the land is not physically divided. Thus, multiple owners (in some cases thousands) can have an ownership interest in the land and may have different ideas about how the land should be used. Interior estimated that out of the 92,000 fractionated tracts (representing more than 10 million acres), more than half generated no income in 2006–2011. For agricultural leases and leasehold mortgages on fractionated lands, BIA regulations require consent from owners of a majority interest in such lands. However, according to Interior, some allotments have thousands of co-owners, some of whose whereabouts are unknown, which could make it difficult to obtain their permission for an agricultural lease or a leasehold mortgage.\nAdditionally, as a result of allotment, many Indian reservations contain different land ownership types, creating a “checkerboard” pattern of lands that can make the establishment and financing of large-scale agricultural projects difficult. For example, in addition to tribal and individual trust and restricted fee lands, reservations also may include lands that passed out of trust during the allotment period and were bought by non-Indians. Thus, multiple tracts within a large-scale agricultural project may need to be leased and financed separately because they have different owners and may be subject to different laws. This can also make legal jurisdiction unclear, which is a concern for private lenders financing projects on such lands, as discussed below.\nExperts and tribal stakeholders we interviewed reported that the barriers to collateralizing various types of tribal lands make it difficult for tribes and tribal members to access different types of agricultural loans. Most long- term loans—typically used for larger projects—generally need to be secured by real estate, which make these inaccessible to tribes and tribal members who do not have land that can be encumbered. For example, an Indian agricultural producer who operates on trust land and wants to build an agricultural facility for a value-added operation may not be able to obtain a long-term loan unless he or she has other unrestricted land to pledge as collateral. In addition, according to the former Executive Director of the Intertribal Agriculture Council, when most agricultural producers face economic distress, they can pledge land as security and receive an extended period of time (20–40 years) to pay off the debt. Tribal members may not have that option, making it difficult to obtain credit in an emergency (such as adverse weather). In addition, according to a tribal agriculture expert and three tribal stakeholders, tribal trust land is not counted as an asset on balance sheets, which may affect an agricultural lender’s assessment of a borrower’s creditworthiness for various types of loans.", "Processes at Interior—particularly at BIA—can increase the amount of time it takes to obtain a loan, which can discourage both lenders and borrowers, according to tribal stakeholders and experts. Most of the tribal stakeholders and experts we interviewed told us that tribal members often encounter delays when seeking necessary documentation from BIA. For example, for loans involving trust or restricted fee lands, BIA needs to provide a title status report to the lender that identifies the type of land ownership and current owners. Two tribal stakeholders told us that BIA takes months to produce a certified title status report. By that time, the growing season could be over. A representative from a Native CDFI serving a tribe in the Great Plains said it can take years to receive these reports. BIA reported that in fiscal year 2017, it certified 95 percent of land titles within 48 hours. However, BIA’s performance on this measure has varied considerably over the last several years, and BIA officials told us that it can take significantly longer to process title status reports for complicated cases.\nTribal members also can encounter administrative challenges at other points in the process. One Native CDFI representative told us she found out that BIA did not record a leasehold mortgage when the CDFI attempted to foreclose on the loan, which almost prevented the CDFI from recovering the loan collateral. In other cases, Interior’s Appraisal and Valuation Services Office might need to conduct an appraisal, such as for an agricultural lease. According to Interior policy, these appraisals should be completed within 60 days, but one tribal economic development expert said they routinely take much longer.", "As a result of the unique legal status of tribes, some lenders, including FCS associations, reported concerns about their ability to recover loan collateral if the borrower defaulted on a loan involving tribal lands. Seven of the 11 FCS associations we contacted told us that they had legal concerns of this nature, and six of the associations said they had experienced the issues themselves. These concerns primarily arise from the following issues:\nTribal sovereign immunity. Tribes are distinct, independent political communities with certain inherent powers of self-government and, as a result of this sovereignty, have immunity from lawsuits. A lender cannot sue to enforce the terms of a loan agreement with a tribe unless the tribe waives its sovereign immunity in connection with the agreement. Private lenders therefore might be hesitant to make a loan because they would not be able to sue the tribe if any disputes arose. We previously reported that tribes may waive sovereign immunity in agreements or contracts on a case-by-case basis and some tribes have formed separate companies to conduct business that are not immune from lawsuits. However, tribal government officials may decide that waiving the tribe’s sovereign immunity for purposes of enforcing the loan agreement is not in the tribe’s best interest. Additionally, tribal sovereign immunity would not bar lenders from seeking to foreclose on loans made to individual tribal members.\nLegal jurisdiction. Loans made to Indian tribes or their members and secured by tribal lands or collateral located on tribal lands may be subject to tribal laws, rather than state laws. In addition, it is sometimes unclear whether federal, state, or tribal courts would have jurisdiction in the event of a default or foreclosure. If tribal laws govern but do not adequately provide for the lender’s foreclosure, or if there is not a legal forum to hear the foreclosure lawsuit, lenders may be unable to recover the loan collateral. To address these types of concerns, some tribes have adopted secured transaction codes modeled after the Uniform Commercial Code, which can help to assure lenders of their ability to recover collateral in the event of default.\nUnfamiliarity with tribal laws. Laws and court systems vary among the nation’s 573 tribes, making it more difficult and costly for lenders to learn tribal laws. For example, one FCS association noted that it has many federally recognized tribes in its region, each of which may have different laws.\nIf lenders have concerns regarding their ability to recover loan collateral in the event of a default, lenders may not make loans involving tribal lands due to concerns that the loan would not meet safety and soundness requirements.", "Five tribal stakeholders we interviewed said some tribal members may need assistance—such as credit repair and technical assistance for loan applications—to become ready for agricultural loans. Some tribal members have no credit history, which can be a barrier to obtaining a loan. One study found that compared to off-reservation counterparts, reservation residents were more likely to have no credit history and when credit scores were available, they were lower on average. Many Native CDFIs provide credit builder or credit repair products to help tribal members qualify for larger loans, such as small business loans.\nFour tribal stakeholders we interviewed said members of their tribes sometimes need technical assistance to complete the paperwork required for agricultural loans, such as a business plan. One tribal member who owns a ranch told us that the first time he tried to apply for a loan, he had trouble completing the required paperwork and ultimately chose not to apply. He felt tribal members seeking credit would benefit from assistance in completing loan applications. One Native CDFI representative told us that her organization provides technical assistance to its borrowers to help them complete loan paperwork but noted that commercial lenders often did not provide these services.", "We and others have noted that the barriers described above have depressed commercial lending on tribal lands. In 2010, we found that banks were reluctant to do business on tribal lands because of the cumbersome procedures and their lack of experience. More recently, a report for the Department of Housing and Urban Development surveying lenders found that BIA processing times were a major challenge in making mortgage loans involving tribal lands. A Native CDFI representative told us that lenders have little incentive to engage in a lengthy underwriting process, particularly if the loan is for a small amount and if other potential borrowers have less complicated circumstances. Some experts have described tribal lands as “credit deserts.” For example, one study of three different areas of tribal lands found that few financial institutions or automated teller machines were located on these reservations. One Native CDFI representative told us that in her experience, many people on her reservation never had a bank account. She noted that when people do not have a bank account, it can be challenging for them to see themselves as potential borrowers.\nSimilarly, our analysis found that the land tenure issues, administrative process delays, lenders’ legal concerns, and loan readiness issues can make agricultural loans involving tribal lands more time-consuming and costly to underwrite. For example, one FCS association told us that loans involving tribal lands require specialized legal analysis, which may be an additional expense that it would not incur for otherwise comparable loans. These same issues can increase a lender’s exposure to the risks inherent in agricultural lending because they can affect the borrower’s ability to repay the loan, the adequacy of the collateral to secure the loan, and the lender’s ability to recover the collateral in the event of a default. According to FCA, consistent with the purposes of the Farm Credit Act of 1971, the ability of a lender to collect loans is an important element of the institution’s safety and soundness, and the continued availability of credit.\nFinally, some stakeholders said they believe that discrimination also contributes to the lack of commercial lending on tribal lands. Four experts, a tribal stakeholder, and a BIA representative told us that they believe that some commercial lenders do not want to make loans involving tribal lands because of bias. As previously discussed, the plaintiffs in the Keepseagle case that USDA settled for $760 million alleged that USDA discriminated against Native American farmers and ranchers in certain programs. According to a tribal economic development expert, tribal members who face discrimination or other negative experiences with commercial lenders may share these experiences with other tribal members and deter them from applying for credit.", "We found that FCS generally has authority to make loans involving tribal lands. Of the 11 FCS associations we contacted with tribal lands in their territories, some reported that they had recently made loans to Indian tribes or their members, and their outreach to these populations included support for agricultural education.", "Generally, FCS has authority to provide a broad range of credit services to eligible agricultural producers, which may include tribes, tribal businesses, and individual tribal members operating on various types of tribal lands. However, borrowers must meet various eligibility and underwriting criteria that are required by law. For example, applicants for agricultural loans must be determined to be eligible borrowers, which means they must own agricultural land or be engaged in the production of agricultural products, including aquatic products.\nAlso, long-term real estate loans (which have terms of up to 40 years) made by FCS institutions must be secured by a first-position lien on interests in real estate, thus enabling FCS to obtain ownership or control of the land in the event of default. FCA has determined that this statutory requirement can be satisfied, for example, with leasehold interests in real estate—such as that held by a tribal member leasing reservation land from a tribe—provided that the lease grants the borrower significant rights to the land, and the loan is made on a safe and sound basis. As noted earlier, BIA regulations often limit agricultural leases of tribal lands to a term of up to 10 years. In such cases, FCS associations similarly may limit the term of the related loan (to less than 10 years). According to FCA, when loans are for shorter terms than the leases, the FCS association’s first lien is preserved, as required by law, and the loan is prudent from a safety and soundness perspective.\nFCA has not issued written guidance indicating whether interests in other types of tribal lands—such as individual trust or restricted fee lands—also satisfy the requirement for a first-position lien on interests in real estate. However, FCA has the authority to determine what types of interests in real estate will satisfy this requirement. Also, according to FCA, there is no statutory requirement that short- and intermediate-term loans be secured with interests in real estate; such loans instead can be secured by other collateral, such as equipment, crops, livestock, and business revenues.\nIn addition to making direct loans to agricultural producers, FCS has authority to lend to non-FCS institutions, such as commercial banks and credit unions, which in turn make agricultural loans to FCS-eligible borrowers. These other financing institutions are known as OFIs.\nAccording to FCA, the OFI lending authority allows FCS banks to fulfill their mission as a government-sponsored enterprise by enhancing the liquidity of OFIs, thereby lowering the cost of agricultural credit. As noted earlier, FCS is required to establish programs to serve young, beginning, and small farmers and ranchers, but it is not statutorily mandated to focus on providing financial opportunities to any other group of eligible agricultural producers.\nNotwithstanding the authorities described above, FCS must comply with other applicable laws and requirements. For example, FCS institutions are subject to safety and soundness oversight by FCA, including with respect to loan underwriting. FCS institutions also must comply with applicable federal, state, and tribal laws governing any tribal lands or property thereon used as loan collateral. FCS associations may obtain Farm Service Agency guarantees on loans to borrowers who otherwise may not meet FCS underwriting requirements. However, by law, loans made by FCS associations are not eligible for a similar BIA loan guarantee program.", "", "Based on information from selected FCS associations located near tribal lands, some FCS associations have lent to Indian tribes or their members in the last 2 years. Of the 11 FCS associations we contacted with tribal lands in their territories, representatives of eight told us they had loaned to tribes or their members in the last 2 years—primarily to individual tribal members. We made the following observations based on the associations’ responses:\nLimited data on lending amounts. Representatives of 10 of the 11 FCS associations we queried stated that they either do not collect or do not maintain data on lending to specific racial populations, thus making it difficult to provide more detailed information on lending to Indian tribes and their members. However, four representatives provided estimates of their recent lending to this population on tribal lands. One association cited more than $25 million in total loans outstanding to a small number of tribes and tribal entities. Another association reported making about $5.5 million in new loans to tribes or their members on tribal lands in the last 2 years. A third reported a $3 million revolving line of credit to a family farm, and the fourth said it had made approximately $150,000 in five separate loans to two tribal members.\nLoan purposes. Seven associations reported on the type of credit they extended to Indian tribes and their members on tribal lands. In general, they made short-term operating loans and short- and intermediate-term loans for the purchase or refinance of items such as machinery and equipment, livestock, vehicles, or buildings and improvements. Two associations also reported making long-term real estate loans. The other association that reported lending to tribes or their members did not report on the types of loans it made.\nType of collateral. Representatives of the eight associations that reported lending to tribes or their members all indicated that the associations secured loans with personal property, such as crops, livestock, or equipment. In addition, the associations that reported making real estate loans said they secured the loans with fee-simple land.\nRepresentatives of three FCS associations said they had not loaned to Indian tribes in the past 2 years. One association had not received any credit applications from tribal members, and another could not say if it had served tribal members because of a lack of racial data on borrowers. The third association had not provided loans to tribal members in the past 2 years, but the representative stated that it provided several letters of credit to guarantee the payments of BIA leases on tribal land.\nAlthough the FCS associations we contacted stated they have the resources to lend to tribes and their members on tribal lands, a few key factors affect their lending decisions. Representatives of all 11 FCS associations stated their associations had adequate financial capacity and resources to make potentially more complicated or time-consuming loans, such as those involving tribal lands. In general, they stated that the factors they consider in deciding whether to loan to Indian tribes or their members on tribal lands are the same as for any comparable loan—for example, creditworthiness, loan purpose, and the ability to secure a lien on collateral. However, as described earlier, some FCS association representatives described challenges related to tribal law, jurisdiction, tribal sovereign immunity, and recovery of collateral as complicating the lending process to Indian tribes and their members on tribal lands. Although three of the 11 FCS associations we queried reported making loans to tribes that had waived their sovereign immunity for those contracts, most loans the associations reported were to individual tribal members and secured by personal property or fee-simple land.\nAccording to two tribal stakeholders we interviewed, Indian tribes or tribal members who received loans from FCS or other commercial lenders may have larger agricultural operations, a longer credit history, and property that can be more easily used as collateral. For example, an established rancher may be able to secure operating loans with his or her cattle herd or interests in fee-simple land, thus preventing the need to rely on trust land as collateral.", "At the national level, FCS—through its trade association, the Farm Credit Council—conducts and facilitates outreach to tribes and tribal stakeholder groups. According to a representative of the Farm Credit Council, the Council and representatives of associations with tribal lands in their territories participate in an informal FCS working group focused on outreach and lending on tribal lands. One association representative described the group as sharing examples of lending success or reasons for missed opportunities; local, regional or national sponsorship opportunities; local or regional agricultural education events; and relevant legal proceedings, such as the Keepseagle settlement.\nAt the institution level, FCS associations must prepare annual marketing plans describing, among other things, how they will be responsive to the credit needs of all eligible and creditworthy agricultural producers in their respective territories, with a focus on diversity and inclusion. The marketing plan must detail strategies and actions to market their products and services to potential borrowers who may not have been considered previously for reasons other than eligibility or creditworthiness. However, FCS associations are not required to achieve specific outcomes or quantifiable results.\nOur nongeneralizable review of the marketing plans of the 11 selected FCS associations with tribal lands in their territories and our analysis of their written responses to our queries for additional information found that outreach to tribes and their members focused on educational and charitable initiatives and direct marketing about agricultural lending, or did not directly target tribal populations.\nSeven of the 11 associations discussed actual or planned outreach to Indian tribes or their members in their marketing plans or written responses.\nFour of those seven associations cited financial support of specific agricultural education activities for tribes and their members. Two associations reported making charitable donations that benefited tribal members.\nFour of the seven associations reported direct marketing to potential tribal borrowers. However, in one case, the marketing was a one-time conversation with a tribe regarding financing for a new facility. The other three associations reported that they called potential Indian borrowers, sought referrals from existing tribal member customers, or conducted meetings with tribal government officials.\nIn general, the four remaining associations, in their marketing plans and written responses, addressed outreach to minority producers through broader methods, such as participation in ethnic group organizations or through inclusion in the association’s overall outreach and marketing efforts. In addition, five of the 11 associations discussed outreach to minority producers in conjunction with their statutorily-mandated outreach to young, beginning, and small farmers. According to FCA officials, FCA’s guidance on providing credit to young, beginning, and small farmers, as well as to local food producers, would be broadly applicable to socially disadvantaged or minority populations that fall within the program definitions.\nMost of the tribal stakeholders with whom we spoke either were not familiar with FCS or did not know of the tribe or any of its members receiving FCS loans. One Native CDFI representative noted that although he was not familiar with any members of his tribe receiving FCS loans, he thought other nearby tribes or their members had worked with FCS.\nFCA also encouraged FCS associations to develop underwriting procedures to facilitate lending on Indian reservations. FCA identified one FCS association that developed such procedures, and another one of the associations we queried noted that they had such procedures. The first association provided an overview of its procedures, which identified links to information on borrower and collateral eligibility and actions that require BIA approval, among other topics. According to representatives of the second association, its procedure manual directs loan officers to treat tribal members’ applications for loans secured by personal property the same as any other applications. In addition, they said the manual contains instructions for working with BIA for real estate loans to tribal members on trust land and for making direct loans to tribes.", "Our review of literature and interviews with experts, tribal stakeholders, FCS associations, Farm Credit Council representatives, and FCA officials identified the following options for improving access to agricultural credit on tribal lands.\nPartnerships with local lenders. Tribal economic development experts and tribal stakeholders cited the importance of commercial or government lenders partnering with Native CDFIs and other Indian- owned lenders, which are the most capable of navigating the challenges related to Indian agricultural credit. According to these experts and stakeholders, if larger commercial or government lenders worked with Native CDFIs or other tribal lenders (such as tribal banks or economic development corporations) to provide funds or conduct outreach, the tribal organizations could more efficiently reach Indian tribes and their members. They noted these organizations are familiar with tribal members and the administrative processes for obtaining loans on tribal land. Partnership with tribal lenders and other tribal businesses also could support tribes’ efforts to improve members’ loan readiness, according to literature we reviewed and a tribal economic development expert and a Native CDFI representative we interviewed.\nCommercial and government lenders may need to clarify whether tribal lenders with which they might partner meet their lending requirements. For example, although FCS banks have authority to lend to OFIs, which in turn can lend to FCS-eligible borrowers, only certain types of CDFIs may qualify as OFIs. In addition, this authority does not extend to long-term funding, and thus cannot be used to fund agricultural real estate loans made by OFIs. One FCS bank that commented on a 2004 FCA rule noted the latter statutory limitation as a major impediment to OFI program expansion.\nFlexibility with collateral requirements. As noted earlier, multiple stakeholders we interviewed discussed the challenges related to collateralizing trust land. In addition, FCA officials cited the need for a statutory change or clarification of the requirement that long-term loans made by FCS be secured by a first lien on interests in real estate. They said that by removing or clarifying this requirement, lenders would have authority to provide larger, longer-term loans to creditworthy tribes or tribal members who cannot mortgage their tribal lands.\nGuarantees. Some stakeholders we interviewed mentioned loan guarantees as an option to improve access to agricultural credit on tribal lands. For instance, FCA officials and Farm Credit Council representatives told us they had spoken with leadership of the Native American Agriculture Fund (created as part of the Keepseagle settlement) regarding the potential establishment of a loan guarantee fund, such as a first-loss fund, which would step in to purchase a loan in default (thus substantially reducing credit risk to the lender). In addition, three of the 11 FCS associations we queried identified guarantees as a possible way to increase FCS lending to Indian tribes and their members on tribal lands.\nFCS associations still face challenges in using guarantees. With regard to the first-loss loan guarantee fund, FCS associations still must adhere to the FCS statutory requirement for a first-position lien on interests in real estate for long-term loans. According to an FCA official, although the first-loss loan guarantee fund could mitigate repayment risk, a statutory change or clarification would be necessary for FCS associations to accept guarantees in lieu of real estate for long-term loans. And as noted earlier, FCS loans are statutorily ineligible for BIA’s loan guarantee program. Two FCS associations noted that removal of this restriction could increase FCS lending on tribal lands. Finally, FCA officials stated that challenges FCS associations face in making loans involving tribal lands also can extend to Farm Service Agency guarantees on those loans. In other words, to obtain such guarantees, FCS associations must navigate issues around land tenure, legal jurisdiction, and tribal laws.\nTribal options. In addition, stakeholders discussed the following tribal actions that could increase credit access for tribes and their members:\nRepresentatives of two FCS associations noted that waivers of sovereign immunity (limited to specific contracts) by tribes may increase lending involving tribal lands, as it helps to enable lenders to enforce the terms of loans made to tribes. According to the Office of the Comptroller of the Currency, some banks have negotiated limited waivers of sovereign immunity (restricted to a specific transaction). As noted earlier, tribes may decide that waiving sovereign immunity is not in their best interest. In addition to the limited waivers of sovereign immunity, representatives of three FCS institutions stated that increased adoption of uniform commercial laws (such as the Uniform Commercial Code) by tribes could increase lending involving tribal lands.\nOne tribal economic development expert told us that tribes that adopted their own leasing regulations under the HEARTH Act have seen substantially increased economic development. As noted earlier, the HEARTH Act provides tribes with greater flexibility to enter into leases for agriculture or other purposes. Once a tribe’s leasing regulations have been approved by the Secretary of the Interior, tribes may negotiate and enter into agricultural leases with 25-year terms without further approval by the Secretary. The combination of longer lease terms and the ability to conduct business outside of the BIA approval process can expedite the process of obtaining a leasehold mortgage on tribal trust and restricted fee land. As of May 1, 2019, the Secretary had approved agricultural leasing regulations for seven tribes under the HEARTH Act.", "We provided a draft of this report to FCA, Interior, and USDA for review and comment. FCA and USDA provided technical comments, which we incorporated as appropriate. In comments provided in an email, Interior officials noted that efforts to simplify the Secretary of the Interior’s approval process could provide faster mortgage determinations and thus may result in expanded lending and production opportunities for Indian agricultural producers.\nWe are sending copies of this report to the appropriate congressional committees, the Chairman and Chief Executive Officer of the Farm Credit Administration, the Secretary of the Interior, and the Secretary of Agriculture. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "Our objectives in the report were to describe (1) what is known about the agricultural credit needs of Indian tribes and their members on tribal lands, (2) the barriers stakeholders and experts identified that Indian tribes and their members on tribal lands face in obtaining agricultural credit to meet their needs, (3) the Farm Credit System’s (FCS) lending authority and lending and outreach activities on tribal land, and (4) suggestions stakeholders have discussed to improve access to agricultural credit on tribal lands.\nFor the purpose of this report, we use the term “tribal lands” to refer to reservations (including all land within the reservations’ boundaries), trust land, allotments, and restricted fee land. In general, our report focuses on the agricultural credit needs of tribes and their members in the lower 48 states.\nTo describe what is known about the agricultural credit needs of Indian tribes and their members on tribal lands, we explored various potential data sources on agricultural loans that Indian tribes and their members applied for or received. We reviewed available data from the Consumer Financial Protection Bureau and Department of Agriculture (USDA). For example, we obtained borrower-reported loan data from USDA’s Agricultural Resource Management Survey, but for several data fields related to Indian producers on tribal lands, sample sizes were too small or the coefficients of variation were too high to produce reliable estimates. We also reviewed provisions of the Equal Credit Opportunity Act, federal regulations, and other legal documentation pertaining to collection of data regarding the personal characteristics of applicants for nonresidential loans.\nTo describe what is known about Indian tribes and their members’ agricultural credit needs and the barriers they face in obtaining agricultural credit, we conducted a literature review. We conducted searches of various databases, such as EBSCO, ProQuest, Google Scholar, and Westlaw to identify sources such as peer-reviewed academic studies; law review articles; trade and industry articles; reports from government agencies, nonprofits, and think tanks; and Congressional transcripts related to tribal agriculture, barriers to accessing credit on tribal lands, and FCS. We identified additional materials through citations in literature we reviewed. In addition, we reviewed statutes and the Department of the Interior’s Bureau of Indian Affairs’ (BIA) regulations related to use and ownership of tribal lands, including leasing.\nTo describe FCS’s authority and lending and outreach activities on tribal lands, we reviewed statutes and regulations governing FCS, as well as written guidance issued by the Farm Credit Administration (FCA). We also reviewed the marketing plans of a nongeneralizable sample of 11 FCS associations (16 percent of the 69 FCS associations that lend directly to agricultural producers) whose territories included large tribal land areas with high levels of agricultural activity, including the tribes we interviewed (described below). We selected an additional FCS association but on closer review realized it did not have a significant amount of tribal land in its territory; we therefore excluded this association from our analysis. For comparison purposes, we also reviewed three marketing plans from FCS associations that did not have significant tribal populations in their territories. In addition to reviewing the marketing plans, we sent the 11 FCS associations a questionnaire about their lending and outreach to tribes and their members and any challenges in making loans involving tribal lands. We also asked these associations about any suggestions to improve access to agricultural credit on tribal lands. We received responses from all 11 FCS associations, and followed up with some associations to clarify information they provided. While the sample allowed us to learn about many important aspects of FCS associations’ lending and outreach to tribes and their members on tribal lands, it was designed to provide anecdotal information, not findings that would be representative of all of 69 FCS lending associations.\nTo address all four objectives, we attempted to interview representatives of six tribes. First, we selected these tribes to represent five regions (Great Plains, Rocky Mountain, Northwest, Southwest) and a state (Oklahoma) that—according to experts we interviewed—have tribes engaged in agricultural activity. Within these regions, we generally selected large tribal land areas that have high levels of agricultural activity, as indicated by the USDA 2012 Census of Agriculture data. Specifically, we selected tribes based on number of farms, land in farms, and market value of agricultural products. In addition, we selected one of the six tribes because two experts recommended that we speak with them. For the six tribes, we contacted tribal government leaders and employees of the relevant government offices, such as the agriculture or tribal lands departments.\nFor two of the six tribes, we interviewed employees of the tribal agriculture department. One of these interviews also included representatives of the Native Community Development Financial Institution (Native CDFI) that serves the reservation.\nFor the third tribe, we received written responses from a tribal farm.\nFor the fourth tribe, we interviewed a representative of the Native CDFI that serves the reservation.\nFor this series of interviews, we only received information relating to four tribes. We did not obtain meetings with relevant tribal government officials for the last two tribes.\nWe also contacted farms or Native CDFIs associated with an additional three tribes based on USDA data or recommendations from experts we interviewed. For one of these tribes, we interviewed a tribal farm employee and a representative of the tribe’s community development corporation. For the second tribe, we interviewed a tribal farm employee. For the third tribe, we interviewed a representative of the Native CDFI that serves the reservation.\nIn summary, we interviewed employees of two tribal agriculture departments, employees of three tribal farms, and representatives of three Native CDFIs and one tribal community development corporation. Throughout this report, we refer to tribal government employees, tribal farm employees, or representatives of Native CDFIs or community development corporations serving a tribe as “tribal stakeholders.” Although the information we obtained from the tribal agriculture employees allowed us to provide anecdotal tribal perspectives, it is not generalizable to the 573 federally recognized Indian tribes. In addition, the views of tribal farm employees and Native CDFI and community development corporation representatives cannot be generalized to tribes but illustrate views on needs, barriers, and other issues from the perspectives of the organizations.\nIn addition, for all four objectives, we interviewed the following:\nExperts on agricultural and economic development on tribal lands. We interviewed subject matter experts on tribal agriculture and economic development from various organizations, including advocacy and academia. Specifically, we interviewed representatives of the following organizations: the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis, First Nations Oweesta Corporation, the Indian Land Tenure Foundation, the Indigenous Food and Agriculture Initiative at the University of Arkansas, the Intertribal Agriculture Council, and the Native American Agriculture Fund. We selected these organizations based on relevant publications, testimonies before Congress, or recommendations from other experts. These organizations work with a number of tribes and thus could speak to general trends or commonalities in tribal agriculture and economic development. Throughout the report, we refer to the representatives of these organizations as “experts.”\nAgency and trade group representatives. We interviewed officials from FCA, USDA (including the Farm Service Agency, Economic Research Service, and National Agricultural Statistics Service), and BIA. We also interviewed representatives of the Farm Credit Council, the national trade association for the Farm Credit System.\nWe conducted this performance audit from December 2018 to May 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "In addition to the contact named above, Karen Tremba (Assistant Director), Lisa Reynolds (Analyst in Charge), Miranda Berry, Tom Cook, Anne-Marie Fennell, John Karikari, Marc Molino, Kirsten Noethen, Barbara Roesmann, Jeanette Soares, and Farrah Stone made significant contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "", "", "h0_full", "h0_title", "h0_full", "", "", "", "", "", "", "", "h1_full", "h1_full", "h1_title", "h1_full", "h1_full", "h2_full", "", "h0_full h3_full", "", "", "" ] }	{ "question": [ "What data exists on the needs of agricultural credit of Indian tribes?", "How have federal regulations prohibited collection of borrower data?", "Why might tribal members not apply for agricultural credit?", "How do tribal members likely obtain agricultural credit?", "What are alternative sources of agricultural credit?", "What credit services is FCS authorized to provide?", "Under what circumstances must FCS associations obtain land as collateral?", "To what extent have the sampled associations loaned to tribes?", "To what extent did the sampled associations provide outreach to tribes?", "How might access to agricultural credit be improved on tribal lands?", "How could tribes ease barriers to lending?", "How did GAO conduct this review?", "What materials did GAO review from the sampled FCS associations?", "What sources did GAO interview for this review?" ], "summary": [ "Limited data are available on the needs of Indian tribes and their members for agricultural credit, such as operating or equipment loans, to develop and expand agricultural businesses on tribal lands.", "Federal regulations have generally prohibited lenders from inquiring about the personal characteristics, such as race, of applicants on nonresidential loans.", "Some tribal stakeholders and experts said that tribal members may not have applied for agricultural credit because they heard of other tribal members being denied loans.", "They said that tribal members likely obtain agricultural credit from Department of Agriculture programs or tribal lenders.", "Another potential source of agricultural credit is the Farm Credit System (FCS), a government-sponsored enterprise that includes 69 associations that lend to farmers and ranchers.", "FCS is authorized to provide a range of credit services to eligible agricultural producers, which may include Indian tribes, tribal businesses, and tribal members.", "FCS associations must obtain land as collateral for long-term real estate loans, but are not required to do so for shorter-term loans, such as for operating costs or equipment purchases.", "In a sample of 11 FCS associations with tribal lands in their territory, eight said they have loaned to tribes or their members in the past 2 years.", "GAO's review of these 11 associations' marketing plans and written responses to GAO follow-up questions found that seven noted outreach—such as support for agricultural education activities—targeted to tribes and their members.", "For example, some stakeholders discussed the potential for partnerships between commercial or government lenders and tribal lenders (such as Native Community Development Financial Institutions) and increased use of loan guarantees.", "Some stakeholders also discussed actions tribes could take to ease barriers to lending, such as adopting their own leasing procedures to reduce administrative processing time with federal agencies for certain loans.", "GAO explored potential data sources on Indians' agricultural credit needs, conducted a literature review, and reviewed statutes and regulations governing tribal lands and FCS.", "GAO also reviewed the marketing plans and written responses of a nongeneralizable sample of 11 FCS associations whose territories included tribal lands with high levels of agricultural activity.", "GAO interviewed stakeholders from a sample of seven tribes (generally selected based on tribal region and agricultural activity), experts in tribal agriculture and economic development (selected based on relevant publications, Congressional testimonies, and others' recommendations), and representatives from FCS and its regulator, the Farm Credit Administration, and other relevant government agencies." ], "parent_pair_index": [ -1, 0, -1, 2, 2, -1, -1, -1, 2, -1, 0, -1, 0, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 9, 9, 9, 9, 10, 10, 2, 2, 2 ] }
GAO_GAO-18-285	{ "title": [ "Background", "RHS Developed a Tool That Estimates That Large Numbers of Mortgages Will Mature Starting in 2028, and Better Controls Could Improve Data Accuracy", "RHS Developed a Tool to Estimate Property Exit Dates", "RHS Data Show a Significant Increase in Maturing Mortgages after 2027", "Better Controls Could Improve the Accuracy and Utility of Maturing Mortgage Data", "RHS Has Taken Steps to Address Properties with Maturing Mortgages, but Lacked Comprehensive Planning and Faces Statutory Constraints That Limit Preservation", "RHS has Taken Steps to Preserve Properties with Maturing Mortgages with Limited Success to Date", "RHS Has Not Comprehensively Planned to Preserve Properties with Maturing Mortgages", "Law Limits RHS’s Ability to Offer Rental Assistance and Vouchers to Low- income Tenants", "Conclusions", "Matter for Congressional Consideration", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Number of Properties and Units That Could Exit the Rural Housing Service’s Program between 2017 and 2050", "State", "State", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Mortgages under RHS’s program can be used to build, acquire, and rehabilitate rental housing in rural areas and are generally 30-year loans with 50-year amortization periods and include subsidized interest rates as low as 1 percent. To help finance housing projects and keep rents affordable to low-income tenants, RHS offers rental assistance subsidies to some property owners, which cover the difference between the tenant’s contribution and a unit’s rent.\nThe rental assistance program, authorized in 1974, provides the rental subsidies through agreements with property owners for an amount estimated to last for 1 year as required under the program’s appropriations acts. Eligible tenants pay no more than 30 percent of their income toward the rent, and RHS pays the balance to the property owner. Tenants must be low-income (incomes above 50 percent of area median income but not more than 80 percent of area median income) or very-low- income (with incomes not more than 50 percent of area median income) to be eligible for rental assistance. The agreements with the owners expire when the original dollar amount obligated is fully expended. Agreements specify that owners will receive payments on behalf of tenants in a designated number of units at the property. In addition, property owners must certify tenants’ incomes annually or when a tenant experiences a substantial change in income. Statutorily, rental assistance is tied to RHS loans for rural rental housing and is no longer provided to property owners once mortgages mature.\nThe program supports five general types of rural rental housing projects— family; elderly (units may be occupied by an income-eligible household that includes a tenant or co-tenant who has a disability or is age 62 or older, or both); mixed (project has both family and elderly units); congregate housing (project may be occupied by income-eligible elderly households that need meals or other services); and group homes (may be occupied by income-eligible elderly persons or individuals with disabilities who share living space within a rental unit).\nProperties with RHS rental housing mortgages can exit the program in three ways—foreclosure, prepayment, and natural maturity of the mortgage. When an owner defaults on loan payments and the property is foreclosed, it may exit RHS’s program. Properties can also exit the program when loans mature naturally, meaning the loan is paid off as scheduled by the original loan term. Loans can also be prepaid, meaning payments are made ahead of schedule, which ends the loan term early. Only those loans made on or after December 15, 1989, are ineligible to prepay. As previously noted, once a property exits RHS’s program, owners are generally no longer required to provide housing for low- income tenants and properties are no longer eligible to receive rental assistance that is used to keep rents affordable for tenants.\nSome owners that are reaching the end of their RHS mortgage terms may wish to exit the program. Other owners may wish to remain in the program and continue renting to low-income tenants. RHS has offered tools and incentives to help owners stay in the program and preserve the affordability of rural rental housing. Some of these tools involve extending mortgage terms, which extends the availability of rental assistance to properties.\nRHS’s June 2017 data showed that the program had approximately 14,000 properties containing 427,000 rental units. Of these, approximately 12,000 properties (85 percent) and 282,000 units (66 percent) received rental assistance. According to RHS, the agency has not financed any new rental housing properties since 2011. Instead, RHS has generally used program funding to repair and rehabilitate existing program properties.\nRHS properties are geographically dispersed, but one-quarter of the RHS program, or about 3,500 properties, was concentrated in six states as of June 2017: Texas (670 properties); Missouri (609); North Carolina (595); Michigan (564); Illinois (534); and Minnesota (509) (see fig. 1). Appendix II provides data in table form for RHS properties, units, and units with rental assistance.\nRHS’s Multi-Family Housing Portfolio Management Division and the Multi- Family Preservation-Direct Loan Division administer USDA’s rural rental housing loan program. RHS’s national office also maintains the Automated Multi-Family Housing Accounting System (AMAS) and Multi- Family Information System (MFIS) databases, develops program policy, and oversees management of the program. RHS state offices administer the day-to-day operations of the rural rental housing program, including entering key mortgage and project information contained in hard copy mortgage closing documents into the AMAS and MFIS databases.", "", "In March 2016, RHS developed the Multi-Family Housing Property Preservation Tool (preservation tool), an electronic system designed to use data from AMAS and MFIS to estimate mortgage maturity and property exit dates and to calculate new dates that may result from RHS’s preservation efforts. Before introducing the preservation tool in 2016, RHS officials manually calculated exit dates for rural rental properties, a process that was subject to errors and inconsistencies due to properties with multiple mortgages and mortgages that could be prepaid. AMAS and MFIS track loan closing dates; loan amounts; interest rates; and property location, among other information, but were not designed to estimate property exit dates.\nAccording to RHS officials, the preservation tool and the underlying data it uses are publicly accessible via the Internet and are intended to improve program transparency and help support the agency’s preservation efforts. Users can search for the date a property began operating; total number of units; units receiving RHS rental assistance; mortgage amount and interest rate; mortgage prepayment eligibility; and property exit date estimates, among other information. The preservation tool enables RHS to look at trends in property exits across years and help determine when RHS will need to take preservation actions. As of April 2018, RHS had estimated property exit data available from 2017 to 2050, but not information on properties whose mortgages may mature in 2051 or beyond. RHS officials said that data will be released publically on its website when available.", "Our analysis of data used by the preservation tool showed that approximately 900 properties (6 percent of the program’s portfolio), including 20,000 units (5 percent), will have maturing mortgages and could exit the program between 2017 and 2027. Industry stakeholders said that low-income tenants living in these properties could face escalating rents or lose their housing altogether. In addition, over 13,000 properties (94 percent) and about 407,000 units (95 percent) are estimated to have mortgages that will mature between 2028 and 2050 (see fig. 2).\nOur analysis of RHS’s June 2017 data, the most recent data available, also showed that 35 percent of RHS’s rural rental properties (4,944 out of 14,075 properties) have mortgages that are eligible for prepayment and could exit the RHS program ahead of their original mortgage maturity date. This earlier exit could cause tenants to face rent increases or search for alternative affordable housing earlier than expected (see fig. 3). According to RHS, if an owner prepays and a property exits the RHS program, rental assistance is no longer available to assist that property’s tenants. Concerns about the loss of affordable units led Congress to enact legislation that precluded prepayment for loans made on or after December 15, 1989. For those properties that are eligible for prepayment, RHS officials said they cannot predict which owners might make this choice and the agency has not been collecting data on borrower’s prepayment choices. As a result, outreach to these owners is particularly important for possible preservation of affordable housing.", "Our review identified three internal control shortcomings that could impact the accuracy, completeness, and timeliness of RHS’s data on properties with maturing mortgages.\nFirst, RHS lacks sufficient controls to help ensure the accuracy of all loan information for each mortgage at the time of initial data entry because it only retroactively reviews a sample of loan document information entered into AMAS and MFIS. Although RHS staff reviews some loan information through the agency’s State Internal Review process, officials noted that the review of mortgage data entered into AMAS and MFIS only occurs for each field office at least once every 5 years and includes a step for staff to review and reconcile AMAS information with loan documents to help ensure the accuracy of RHS debt instruments. RHS officials added that they improved the guidance in October 2017 by adding specific data checks intended to help ensure that loan amount, interest rate, and amortization period information were correct. In addition, during our review of RHS’s rural rental housing loan documents, we identified mismatches between loan document information and the data in AMAS and MFIS used by the preservation tool. We found errors in the data on mortgage amounts, closing dates, and repayment periods in an estimated 3 percent to 5 percent of the properties in five states we examined. While the data we reviewed had limited errors, without appropriate internal controls, RHS cannot be assured that the data that is used by the preservation tool will be reliable in the future, and the mismatches suggest that RHS could improve how data are entered into AMAS and MFIS.\nAccording to RHS officials, these systems were not designed to estimate the expected maturity of rural rental housing mortgages. At the time of the systems’ development, officials said that it was not a priority to build in controls to ensure the accuracy of such estimates. RHS officials said that rural rental housing mortgages would not mature for many years after they were originated. As a result, RHS did not create controls intended to ensure the accuracy of data related to mortgage maturity and did not prioritize establishing a process to check that data.\nFederal internal control standards state that management is responsible for designing control activities for information systems and information processing objectives to support the completeness, accuracy, and validity of information processing. Without these controls, mortgage information used by the preservation tool to estimate property exit dates may be inaccurate and could affect the reliability of exit date estimates needed to identify properties for possible preservation.\nSecond, RHS lacked controls to check the accuracy and completeness of underlying data used by the preservation tool. When we examined the underlying data the preservation tool uses to estimate property exit dates, we observed missing (blank) values for some property address; property state; borrower address; and management company name information. For example, borrower address and property address were missing for 588 and 141, respectively, of the roughly 14,000 properties. In addition, some properties in RHS’s data included estimated property exit dates but contained incomplete information (“N/A” designations) for key variables such as property name; property address; property state; number of units; and type of housing.\nAlthough RHS has been developing and implementing the preservation tool since 2016 and has made the preservation tool’s exit date estimates available on its website, the agency has not yet developed a control process to identify potential issues with its underlying data. As noted above, federal internal control standards require activities to help ensure the completeness, accuracy, and validity of program information. Without information that has been checked for accuracy, RHS might not be assembling the most complete and accurate information with which to estimate exit dates and begin possible preservation of rural rental housing for low-income tenants. In addition, RHS is missing an opportunity to improve data on properties with maturing mortgages and be better positioned to address those properties to protect low-income tenants.\nThird, the agency has not developed a regular, timely process for updating the preservation tool’s underlying data and exit date information. Since RHS developed the tool in March 2016, RHS updated the underlying data for September and December 2016 and June 2017 but not for 2018. RHS staff said the data were intended to be updated quarterly because information that affects exit date calculations changes as RHS preserves rural rental housing or properties exit the RHS program. However, RHS officials said that they have been unable to update the preservation tool quarterly due to staff attrition and competing program demands across RHS.\nFederal internal control standards require activities to help ensure the accuracy and validity of program information. For RHS’s information to be accurate and valid, it needs to be as current as possible for program management purposes. Since the mortgage maturity dates of properties are affected by RHS’s preservation options and the exit dates of properties can change over time as mortgages mature, it is critical for RHS to have accurate, complete, and timely rural rental housing information.\nWithout controls to help ensure that RHS, industry stakeholders, and the public have the most recent data available, they might not have the most current information that could be used for estimating property exit dates and starting preservation.", "While RHS has taken steps to address properties with maturing mortgages, such as identifying various options and incentives intended to preserve the affordability of properties for low-income tenants, a majority of properties with maturing mortgages from 2014 to 2017 have exited RHS’s rural rental housing program. Moreover, RHS has not taken important steps to comprehensively plan and prepare for the much larger number of potential property exits in future years, such as developing goals and metrics to assess the effectiveness of its preservation efforts and analyzing risks to its ability to preserve properties. While taking these steps would help RHS’s preservation efforts, some tenants may still be at risk of losing rental assistance when mortgages mature because RHS cannot continue to provide rental assistance. RHS also cannot provide vouchers to tenants residing in properties whose mortgages have matured.", "In addition to developing the preservation tool as a first step in preserving properties with maturing mortgages, RHS officials said they commissioned two studies on the impacts of maturing mortgages to advance the agency’s understanding of key issues. Officials said they hoped the two studies would help the agency prepare for maturing mortgages. In September 2016, the Housing Assistance Council completed its first study for RHS, which identified the characteristics of RHS’s rural housing program and the impact that maturing mortgages may have on tenants and geographic regions. The report noted that understanding these characteristics and effects is important for planning and implementing strategies to preserve the properties. According to officials, the second study, which was under review by the agency as of December 2017, was intended to outline issues facing RHS’s multifamily housing program, such as the estimated $5.6 billion needed to rehabilitate properties program-wide, and possible policy solutions for addressing potential property exits.\nRHS has offered property owners several options to prevent property exits and preserve the access to and affordability of housing for low- income tenants (see fig. 4).\nReamortization: Loan reamortization and a shortened reamortization process (known as “Re-Am Lite”) allow borrowers to repay outstanding loan balances over new, longer repayment periods. By extending the term of the loan, officials said that the agency can continue providing rental assistance to that property. Re-Am Lite does not require borrowers to have their properties appraised, which officials said can shorten the reamortization application process by 60 to 90 days.\nDeferral: Borrowers can defer repayment of direct loans for up to 20 years. This prevents property exits and preserves affordability for low- income tenants by continuing the payment of rental assistance to property owners. Loan deferrals can be offered under the Multi- Family Housing Preservation and Revitalization program. This 12- year-old demonstration program offers a combination of property rehabilitation funding and the opportunity for owners to reamortize or defer loan payments to help keep rents affordable. Officials said the program can also be used to attract new owners who wish to stay in the affordable housing program by offering a funding source for property rehabilitation.\nPrepayment Offer: If borrowers decline RHS’s options that extend loan terms (reamortization, Re-Am Lite, and deferral), but wish to remain in the RHS portfolio, the agency encourages property owners to submit a request to prepay their mortgage, if eligible to do so and if their mortgages are 12 or more months from maturity. After an owner submits a prepayment request, RHS is authorized to offer owners incentives to avert prepayment. These incentives include increased returns on investment to for-profit owners, additional rental assistance units, and equity loans.\nPrepayment: If borrowers decline RHS’s options, the agency encourages property owners to prepay their loans. While owners who prepay would no longer have rural rental housing loans with RHS or be eligible to receive rental assistance from the agency, prepayment of a loan allows RHS to provide vouchers to tenants affected by the loss of affordable housing. According to RHS data, only about 5,000 of the 14,000 properties within RHS’s multifamily housing program are eligible to prepay loans.\nTransfer: RHS has taken steps to facilitate the sale (transfer) of properties to new owners to prevent property exits. Officials described this as a key preservation tool because new RHS mortgage terms typically accompany the sale and allow for rental assistance to continue at properties where applicable. First, the agency established a more centralized and standardized transfer process based on input from developers, owners, and other stakeholders, which officials say reduced the average property transfer time from 156 to 112 days. Second, RHS maintains a spreadsheet available on the agency’s website, called the Preliminary Assessment Tool, which officials said streamlines and provides greater transparency to the property transfer process for potential buyers and sellers. The agency also hosted three conferences in 2016 designed to help find new buyers for RHS properties whose owners were seeking to sell their properties. Finally, in September 2016, RHS announced a 2-year pilot program to encourage nonprofit organizations to purchase rural rental properties with maturing mortgages, which could create new loan terms that would extend the repayment period and continue the properties’ affordability. Prior to the pilot, nonprofit owners were not required to make an initial equity contribution to projects and therefore could not earn any return on investment. Under the pilot, loan transfers to nonprofits would allow nonprofits to earn returns on their own resources initially invested in the property.\nDespite the preservation options and incentives identified by RHS, 61 percent (148 of 244) of the properties with mortgages that matured between January 2014 and December 2017 exited the agency’s rural rental housing program (see table 1). Some industry stakeholders said that options and incentives did not adequately or broadly appeal to property owners. They added that existing options and incentives would be used primarily by owners who have no other choice but to stay in the program. Stakeholders explained that owner choice might be limited because of the condition of their property or because their property is located in a market that would not accommodate the sale of a property or rent increases to market levels. Some stakeholders also said options that extend loan terms only offer a short-term solution to preservation challenges because mortgages cannot be extended indefinitely.", "RHS’s efforts lacked a number of important steps that would better position the agency to preserve properties. First, RHS lacked documented goals for preserving its program and has not created measures for tracking progress toward those goals. In the absence of documented goals, RHS national officials stated that the agency’s goal is to preserve all properties within its program that are needed to ensure sufficient affordable housing, though they acknowledged that current resource levels would preclude that possibility and that some owners may leave the program regardless of the options the agency offers.\nSecond, RHS is not monitoring and assessing options and incentives it is providing in a way that would inform or improve the use of these options. While the agency can track preservation status—meaning whether a property is still within the program or not—through its preservation tool discussed above, it is not actively tracking preservation outcomes. RHS is also not systematically collecting data for monitoring purposes. RHS officials said agency databases contain variables that would show which options owners choose to use, but added that this information is not available in a single source. RHS is also not collecting information that would help them assess options. For example, the agency is not collecting information from property owners on what options and incentives appeal to them. This information would help the agency assess preservation options on how well they are being received by borrowers. Similarly, RHS is not monitoring the results of efforts to preserve properties, including information on how many properties were transferred as a result of its three buyers-sellers conferences.\nFinally, RHS has not fully analyzed or responded to the risks facing its rural rental housing program, such as the following:\nOwner behavior—RHS officials told us a key risk to preserving its rural rental housing program is that the agency cannot predict whether owners will choose to leave the program or stay. To help respond to this risk, the agency directed staff to notify owners 3 years in advance that their loan is maturing and that options are available for preserving the property within the program. While this window could provide RHS with the time to plan for property exits, RHS is not collecting information from owners on why they may choose to exit rather than stay in the affordable housing portfolio. The agency’s effort to predict owner behavior would be aided by collecting and analyzing data on how many owners choose to leave the program and why.\nResource constraints—During a May 2017 conference, a senior RHS official highlighted the issue of agency resource constraints for addressing maturing mortgages, saying that the agency does not have the ability or the financial resources to preserve all of the properties that could leave the program once the loans mature. RHS has also acknowledged that, even at lower levels of about 80 maturing mortgages each year, the agency does not have the resources to provide all preservation options to every owner who wishes to use them. RHS has also not analyzed or planned for how it would prioritize the use of limited resources. RHS national office officials said there is some guidance that could be used by state offices to prioritize the use of resources, but this guidance was not specific to addressing maturing mortgages and was in the process of being updated to include information that could be used to help prioritize limited resources for preserving properties. That update is expected by January 2019.\nManagement of maturing mortgages—RHS has not analyzed or responded to risks involving staff management of maturing mortgages. For example, the agency’s national office said that staff attrition and turnover in the national, state, and field offices that manage mortgages have resulted in fewer staff managing its program in general and that they were not sure what the effect of maturing mortgages would have on staff workloads. RHS staff in some of the states we visited expressed concern that workloads are already heavy and that any increase caused by maturing mortgages, including smaller numbers occurring now, might affect their ability to be responsive to program needs. Similarly, some state office staff expressed concerns that they were not trained for managing and responding to properties with maturing mortgages and needed additional guidance from the national office. RHS national office officials said that while the agency does not provide training specific to maturing mortgages, it does provide training on loan servicing, which includes the use of preservation options, and the national office conducts monthly conference calls that all state offices participate in, which have included maturing mortgages as a topic and which can be used to answer staff questions about maturing mortgages.\nRehabilitation Costs—RHS has commissioned two studies on the risks that program-wide rehabilitation costs pose to its ability to preserve its program, but has not analyzed or planned for how it would address the estimated $5.6 billion needed to rehabilitate its aging portfolio of properties. Officials said that they have met with industry stakeholders and Congress about capital needs estimates, but no additional steps such as requesting additional funding were taken. Officials added that federal budget uncertainties caused by years of continuing resolutions and a sequestration have made planning for maturing mortgages and program-wide rehabilitation more difficult. However, RHS has been aware of growing rehabilitation needs since at least 2004, when the agency released a commissioned study that said capital needs program-wide would continue to increase and cost more if not addressed.\nFederal internal control standards call for agencies to define objectives in specific and measurable terms to enable management to identify, analyze, and respond to risks related to achieving those objectives. Specifically, these standards call for agencies to establish goals and performance measures for tracking progress toward achieving goals; establish activities that monitor performance and assess results so that appropriate action is taken; and identify, analyze, and respond to risks related to achieving their goals.\nRHS officials said that, as of December 2017, they had not taken steps to develop goals and measures, perform key monitoring and assessments, and analyze and respond to risks because the larger number of potential property exits is not expected to begin for another 10 years (2028). RHS officials said that they were using this time to see how their existing options and resources perform, and that the agency would make resource and other adjustments over time as they gained experience with preservation. However, as discussed above, mortgages have already begun to mature and the majority of properties with maturing mortgages between 2014 and 2017 exited the agency’s rural rental housing program. Some property owners may have chosen to exit the program regardless of additional actions or incentives. For example RHS officials noted that many of the property owners whose mortgages are currently maturing are nearing retirement or prefer market returns to RHS’s options and incentives. However, the percentage of exits (61 percent) suggests that RHS’s current planning efforts have not proven sufficient to prevent the majority of properties with mortgages that have matured from exiting its rural housing program.\nBy not having taken the planning steps identified above, RHS is not well positioned to respond to properties that currently have maturing mortgages and require action, nor is the agency prepared for the future larger number of potential property exits that starts in 2028. In particular, without developing goals and measures, conducting sound monitoring and assessments of rural rental housing program developments, and analyzing and responding to risks, RHS may not have the key information, staff, tools, and resources in place to effectively preserve properties and prevent the financial hardship that increasing housing costs could cause rural low-income tenants or the loss of their housing altogether.", "RHS has options to extend loan terms in order to continue rental assistance at properties but cannot continue providing rental assistance to tenants once the loan is paid off and the property exits RHS’s affordable housing program. Some owners of properties with maturing mortgages may be open to continue offering rental assistance and agree to restrict the units to eligible low-income tenants after mortgage maturity. Further, some industry stakeholders cited that having the ability to extend existing rental assistance contracts after mortgage maturity would be useful in protecting tenants from rent increases or displacement.\nHowever, in some cases, property owners may not want to extend rental assistance contracts after mortgage maturity. Tenants living in these properties could be subject to rent increases or the risk of displacement. RHS lacks the authority to provide vouchers to tenants in these situations. Voucher assistance would allow RHS to provide assistance to the tenants to help pay for rent in their existing unit or at other rental housing in the private market without requiring the owner to serve low-income tenants exclusively.\nIn 2016, legislation was introduced that would have allowed RHS to continue providing rental assistance to properties through new contracts with owners after their loans matured or to provide vouchers to tenants under different circumstances, including mortgage maturity. In exchange for accepting rental assistance payments on behalf of eligible tenants, the legislation would have required the property owners to enter into an agreement with RHS to ensure that the property remained subject to low- income use restrictions for an additional period of time. In cases where a new rental assistance contract is not possible, RHS would offer vouchers to tenants after mortgage maturity. The proposed legislation was introduced on April 12, 2016, but no further action on the bill was taken.\nIn the past, Congress has taken legislative action to continue rental assistance to low-income tenants and protect them from the impact of terminated assistance. For example, beginning in fiscal year 2006, Congress has authorized RHS to provide vouchers to tenants affected by loan prepayments, which leads to the property owners’ exit of the RHS’s housing program. Tenants receiving vouchers after the prepayment of a loan could use them to remain in the property after it exits RHS’s program or to find other suitable housing in the private market. Congress has limited the amount that RHS paid in subsidies. The amount of a voucher is limited to the difference between the comparable fair market rent for the housing unit occupied by a tenant and the rent paid by the tenant on the date of prepayment or foreclosure.\nIn addition, when the Department of Housing and Urban Development (HUD) faced a similar loss of affordable housing, Congress gave the department authority in 2011 to further protect tenants through the creation of the Rental Assistance Demonstration (RAD). Before the RAD program, HUD had limited authority to extend rental assistance at these properties when contracts expired or owners terminated contracts. However, this demonstration, among other things, allowed HUD to continue providing rental assistance to property owners after the original contracts expired. In 2014, we reported that the conversion of rental assistance should not have an effect on voucher program costs because HUD uses the same calculation for providing budget authority for the project-based vouchers converted under RAD as it does for calculating budget authority for tenant-protection vouchers.\nWithout the authority to continue providing rental assistance or to provide vouchers to tenants at existing properties whose mortgages have matured, RHS is not well positioned to protect tenants from potential increased rents or displacement from their units. The agency could lose important sources of low-income housing, which for some communities may be the only source of affordable housing. Further, without the authority to offer vouchers to tenants living in units that received rental assistance at mortgage maturity, tenants may also face rent increases and not be able to afford their rents in properties where the owners choose not to extend their rental assistance contracts. Continued provision of rental assistance could be limited to units or tenants that were receiving rental assistance at mortgage maturity and would not represent an expansion of the number of units or tenants assisted. Furthermore, Congress could structure this to have no or limited budgetary impact, similar to what was done under HUD’s RAD program. For example, subsidies could be kept at a level that is similar to what was provided at mortgage maturity.", "RHS’s preservation tool is a positive first step to help the agency estimate property exit dates, alert stakeholders to properties with maturing mortgages, and begin to preserve their affordability. However, the lack of data controls for information on RHS rural rental properties raises concerns about data used by the preservation tool, especially as RHS applies preservation options that extend mortgages and result in new exit dates. The lack of controls for underlying data used by the preservation tool, and missing information on some properties, demonstrate that RHS has opportunities to improve rural housing program data as properties continue to have maturing mortgages. RHS has not been able to update the preservation tool’s data on a regular basis. Developing controls with clear guidance on the frequency and process for routinely updating data on RHS’s website could help ensure that preservation efforts are based on the most current information available. Regular updated information would also help ensure that industry and other stakeholders have the most recent information available on RHS’s rural rental housing program.\nWhile RHS has taken steps to better understand maturing mortgage challenges and preserve properties, RHS’s strategy to use the next several years to plan for the larger number of expected future maturations and test available preservation options does not address the significant number of mortgages that will mature before then. The agency has also not taken important planning steps required by federal internal control standards to establish goals and performance measures for tracking progress toward achieving goals; establish activities that monitor performance and assess results so that appropriate action is taken; and identify, analyze, and respond to risks related to achieving their goals. Actions to enhance the agency’s data and controls, and strengthen its comprehensive planning and program evaluation processes, would better position RHS to respond to maturing mortgages, preserve its rural rental housing program, and maintain affordable housing for low-income tenants.\nFurther, the agency lacks the authority to continue rental assistance to properties with matured mortgages and is limited in its ability to issue vouchers to tenants affected by property exits. Even if the agency takes additional steps to plan for maturing mortgages or increases options and incentives for preserving housing, these limits to rental assistance and vouchers restrict RHS’s ability to protect tenants. These limits also effect RHS’s ability to meet the agency’s objective of providing decent, safe, and sanitary housing to low-income rural residents. Expanding RHS’s ability to protect existing tenants would give the agency tools that are available to other affordable rental housing programs, and could be implemented in a way to maintain, rather than increase, program size and costs.", "We are making the following matter for congressional consideration:\nFor RHS properties whose mortgages have matured, Congress should consider granting RHS the authority to renew annual rental assistance payments to owners who wish to continue to receive them and provide vouchers to tenants living in rental assistance units in properties whose owners choose to no longer receive rental assistance.", "We are making the following five recommendations to RHS:\nThe RHS Administrator should establish additional controls to check the accuracy of all loan information entered into RHS information technology systems, to help ensure complete, accurate, and reliable data for estimating rural rental housing property exit dates. (Recommendation 1)\nThe RHS Administrator should establish a process to help ensure regular and frequent updates for the preservation tool and its underlying data. (Recommendation 2)\nThe RHS Administrator should establish performance goals and measures for its rural rental housing preservation and rehabilitation efforts and report out these outcomes. (Recommendation 3)\nThe RHS Administrator should monitor the results of rural rental housing preservation efforts and assess the degree to which those efforts yielded intended outcomes. (Recommendation 4)\nThe RHS Administrator should identify, analyze, and respond to risks to achieving its preservation goals, including resource and staffing limitations. (Recommendation 5)", "We provided a draft of this report for review and comment to RHS and HUD. RHS provided technical comments, which we incorporated into the report, and stated that it agreed with all five of our recommendations but did not provide a formal agency comment letter. HUD stated that it had no comments on the draft.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Agriculture, the Secretary of Housing and Urban Development, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III.", "Our objectives were to examine the Rural Housing Service’s (RHS) efforts to (1) estimate the dates that properties may exit the rural rental housing program due to mortgage maturity, and (2) preserve the affordability of rural rental properties with maturing mortgages.\nTo examine RHS’s efforts to estimate property exit dates, we analyzed RHS documentation and interviewed RHS officials about the data the agency uses to identify and preserve properties with maturing mortgages. To determine what steps RHS has taken to help ensure the accuracy and reliability of RHS’s Multi-Family Housing Property Preservation Tool (preservation tool), we reviewed documentation that included the preservation tool’s user guide, and the capabilities it offered the agency and the public. We also conducted interviews with RHS national and state office officials about the preservation tool and about how the agency’s Automated Multi-Family Housing Accounting System (AMAS) and the Multi-Family Housing Information System (MFIS) operate. AMAS contains data on loans and rental assistance contracts and MFIS tracks monthly loan and rental assistance payments and contains data on the location of RHS’s rural rental properties. Both systems provide data used by the preservation tool to calculate mortgage maturity and exit dates for rural rental housing properties. To determine how the preservation tool was built and the main information it uses to determine mortgage maturity and property exit dates, and the information it calculates for users, we interviewed the contractor hired by the agency to create and populate the preservation tool.\nTo analyze the accuracy of AMAS and MFIS data used by the preservation tool to calculate mortgage maturity and property exit dates, we reviewed mortgage documents that RHS uses to populate those systems. We reviewed loan documents for a generalizable stratified random sample of 100 properties in five states—California; Illinois; Minnesota; Pennsylvania; and Virginia—to determine if loan information found within mortgage documents matched data contained in AMAS and MFIS for selected variables relevant to mortgage maturity and property exit date calculations. We stratified the population of 2,152 loan documents in the five states by state, number of loans per property, and age groups. We computed an initial sample size of 60 properties for a simple random sample to achieve an upper bound of no more than 5 percentage points, an expected error (inaccurate data field) rate of 0 percent, and a 95 percent confidence level. We then proportionally allocated the sample across the strata and increased sample sizes in stratum within each state so that we selected at least 10 properties with more than 1 loan and 10 properties older than 20 years old. States we visited were selected based on their geographic diversity, diversity (age and size of program) of rural rental housing properties, and their proximity to GAO offices.\nTo select properties’ loan files for this review, we created a nongeneralizable sample of 20 properties in each of the five states. We also interviewed agency officials knowledgeable about the data— including officials from RHS, Rural Development’s Office of Operations and Management, and the U.S. Department of Agriculture’s (USDA) National Financial and Accounting Operations Center—about the processes used to populate these systems and any quality checks in place for ensuring that data were inputted completely and accurately, including any available documentation on these steps. We also interviewed RHS state office officials, who service loans, about the process for identifying errors in these systems and making corrections.\nTo determine which rural rental housing properties were estimated to exit the RHS program and where these properties were located, we analyzed RHS’s raw data from June 2017 (the latest available RHS data). We analyzed the data to determine the number of properties, units, and rental assistance units with property exit dates by state and by year from 2017 to 2050. We also generated summary statistics on the number of properties that were eligible to prepay their mortgages. In assessing RHS’s data we also conducted checks on the data for outliers and missing information. Although we found a selected number of data anomalies that point to the need for better data controls, we determined the data we used were sufficiently reliable for purposes of describing the estimated number of properties that could exit the RHS program between 2017 and 2050.\nTo better understand the calculations used by the preservation tool, we reviewed the logic or code it uses to calculate mortgage maturation dates. For this analysis, we used documentation on the program used to generate estimates and compared this documentation to the code to see if there were any operational differences. Additionally, we reviewed each of the functions within the logic and looked for inconsistencies in logic or deviations from financial convention that might cause incorrect predictions.\nTo examine steps RHS has taken to preserve properties with maturing mortgages, we reviewed documents that listed options available for retaining properties with maturing mortgages. We gathered and analyzed documentation on any comprehensive planning efforts by RHS to address rural rental housing maturing mortgages, including documentation showing preservation goals and measures, and any assessments of RHS’s plans, efforts, or resources needed to address maturing mortgages. We also analyzed documentation and interviewed national and state RHS officials about any training and guidance that was being provided to staff on maturing mortgages. In addition, we interviewed RHS national and state officials about what tools, resources, and plans were in place for addressing maturing mortgages and their limits. Further, we asked about ongoing efforts to address maturing mortgages, including any plans to obtain additional resources for managing maturing mortgages now and in the future when a larger number of properties are expected to have loans mature. We reviewed and interviewed officials about studies commissioned by RHS on the effects of maturing mortgages on the rural affordable rental housing program and affected communities and on program-wide rehabilitation needs and cost estimates. We also assessed how the studies and reports were conducted for any flaws in their approaches and methodologies.\nTo determine stakeholder perspectives on how RHS was managing maturing mortgages, we interviewed officials from a judgmental sample of rural housing industry organizations. We took multiple steps to identify these industry organizations. First, we met with an affordable housing organization with a national membership that represents owners; developers; housing advocates; and tenants. We asked this national organization to identify industry organizations that work with RHS. From that list, we focused on organizations that also had a multi-state or national focus. Second, during interviews with these organizations, we requested additional contacts. We interviewed organizations that were named during multiple interviews. This selection process allowed us to identify stakeholders that represented a diverse range of roles in the rural housing industry including: developers, borrower and tenant advocacy organizations, and organizations advocating for the retention or expansion of affordable housing.\nTo determine how other agencies approached expiring rental assistance contracts and low-income housing preservation, we also interviewed Department of Housing and Urban Development officials. More specifically, we determined what key steps and best practices the department used to preserve its multifamily housing program properties, including properties with maturing mortgages, and what tools and resources were required for managing its housing program.\nWe conducted this performance audit from May 2016 to May 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "", "In addition to the contact named above, Harry Medina (Assistant Director); Steve Ruszczyk (Analyst in Charge); Holly Hobbs; Enyinnaya David Aja; Jim Ashley; Stephen Brown; William Chatlos; DuEwa Kamara; John McGrail; Marc Molino; and Tovah Rom made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1, 2, 2 ], "alignment": [ "h2_full", "h0_title h2_title h1_title h3_title", "h0_full", "h2_full", "h0_full h3_full h1_full", "h1_full", "", "h1_full", "h1_full", "", "h3_full", "h3_full", "h3_full", "h0_full", "", "", "", "", "", "" ] }	{ "question": [ "To what extent could the RHS ensure the accuracy of its automated property estimates?", "Why did RHS develop the Multi-Family Housing Property Preservation Tool?", "What are the expected exit rates of properties in the program?", "Why couldn't RHS ensure the accuracy of the estimated exit dates?", "What is the retention rate of properties with maturing mortgages?", "How were the planning efforts of RHS flawed?", "Why are these actions critical?", "What changes could help RHS protect low-income tenants?", "What precedent exists for such an authorization?", "How does RHS support affordable housing for low-income tenants?", "How may property owners exit the program?", "How may this affect tenants with maturing properties?", "What action should Congress take regarding RHS?", "What recommendations did GAO make?", "How was this report disseminated?", "How did RHS respond to GAO's recommendations?" ], "summary": [ "The U.S. Department of Agriculture's Rural Housing Service (RHS) implemented an automated tool to estimate when properties could exit the rural rental housing program, but RHS lacked sufficient controls to ensure the accuracy, completeness, and timeliness of those estimates.", "In 2016, RHS developed its Multi-Family Housing Property Preservation Tool to replace a manual process of estimating exit dates.", "RHS data suggest that a smaller number of properties could exit RHS's program in the near term, but between 2028 and 2050, over 90 percent of RHS's properties and units could exit the program (about 13,000 properties with 407,000 units).", "However, RHS lacked controls that would better ensure the accuracy and completeness of these estimated exit dates, such as the verification of key data input at mortgage origination.", "While RHS has taken actions to address properties with maturing mortgages, such as offering property owners options designed to prevent property exits, about 60 percent of properties with maturing mortgages exited the program between 2014 through 2017.", "The agency's planning efforts lacked key steps such as (1) establishing preservation goals, (2) developing metrics for evaluating preservation efforts, and (3) analyzing and responding to risks facing its portfolio such as resource limits and growing capital rehabilitation needs.", "Without taking these actions, RHS is not well positioned to preserve affordable housing in the near term or when much larger numbers of properties and units could exit the program starting in 2028.", "Accordingly, allowing RHS to renew rental assistance after mortgage maturity could protect assisted low-income tenants from increased rents or displacement from their units.", "When the Department of Housing and Urban Development (HUD) faced a similar loss of affordable housing subsidies, Congress authorized the department in 2011 to continue providing rental assistance at properties after contracts expired.", "Under its rural housing program, RHS provides mortgages and rental assistance to support affordable rental units for low-income tenants (see figure).", "When these mortgages reach the end of their terms (mature), property owners may exit the program; current law does not allow RHS to continue providing rental assistance when such exiting occurs.", "As a result, tenants in properties with mortgages that are maturing may face rent increases or lose their housing altogether.", "Congress should consider granting RHS authority to continue providing rental assistance to tenants in properties with maturing mortgages.", "GAO is also making five recommendations, including that RHS improve data quality and take steps to comprehensively plan for preserving properties with maturing mortgages.", "We provided a draft of this report for review and comment to RHS and HUD.", "RHS agreed with all five of GAO's recommendations." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, 1, 0, 3, -1, 0, 0, -1, 0, -1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 0, 0, 0, 4, 4, 4, 4 ] }
CRS_R45463	{ "title": [ "", "What Is a User Fee or User Charge?", "Offsetting Collections and Offsetting Receipts", "Data Sources and Federal Analyses of User Fees and Charges", "The Benefit Principle", "Matching Charges to Spillover Costs Can Enhance Efficiency", "Logic of Pigou Taxation May Apply to Design of User Fees and Charges", "Spillover Benefits Complicate Application of Benefit Principle", "Other Policy Concerns", "Is Privatization an Option?", "User Fees and the Power of the Purse", "The Miscellaneous Receipts Act", "Recent Proposals on User Fees and Charges", "Issues and Options for Congress", "Congressional Oversight and Control of the Federal Purse", "Transparency", "Broader Policies Regarding User Fees and Charges" ], "paragraphs": [ "T he federal government collects various fees and other charges from businesses and households. Choosing to raise public funds via user fees, as opposed to other means such as taxes, has important administrative and economic consequences. Many fees stem from \"business-like activities,\" in which the government provides a service or benefit in return for payment. For example, many n ational p arks charge entry fees , which then help fund maintenance projects. Some fees are closely tied to regulatory or judicial activities, such as filing or inspection fees, which stem from the federal government's sovereign powers. Other federal fees or charges are intragovernmental transactions that do not involve the public. For example, the Office of Personnel Management (OPM) charges other federal agencies fees to cover the cost of background investigations.\nFor many federal agencies, fees or user charges amount to a minimal portion of budgetary resources. Other regulatory agencies, such as the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), the Patent and Trademark Office (PTO), and the Federal Trade Commission (FTC), are wholly or partially funded by user fees and other nontax receipts. User fees from the public accounted for $331 billion in FY2017, about a tenth of total federal receipts ( $3.32 trillion ).\nFees and charges generally result from voluntary choices, such as entering a national park. By contrast, the collection of taxes ultimately relies on the government's sovereign power to compel payments. Fees may not be compulsory, but not paying them may make it impossible to carry out many activities legally. For instance, without paying passport application fees and obtaining a passport, people cannot fly to other countries. Nor can businesses issue securities without paying federal filing fees.\nThe statutory basis for each particular fee or user charge varies in specificity and in the degree of discretion granted to the executive branch. For example, authorizing legislation might specify in detail how certain fees are imposed and how proceeds are used. In other cases, federal agencies rely on broader authorities to impose user fees.\nUser fees have several advantages as a means of financing public activities. They are voluntary, they connect the burden of financing activities to those who directly benefit from them, and they can help decentralize decisionmaking by bypassing centralized allocation of resources. At times, proposals to raise fees may encounter less political resistance than proposals to raise an equivalent sum via taxes. On the other hand, the flow of user fees and charges may reflect fluctuations in economic conditions, which may complicate the financing of government operations. Some are also concerned that funding arrangements may bypass regular congressional scrutiny and dilute Congress's power of the purse.", "The Government Accountability Office (GAO) defines a user fee as a\nfee assessed to users for goods or services provided by the federal government. User fees generally apply to federal programs or activities that provide special benefits to identifiable recipients above and beyond what is normally available to the public.\nThe Office of Management and Budget (OMB) defines the term user charge to include transactions not normally considered fees, such as land or asset sales. OMB's budget preparation documents state that user charges include not only proceeds from selling postage stamps, electricity, and Medicare Part B premiums, but also sales of assets and natural resources, among other categories.\nThe federal government, which operates on a modified cash accounting basis, does not recognize in its budgetary accounts the loss of asset values when it sells assets or natural resources, as a private firm would using typical business accounting methods. For instance, if the government were to sell oil at a price of $60 per barrel that it bought at $120 per barrel, only the current revenues would be reflected in budget accounts. A private firm would normally adjust its balance sheet to reflect a loss.\nOMB designates whether each account receives collections associated with user charges, and that information is contained within OMB's MAX budget data system. OMB has not released data on those designations. The Budget Appendix that OMB issues annually, while not including information on that designation, does present detailed subaccount-level data that often indicate whether a federal program's budgetary resources rely on fee income. The format of the Budget Appendix, however, makes it an impractical source of data for government-wide research.\nAs far as CRS can determine, a comprehensive and authoritative list of federal fees is not publicly available. Budget and financial documents from OMB and the U.S. Treasury, however, do provide detailed information on offsetting collections and offsetting receipts—the budget categories that typically contain user fees and other charges—as well as information on budgetary accounts. In some cases, account descriptions clearly indicate an association with one or more fees. In other cases, however, whether or not an account receives fees is unclear. For example, an account might be labeled as miscellaneous receipts, or as fines, fees, and penalties.", "User fees classified as offsetting collections, which go into expenditure accounts, generally can be used without further congressional action. Offsetting collections, as the term suggests, typically count as offsets to spending when accounts are scored to check compliance with various budgetary controls. Scorekeeping is the process of measuring the budgetary effects of legislation. For example, the Budget Control Act of 2011 ( P.L. 112-25 ) imposed caps on specified categories of discretionary budget authority. When evaluating compliance with those caps, scorekeepers (CBO, OMB, and the b udget c ommittees) subtract offsetting collections from budget authority totals.\nUser fees or charges are collected into the U.S. Treasury General Fund or into special fund accounts. Offsetting receipts, which go into receipt accounts, typically require approval through appropriations acts. User fees can be classified as discretionary or mandatory spending, depending on how those fees are authorized.\nSome payments to the federal government, such as electromagnetic spectrum auction proceeds or offshore continental shelf oil and gas leases that are classified as undistributed offsetting receipts, do not offset spending of any agency, but are recorded as reducing the federal deficit.", "OMB provides a discussion of budget concepts related to offsetting receipts and offsetting collections, which include the bulk of user fees and charges in terms of dollar amounts, in the President's annual budget submission. More detailed supplementary tables that summarize collections of offsetting receipts and offsetting collections are also provided online.\nThe U.S. Treasury's Bureau of the Fiscal Service issues its annual Combined Statement that reports budget data for all federal agencies at an account level as well as detailed summaries of receipts, including user fees. The Monthly Treasury Statement and a quarterly statement of offsetting receipts provide data on an ongoing basis. As the Treasury's role and responsibilities differ from those of OMB, totals from Treasury sources may not coincide with data issued by OMB due to various budgetary reporting adjustments.\nGAO has analyzed the administration of various user fees and has set out some principles for the design of those fees .", "User fees, as noted above, can tie benefits enjoyed by households or firms—such as passports, access to national parks, or approvals to raise investment funds from the public—to payments that can help defray public costs of providing them. An economist's rule of thumb known as the benefit principle, which suggests linking the fiscal burden of publicly provided benefits to those who enjoy those benefits, can promote fairness and efficiency. For example, many would contend that those with the opportunity to travel abroad should shoulder more of the costs of reviewing passport applications and issuing documents than those who do not. Moreover, if fees are set at levels that match the incremental cost of providing benefits, then when an agency is called to expand its work—such as an uptick in demand for passports, park visits, or company registrations—then those fees could fund the needed extra resources. Matching fees to incremental costs, however, is difficult where demand is irregular or unpredictable.\nOMB guidelines on user fees outline aims similar to the benefit principle, mandating that federal agencies\nensure that each service, sale, or use of Government goods or resources provided by an agency to specific recipients be self-sustaining; promote efficient allocation of the Nation's resources by establishing charges for special benefits provided to the recipient that are at least as great as costs to the Government of providing the special benefits; and allow the private sector to compete with the Government without disadvantage in supplying comparable services, resources, or goods where appropriate.\nOMB mandates that agencies review user fees every other year. OMB also encourages agencies seeking new authority to assess fees to \"seek to remove restraints on user charges.\"\nIn some cases, federal agencies and regulated industries negotiate over user fee levels and the improvements in federal regulatory operations supported in large part by those fees. For instance, pharmaceutical companies negotiate with the Food and Drug Administration (FDA) over fees charged to review drug applications. Over time, the scope of FDA activities supported in part by fees has expanded. Some contend that the FDA's increasing reliance on user fees has tilted the agency's priorities toward industry interests and away from consumer protection responsibilities. One 2005 analysis of the FDA drug review process found that approval times decreased after legislation expanded the agency's reliance on user fees, while it found no statistically significant evidence of a decrease in one proxy measure of drug safety.\nFederal agencies such as the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC) are largely supported from amounts paid by covered industries.", "The costs and benefits associated with many goods and services mainly involve buyers and sellers. For example, buying a stamp allows a correspondent to mail a letter, which leads the postal service to incur roughly similar costs. Others—at least to a first approximation—are not affected. For other goods, market or market-like transactions may impose costs or convey benefits on third parties. When prices paid by buyers or received by sellers do not reflect spillover costs or benefits to others, economic theory suggests levels of transactions will be inefficient, in the sense that alternative economic arrangements could make all participants—at least potentially—better off.", "The benefit principle is in some ways similar to the concept of Pigou taxation—that taxing goods linked to negative spillovers, such as pollution, can enhance economic efficiency by diminishing those spillovers. More generally, spillovers are costs borne or benefits enjoyed by one party due to activities of another party where no voluntary exchange or market transaction occurs. Conversely, subsidizing goods or services that provide beneficial spillovers can also increase economic efficiency. For instance, some justify federal tax subsidies to home ownership on the grounds that homeowners generate positive spillovers in their neighborhoods.\nCharges aimed at limiting negative spillovers are known as Pigou taxes, after the English economist who first articulated the concept. Pigou taxation provides a more narrowly based efficiency rationale for user fees that would limit negative spillovers. Moreover, administering an excise tax imposed on Pigou tax grounds—which would involve a private vendor collecting and remitting tax revenues—differs from user fees and charges collected directly by a government.\nNonetheless, the same logic that raising the end-user price of goods linked to negative spillovers can enhance economic efficiency can be applied to the design of user fees. For instance, federal policymakers might choose to charge pharmaceutical companies application fees lower than the full cost of associated approval processes because introducing new drugs onto the market may have wider positive social benefits.", "The economic suitability of the benefit principle depends on whether the publicly provided benefit has meaningful spillover effects. For example, benefits generated by governments such as national defense or support for basic research are widely shared and thus, arguably, are appropriately supported by general taxation. By contrast, while the broader economy benefits from the ability of firms to raise capital in transparent and competitive markets, the chief beneficiary of having a security offering approved is the issuing firm. Similarly, a family visiting a federal park presumably benefits more than another family that stayed at home. Financing more of park maintenance through general taxation would thus involve an implicit subsidy from nonusers to users, something that reliance on user fees would mitigate. In other cases, the linkage between fees and benefits is not apparent. For example, a 2009 law ( Travel Promotion Act of 2009 , TPA; P.L. 111-145 ) imposed a $10 fee on most international air travelers from visa-waiver countries to fund tourism marketing initiatives .\nAn exact match between the level of user fees and publicly provided benefits may be hard or impossible to determine in many situations. While public corporations operating on a largely commercial basis, such as the Tennessee Valley Authority, may set prices and fees much as a private firm would, many of the federal government's activities are within the public sector because past policymakers considered them to be closely associated with inherently governmental functions—such as providing security—or as services that the private sector would have had trouble providing, such as basic research. The U.S. Postal Service sets rates to cover nearly all of its costs according to a 2006 statutory framework . Subsidized rates for certain classes of mail users, such as the blind, reflect adaptation of pricing schemes to broader social priorities. The proper boundaries between public, private, and nonprofit sectors, of course, is an ongoing concern of policymakers.\nIn many cases, it is difficult to design fees, charges, or taxes that directly influence activities generating negative spillovers. For instance, cars and trucks generate air pollution as well as wear and tear on roadways. Excise taxes on gasoline and other fuels—if set at levels that approximate the costs of pollution and road wear—can motivate drivers to use roads less often when the total costs of driving, including pollution, road wear, and other costs, exceed the benefits of driving. Thus, excise taxes can be a way of using the price mechanism to induce individuals to make decisions that lead to more economically efficient outcomes. Setting excise taxes at levels that reflect all costs to third parties may involve complex estimates. For instance, while higher fuel usage implies greater use of roads and more production of air pollutants, several other factors complicate that linkage. Heavier vehicles may cause disproportionate damage to roads. Vehicles vary widely in fuel efficiency and in the volume of pollutants generated. In addition, driving also imposes congestion costs on other drivers, and those costs vary by location and time of day. One recent analysis estimated that fuel excise taxes addressed less than a third of the air-pollution-related efficiency losses.\nWhile excise taxes are a public finance instrument that is distinct from user fees and charges, similar complications may be encountered. In some cases, adopting new fiscal instruments—such as using road charges or tolls—may prove more effective tools in increasing efficiency. In the case of transportation policy, increased economic efficiency, depending on how consumers and policymakers respond, might manifest itself in some combination of higher after-tax incomes, greater provision of publicly provided goods, cleaner air, and less-congested highways. Changes in the design of some user fees or charges might also yield analogous efficiency improvements.", "Some observers have raised concerns that federal agencies that rely more heavily on user fees may put greater weight on the interests of those paying fees rather than the broader public interest. For instance, the U.S. Patent and Trademark Office charges application and examination fees to those seeking to obtain a patent. Certainly, the applicant would be a central beneficiary of a patent, if granted, although many others—including other inventors, business competitors, and consumers—might also be significantly harmed or benefited. Some contend that the Patent Office's reliance on fees motivates it to approve invalid patents . Tying patent fees narrowly to the benefits obtained by the applicant, while overlooking wider spillover effects, might then result in poor decisions. Of course, nonfinancial policy instruments, such as applicable laws, regulations, or congressional oversight, may affect outcomes more directly.\nAdministrative concerns may also play a role. In some cases, where the costs of collecting fees are high relative to the costs of providing public services, imposing user fees may be a suboptimal choice of funding. For instance, federal courts collect more in PACER fees (which provide access to court documents ) than is needed to maintain the underlying computer system , with excess fees being earmarked for other court improvements. Some argue that funding that system and other court improvements with general revenues would allow broader access to court filings and related public documents, which one proposal ( H.R. 6714 introduced in the 115 th Congress ) would have implemented. Charging access fees above incremental costs—which for electronic documents may be minimal—can limit access to public information. Eliminating PACER user fees , however, may require Congress to shift that fiscal burden elsewhere.\nOther policy concerns also may play a role. Ability to pay among households varies widely; a national park entrance fee that one family regarded as trivial might deter another family. Policymakers may also wish to express preferences for identifiable groups, such as the elderly, children, or veterans.\nThe classification of fees, charges, taxes, and even negative loan subsidy amounts hinges on budget concepts outlined above along with scorekeeping rules and precedents. In some cases, the distinctions made to categorize a given receipt might seem arbitrary to some. For example, the Travel Promotion Act fees imposed on most international air travelers convey n o special benefit on them, but are not categorized a s tax es . Refundable biofuel tax credits are counted as negative taxes in budget documents rather than as subsidy outlays. Those distinctions, however, can affect the tax treatment of those receipts. For instance, a firm can generally deduct an excise tax from its gross revenues, but typically cannot deduct a fee.\nSome governments have instituted user fees to fill shortfalls in tax revenues. The economic burden of higher fees or charges might be less obvious and therefore subject to less resistance than broad-based taxes. For example, policymakers in several states have sought to avoid increases in general taxes by increasing fee revenues. That strategy may have two downsides. First, more narrowly focused fees set at higher levels could cause greater economic distortions than smaller taxes applied to a broader base. Second, more narrowly based fees might be less stable in economic downturns. To the extent that fees diverge from the incremental costs of publicly provided services, sudden fiscal adjustments might be required.", "If benefits from federal operations are distributed narrowly enough to justify financing them via user fees or charges, one might ask whether those activities should be carried out by the private sector. State and local governments and the federal government have privatized many services previously provided by government. Foreign governments have also privatized provision of goods and services once delivered by the public sector. Some activities, however, may involve inherently governmental responsibilities that would be difficult to devolve to the private sector. A 1997 GAO report noted that rigorous evaluations of cost savings of privatization initiatives at the state and local government level were not common. GAO also noted that privatization increased the need for oversight and evaluation, although some local officials deemed that the \"weakest link\" in privatization initiatives. Others note that while privatization may yield efficiency gains, it may also lead to policy or operational failure.", "Conflicts between executive branch agencies, which often have sought greater flexibility to use funds to respond to public priorities as they see them, and Congress, which has sought to defend its fiscal prerogatives and ability to set federal policy priorities, are long-standing.", "In 1849, Congress sought to bolster its powers of the purse by passing the Miscellaneous Receipts Act , which required all government revenues, aside from postal sales, to be deposited into the U.S. Treasury \"at as early a day as practicable, without any abatement or deduction on account of salary, fees, costs, charges, expenses, or claim of any description whatever…\" Over time, Congress set out exceptions to the modern version of the Miscellaneous Receipts Act that let agencies charge user fees, accept gifts, and collect and retain fines and penalties within specified limits or as detailed in appropriations laws.", "Some legislative proposals, such as H.R. 850 (115 th Congress) , would eliminate most exceptions and require most fees and charges to be deposited in the U.S. Treasury General Fund. Congress could fund agencies and activities directly through annual appropriations. Funding through lump-sum appropriations, as opposed to via user fees, however, might change incentives facing decisionmakers and could affect federal operations and programmatic outcomes.", "", "Congress could constrain agency discretion by requiring more user fee proceeds be either subject to annual appropriations or deposited in the U.S. Treasury General Fund, although that may limit agencies' capacity to respond to new public demands and other changing conditions, as the Government Accountability Office (GAO) has noted . Some inspectors general and congressional committees have also called for tighter, more efficient, and more consistent financial management of user fee funds. During the mid-1980s, Congress, with GAO support, conducted a comprehensive review of so-called \"backdoor spending\"—an informal term for budget authority provided in laws other than appropriations acts—including spending supported by user fees, which was updated in 1996 . A narrower follow-up in 2017 covering five agencies concluded that \"all entities GAO examined have policies and procedures to manage and report on their permanent funding authorities,\" but that \"some, however, could improve practices to manage funds and report information that facilitates oversight.\"\nSweeping changes to the budgetary treatment of user fees, however, could add new pressures on the congressional appropriations process. Proposals to require that most fees be collected into the Treasury General Fund and that activities previously supported by those fees be funded by annual appropriations could create new demands on appropriations committees. Such proposals could also affect the division of responsibilities among authorizing committees and appropriations committees. Statutory texts governing many fees, including those noted above, have evolved over many years and involve substantive policy decisions, often related to industry or programmatic concerns. Congress may also enhance its oversight of agencies reliant on user fees by requiring more timely and detailed financial reports as well as more precise and systematic explanations of linkages between those fees and associated programs.", "OMB and Treasury issue extensive information on user fees and charges. Nonetheless, the format and level of detail of published data make it difficult to address some government-wide policy questions regarding user fees and charges. Congress could modify laws governing the President's budget submission (31 U.S.C. 1105) to require OMB to release data that it collects on which budget accounts receive material amounts of user fee and user charge revenues. That could allow Congress to track and analyze user fees and charges more easily. In particular, it would also provide a means to distinguish discretionary and mandatory fees and charges, which could be useful in understanding the effects or constraints imposed by budget enforcement measures. That might provide Congress with a clearer view of its fiscal options when considering budgetary measures. Mandating that OMB or other agencies provide more data would probably require additional budgetary resources to cover costs of new personnel and capabilities.", "Congress can promote economic efficiency and an equitable sharing of public burdens by choosing appropriate means of financing federal operations. User fees and charges, as noted above, can help tie the costs of supporting specific federal operations with those who benefit from them. Even if closely regulated industries may find federal requirements, inspections, or approval processes burdensome, they also presumably benefit from the increased demand for their products that carry the imprimatur of explicit or implicit federal approval. Federal regulation and inspection operations, however, also serve broader interests of consumers, taxpayers, and related industries. To the extent that inherently governmental responsibilities motivate federal operations, the argument for using general revenues may be stronger. If benefits of federal actions are more narrowly distributed, the case for financing operations with user fees or charges may become stronger. Of course, the structure and administration of federal inspection and regulation plays a central role in enhancing efficiency and minimizing burdens borne relative to benefits enjoyed." ], "depth": [ 0, 1, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h2_title", "h2_full", "h2_full", "h0_full h2_full h1_title", "", "", "", "h0_full h2_full h1_full", "h1_full", "h3_title", "", "h3_full", "h4_title h1_title h3_title", "h3_full h4_full h1_full", "h4_full", "" ] }	{ "question": [ "What are the sources of many user fees?", "How do national parks charge user fees?", "How do user fees differ from taxes?", "How does GAO define user fees?", "What are some advantages of user fees?", "What concerns exist regarding user fees?", "How are user fees affected by external factors?", "How are user fees classified?", "How can offsetting collections be used?", "How are other fees classified?", "To what extent are agencies reliant on user fees?", "Why might this be a cause for concern?", "How may legislative proposals affect user fees?", "How would this affect Congressional funding?", "How would these proposals compare to the status quo?", "How will the change in funding affect the division of responsibilities?", "How may Congress increase oversight over user fees?", "Why is it difficult to conduct governmentwide analyses of user fees?", "How could Congress expand sources of user fee data?" ], "summary": [ "Many fees stem from \"business-like activities,\" in which the government provides a service or benefit in return for payment.", "For example, many national parks charge entry fees, which then help fund maintenance projects.", "Such fees and charges that result from voluntary choices, such as entering a national park, are distinguished from taxes—which stem from the government's sovereign power to compel payments.", "The Government Accountability Office (GAO) defines a user fee as a \"fee assessed to users for goods or services provided by the federal government. User fees generally apply to federal programs or activities that provide special benefits to identifiable recipients above and beyond what is normally available to the public.\"", "They are voluntary, they connect the burden of financing activities to those who directly benefit from them, and can help decentralize decisionmaking by bypassing centralized allocation of resources.", "Some have expressed concerns that user fee arrangements may bypass regular congressional scrutiny and dilute Congress's power of the purse.", "Collections of fees and charges may also be more sensitive to economic fluctuations, which could complicate financing of programs dependent on those revenue streams.", "Many user fees or charges are classified as offsetting collections, which are deposited into expenditure accounts.", "Offsetting collections can be used to offset agency spending and typically require no further congressional approval to use.", "Other fees and charges are classified as offsetting receipts, which are collected into revenue accounts and typically require congressional authorization to be spent.", "Certain agencies, such as the Food and Drug Administration (FDA), have increased their reliance on user fees in past decades.", "Some critics have raised concerns that increased reliance on user fees could shift incentives facing those agencies.", "Some legislative proposals, such as H.R. 850 introduced in the 115th Congress, would limit or eliminate most exceptions and require most fees and charges to be deposited in the U.S. Treasury General Fund.", "Congress could fund agencies and activities now funded in whole or in part via user fees directly through the annual appropriations process.", "Such proposals would mark a departure from past practice.", "A general change in funding from user fees and charges to annual appropriations would likely shift the division of responsibilities between authorizing committees and appropriations committees.", "Congress may also enhance its oversight of agencies reliant on user fees by requiring more timely and detailed financial reports as well as more precise and systematic explanations of linkages between those fees and associated programs. Congress could also ask for greater transparency in fiscal data.", "While the Office of Management and Budget (OMB) and the U.S. Treasury Bureau of the Fiscal Service provide extensive data on user fees and charges, it is difficult to conduct governmentwide analyses using publicly available sources.", "Congress could mandate more detailed and more easily accessed data on user fees and charges." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 1, -1, 0, 0, -1, 3, -1, 0, 1, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4 ] }
CRS_R43953	{ "title": [ "", "Introduction", "EPA's 2013 Changes to the PM NAAQS", "Designation of Geographical Nonattainment Areas", "NAAQS Designation Process", "Designations for the 2013 PM2.5 Annual NAAQS33", "EPA April 2015 Amended Final Designations", "EPA January 2015 Final Designations", "State Recommendations and EPA August 2014 EPA Proposed Designations in Response", "Comparing EPA's Final Nonattainment Designations for the 2013 PM NAAQS with the 2006 and 1997 PM2.5 NAAQS Final Designations", "Demonstrating Attainment with the 2013 PM2.5 NAAQS", "State Implementation Plans (SIPs)", "EPA NAAQS Implementation Rules/Guidance", "National Regulations", "New Source Review86", "Transportation Conformity90", "Conclusion" ], "paragraphs": [ "", "Under Sections 108-109 of the Clean Air Act (CAA), Congress mandated that the Environmental Protection Agency (EPA) set national ambient (outdoor) air quality standards (or NAAQS) for pollutants whose emissions (1) \"may reasonably be anticipated to endanger public health or welfare\" and (2) \"results from numerous or diverse mobile or stationary sources.\" The statute further requires that EPA review the latest scientific studies and either reaffirm or modify previously established NAAQS every five years. EPA has identified and promulgated NAAQS for six principal pollutants commonly referred to as \"criteria pollutants\":\n1. Particulate matter (PM), 2. Ozone (O 3 —a key measure of smog), 3. Nitrogen dioxide (NO 2 , or NOx—inclusively, nitrogen oxides), 4. Sulfur oxides (SOx or specifically SO 2 ), 5. Carbon monoxide (CO), and 6. Lead (Pb).\nFor particulate matter (PM), EPA established short-term (24-hour) and long-term (annual) standards. Additionally, EPA established separate standards for two categories of PM based on size: \"fine\" particulate matter 2.5 micrometers or less in diameter (referred to as PM 2.5 ) and slightly larger, but still inhalable, particles less than or equal to 10 micrometers (referred to as PM 10 ). EPA last reviewed and revised the PM NAAQS in 2006. (See PM NAAQS chronology presented in Table A-1 .)\nOn January 15, 2013, EPA published its revisions to the NAAQS for PM to provide protection against potential health effects associated with short- and long-term exposure to particulates (including chronic respiratory disease and premature mortality). Because the agency finalized its decision on December 14, 2012, EPA frequently refers to these changes as the \"2012 PM NAAQS.\" In this report, CRS will refer to the changes as the 2013 PM NAAQS based on the January 15, 2013, publication date of the final rule.\nEPA's 2013 PM NAAQS revisions primarily tightened the pre-existing (2006 and 1997) standards for \"fine\" particulate matter PM 2.5 and affected only the stringency of the annual PM 2.5 standard. The 24-hour PM 2.5 standard as revised in 2006 was not similarly strengthened in the 2013 NAAQS revisions. The standards for slightly larger, but still inhalable, particles less than or equal to 10 micrometers (PM 10 ) established in 1987 were also not changed to a more stringent level in the 2013 PM NAAQS revisions.\nEstablishing NAAQS does not directly limit emissions or directly compel specific emissions controls; rather, it represents the EPA administrator's formal judgment regarding the level of ambient pollution that will protect public health with an adequate margin of safety . Promulgation of NAAQS sets in motion a process under which the states and EPA first identify geographic nonattainment areas (i.e., those areas failing to meet the NAAQS) based on monitoring and analysis of relevant air quality data. States then submit State Implementation Plans (SIPs), which identify specific regulations and emission control requirements that are to bring areas into compliance as well as actions for maintaining compliance.\nOn April 7, 2015, EPA published amendments to the final designations for the 2013 PM 2.5 NAAQS that were published on January 15, 2015. The changes to area designations were the result of air quality data for 2014 recently submitted by affected states. The effective date of April 15, 2015 (90 days from the date of publication) for the final designation rule remained unchanged.\nThe final area designations as amended and published in the April 7, 2015, Federal Register encompass 20 counties or portions of counties (nine areas) in four states as nonattainment only for the 2013 revised annual PM 2.5 standard. EPA also designated five areas in Georgia (including two adjacent counties in Alabama and South Carolina) as unclassifiable. In the final designation rule as published on January 15, 2015, EPA had designated 38 counties or portions of counties (14 areas) in six states. At that time EPA announced that it was also deferring initial designation for 10 areas in three states by up to one year as a result of insufficient data. Included were all of Florida, all of Tennessee except for three counties, and eight areas in Georgia (including two adjacent counties in Alabama and South Carolina). The EPA also designated three areas (including all of Illinois) as \"unclassifiable\" due to insufficiencies in the available ambient air quality monitoring data for these areas for the three-year period (2011-2013).\nThe April 2015 modifications did not impact EPA's designation determinations for areas in Indian country as published in January 2015. Twelve areas in Indian country adjacent to counties designated nonattainment in two areas in California were designated nonattainment for the 2013 annual PM 2.5 standard. EPA designated all remaining state areas and areas in Indian country as \"unclassifiable/attainment\" for the 2013 annual PM 2.5 standard, indicating that \"the areas either have attaining [sic] air quality monitoring data or that air quality information is not available because the areas are not monitored, and the EPA has not determined that the areas contribute to a violation in a nearby area.\"\nAs EPA had specified in its April 2013 area designation guidance to states and tribes, the initial area designations for all 2013 PM 2.5 NAAQS nonattainment areas are classified as \"moderate\" as provided under Section 188(a) of Subpart 4 of Part D of Title I of the CAA. EPA had previously implemented the PM 2.5 NAAQS—including nonattainment determinations for the 1997 and 2006 revisions—only under the general implementation provisions in Subpart 1 (§171-§176) of Part D in Title I of the CAA (\"Subpart 1\"). However, in a January 4, 2013, decision, the U.S. Court of Appeals for the District of Columbia Circuit determined that EPA had erred in implementing the PM 2.5 NAAQS under Subpart 1 and required the agency to implement the PM 2.5 NAAQS under Subpart 4 of Part D in Title I of the CAA (\"Subpart 4\").\nThis CRS report focuses primarily on the NAAQS implementation process for designating geographical nonattainment areas with respect to the tightening of the PM 2.5 annual standard under the 2013 particulates NAAQS, including comparisons with the final designations under the 2006 and 1997 PM 2.5 NAAQS revisions. EPA is not requiring new nonattainment designations for the PM 2.5 24-hour standard or the PM 10 standard, as the levels for these standards were unchanged in the 2013 revisions.\nAlso included in this CRS report is a brief overview of states' subsequent obligations for developing and submitting SIPs for attaining or maintaining compliance with the NAAQS. Appendix A presents a chronology of PM NAAQS regulations, and Appendix B includes a comparative table of the implementation timeline for the 1997, 2006, and 2013 PM NAAQS. The table in Appendix C provides a state and county breakdown of EPA's final designated nonattainment areas published in January and April 2015, areas proposed by EPA in August 2014, and recommendations by the states for the 2013 annual PM 2.5 NAAQS compared to the final EPA designations for the 2006 (24-hour) and 1997 (annual) PM 2.5 NAAQS for those states and counties. Table D-1 in Appendix D identifies areas in Indian country designated nonattainment for the 2013 PM NAAQS.", "The CAA provides for two types of NAAQS: (1) primary standards, \"the attainment and maintenance of which in the judgment of the [EPA] Administrator ... are requisite to protect the public health\" with \"an adequate margin of safety\"; and (2) secondary standards, which are necessary to protect public welfare —a broad term that includes visibility impairment as well as damage to crops, vegetation, and effects on soil and nutrient cycling, water, wildlife, property, building materials, etc.\nEPA's 1997 revisions to the PM NAAQS revised the standards that focused on particles smaller than 10 microns (PM 10 or coarse particles) established in 1987 and introduced standards for \"fine\" particles smaller than 2.5 microns (PM 2.5 ) for the first time. The primary NAAQS as revised included a daily (24-hour) limit for both PM 2.5 and PM 10 and an annual limit for PM 2.5 . (EPA revoked the previous annual limit for PM 10 in 2006.)\nAchieving attainment of the annual standard requires that the three-year average of the weighted annual arithmetic mean PM concentration at each monitor within an area must not exceed the maximum limit set by the agency. The 24-hour standards are a concentration-based percentile form, indicating the percentage of the time that a monitoring station can exceed the standard. For example, a 98 th percentile 24-hour standard indicates that a monitoring station can exceed the standard 2% of the days during the year. For PM 2.5 and PM 10 , EPA set the secondary (welfare) NAAQS the same as the primary standards.\nAs modified and published in the January 15, 2013, Federal Register , the PM 2.5 and PM 10 primary (public health) standards as set in the final rule are as follows:\nPM 2.5 : EPA revised the annual standard of 15 micrograms per cubic meter (µg/m 3 ) by setting a new limit to 12 µg/m 3 . (EPA's proposed rule included an optional limit of 13 µg/m 3 and solicited comment for 11 µg/m 3 .) Compliance with the \"annual\" standard is determined by whether the three-year average of its annual average PM 2.5 concentration (at each monitoring site in the area) is less than or equal to 12 µg/m 3 ; as proposed, EPA retained the daily (24-hour) standard at 35 µg/m 3 based on the current three-year average of the 98 th percentile of 24-hour PM 2.5 concentrations as established in 2006. PM 10 : EPA retained the current daily PM 10 standard of no more than one exceedance of concentrations of 150 µg/m 3 per year on average over three years; there is no current annual standard for PM 10 . (EPA eliminated the previous annual maximum concentration standard of 50 µg/m 3 in 2006.)\nEPA retained the secondary annual PM 2.5 standard at 15 µg/m 3 .", "Designating geographical areas as not achieving the established NAAQS based on monitoring and analysis of relevant air quality data is a critical step in NAAQS implementation. Section 107(d) of the CAA (42 U.S.C. 7407) establishes the process for designating \"attainment\" (or alternatively \"unclassifiable\") and \"nonattainment\" areas and setting their boundaries, but it allows the EPA administrator some discretion in determining what the final boundaries of the areas will be. Areas are identified as nonattainment when they violate or contribute to the violation of NAAQS.\nUnder Section 107(d)(1) of the CAA, the governor of each state must submit a list identifying designations for a NAAQS \"by such a date as the [EPA] Administrator may reasonably require, but not later than 1 year after promulgation\" of the new or revised NAAQS. EPA must promulgate final designations \"as expeditiously as possible\" but no later than two years from the date of promulgation of the new or revised NAAQS. Section 107(d) of the CAA provides for an extension of up to one year if the EPA administrator \"has insufficient information to promulgate designations.\" The process leading up to final designation determinations has in the past extended beyond the established deadlines as states have continuously reviewed and analyzed data and modelling results with EPA.\nFor the 2013 NAAQS, state submissions were to be submitted by December 13, 2013, and EPA was to promulgate final designations by December 12, 2014.", "The NAAQS designation process is intended as a cooperative federal-state-tribal process in which states and tribes provide initial designation recommendations to EPA for consideration. Section 107(d)(1)(A) (42 U.S.C. 7407) of the CAA requires the governor of each state to submit a list to EPA of all areas in the state \"designating as ... nonattainment, any area that does not meet ( or that contributes to ambient air quality in a nearby area that does not meet ) an air quality standard\" (emphasis added). Areas are identified as \"attainment/unclassifiable\" when they meet the standard or when the data are insufficient for determining compliance with the NAAQS.\nTribes have been encouraged to submit NAAQS designation recommendations. The area designation requirements under the CAA (Section 107(d)) are specific with respect to states but do not explicitly reference Indian tribes or Indian country. EPA follows the same designation process for tribes per Sections 110(o) and 301(d) of the CAA and pursuant to the 1988 Tribal Authority Rule, which specifies that tribes shall be treated as states in selected cases (40 C.F.R. Part 49).\nFollowing state and tribal designation submissions, the EPA Administrator has discretion to make modifications, including to the area boundaries. As required by the CAA (Section 107(d)1(B)(ii)), the agency must notify the states and tribes regarding any modifications, allowing them sufficient opportunity to demonstrate why a proposed modification is inappropriate, but the final determination rests with EPA.\nMeasuring and analyzing air quality to determine where NAAQS are not being met is a key step in determining an area's designation. Attainment or nonattainment designations are made primarily on the basis of three years of federally referenced monitoring data. EPA began developing methods for monitoring fine particles at the time the PM 2.5 NAAQS were being finalized in 1997, and operation of the network of monitors for PM 2.5 was phased in from 1999 through 2000. EPA's final designations for the 2013 particulates NAAQS were based on 2011-2013 monitoring data.\nThe network of monitors and their locations has been modified over time. In conjunction with the October 2006 publication of the revised particulates NAAQS, for example, EPA amended its national air quality monitoring requirements, including those for monitoring particle pollution. The amended monitoring requirements were intended to help federal, state, and local air quality agencies by adopting improvements in monitoring technology. Additional modifications to the PM NAAQS monitoring network were included in the final January 2013 rule.\nEPA also considers a number of other relevant factors when designating nonattainment areas and recommends that states apply these factors in their determinations in conjunction with other technical guidance. Examples of these factors include:\npopulation density and degree of urbanization (including commercial development); location of sources in relation to population; existing emission controls; traffic and commuting patterns and growth rates; weather and transport patterns (meteorology); geography/topography; and jurisdictional boundaries such as counties (or portions of counties), tribal reservations, metropolitan planning areas, and air districts.\nStates and tribes may submit additional information on factors they believe are relevant for EPA to consider.\nEntire metropolitan areas may be designated nonattainment in some cases based on monitoring data in a single location taking into account other factors. States' or tribes' boundary recommendations for an area are to also show that violations are not occurring in those portions of the recommended area that have been excluded and that they do not contain emission sources that contribute to the observed violations.\nThe CAA does not specifically require combining neighboring counties within the same nonattainment area, but it does require the use of metropolitan statistical area boundaries in the more severely polluted areas (§107(d)(4)(A)(iv)). However, unlike the 1997 PM 2.5 standards, Metropolitan Statistical Areas or Consolidated Metropolitan Statistical Areas did not generally serve as the \"presumptive boundary\" for nonattainment areas under the 2013 PM 2.5 standards. EPA made this change when determining nonattainment for the 2006 PM 2.5 standards. Rather than establish a presumption for the minimum size of an area, in its June 2007 guidance EPA instructed states and tribes to evaluate each area on a case-by-case basis. EPA expected that nonattainment areas for the 2006 24-hour PM 2.5 would include counties with monitors violating the 24-hour standard and nearby counties that contribute to that violation.\nEPA also recommended that states and tribes consider using common boundaries for areas to be designated as nonattainment for both the annual and 24-hour PM 2.5 standards. In April 2013, EPA provided similar guidance to states and tribes with regard to the 2013 revisions of the annual PM 2.5 standards. States used this information, in conjunction with air emission and air quality data—as well other relevant factors listed above as recommended in EPA's guidance in determining the boundaries for the designated areas.", "Section 107(d)(1) of the CAA requires states to submit area designation recommendations no later than one year following the promulgation of a NAAQS standard. During November 2013, four states—California, Idaho, Ohio, and Pennsylvania—provided EPA with recommended nonattainment boundaries for the 2013 revised primary annual PM 2.5 standard. Remaining states, the District of Columbia, Puerto Rico, and Guam recommended all areas as attainment or unclassifiable/attainment. EPA also received six tribal recommendations of attainment or unclassifiable/attainment. EPA has indicated that seven tribes are eligible to submit recommendations under Section 107(d), but all tribes were invited to submit recommendations or to comment on state and EPA recommendations.\nEPA responded to these recommendations in August 2014, and promulgated the final area designations as published January 15, 2015. These final designations for the 2013 PM 2.5 NAAQS reflected some modifications to EPA's August 2014 proposed designations. EPA subsequently amended the final designations based on complete, quality assured, and certified air quality data for 2014 recently submitted by several states. These modifications, and a technical correction, were published April 7, 2015.", "The final area designations as amended and published in the April 2015 Federal Register encompass 20 counties or portions of counties (nine areas) in four states—California, Idaho, Ohio, and Pennsylvania—as nonattainment only for the 2013 revised annual PM 2.5 standard. The remaining nearly 3,000 counties in the United States were classified as unclassified or unclassified/nonattainment for the 2013 revised annual standard. Comparatively, EPA's final designations for nonattainment of the 2006 and 1997 PM 2.5 NAAQS (those areas with or contributing to air quality levels exceeding the annual and 24-hour PM 2.5 standards or both) included all or part of 242 counties in 28 states and the District of Columbia.\nAs EPA indicated in its April 2013 area designation guidance to states and tribes, the initial area designations for all 2013 PM 2.5 NAAQS nonattainment areas were classified as \"Moderate\" as provided under Subpart 4 of Part D of Title I of the CAA (Section 188(a)). EPA may reclassify as \"serious\" those nonattainment areas that EPA determines cannot practicably attain the PM 2.5 NAAQS by the applicable attainment date or has not in fact attained the PM 2.5 NAAQS after each area's applicable attainment date has passed. Such a determination would trigger additional implementation requirements on the state that were not previously included in SIPs under Subpart 1 of the CAA.\nAs a result of its review of 2014 air quality data most recently submitted by affected states, EPA's re-designations resulted in 5 fewer areas, 18 fewer counties, and 4 states instead of six previously designated as nonattainment in January 2015 (see Table C-1 ). The re-designations include all 5 counties in two areas previously designated nonattainment in Kentucky, the only 2 counties in one area in Indiana, 7 counties in two areas in Ohio, and 4 counties in two areas in Pennsylvania. The area in Indiana (2 counties) and one of the two areas in Kentucky (2 of the 5 counties) were re-designated unclassifiable. All of the remaining areas were re-designated unclassifiable/nonattainment.\nThe 12 areas in Indian country adjacent to counties in two areas designated nonattainment in California (Los Angeles–South Coast Air Basin and San Joaquin Valley) in the January 2015 final designations were not affected by EPA's April 2015 amendments (see Table D-1 ).\nEPA also designated five areas in Georgia (including two counties in Alabama and South Carolina) as unclassifiable. EPA had deferred its determination for these areas in the January 2015 final designation rule. As indicated earlier, EPA also made a technical correction regarding Allegheny County in Pennsylvania, affirming that the entire county was designated nonattainment. All other designation determinations, including 12 areas in Indian country adjacent to counties in areas designated nonattainment in California, remain as published January 2015.\nCounties included in EPA's amended final nonattainment area designations for the 2013 PM 2.5 NAAQS are indicated in the map in Figure 1 . Although EPA's final designations for the 2013 PM NAAQS do not identify areas violating the 24-hour PM 2.5 standard, as the level is unchanged from the 2006 PM NAAQS, the map distinguishes those counties not previously designated as nonattainment for the annual or the 24-hour PM 2.5 standards.\nWhile the nonattainment areas for the 2013 NAAQS may seem small compared with the approximately 3,000 counties in the United States, PM NAAQS nonattainment counties tend to have larger populations than those in attainment. Roughly 28 million people reside in the 39 counties EPA designated as nonattainment for the 2013 annual PM 2.5 NAAQS. Comparably, at the time of EPA's final designation for the 2006 PM NAAQS, more than 70 million people (over 20% of the U.S. population) lived in the 120 counties designated as nonattainment for the 2006 24-hour PM 2.5 NAAQS. For the areas designated for 1997 PM NAAQS, nearly 90 million people (about 30% of the U.S. population) lived in the 205 counties designated as nonattainment.", "In a final rule published in January 2015, EPA had designated 14 areas in six states—California, Idaho, Indiana, Kentucky, Ohio, and Pennsylvania—as nonattainment only for the 2013 revised annual PM 2.5 standard, the same as the agency proposed in August 2014 (see Table C-1 for state-by-state county/area nonattainment designations). The 14 nonattainment areas included 38 counties or portions of counties, one less than EPA proposed (Lake County, OH). (See the map depicting EPA January 2015 final nonattainment area designations in Appendix E .) EPA also designated 12 areas in Indian country adjacent to counties in two areas designated nonattainment in California: Los Angeles–South Coast Air Basin and San Joaquin Valley (see Table D-1 ).\nIn the January 15, 2015, Federal Register , EPA announced that it was also deferring initial designation for 10 areas in three states by up to one year as a result of data validity issues. Included are all of Florida, all of Tennessee except for three counties, and eight areas in Georgia (including two counties in Alabama and South Carolina). EPA had previously proposed to designate the areas in Tennessee and three of the eight areas in Georgia as unclassifiable. Florida was added as EPA indicated that it had only recently identified data quality issues in that state.\nThe EPA also designated three areas as unclassifiable: Puerto Rico, the U.S. Virgin Islands, and all of Illinois (including two adjacent counties in Indiana as part of the Chicago area and four counties and one city in Missouri included in the St. Louis area) as \"unclassifiable.\" All remaining state areas and areas in Indian country were designated as \"unclassifiable/attainment\" for the annual PM 2.5 standard.", "Four states—California, Idaho, Ohio, and Pennsylvania—identified 12 areas comprising 25 counties, including six partial counties (see Table C-1 for state-by-state county/area nonattainment designations). The recommended designations were primarily based on 2010-2012 monitoring data, criteria and technical guidance from EPA and assistance from its regional offices, and states' own relevant information and criteria. States providing revised determinations based their area designation recommendations on 2011-2013 monitoring data.\nAs required by statute, EPA responded to the states with its recommended modifications to the states' proposed area designations for the 2013 PM 2.5 NAAQS for the annual standard in letters on or about August 19, 2014. As EPA did in implementing the 2006 and 1997 PM 2.5 NAAQS, and as it has done with NAAQS for other criteria pollutants, the agency used its discretion to identify areas as nonattainment in states that had recommended all areas as attainment or unclassifiable/attainment, expand the size of nonattainment areas (i.e., added more counties or portions of counties), or combine areas that states listed as separate areas into a single larger unit. EPA also combined nonattainment counties across state lines into the same nonattainment areas if the counties are part of the same metropolitan area.\nIn its August 2014 response to states, EPA proposed 14 areas comprised of 39 counties—25 whole and 14 partial counties—in six states as nonattainment only for the revised 2013 primary annual PM 2.5 standard. (See table in Appendix C for state-by-state county/area nonattainment designations.) In addition to the four states that had previously identified counties as nonattainment for the 2013 PM 2.5 NAAQS, EPA added seven counties in Kentucky and Indiana, four of which are included in the nonattainment area designated as Louisville-KY/IN. The three additional counties in Kentucky are adjacent to counties in an area previously recommended for nonattainment designation by Ohio; EPA refers to the area as Cincinnati/Hamilton-OH/KY. EPA also designated as nonattainment additional counties in Pennsylvania and Ohio that had not been previously recommended as nonattainment by those states for the 2013 PM 2.5 NAAQS. Several of the 14 nonattainment areas included counties from multiple states.\nIn the August 29, 2014, Federal Register notice announcing the posting of the response letters, EPA also indicated that due to data validity issues it was extending the designation period by up to one year, to December 2015, for 10 counties in Alabama, Georgia, and South Carolina. EPA determined that the information currently available for these areas was insufficient for making designations. In addition, due to data quality assurance issues at several monitoring sites, EPA indicated that it intended to designate as \"unclassifiable\" two territories, one area in Indian country, three areas in Georgia, all counties in Illinois, two counties in Indiana, four counties and a city in Missouri, and all counties except three (Chattanooga area) in Tennessee. EPA indicated that it intended to designate all remaining areas throughout the United States, including areas in Indian country and territories, as unclassifiable/attainment.\nPer the CAA, states and tribes were provided the opportunity to submit additional relevant information to demonstrate why EPA's modifications to the states' recommendations were inappropriate prior to the agency's final designations. Although the CAA provides for up to 120 days, the EPA August 2014 response letters for all states with areas intended to be designated nonattainment urged states to submit \"additional information for the EPA to consider\" by October 29, 2014. Several states, including all those with areas EPA intended to designate nonattainment, submitted their responses to the EPA's August 2014 proposed designations by the October 2014 deadline. As with past designations by EPA, a number of states challenged the agency and maintained support for their original recommendations.", "EPA's final designations for nonattainment of the 2006 and 1997 PM 2.5 NAAQS (those areas with or contributing to air quality levels exceeding the annual and 24-hour PM 2.5 standards or both) included all or part of 242 counties in 28 states and the District of Columbia. More than 2,900 counties in 30 states were designated as attainment/unclassifiable for the 2006 24-hour and 1997 annual PM 2.5 NAAQS. See the map in Figure 2 .\nBased on EPA's April 2015 amended final designations for the 2013 PM 2.5 annual standard, two counties (or portions) of the 20 counties are designated nonattainment for PM 2.5 for the first time, but the majority of the counties overlap with EPA's final nonattainment designations for the 2006 and 1997 PM 2.5 annual and/or 24-hour standards. Of the remaining 18 counties designated as nonattainment for the 2013 revised annual PM 2.5 standard, two have not been previously designated for the annual standard but were designated as nonattainment for the 24-hour standard, and the remaining 16 counties have been previously designated as nonattainment only for the annual standard or for the annual and the 24-hour PM 2.5 standards (see Table in Appendix C ). The map in Figure 3 presents the overlap of the April 2015 amended nonattainment designations for the 2013 PM 2.5 annual standard with those areas designated nonattainment for the 2006 and 1997 PM 2.5 standards.\nEPA final designations published on November 13, 2009, for the 2006 PM NAAQS included 31 areas in 18 states comprising 120 counties (89 counties and portions of 31 additional counties) for nonattainment of only the revised 2006 24-hour PM 2.5 standard. EPA's November 2009 final designations did not include new counties violating the annual standard, as the level was unchanged from the 1997 PM 2.5 NAAQS. EPA's designations for the 1997 PM 2.5 NAAQS included all or part of 204 counties in 20 states and the District of Columbia. Most of the counties were exceeding only the annual standard, only 12 counties were exceeding both the 24-hour and the annual standards, and no counties were exceeding only the 24-hour standard. (For a historical presentation of the 1997 NAAQS designations, see Figure F-1 in Appendix F .)\nTable 1 below illustrates the comparative geographic distribution of counties in areas that EPA designated as nonattainment as amended and published April 7, 2015, for the 2013 PM 2.5 NAAQS and those counties in EPA's final area designations for the 2006 and 1997 PM 2.5 NAAQS.\nIt is difficult to anticipate what effect the EPA final area designations for the 2013 PM 2.5 NAAQS may have on current control measures in these areas. In some of these areas, current measures focused on achieving attainment for the 1997 annual standard and 2006 24-hour PM 2.5 standard may require supplemental or significant modifications to ensure compliance with the stricter annual standard. The impacts could vary substantially from area to area within a state and from state to state depending on many factors, including the type and locations of primary emission sources, current control measures, the extent to which the area is exceeding the standard, topography, weather, etc. For the most part, these measures will be established by the states in their SIPs.\nOnce final designations take effect, they become an important component of state, local, and tribal governments' efforts to reduce fine particle pollution. The designations govern what subsequent regulatory actions states, tribes, and EPA must take in order to improve or preserve air quality in each area.", "Under the CAA, EPA sets the nationwide standard for criteria pollutants, and EPA and states are responsible for placing limits on emissions that contribute to criteria pollution and for regulating entities that emit criteria pollutants. Areas designated as attainment/unclassifiable will not have to take steps to improve air quality, but under the statute they must take steps to prevent air quality from deteriorating to unhealthy levels. For those areas designated as nonattainment, state, local, and tribal governments must outline detailed control requirements in plans demonstrating how they will meet and/or maintain compliance with the 2013 PM 2.5 annual standard. These plans are defined as state implementation plans and referred to as SIPs (TIPs for tribal implementation plans).\nAs discussed previously in this report, in response to a January 2013 D.C. Circuit Court decision EPA has classified all initial nonattainment area designations for the 2013 PM 2.5 annual standard as moderate. EPA had previously implemented the PM 2.5 NAAQS, only under the general implementation provisions in Subpart 1 of the act. Subpart 4 requires EPA to classify areas based on the severity of their fine particle pollution problem. Subpart 1 does not include classification requirements for nonattainment areas but does authorize EPA to establish classifications if the agency deems it appropriate.\nThe Subpart 4 requirements for areas classified as moderate are generally comparable to those of Subpart 1. However, under Subpart 4, states have 18 months from the date of EPA's final designations to submit SIPs, which identify specific regulations and emission control requirements that will bring an area into compliance. Implementing the PM 2.5 NAAQS under Subpart 1 required submission of SIPs three years from the date of EPA's final designations.\nUnder Subpart 4, EPA may reclassify as \"serious\" any nonattainment area that the agency determines cannot practicably attain the PM 2.5 NAAQS by the applicable attainment date or those areas classified as moderate that do not attain the PM 2.5 NAAQS after their applicable attainment date has passed. Subpart 4 introduces additional statutory SIP planning requirements for areas classified as serious. These additional requirements must be reflected in the states' initial SIP submissions.\nStates must achieve attainment for moderate areas as expeditiously as practicable but no later than six years after designation and serious areas must achieve attainment no later than 10 years from designation as nonattainment under Subpart 4. Under the general provisions in Subpart 1, which has no classifications, attainment must be achieved no later than five years from the effective designation date. Both Subpart 4 and Subpart 1 include provisions for extensions.\nEven though EPA has concluded that although in many cases attainment will be reached as the result of several promulgated federal regulations, states will very likely require some local controls because of the requirements of the CAA. All areas no matter their classification of attainment or nonattainment will be required under the CAA to conduct emission inventories which will provide states the basis for states to analyze and estimate the extent to which various sources are contributing to nonattainment.\nTo achieve the most expeditious attainment date for an area, EPA has recommended that states first identify emission reduction programs that have already been adopted and are being implemented at the federal, state, and local levels. The agency also recommends that states evaluate additional control measures and control technologies—reasonably available control measures (RACM) and reasonably available control technology (RACT)—for an area. States are required under the CAA to impose RACM and RACT that can be implemented on sources located in nonattainment areas and to adopt enforceable regulations to ensure these areas will attain as expeditiously as practicable.\nSome have expressed concern that a nonattainment designation may negatively impact an area's economic development, as potential additional requirements associated with achieving compliance may deter investment. EPA and others contend that the benefits associated with the CAA exceed the costs and that, while short-term impacts may vary, historical evidence suggests that impacts on overall economic growth concurrent with environmental (including CAA) regulations are generally less significant than often anticipated.\nAs indicated earlier in this report, based on EPA's January 2015 final designations for the 2013 PM 2.5 annual standard, three counties (or portions) of the 38 counties identified in the rule would be designated nonattainment for PM 2.5 for the first time. Nevertheless, exceeding the 2013 PM 2.5 annual standard may have implications with respect to existing SIPs, the extent of which could vary significantly from area to area based on many factors. In some cases SIPs may require substantial modifications, while in other cases the current SIP may be sufficient to achieve compliance with both standards.", "Section 110(a)(1) of the CAA requires states to submit new or revised SIPs that provide for implementation, maintenance, and enforcement of the new or revised NAAQS. All states are required to submit SIPs that include the basic program requirements for managing air quality required in Section 110(a)(2) of the CAA showing that they have the capacity to attain, maintain, and enforce the revisions associated with the PM 2.5 NAAQS. These \"infrastructure SIP\" submissions must address a number of basic elements, including:\nAmbient air quality monitoring and data systems, Programs for enforcement of control measures, Adequate authority and resources to implement the plan, and Prohibition of interstate pollution transport.\nSection 110(a)(2)(D)(i) of the act contains four elements that revised SIPs must address. The first two elements of this section require each state in its SIP to demonstrate adequate provisions for the ability to prohibit air emissions within the state that (1) contribute significantly to another state's nonattainment of the NAAQS, or (2) interfere with another state's maintenance of the NAAQS.\nThe specific provisions for requirements for all nonattainment areas designated as moderate under Subpart 4 of Part D of the CAA include:\nNonattainment new source review (§172(c)(5)) permit program providing that permits meet the requirements of Section 173 of the act (§189(a)(1)(A)); Attainment demonstration or demonstration that attainment by the applicable attainment date is impracticable (§189(a)(1)(B)); Assurance of implementation of RACM and RACT (§189(a)(1)(C)); Quantitative milestones and demonstration of reasonable further progress (§189(c)); and Control requirements applicable to major stationary sources precursors (§189(e)).", "The EPA typically publishes an \"implementation rule\" that describes the requirements that states and tribes must meet in their implementation plans to achieve and maintain attainment. The rule also provides guidance and procedures for establishing controls to achieve and maintain attainment. In addition, the implementation rule generally includes guidance for submitting a SIP when reaching attainment within the five-year requirement is impractical. The implementation rule takes into account existing (oftentimes pending) federal regulations that contribute to controlling criteria pollutants and their precursors.\nEPA published a proposed implementation rule for the PM 2.5 NAAQS on March 23, 2015. The public comment period was extended to May 29, 2015. The EPA proposal would apply to the 2013 annual PM 2.5 NAAQS, the 2006 24-hour PM 2.5 NAAQS, and \"any future revisions to the PM 2.5 NAAQS.\" EPA also proposed revocation of the 1997 primary annual PM 2.5 standard because it was revised in the 2013 PM NAAQS. The proposal details (1) how air agencies are to meet statutory SIP requirements under Subpart 4 for areas designated nonattainment PM 2.5 NAAQS, (2) \"specific attainment planning requirements\" as they would pertain to areas based on their classification as moderate or serious, and (3) the process for reclassifying moderate areas to serious. The proposed PM 2.5 NAAQS implementation rule would replace EPA's \"2007 PM 2.5 Implementation Rule'' and portions of the ''2008 PM 2.5 New Source Review (NSR) Rule.\" These rules were remanded to EPA by the U.S. Court of Appeals for the D.C. Circuit Court in its January 2013 decision.\nIn June 2014, EPA published a final rule reclassifying 1997 and 2006 nonattainment as \"moderate\" and set a deadline for December 31, 2014, for states to submit outstanding SIP requirements. The basic framework of the implementation rule for the 1997 PM 2.5 NAAQS published in April 2007 included a description of the requirements that states and tribes must meet in their implementation plans to achieve and maintain attainment of the 2006 standards. The 2007 rule was based on statutory requirements under Subpart 1 of the CAA. In addition to the 2007 implementation rule for the 1997 PM 2.5 NAAQS, EPA outlined implementation guidance regarding the development of SIPs to demonstrate attainment with the 2006 PM 2.5 NAAQS in a March 12, 2012, memorandum to EPA regional air directors. The memorandum was withdrawn on June 6, 2013, following the January 2013 D.C. Circuit Court decision.", "EPA expects that in many cases emission reductions from implementing existing national regulations and strategies will provide a framework for helping states achieve attainment with the PM 2.5 NAAQS. These national actions include:\nCross-State Air Pollution Rule; Mercury and Air Toxics Standards; Light-Duty Vehicle Tier 2 Rule; Motor Vehicle Emission and Fuel Standards Tier 3 Rule; Heavy Duty Diesel Rule; Clean Air Nonroad Diesel Rule; Regional Haze Regulations and Guidelines for Best Available Retrofit Technology Determinations; NOx Emission Standard for New Commercial Aircraft Engines; Emissions Standards for Locomotives and Marine Compression-Ignition Engines; Emission Standards for Ignition Engines, Control of Emissions for Nonroad Spark Ignition Engines and Equipment; Category 3 Oceangoing Vessels; Reciprocating Internal Combustion Engines National Emissions Standards for Hazardous Air Pollutants; and New Source Performance Standards and Emissions Guidelines for Hospital/Medical/Infectious Waste Incinerators Final Rule Amendments.", "Areas designated nonattainment, as well as those designated unclassifiable or unclassifiable/attainment for the NAAQS, are also subject to new source review (NSR) requirements. Enacted as part of the 1977 CAA amendments and modified in the 1990 CAA amendments, NSR is designed to ensure that newly constructed facilities or substantially modified existing facilities do not result in violation of applicable air quality standards. NSR provisions outline permitting requirements both for construction of new major pollution sources and for modifications to existing major pollution sources. The specific NSR requirements for affected sources depend on whether the sources are subject to \"Prevention of Significant Deterioration\" (PSD) or nonattainment provisions.\nOver time, EPA has promulgated rules that contain certain NSR program requirements for sources that emit PM 2.5 and its precursors, including SIP modifications to state NSR programs to account for emissions of PM 2.5 . For example, the January 2013 final PM NAAQS includes revisions to the PSD permitting program (rules) with respect to the revised PM NAAQS so as not to \"unreasonably delay\" pending permits and establish a \"grandfather\" provision for permit applications if (1) the permitting agency deemed an application complete by December 14, 2012; or (2) a draft permit or preliminary determination has been issued for public comment by the date the revised 2013 PM NAAQS went into effect (60 days after January 15, 2013, publication in the Federal Register ).", "If new or revised SIPs for attainment establish or revise a transportation-related emissions budget or add or delete transportation control measures, they will trigger \"conformity\" determinations. Transportation conformity is required by the CAA, Section 176(c), to prohibit federal funding and approval for highway and transit projects unless they are consistent with (\"conform to\") the air quality goals established by a SIP and will not cause new air quality violations, worsen existing violations, or delay timely attainment of the national ambient air quality standards.\nOn March 24, 2010, EPA published a final rule amending the transportation conformity regulation primarily to incorporate the October 17, 2006, strengthening of the 24-hour PM 2.5 air quality standard and revocation of the annual PM 10 standard. The final rule, which affects implementation of conformity in PM 2.5 and PM 10 nonattainment and maintenance areas, also addresses a court remand concerning hot-spot analyses as they apply to PM 2.5 and PM 10 , as well as to carbon monoxide and nonattainment and maintenance areas.\nOn March 14, 2012, EPA published a final rule restructuring sections of the conformity rule (40 C.F.R. 93.109 and 93.119) so that existing requirements apply to new or revised NAAQS. EPA also released associated implementation guidance in July 2012. The rule is intended to remove the need to amend the transportation conformity rule merely to reference specific new NAAQS.", "States will have 18 months from April 15, 2015, the effective date of EPA's final designations for the 2013 PM 2.5 NAAQS, to submit SIPs, which identify specific regulations and emission control requirements that are to bring an area into compliance. Following EPA approval of SIPs, implementation through imposition of control measures, where necessary, is to occur for several years. Under CAA, Section 188 of Subpart 4, states must achieve attainment as expeditiously as practicable but no later than the end of the sixth calendar year after designation as nonattainment: December 2021 for the 2013 PM 2.5 standard. (See timeline presented in Appendix B ).\nBecause of health and cost implications, NAAQS decisions have historically been the source of significant concern to some Members of Congress. The evolution and development of the PM NAAQS, in particular, has been the subject of extensive oversight. ( Appendix A presents a chronology of PM NAAQS regulations.) EPA's failure to complete timely review and revision of the NAAQS as required under the CAA has also been an area of concern to some in Congress and others.\nSome Members expressed concerns in hearings, letters to the EPA administrator, and proposed legislation in anticipation of potential changes to the PM NAAQS leading up to the January 2013 final published revisions. Some Members and industry stakeholders had urged EPA to delay the final rule, while others, including some states and various environmental and public health advocacy groups, urged timely completion of a tighter standard.\nChanges to the NAAQS have historically triggered litigation alleging that the standards are too stringent or not stringent enough and often result in delays in implementation. The agency's final designations of nonattainment areas and the implementation of the 2013 PM 2.5 NAAQS are expected to generate further interest and oversight.\nChronology of EPA's National Ambient Air Quality Standards (NAAQS) Regulations for Total Suspended Particulates (TSP) and Particulate Matter (PM) 1971-2013\nEPA first promulgated annual and 24-hour NAAQS for PM 2.5 in July 1997. EPA had previously addressed particulate matter by regulating \"total suspended particles\" (TSP) in 1971, followed by the agency's regulation of PM 10 in 1987.\nComparative Timeline for Implementing the 1997, 2006, and 2013 PM 2.5 NAAQS\nThe timeline presented in Table B-1 reflects the most recent key milestone dates for implementing the 1997 and 2006 NAAQS and estimates for the 2013 PM 2.5 NAAQS, including actual completions. These milestones are driven primarily by statutory requirements. The table mimics an EPA milestone schedule outlined in an April 1, 2003, memorandum to EPA regional administrators that also provided the nonbinding guidance for implementation of the 1997 PM 2.5 area designations and the agency's projected timeline for the 2006 PM 2.5 NAAQS.\nComparison of EPA Nonattainment Areas for the 2013 PM 2.5 Annual Standard and Previous PM 2.5 Standards\nEPA Nonattainment Areas for the 2013 PM 2.5 Annual Standard in Indian Country\nAs noted earlier in this report, the area designation requirements under the CAA (Section 107(d)) are specific with respect to states but do not explicitly reference Indian tribes or Indian country. EPA follows the same designation process for tribes per Sections 110(o) and 301(d) of the CAA and pursuant to the 1988 Tribal Authority Rule, which specifies that tribes shall be treated as states in selected cases. EPA encouraged tribes to submit NAAQS designation recommendations or to comment on state and EPA recommendations.\nEPA indicated that 32 tribes participated in the area designation process for the 2013 annual PM 2.5 standard. Six of the 32 tribes submitted letters with designation recommendations. With the exception of areas in the Indian country of the Pechanga Band of Luiseno Indians, all of tribal lands were designated as part of adjacent state areas. Of the 32 participating tribes, EPA designated 12 tribal land areas adjacent to two areas in California as nonattainment. The remaining 20 participating tribes, including the lands of the Pechanga Band of the Luiseno Mission Indians, and all other areas of the country were designated unclassified/nonattainment.\nTable D-1 below identifies those areas in Indiana country designated by EPA to be nonattainment based on their proximity to state counties in areas designated as nonattainment. For those tribal lands areas designated by EPA other than nonattainment, including those tribes submitting recommendations, see EPA's website \"Area Designations for the 2012 Annual Final Particle (PM 2.5 ) Standard: Tribal Recommendations and EPA Responses for Area Designations ( http://www.epa.gov/pmdesignations/2012standards/tribalrec.htm ).\nCounties in Nonattainment for the 2013 PM 2.5 NAAQS Annual (12 μg/m 3 ): U.S. EPA January 15, 2015, Final Designations and Comparison with the 2006 and 1997 PM 2.5 NAAQS Final Designations\nThe following maps present EPA's final nonattainment area designations as published in the Federal Register on January 15, 2015, which EPA subsequently amended April 7, 2015, based on more current air quality data (2012-2014). The maps include comparisons to 2006 and 1997 PM 2.5 NAAQS final designations.\nBased on EPA's April 2015 amended final designations for the 2013 PM 2.5 annual standard, three counties (or portions) of the 38 counties are designated nonattainment for PM 2.5 for the first time, but the majority of the counties overlap with EPA's final nonattainment designations for the 2006 and 1997 PM 2.5 annual and/or 24-hour standards. Of the remaining 35 counties designated as nonattainment for the 2013 revised annual PM 2.5 standard, five have not been previously designated for the annual standard but were designated as nonattainment for the 24-hour standard, and the remaining 30 counties have been previously designated as nonattainment only for the annual standard or for the annual and the 24-hour PM 2.5 standards. (See Table in Appendix C .)\nCounties included in EPA's January 2015 final nonattainment area designations for the 2013 PM 2.5 NAAQS are indicated in the map in Figure E-1 . Although EPA's final designations for the 2013 PM NAAQS do not identify areas violating the 24-hour PM 2.5 standard, as the level is unchanged from the 2006 PM NAAQS, the map distinguishes those proposed counties not previously designated as nonattainment for the annual or the 24-hour PM 2.5 standards. The map in Figure E-2 presents the overlap of the January 2015 nonattainment designations for the 2013 PM 2.5 annual standard with those areas designated nonattainment for the 2006 and 1997 PM 2.5 standards.\nCounties in Nonattainment for the 1997 PM 2.5 NAAQS Annual (15 μg/m 3 ) and/or 24-Hour (65 μg/m 3 ) Standards: U.S. EPA Final Designations\nThe figure below provides a historical presentation of counties designated as nonattainment for the 1997 PM 2.5 NAAQS. All counties were designated nonattainment for the PM 2.5 annual standard or both the annual and 24-hour PM 2.5 standards. No counties were designated nonattainment only for the 24-hour PM 2.5 standard." ], "depth": [ 0, 1, 1, 1, 2, 1, 2, 2, 2, 2, 1, 2, 3, 2, 2, 2, 1 ], "alignment": [ "h0_title h1_title", "h0_full", "", "", "", "h0_title h1_title", "h0_full h1_full", "h1_full", "", "h0_full h1_full", "", "", "", "", "", "", "" ] }	{ "question": [ "How were counties designated as nonattainment?", "How does their new status compare to their status before 2015?", "What authority does the EPA have to designate nonattainment?", "What areas did the EPA's January 2015 designations cover?", "How did the EPA's April 2015 designations differ from the January designations?", "What new designations were introduced in April?" ], "summary": [ "Based on its review of recently submitted 2014 air quality data, EPA's April 2015 modifications to the final area designations for the 2013 PM NAAQS resulted in nine areas consisting of 20 counties in four states designated as nonattainment.", "All but two of the 20 counties have been previously designated as nonattainment for the 2006 and/or the 1997 PM2.5 NAAQS.", "In accordance with a decision by the U.S. Court of Appeals for the District of Columbia Circuit on January 4, 2013, EPA classified all areas determined to be in nonattainment as \"moderate\" nonattainment areas under the authority of Section 188 of the CAA.", "In comparison to the nonattainment area designations as amended by EPA in April 2015, EPA's final designations published in January 2015 were composed of 14 areas comprising 38 counties in 6 states.", "The EPA April 2015 amended designations changed the nonattainment designation of two areas in Pennsylvania (four counties) and one each in Ohio (three counties) and Ohio (four counties)/Kentucky (three counties) to \"unclassifiable/attainment\" and one area in Kentucky (two counties)/Indiana (two counties) to \"unclassifiable.\"", "EPA also designated five areas in Georgia (including two counties in Alabama and South Carolina) as unclassifiable." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 1 ], "summary_paragraph_index": [ 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-13-607	{ "title": [ "Background", "Flood Zone Designations", "Legislative Authority for and Changes to NFIP", "Most Subsidized Policies Continue to Receive Discounted Rates and Have Mixed Characteristics Relative to Financial Indicators", "Most Policies Estimated to Still Qualify for Subsidized Rates, but their Numbers Are Expected to Decline over Time", "Similarities and Differences between Properties with Subsidized versus Full-Risk Rates", "Data Constraints Limit FEMA’s Ability to Estimate the Cost of Subsidies and Establish Full-Risk Rates on Previously Subsidized Policies", "Historical Cost of Subsidies Difficult to Estimate", "Mandated Information on Claims and Premiums Associated with Subsidized Policies", "FEMA Lacks the Information Needed to Establish Full-Risk Rates That Reflect Risk of Flooding for Remaining Subsidized Policies", "Several Options Exist for Reducing the Financial Impact of Remaining Subsidized Policies", "Adjust the Pace of the Elimination of Subsidies", "Target Assistance or Remaining Subsidies Based on Financial Need of Property Owner", "Increase Mitigation Efforts", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Number, Location, and Financial Characteristics of Properties That Continue to Receive Subsidized Rates Compared with Full-Risk Rate Properties", "Estimated Historic Financial Impact of Subsidized Properties on NFIP", "Options to Reduce the Financial Impact of Remaining Subsidized Properties", "Appendix II: Comparison of Remaining Subsidized Policies with Nonsubsidized Policies in Special Flood Hazard Areas", "Selected Counties", "Appendix III: Comments from the Department of Homeland Security", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Since the inception of NFIP in 1968, FEMA has sought to have local communities adopt floodplain management ordinances and offered flood insurance to their residents in an effort to reduce the need for government assistance after a flood. Premium subsidies were seen as a way to achieve the program’s objectives by ensuring that owners of existing properties in flood zones could afford flood insurance. NFIP has three components: (1) the provision of flood insurance; (2) the requirement that participating communities adopt and enforce floodplain management regulations; and (3) the identification and mapping of floodplains. Community participation in NFIP is voluntary. However, communities must join NFIP and adopt FEMA-approved building standards and floodplain management strategies in order for their residents to purchase flood insurance through the program. Additionally, communities with Special Flood Hazard Areas (SFHA)—areas at high risk for flooding— must participate in NFIP to be eligible for any form of disaster assistance loans or grants for acquisition or construction purposes in connection with a flood. Participating communities can receive discounts on flood insurance if they establish floodplain management programs that go beyond the minimum requirements of NFIP. FEMA can suspend communities that do not comply with the program, and communities can withdraw from the program. As of May 2013, about 22,000 communities voluntarily participate in NFIP.\nPotential policyholders can purchase flood insurance that covers both buildings and contents for residential and commercial properties. NFIP’s maximum coverage limit for single-family residential policyholders is $250,000 per unit for buildings and $100,000 per unit for contents. For commercial policyholders, the maximum coverage is $500,000 per unit for buildings and $500,000 for contents.\nCurrent law prohibits federally regulated lenders, federal agency lenders, and government-sponsored enterprises for housing from making loans for real estate in SFHAs where the community is participating in NFIP, unless For structures deemed not to the property is covered by flood insurance.be in SFHAs—that is, that have moderate to low risk of flooding—the purchase of flood insurance is voluntary.", "NFIP studies and maps flood risks, assigning flood zone designations from high to low depending on the risk of flooding. SFHAs are high-risk areas that have a 1 percent or greater annual chance of flooding and are designated as zones A, AE, V, or VE (table 1). Areas designated as V or VE are located along the coast. Areas with a moderate-to-low risk for flooding are designated as zones B, C, or X. Areas where analysis of the flood risk has not been conducted are designated as D zones.\nNFIP offers two types of flood insurance premiums: subsidized and full- risk. Subsidized rates are not based on actual flood risk. According to FEMA, subsidized rates represent only about 40 percent to 45 percent of rates that reflect full flood risk. (We discuss how FEMA determines rates in more detail later in this report.) The type of policy and the subsequent rate a policyholder pays depend on several property characteristics—for example, whether the structure was built before or after a community’s FIRM had been issued and the location of the structure in the floodplain. Structures built after a community’s FIRM was published must be built to meet FEMA building standards and pay full-risk rates. Some communities may implement activities that exceed the minimum standards.\nPrior to the Biggert-Waters Act, subsidized policies accounted for about 21 percent of all NFIP policies, while those with full-risk premiums accounted for the remaining 79 percent. While the percentage of subsidized policies has decreased since the program was established, the number of these policies has stayed fairly constant (see fig. 1).\nAs communities were mapped and joined NFIP, new subsidized policies were added. As shown in figure 2, the percentage change in subsidized policies generally followed the same trend as the percentage change in total policies.\nEven with highly discounted rates, subsidized premiums are, on average, higher than full-risk premiums. The premiums are higher because subsidized pre-FIRM structures generally are more prone to flooding (that is, riskier) than other structures. In general, pre-FIRM properties were not constructed according to the program’s building standards or were built without regard to base flood elevation—the level relative to mean sea level at which there is a 1 percent or greater chance of flooding in a given year. For example, the average annual subsidized premium with October 2011 rates for pre-FIRM subsidized properties located in zone A was about $1,200, while the average annual premium for post-FIRM properties in the same zone paying full-risk rates was about $500. Post- FIRM structures have been built to flood-resistant building codes or mitigation steps have been taken to reduce flood risks; thus, they are generally less flood-prone than pre-FIRM properties.", "The authority for subsidized rates was included in the National Flood Insurance Act of 1968 as an incentive for communities to join the program by adopting and enforcing floodplain management ordinances that would reduce future flood losses. Subsidies were intended to be only part of an interim solution to long-term adjustments in land use. Congress also authorized the use of subsidized premiums because charging rates that fully and accurately reflected flood risk would be a burden to some property owners. Table 2 shows the sources of legislative authority for various subsidized premium rates.\nSince NFIP was established, Congress has enacted legislation to strengthen certain aspects of the program. The Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for properties in SFHAs that are secured by mortgages from federally regulated lenders. This requirement expanded the overall number of insured properties, including those that qualified for subsidized premiums. The National Flood Insurance Reform Act of 1994 expanded the purchase requirement for federally backed mortgages on properties located in an SFHA. The Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004 established a pilot program to mitigate properties that continually suffered from severe repeated flood losses and offer grants for properties with repetitive insurance claims.loss” properties who refuse to accept any offer for mitigation actions face higher premiums.\nOwners of these “repetitive More recently, in July 2012, Congress passed the Biggert-Waters Act.The act extended the authorization for NFIP for 5 years and made reforms to NFIP that include eliminating existing subsidies for any residential property which is not a primary residence; any severe repetitive loss property; any property that has incurred flood-related damage in which the cumulative amounts of payments under this title equaled or exceeded the fair market value of such property; any business property; and any property that has experienced or sustained substantial damage exceeding 50 percent of the fair market value or substantial improvement exceeding 30 percent of the fair market value.\nRates that fully reflect flood risk for the types of properties listed previously are to be phased in over several years—with increases of 25 percent each year—until the average risk premium rate for such properties is equal to the average of the risk premium rates for properties within any single risk classification.\nFurthermore, according to the Biggert-Waters Act, other properties will no longer qualify for subsidies under the following circumstances: any NFIP policy that has lapsed in coverage, as a result of the deliberate choice of the policyholder; and any prospective insured who refuses to accept any offer for mitigation assistance (including an offer to relocate) following a major disaster.\nThe act also stated that no new subsidies would be provided to any property not insured by NFIP as of the date the act was enacted; any property purchased after the date of enactment of the act. (Thus, property sales trigger elimination of subsidies.)\nThe Biggert-Waters Act also requires FEMA to adjust rates to accurately reflect the current risk of flood to properties when an area’s flood map is changed, subject to any other statutory provision in chapter 50 of Title 42 of the United States Code. FEMA is determining how this provision will affect properties that were “grandfathered” into lower rates. In addition, the act allows insurance premium rate increases of 20 percent annually (previously capped at 10 percent), establishes minimum deductibles, and requires FEMA to include the losses from catastrophic years in determining premiums that are based upon “average historical loss year.” It also incorporates a definition of “severe repetitive loss property” for single-family properties and required FEMA to establish a reserve fund, among other things.", "The Biggert-Waters Act eliminated subsidies on approximately 438,000 policies, and with the continuing implementation of the act, more of the subsidies on the approximately 715,000 remaining policies are expected to be eliminated over time. In terms of characteristics, the geographic distribution of remaining subsidized policies was similar to the distribution of all NFIP policies. Other characteristics we analyzed—indicators of home value and owner income—were different for the policies that continue to qualify for subsidized premium rates compared to those with full-risk rates. In particular, counties with higher home values and income levels tended to have larger percentages of remaining subsidized policies compared to those with full-risk rates.", "We estimated that the Biggert-Waters Act eliminated subsidies for approximately 438,000 policies, and that about 715,000 policies continue to qualify for subsidized premium rates (remaining subsidized policies). Before the act, subsidized policies represented about 21 percent of all policies and nearly all subsidized policies were in the high risk areas. After the initial reduction of subsidies, the approximately 715,000 policies that would continue to receive subsidized rates represent about 13 percent of all NFIP policies and 21 percent of all SFHA policies.elimination affected various property types, including nonprimary residences, businesses, and severe repetitive loss properties. About 92 percent of the projected remaining subsidized policies cover single-unit primary residence properties and more than 99 percent cover properties in SFHA areas. The continuing implementation of the act is expected to decrease the number of subsidized policies. However, FEMA faces a number of implementation challenges and elimination of subsidies as required by the act will likely take years.\nAs mandated by the Biggert-Waters Act, FEMA has begun phasing out subsidized premiums for business properties, residential properties that are not primary residences, and single-family (1-4 units) severe repetitive loss properties. According to our analysis of NFIP data, the 438,000 policies that would no longer qualify for subsidized premium rates included about 345,000 nonprimary residential policies, about 87,000 business policies, and about 9,000 single-family severe-repetitive loss policies. Nearly all subsidized policies for primary residential properties continue to have subsidized rates. Figure 3 summarizes our analysis of the immediate decreases in subsidized policies stemming from the act, by property type.\nSubsidies on most of the approximately 715,000 remaining subsidized policies should be eliminated over time. Under provisions of the Biggert- Waters Act, most policies no longer qualify for subsidies if NFIP coverage lapsed or the properties were sold or substantially damaged. We estimated that with implementation of the changes in the act addressing sales and coverage lapses, the number of subsidized policies could decline by almost 14 percent per year (see fig. 4). At this rate, the number of subsidized policies would be reduced by 50 percent in approximately 5 years. After about 14 years, fewer than 100,000 subsidized policies would remain. We based our estimate of the annual decline rate on the average experience of the last 10 years of NFIP data using policies with similar characteristics, but the actual outcomes and time required for subsidies to be reduced could vary. For example, the average annual decline rate for the most recent 3 years of NFIP data was about 11 percent. At this rate, the number of subsidized policies would be reduced by 50 percent in approximately 7 years, and after 18 years, fewer than 100,000 subsidized policies would remain. Additionally, changes from the act may affect the behavior of policyholders. For example, policyholders might not allow their coverage to lapse if they knew that they would lose their subsidy or they might not be able to sell their properties at the same rate if the flood insurance was more expensive.\nThe Biggert-Waters Act will likely require several years for FEMA to fully implement. FEMA officials acknowledged that they have data limitations and other issues to resolve before eliminating some subsidies. We projected that subsidies on most of the policies required to be eliminated by the act could be identified in FEMA’s data; however, data limitations make implementation of some provisions of the act more difficult. For example, the act eliminated subsidies for residential policies that covered nonprimary residences. FEMA has data on whether a policy covers a primary residence but officials stated that it may be outdated or incorrect. In the past, FEMA did not collect this information for policy renewal so it may have changed over time. The act also eliminated subsidies for business policies. However, FEMA categorizes policies as residential and nonresidential rather than residential and business. As a result, FEMA does not have the information to identify nonresidential properties, such as schools or churches that are not businesses and continue to qualify for a subsidy. Beginning in October 2013, FEMA will require applicants to provide residential and business status for new policies and renewals.\nAdditionally, the act states that subsidies will be eliminated for policies that have received cumulative payment amounts for flood-related damage that equaled or exceeded the fair market value of the property, and for policies that experience damage exceeding 50 percent of the fair market value of the property after enactment. Currently, FEMA is unable to make this determination as it does not maintain data on the fair market value of properties insured by subsidized policies. FEMA officials said that they are in the process of identifying a data source.\nFEMA will have to determine how to apply certain provisions of the Biggert-Waters Act before eliminating some subsidies. For example, the act eliminates subsidies for severe repetitive loss policies and provides a definition of severe repetitive loss for single-family homes. However, it requires FEMA to define severe repetitive loss for multifamily properties. FEMA has not yet developed this definition and we estimate that 1,000 multifamily severe repetitive loss policies will continue to receive a subsidy until the definition is developed and applied. The act also eliminates subsidies when properties are purchased. However, FEMA has not yet determined how to apply this provision of the act to condominium associations. Finally, FEMA officials stated that they have been applying the provisions of the act that eliminate subsidies only to pre-FIRM policies. As a result, approximately 5,500 subsidized post-FIRM V zone structures built before 1981 that currently receive subsidized rates would continue to qualify for subsidies.", "We analyzed a number of characteristics of the remaining subsidized policies. First, they had a geographic distribution similar to all NFIP policies. Second, while higher percentages of remaining subsidized policies than policies with full-risk rates were found in counties with higher median home values, remaining subsidized policies generally carried smaller amounts of coverage. Third, counties with the highest median household incomes and counties at the lower end of our income ranking had larger percentages of remaining subsidized policies compared to the percentage of policies with full-risk rates. We limited our analysis of the similarities and differences between remaining subsidized policies and the policies with full-risk rates (nonsubsidized) to single-unit primary residences in SFHAs.\nOur analysis of NFIP data on the location of properties that would continue to receive subsidized rates shows that remaining subsidized policies would cover properties in every state and territory in which NFIP operates. Florida (133,000), Louisiana (65,000), California (64,000), New Jersey (48,000), Texas (44,000), and New York (43,000) had the highest numbers of remaining subsidized policies. These states with the addition of South Carolina also had the highest number of total NFIP policies. In contrast, Indiana, Michigan, and Puerto Rico had the highest percentages of remaining subsidized policies as a fraction of total NFIP policies in the state, representing more than 40 percent of all NFIP policies in those states. Figure 5 shows the estimated number of remaining subsidized policies by state and the remaining subsidized policies as a percentage of total NFIP policies in the state.\nStates with the highest percentage of remaining subsidized policies did not necessarily have the highest percentage of total NFIP policies. Some states had a higher percentage of remaining subsidized policies than the percentage of total NFIP policies in the state (see fig. 6). For example, California had 9 percent of all remaining subsidized policies and about 5 percent of all NFIP policies, and New York had 6 percent of all remaining subsidized policies and 3 percent of all policies. Other states had a larger percentage of total NFIP policies than subsidized policies. For example, Florida had 37 percent of total NFIP policies and about 19 percent of all remaining subsidized policies and Texas had about 12 percent of all policies and 6 percent of remaining subsidized policies.\nWhen analyzed by county, the remaining subsidized policies were located in about 2,930 of the more than 3,100 counties with NFIP policies. The number of remaining subsidized policies in the counties varied greatly. We estimated that 151 counties had only one remaining subsidized policy, and another 1,137 had fewer than 25 remaining subsidized policies. We also estimated that 247 counties had more than 500 of these policies. Ten of these counties had more than 10,000 remaining subsidized policies, 4 of which were in Florida, 2 in Louisiana, and 1 each in California, New Jersey, New York, and Texas. Pinellas County, Florida, had the highest number of estimated remaining subsidized policies at more than 28,000.\nCounties with the highest median home values tended to have a higher percentage of remaining subsidized policies than nonsubsidized policies. For our analysis of the financial characteristics of remaining subsidized and nonsubsidized policies, we selected 351 counties that represented See appendix II more than 78 percent of remaining subsidized policies.for more information about the 351 counties we selected for our analysis. Because FEMA lacks data on home values, we used several indicators of home value to compare properties in these counties that would continue to receive subsidized rates with properties charged full-risk rates (see table 3). Most of the policies were in the counties with relatively high home values. For example, the median home value for more than half of the selected counties was in the top quartile of counties nationwide. Further, the median home value for more than one-third of the selected counties was in the top 10 percent of median home values for all counties nationwide.\nThe results of our analysis of home values varied depending on the indicator and the location. Our analysis showed that in the counties with the highest and lower median home values the percentage of remaining subsidized policies was larger than nonsubsidized policies in SFHAs. For example, about 43 percent of total NFIP policies in the selected 351 counties were in the highest decile of median home values, but about 43 percent of the remaining subsidized policies compared with about 35 percent of nonsubsidized policies were in these counties. Very few policies of any type were in counties in the lower deciles of median home value (deciles 6-10), however in these counties there were higher percentages and larger numbers of remaining subsidized policies than nonsubsidized policies (see table 4).\nOur analysis of coverage amounts found that remaining subsidized policies generally carried smaller NFIP coverage amounts than nonsubsidized policies in SFHAs, a possible indicator of lower home values. As shown in figure 7, a smaller percentage of remaining subsidized policies had the maximum coverage of $250,000 than nonsubsidized policies (29 percent versus about 50 percent). Also, a larger percentage of remaining subsidized policies had less than $100,000 in building coverage than nonsubsidized policies (26 percent versus 8 percent). The results of our comparison of coverage amounts could indicate that the subsidized policies were for lower-valued properties, but the perceived flood risk and cost of coverage also could affect the coverage amount. Finally, a larger percentage of V-zone policies had the maximum coverage amount than the A-zone policies but represented a small fraction of all SFHA policies. Further details of our analysis by flood zone appear in appendix II.\nWe analyzed NFIP coverage amounts (on single-unit primary residence nonsubsidized policies and remaining subsidized policies in SFHAs) and county median home values together and found that higher coverage amounts were associated with higher county median home values. Counties with higher median home values had larger percentages of both remaining subsidized policies and nonsubsidized policies at the NFIP maximum coverage level of $250,000 than counties with lower median home values. In addition, counties with lower median home values generally had larger percentages of remaining subsidized policies and nonsubsidized policies with lower amounts of coverage (less than $100,000) than counties with higher median home values. However, nonsubsidized policies consistently had higher amounts of coverage. In every decile of county median home value, a larger percentage of nonsubsidized policies had the maximum amount of NFIP coverage than remaining subsidized policies, while a smaller percentage of nonsubsidized policies had lower amounts of coverage (less than $100,000) than remaining subsidized policies. Additional details of the combined analysis are presented in appendix II.\nWe performed five case studies to illustrate results in specific counties. The case studies offer a more in-depth, within county view (how characteristics vary across cities within select counties). We performed the NFIP coverage and median home value analyses, but also used publicly available real estate data to examine city-level median home values within the county. These cases are illustrative only and are not nationwide indicators, and some of the results from these case studies matched our earlier results and some did not. Los Angeles County is one illustration of how NFIP policies compared within a county, but other counties had different results. The results of the other case study counties are presented in appendix II.\nCase Study: Los Angeles County, California\nLos Angeles County had a median home value in the top 10 percent of all counties and consistent with our earlier results had a higher percentage of remaining subsidized policies than nonsubsidized policies in SFHAs (more than twice as many policies).\nConsistent with our analysis of NFIP coverage amounts, a lower percentage of remaining subsidized policies in Los Angeles County had maximum building coverage than nonsubsidized policies (59 versus 77 percent), but a higher percentage had building coverage less than $100,000 (6 versus 3 percent).\nHowever, Los Angeles County also had a high percentage of both subsidized and nonsubsidized policies with maximum NFIP coverage and a low percentage of both types of policies at lower levels of coverage.\nOur analysis of the city median home value in Los Angeles County found that about 88 percent of remaining subsidized and nonsubsidized policies were in cities in the second and third quartiles of median home value.\nAdditionally, although Los Angeles County is located on the Pacific Ocean, it had 120 V-zone (high-risk velocity coastal) policies compared to about 6,000 A-zone (high-risk) policies. Ninety-seven of the V-zone policies were remaining subsidized policies and all were located in a single city with a median home value in the top quartile of median home value.\nComparing policies in SFHAs in the selected counties, our analysis showed that in counties with the highest and lowest median household incomes, there were a larger percentage of remaining subsidized policies than nonsubsidized policies. We used county median household income from the 2007 through 2011 ACS 5-year data for all U.S. counties as an indicator of household income for property owners. We analyzed the data to determine relative ranking of the 351 selected counties relative to all counties and compared the number and percentage of properties that would continue to receive subsidized rates with properties charged full- risk rates. In general, most of all of the policies in our analysis were in counties with higher median household income (deciles 1-4), with fewer policies in the counties with lower median household income counties. However, counties in the highest and lowest decile in median household income had higher percentages of remaining subsidized policies than nonsubsidized policies (see table 5). For example, 19 percent of all policies in the 351 selected counties were in the highest decile of median household income. But about 29 percent of the remaining subsidized policies were in these counties versus about 11 percent of nonsubsidized policies. One percent of all policies in the selected counties were in the lowest decile of median household income. But 4 percent of the remaining subsidized policies were in these counties versus 1 percent of nonsubsidized policies.\nWe also examined home value and household income indicators together. Selected counties with the highest median household incomes and highest median home values had higher percentages of remaining subsidized policies than nonsubsidized policies in SFHAs. For example, 78 of the 351 selected counties were in the highest decile category for both median home value and median household income. About 26 percent of remaining subsidized policies were in these counties, compared with 7 percent of nonsubsidized policies. Selected counties with higher median household income generally also had higher median home values, but counties with higher median home values did not always have higher median incomes. Higher percentages of remaining subsidized policies than nonsubsidized policies were found in counties with lower median home values and lower median household incomes. More detail on these results can be found in appendix II.", "The cost of subsidized policies to NFIP can be measured in terms of forgone net premiums (the difference between subsidized and full-risk rates, adjusted for premium-related expenses). However, FEMA does not have the historical program data needed to make this calculation. Because of this constraint, estimating the historic cost of subsidies on NFIP is difficult. FEMA also does not have information on the flood risk of properties with previously subsidized rates, which is needed to establish full-risk rates for these properties going forward.", "FEMA does not have sufficient data to estimate the aggregate cost of subsidies. Since fiscal year 2002, FEMA’s annual actuarial rate reviews have included an estimated range of the percentage of the full-risk premiums that policyholders with subsidized premiums pay. (We refer to this as the subsidy rate). FEMA based these estimated ranges, in part, on the analysis in a 1999 report conducted by PricewaterhouseCoopers (PwC), which sampled pre-FIRM structures around the nation and collected information on elevation of the properties to calculate what the full-risk rates on these properties would have been. FEMA has continued to use this report as the basis for estimating the percentage of the full-risk rate that subsidized policyholders pay. Since fiscal year 2002, NFIP has reported that the estimated subsidized premium rate is between 35 and 45 percent of the full-risk premium rate.said that they did not report an estimate before the 1999 PwC report. Therefore, determining forgone premiums without these estimates would be difficult because the percentage of subsidized premium rates compared with full-risk rates may have varied considerably over time.\nAlthough it was not possible to estimate forgone premiums since the program was established, the following provides information about the impact of subsidized premiums on the program.\nData are not available from FEMA to estimate the forgone premiums before 2002. Using FEMA’s estimated range of subsidy rates to actual premiums collected from 2002 through 2011, we conducted an analysis to estimate the premiums that could have been collected if subsidies had not existed over that period. FEMA officials have clarified their estimate that 2011 subsidized premiums represented 40 percent to 45 percent of full-risk premium rates, explaining that after paying for all administrative and other expenses, the remaining premiums would cover about 40 to 45 percent of the expected average long-term annual losses.\nPremiums are used to cover not only claims, but also operating expenses and any debt. According to FEMA officials, 17 percent of forgone premiums would be needed to pay operating expenses that would increase if subsidized premiums were increased. Such expenses consist of premium taxes (about 2 to 2.5 percent of premium) and agents’ commissions associated with the private insurance companies that sell and service NFIP policies (about 15 percent of premium). Therefore, about 83 percent would be available to help cover fixed expenses (which do not vary with premiums) and to pay losses. During years when losses are less than average, the program potentially generates a surplus. During higher-loss years, accumulated surplus could be used to help pay the insured flood losses that exceed that year’s net premium revenue and reduce the likelihood of needing to borrow from Treasury. Therefore, additional premiums could have helped offset FEMA’s need to borrow or put the agency in a better position to manage catastrophic losses or repay its debt.\nA similar number but higher percentage of policies were subsidized in the earlier years of the program, therefore, most of the program’s premium revenue did not reflect the risk of flooding. In 1978 about 76 percent of policies were subsidized compared with about 20 percent in 2012. The Flood Disaster Protection Act of 1973 expanded the use of premium subsidies to encourage the purchase of flood insurance and introduced mandatory flood insurance purchase requirements in SFHAs as a condition of receipt of direct federal and federally related financial assistance related to the property. For the next 7 years, the subsidized premiums remained in effect. During this period, nearly every community with a flood hazard joined NFIP, and policies in force reached 2 million by 1979.\nThe percentage of full-risk premiums that policyholders with subsidized rates paid was also lower than today. When the program began, NFIP administrators set the subsidized rates on the basis of what they considered affordable. However, from 1981 through 1986, FEMA initiated a series of rate increases for all subsidized policies. The increases were intended to generate premiums at least sufficient to cover expenses and losses relative to the historical average loss year when combined with the premiums paid by policyholders with full-risk rates. Since 1986, additional rate increases have been made to bring the average program premium to a level intended to be sufficient to pay for the historical average loss year and have additional funds available to service its debt to Treasury.", "As mandated in the Biggert-Waters Act, we also calculated the claims and premiums attributable to all policies that received subsidies (historically subsidized policies) since 1978 and to policies with characteristics similar to remaining subsidized policies (remaining subsidized policies). While the difference between claims and premiums is not a meaningful measure of the costs of subsidies because premiums are used to pay not only claims but other costs of administering the program, they provide additional descriptive information. Moreover, because flooding is a highly variable event, with losses varying widely from year to year, even analysis of the decades of historical data available could lead to unreliable conclusions about actual flood risks. Based on our analysis of NFIP claims data, we calculated the amount of claims attributable to historically subsidized policies from 1978 through 2011 to have been $24.1 billion, of which $15.2 billion is attributable to remaining subsidized policies. NFIP had $28.5 billion in claims for policies charged at the full-risk premium rates in the same time period. Based on data provided by FEMA on all subsidized premiums, we calculated the amount of premiums collected for all historically subsidized policies from 1978 through 2011 to have been $26.2 billion, of which $15.7 billion is attributable to remaining subsidized policies. Comparatively, FEMA collected $33.7 billion in premiums for policies with full-risk premium rates for the same time period.", "FEMA generally lacks information to establish full-risk rates that reflect flood risk for active policies that no longer qualify for subsidies as a result of the Biggert-Waters Act and also lacks a plan for proactively obtaining The act requires FEMA to phase in full-risk rates on such information.these policies. Federal internal control standards state that agencies should identify and analyze risks associated with achieving program objectives, and use this information as a basis for developing a plan for mitigating the risks. In addition, these standards state that agencies should identify and obtain relevant and needed data to be able to meet program goals.\nSurveyors calculate the elevation of the first-level of a structure in relation to the expected flood level, or base flood elevation. According to FEMA, obtaining such a certificate typically would cost a policyholder from $500 to $2,000 or more. elevation as one of the factors in its model to set full-risk rates for buildings constructed after the publication of a community’s FIRM. FEMA officials said that although a variety of factors, such as occupancy status and number of floors, are used to determine these rates, the elevation of the building is the most important factor. FEMA also uses elevation certificates as administrative tools. Elevation certificates are required for some properties, but optional for others. For example, communities participating in NFIP must obtain the elevation information for all new and substantially improved structures. In addition, FEMA requires elevation certificates to determine rates for post-FIRM buildings located in high-risk areas, the A and V zones. However, an elevation certificate generally has not been required for pre-FIRM buildings that previously received subsidized rates because information about elevation was not used in setting subsidized rates. According to NFIP data, property elevations relative to the base flood elevation are unknown for 97 percent of both the 1.15 million historically subsidized policies and the more than 700,000 remaining subsidized policies in SFHAs. As of October 2013, FEMA is requiring applicants for new policies on pre-FIRM properties that previously received subsidized rates and property owners whose coverage has lapsed to provide elevation certificates.\nFEMA is phasing-in rate increases for other policyholders who no longer qualify for subsidies and is relying on policyholders to voluntarily provide elevation certificates. With the 1999 PwC report as a basis for an estimate of the full-risk rate for subsidized policies, FEMA officials said they have been using the assumption that subsidized rates are about half of the full-risk rates and have begun implementing premium increases of at least 100 percent for all active policies that are having their subsidies eliminated. According to FEMA, they will phase in these increases at 25 percent per year, consistent with the act, for several years until the rates reach a specific level or until policyholders supply an elevation certificate that indicates the property’s risk, allowing FEMA to determine the full-risk rate. If policyholders voluntarily obtain an elevation certificate that shows that their risk is lower, they may be able to qualify for lower rates or it may not take as many years of rate increases to reach the full-risk rate. However, policyholders at higher risks could be subject to even higher rates. According to FEMA officials, it will take several years for previously subsidized policies to reach a full-risk rate and the agency will communicate to policyholders to encourage them to purchase elevation certificates to determine their actual flood risk. For example, FEMA has posted information on its website about program changes as a result of the Biggert-Waters Act and the importance of obtaining elevation certificates.\nAlthough subsidized policies have been identified as a risk to the program because of the financial drain they represent, FEMA does not have a plan to expeditiously and proactively obtain the information needed to set full- risk rates for all of them. Instead, FEMA will rely on certain policyholders to voluntarily obtain elevation certificates. Those at lower risk levels have an incentive to do so because they can qualify for lower rates. However, policyholders with higher risk levels have a disincentive to voluntarily obtain an elevation certificate because they could end up paying an even higher premium. Without a plan to expeditiously obtain property-level elevation information, FEMA will continue to lack basic information needed to accurately determine flood risk and will continue to base full- risk rate increases for previously subsidized policies on limited estimates. As a result, FEMA’s phased-in rates for previously subsidized policies still may not reflect a property’s full risk of flooding, with some policyholders paying premiums that are below and others paying premiums that exceed full-risk rates. As we have previously found, not accurately identifying the actual risk of flooding increases the likelihood that premiums may not be adequate and adds to concerns about NFIP’s financial stability.", "Through our previous work as well as interviews we conducted and literature we reviewed for this report, we identified three broad options that could help address NFIP’s financial situation: (1) adjust the pace of the elimination of subsidies, (2) target assistance or remaining subsidies by the financial need of property owners, and (3) increase mitigation efforts. In prior work, we discussed similar options for addressing the impact of subsidized policies and the work we conducted for this report confirmed that, with some modifications to reflect the changes from the Biggert-Waters Act, these were still generally the prevailing options. addition, our previous and current work have shown that each of the options has advantages and disadvantages in terms of the impact on the program’s public policy goals and would involve trade-offs that would have to be weighed. For example, charging premium rates that fully reflect the risk of flooding could help improve the financial condition of NFIP and limit taxpayer costs before and after a disaster. However, eliminating or reducing subsidized policies could have unintended consequences, such as increasing premium rates to the point that flood insurance is no longer affordable for some policyholders and potential declines in program participation.", "See GAO, High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: Feb. 2013).\nGAO-09-20. where they lived. Stakeholders also noted that the threat of increased premium rates would encourage some policyholders affected by Superstorm Sandy to undertake mitigation efforts as they repaired their properties.\nAlthough accelerating the elimination of subsidies could strengthen the financial solvency of the program, it also entails trade-offs and unintended consequences. For example, according to FEMA estimates, the elimination of subsidies for pre-FIRM properties would on average more than double these policyholders’ premium rates, raising concerns about the affordability of the coverage and participation in the program. Higher premium rates might result in reduced participation in NFIP over time as people either decide to drop their policies or are priced out of the market, according to FEMA officials and insurance industry stakeholders we interviewed. The 1999 PwC study estimated that, for communities most likely to experience a decrease in property values if subsidies were immediately eliminated, on average 50 percent of policyholders might cancel their coverage. It is too soon to tell the long-term impacts of the elimination of subsidies that went into effect in 2013. Even reducing, rather than eliminating, subsidies could increase the financial burden on some existing policyholders—particularly low-income policyholders—and could lead to some of them deciding to leave the program. As a result, if owners of pre-FIRM properties, which have relatively high flood losses, cancelled their insurance policies, the federal government—and ultimately taxpayers—could face increased costs in the form of FEMA disaster assistance grants to these individuals. However, according to a recent study, a large proportion of disaster assistance is provided to states, versus directly to individuals, and the assistance provided to individuals via grants and low-interest loans is fairly limited in size. An additional trade-off associated with making immediate increases to premium rates is resistance from local communities. Stakeholders we interviewed further noted that increased insurance costs might make some properties more difficult to sell, particularly pre-FIRM properties in older, inland communities at high risk of flooding.\nDelaying the elimination of subsidized policies could address stakeholder concerns about the affordability of flood insurance and the time frames in the Biggert-Waters Act for implementing full-risk rates, but also has trade- offs. For example, while stakeholders we interviewed supported provisions of the act to reduce the number of subsidized policies and moving to full-risk rates, they said that the time frames in the act were aggressive and could be burdensome for low-income policyholders. They also stated that more gradual increases for certain policyholders could keep policies more affordable. They noted there have been proposals to delay the elimination of subsidies and phasing in of full-risk rates. However, delaying the elimination of subsidies would continue to expose the federal government to increased financial risk. And, as previously noted, not charging full-risk rates contributes to FEMA’s ongoing management challenges in maintaining the financial stability of NFIP. NFIP has been on our high-risk list since 2006 because of concerns about its long-term financial solvency and management issues. While Congress and FEMA intended that, insofar as practicable, NFIP be funded with premiums collected from policyholders, the program was, by design, not actuarially sound.", "Targeting assistance, based on financial need, could help ensure that only those in need receive subsidies, with the rest paying full-risk rates. This assistance could take several forms, including direct assistance through NFIP, tax credits, grants, or vouchers. For example, other federal programs have targeted subsidies through means tests or other methods. Such an approach could help ensure that those needing the subsidy would have access to it and retain their coverage. Alternatively, stakeholders we interviewed for this report noted that FEMA could replace the subsidies with vouchers based on financial need to offset higher premiums. For example, the Department of Housing and Urban Development’s Housing Choice Voucher program is administered by public housing agencies that collect information on applicants’ income and assets to determine eligibility and voucher amounts. flood insurance policyholders could be collected to assess need, determine eligibility, and provide appropriate amounts of financial assistance to families that otherwise could not afford their flood insurance premiums.\n24 C.F.R. Part 982.\nAccording to industry stakeholders we interviewed, targeting assistance based on financial need would help make the planned phased-in premium increases more affordable. In a recent paper on flood insurance affordability, the Association of State Floodplain Managers (ASFPM) suggested that a flood insurance voucher program could be developed for low-income policyholders who may not be able to afford the rate increases or for those who might need time to adjust to premium increases. ASFPM’s paper also noted that, while the premium rate increases required by the Biggert-Waters Act will improve the financial stability of NFIP, those increases could have a significant impact on flood insurance affordability for low-income policyholders. In particular, the ASFPM paper states that assistance will be necessary for some policyholders to help them transition to either full-risk rates, or to mitigate their properties, otherwise some property owners might not be able to afford to remain in their homes. Other insurance industry representatives and stakeholders have also cited affordability concerns and suggested that as full-risk rates were phased in, assistance for low-income individuals could be provided through a voucher system or program based on financial need. A provision of the act requires FEMA to study NFIP participation and affordability issues, including offering vouchers based on income. According to FEMA officials, as of May 31, 2013, FEMA has consulted with the National Academy of Sciences about determining how to undertake this study.\nAs previously discussed, our comparison of characteristics (such as median income and median home values) associated with remaining subsidized and nonsubsidized policies indicates that applying full-risk rates may be overly burdensome for some property owners and not for others. For example, we found a higher percentage of subsidized policies in both counties with lower and very high incomes, indicating that in certain areas, some subsidized policyholders may find higher flood insurance rates difficult to afford, while those who were located in higher- income areas may be able to afford premium increases.\nHowever, it could be challenging for FEMA to develop and administer such an assistance program in the midst of ongoing management challenges. Specifically, we have previously found that FEMA has faced significant management challenges in areas that affect NFIP, including strategic and human capital planning; collaboration among offices; and record, financial, and acquisition management. In addition, in previous work we found that FEMA has faced challenges modernizing NFIP’s insurance policy and claims management system. Implementing a financial assistance program would require FEMA to plan and develop new processes. Representatives from a national insurance professional organization we interviewed for this report stated that it would be difficult for FEMA to administer an assistance program and ensure that an evaluation for assistance was done consistently. In addition, they said that to administer an assistance program such as vouchers, tax credits, or grants through the Write-Your-Own companies (insurance companies that sell and service flood insurance for NFIP), a process would be needed to ensure that means-testing is evaluated and administered consistently. They also suggested that it would be easier to administer a program if all policyholders were charged a full-risk rate, with a separate process that would allow them to apply for assistance, based on financial need.", "A third option to address the financial impact of subsidized premium rates on NFIP would be to substantially expand mitigation efforts to ensure that more homes were better protected from flooding, including making mitigation mandatory. Mitigation efforts such as elevation, relocation, and demolition can be used to help reduce or eliminate the long-term risk of flood damage to structures insured by NFIP. However, mitigation of pre- FIRM properties is voluntary unless a property has been substantially damaged or the owner undertook substantial improvement.\nGAO-09-20. assistance. While the Biggert-Waters Act eliminated subsidies for severe repetitive loss properties and for prospective policyholders who refuse to accept any offer for mitigation assistance (including an offer to relocate) following a major disaster, properties not built to meet a community’s flood resistant requirements or in the highest-risk zones could face more severe damages in the event of a flood. Insurance industry stakeholders agreed that mitigation could be used to reduce future financial risk for NFIP.\nStakeholders we spoke to for this report also commented that since such mitigation measures often are done at the community level, offering community-based policies could help encourage more mitigation. This is consistent with our prior work in which local officials generally support increased mitigation efforts.incorporating community-based flood insurance into NFIP could help leverage community resources for mitigation projects that would benefit the entire community, rather than individual structures. For example, floodplain mangers noted that with a community-based policy, the local unit of government could assess fees on all properties benefitting from community mitigation measures. In addition, because the premium rate would be on a community versus structure basis, the community, not the property owner, generally would make development or neighborhood-type decisions that either increased or decreased risk in the community.\nIndustry stakeholders also commented that Disadvantages associated with mitigation as an option to reduce the financial impact of the subsidized policies include the expense to NFIP, taxpayers, and communities. For example, implementing mitigation measures for tens of thousands of properties that continue to receive subsidized rates could take a number of years to complete, which could have an on-going risk to NFIP’s financial health. We have previously reported that increasing mitigation would be costly and require increased funding. Furthermore, we found in our past and current work that buyouts and relocations would be more costly in certain areas of the country and in some cases the cost for mitigating older structures might be prohibitive. The effectiveness of mitigation efforts could be limited by FEMA’s reliance on local communities with varying resources. For example, not all communities have the staff or resources to fully carry out mitigation, meet cost-sharing requirements, and enforce compliance.\nAs we reported in 2008, even when federal funds are made available to a community and property owners are interested in mitigating their properties, property owners still may have to pay a portion of the mitigation expenses, which could discourage participation in mitigation efforts. In interviews for this report, stakeholders said that mitigation was expensive and that as premiums are increased to full-risk rates, some means of assistance would be helpful for policyholders who may have difficulty paying for mitigation efforts. Mitigation costs would have to be weighed against mitigation benefits (possible savings from a decrease in flood damage).\nIn addition, certain types of mitigation, such as relocation or demolition, might be met with resistance by communities that rely on those properties for tax revenues, such as coastal communities with significant development in areas prone to flooding. Furthermore, mitigation activities are often constrained by conflicting local interests, cost concerns, and a lack of public awareness of the risks of natural hazards and the importance of mitigation. Communities’ economic interests often can conflict with long-term hazard mitigation goals. For example, a community with a goal of economic growth might allow development to occur in hazard-prone areas (along the coast or in floodplains).\nOur analysis indicates that the three options discussed above are not mutually exclusive and may be used together to reduce the financial impact of subsidized policies on NFIP. For example, accelerating the elimination of subsidies could be done in conjunction with targeting assistance to only those policyholders who need help to retain their flood insurance—thus advancing the goal of strengthening the financial solvency of NFIP and addressing affordability concerns for low-income policyholders. In addition, FEMA may be able to build on its existing mitigation efforts and target assistance for mitigation efforts to those policyholders who need financial assistance. The way in which an option is implemented, such as more aggressively or gradually, also can produce different effects in terms of policy goals and thus change the advantages and disadvantages (see table 6).", "While FEMA has taken initial steps to eliminate subsidies for various types of properties in accordance with the Biggert-Waters Act requirements, eliminating the more than 700,000 additional policies that continue to receive subsidies will take many years to accomplish. Subsidies on some policies will be eliminated as properties are sold or if coverage lapses, but FEMA has some data limitations and implementation issues to resolve before other subsidies identified in the act can be eliminated. With some efforts under way, FEMA has much work ahead of it in planning and executing implementation of the changes in the act as well as effectively managing NFIP.\nAlthough FEMA has information on premiums and claims paid for subsidized policies over time, it does not have the information needed to determine the appropriate premium amounts policyholders should pay to reflect the full level of risk for floods. To phase out and eventually eliminate subsidies and revise rates over time, FEMA will need information on the relative risk of flooding and property elevations (elevation certificates), which generally had not been required for subsidized policies prior to the Biggert-Waters Act. The act requires FEMA to phase in full-risk rates on policies that previously received subsidies. According to federal internal control standards, agencies should identify and analyze risks associated with achieving program objectives, and use this information as a basis for developing a plan for mitigating the risks and obtaining needed information. Going forward, FEMA will require new policyholders and those whose coverage has lapsed to provide elevation information when renewing or obtaining new policies; however, FEMA will rely on other policyholders who previously received subsidized rates to voluntarily provide this information. As FEMA continues to implement the requirements of the act to charge full-risk rates, the agency plans to assume that all subsidized policies pay about half of the full-risk premium and has begun phasing-in rate increases based on this factor for all active policies that are having their subsidies removed. Without a plan to require all policyholders to obtain elevation certificates to accurately document their property elevations and relative risk of flooding, FEMA will lack information that is key to determining appropriate full-risk rate premiums. As a result, the rates that FEMA plans to implement may not adequately reflect a property’s actual flood risk, and some policyholders may be charged too much and some too little for their premiums.", "To establish full-risk rates for properties with previously subsidized rates that reflect their risk for flooding, we recommend that the Secretary of the Department of Homeland Security (DHS) direct the FEMA Administrator to develop and implement a plan, including a timeline, to obtain needed elevation information as soon as practicable.", "We provided a draft of this report to DHS for its review and comment. DHS provided written comments that are presented in appendix III. The letter noted that the department concurred with our recommendation to develop and implement a plan to obtain elevation information from previously subsidized policyholders. The letter stated that FEMA will evaluate the appropriate approach for obtaining or requiring the submittal of this information. In particular, the letter noted that although obtaining this information cost-effectively presents significant challenges, FEMA will explore technological advancements and engage with industry to determine the availability of technology, building information data, readily available elevation data, and current flood hazard data that could be used to implement the recommendation. FEMA also provided technical comments, which we have incorporated into the report, as appropriate.\nWe are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you have any questions about this report, please contact me at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "The Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) mandated that GAO conduct a number of studies, including this study on the properties that continue to receive subsidized rates after the implementation of the act and options to further reduce these subsidies.\nThis report discusses (1) the number, location, and financial characteristics of properties that continue to receive subsidized rates compared with full-risk rate properties, (2) information needed to estimate the historic financial impact of subsidies and establish rates that reflect the risk of flooding on properties with previously subsidized rates, and (3) options to reduce the financial impact of remaining subsidized properties.\nAlthough the Biggert-Waters Act mandated that GAO report on certain characteristics of the remaining subsidized policies and properties, the National Flood Insurance Program (NFIP) databases do not contain information to address several elements listed in the act. Therefore, to the extent possible, we developed alternative methodologies to address the elements of the act.", "To provide information on the number and location of NFIP-insured properties that would continue to receive subsidized premium rates, we analyzed data from NFIP’s policy and repetitive loss databases as of June 30, 2012. We applied the Federal Emergency Management Agency’s (FEMA) algorithm to determine which policies were subsidized, and applied FEMA’s interpretation of the provisions in the Biggert-Waters Act that eliminate subsidies to determine which policies would retain their subsidies.FEMA’s implementation of legislative requirements authorizing subsidized rates for certain properties in high-risk locations.\nWe also analyzed NFIP’s legislative history and relied on To determine the fair market value of properties that would continue to receive subsidized premium rates, we used other NFIP data and publicly available information as indicators of value because the fair market values required by the act were not available in NFIP’s databases. We used three indicators of home value, (1) NFIP policy-level coverage amounts, (2) 2007 through 2011 5-year American Community Survey (ACS) county-level data on median home values, and (3) January 2013, Zillow city-level median home value index within case study counties.\nFor consistency in our message, we compared all the indicators at the county-level. To place NFIP policies in counties, we used ZIP code information contained in the NFIP policy file as of June 30, 2012, and matched those data with U.S. Postal Service and Department of Housing and Urban Development ZIP code to county data (as of December 2011). For ZIP codes that crossed county borders, we assigned policies proportionally to the counties based on the fields available in the ZIP code to county file.\nWe aggregated the total number of policies and remaining subsidized policies for all counties, and selected 351 counties for our analysis that contained the majority of the policies. We selected all counties with 500 or more remaining subsidized policies for single-unit, primary residences (247 counties). We also included the five counties in each state and Puerto Rico with the most remaining subsidized policies for single-unit primary residences, regardless of the total number in the county, to better ensure a comprehensive national representation. Accordingly, the 351 counties we selected represent 78 percent of all remaining subsidized policies nationwide, 77 percent of all remaining subsidized policies for single-unit primary residences, and 77 percent of all NFIP policies. As more than 99 percent of remaining subsidized policies were in Special Flood Hazard Areas (SFHA), we limited our comparison with nonsubsidized policies to those for single-unit primary residences in SFHAs.\nWe used NFIP policy data as of June 30, 2012, on coverage amounts as the first indicator of home value. To determine how building coverage amounts compared between remaining subsidized and nonsubsidized policies, we categorized NFIP building coverage amounts using less than $100,000, $100,000-$149,999, $150,000-$199,999, $200,000-$249,999, and $250,000, which is the maximum coverage for residential units. We compared the percentage of policies of each type within each category of coverage at the county level for the selected counties. We also conducted this analysis using flood zones, comparing the coverage amounts for A- zone and V-zone policies separately. (The A and V flood zones represent areas at high risk for flooding, and V zones also indicate coastal areas.) Coverage amount as an indicator for home value is limited because NFIP has a maximum building coverage amount of $250,000 per residential unit. Additionally, the perceived flood risk and cost of coverage could affect the coverage amount. However, coverage amount can give an indication of a property’s value relative to other properties.\nAs a second indicator of home value, we used 2007 through 2011 ACS 5- year county-level estimates for median home values (known as B25077) for all counties in the United States and also included the District of Columbia and Puerto Rico. We included Puerto Rico because of its relatively large number of NFIP policies. We used 5-year data because other ACS data sets did not contain data for all the 351 selected counties. Using county median home value, we ranked all counties and determined the deciles for the 351 selected counties. We compared the percentage of remaining subsidized with nonsubsidized policies from the selected counties in each decile. Because these data are at the county level, areas within the county of relatively high or low home values are indistinguishable. We also analyzed the ACS and NFIP coverage data together, at the county level.\nAs a third indicator of home value, we used Zillow city-level median home value data as of January 2013, within five selected counties. For the purposes of our county case study analysis, we selected the Zillow Home Value Index because it was publicly available; covered more housing units at the city level than other housing indices; was estimated at a smaller geographic region; and only included nonforeclosure housing units. We judgmentally selected five case study counties and compared data at the city level within the county to provide more detailed illustrations of how home values for properties that continue to receive subsidies compare with those that pay full-risk rates. These cases are not projectable to all counties. We selected our case study counties based on the number of relevant NFIP policies, their location, and the reliability of the data for the county. Specifically, we selected counties with at least 1,000 remaining subsidized policies and nonsubsidized policies for single- unit primary residences. We selected one county from each of the four states with the most remaining subsidized policies. We selected Pinellas County, Florida; Los Angeles County, California; and Ocean County, New Jersey; however, the Zillow data for Louisiana did not meet our level of reliability and was eliminated. As Pinellas County is on the Gulf of Mexico, Los Angeles County is on the Pacific Ocean, and Ocean County is on the Atlantic Ocean, we chose the other two counties to represent inland flooding—Cook County, Illinois, and Pima County, Arizona. The Zillow information for these counties met our criteria for data reliability. For each county, we determined which NFIP policies may be located in the county based on ZIP code. Because the NFIP city name was not consistently entered, two analysts independently matched the NFIP policy city names to Zillow city names within the county. A third analyst served as the mediator for differences using alternative location information. Within each county, we ranked the cities by median home value and distributed them into quartiles. We compared the number and percentage of remaining subsidized policies with the nonsubsidized policies in the cities in each quartile. Additionally, for each case study county, we reviewed the results from the NFIP coverage and ACS analyses within the county.\nBecause owner income data were not available in NFIP’s databases, we analyzed 2007 through 2011 ACS 5-year data as an indicator of income levels of owners of remaining subsidized properties. We used 5-year, county-level data on median household incomes (B19013) for all counties in the United States, the District of Columbia, and Puerto Rico. Using the median household income data, we ranked all counties and determined the deciles for the 351 selected counties. We compared the percentage of remaining subsidized policies with nonsubsidized policies in SFHAs from the selected counties in each decile. Because these data are at the county level, areas within the county of relatively high or low household incomes are indistinguishable. We also analyzed the ACS median home value and median household income data together, at the county level.\nBecause consistent, nationwide aggregate data on sales prices for each property covered by a remaining subsidized pre-Flood Insurance Rate Map (FIRM) policy since 1968 were not available from NFIP or other sources, we determined that the home value analysis was sufficiently similar to provide an indication of sales prices to respond to this study element.\nWe also used NFIP policy fiscal year-end data from 2002 through 2012 to estimate the potential annual rate of decline in the number of remaining subsidized policies over time. Consistent, nationwide aggregate data on sales dates for each pre-FIRM property since 1968 were not available from NFIP or other sources. We compared sequential years of policy data to determine whether each policy with the characteristics of a remaining subsidized policy continued to have coverage. We first matched company and policy data and if no match was found, matched on owner name. If a policy in the first year failed to match by either method, we assumed that the policy no longer had coverage. We estimated the annual rate of decline for 10 sequential year pairs. We compared our results with a recent NFIP policy tenure study by calculating the decline rate from the reported tenure rate. We estimated the number of remaining subsidized policies over a 30-year period given the different annual decline rates.\nBecause data were not available from NFIP on the number of times each pre-FIRM property had been sold, we determined that the policy decline rate analysis was sufficiently similar to provide an indication of extent of ownership or length of time policies remained in the program to respond to this study element.\nAdditionally, because data were not available from NFIP’s databases on the extent to which pre-FIRM properties are currently owned by the same owners as at the time of the original NFIP rate map, we determined that the policy decline rate analysis was sufficiently similar to provide an indication of extent of ownership or length of time policies remained in the program to respond to this study element.", "To estimate the financial impact, or cost, of subsidized properties to NFIP, we attempted to calculate forgone premiums—lost revenue to the program in premiums—due to subsidies. Because data on elevations of NFIP subsidized properties were not available to determine the total forgone premiums from subsidized policies, we used FEMA’s estimates of the subsidy rate from 2002 through 2011 to estimate a range of forgone premiums attributable to subsidized properties in this period. We limited our analysis to 2002 through 2011 because FEMA did not estimate subsidy rates prior to 2002. Lacking the information to calculate the ranges associated with the premiums that would have been collected, we made assumptions based on limited historical information from FEMA, including the annual Actuarial Rate Reviews from 2002 through 2011, which state that subsidized premiums were estimated to be between 35 and 45 percent of the full-risk premium (the subsidy rate). Our analysis did not adjust for potential effects on behavior (such as on program participation) or changes in operating expenses that could have occurred had historical rates not been subsidized. In addition, our analysis did not account for new information provided by FEMA officials that only a portion of subsidized premiums is available to pay for losses. We plan to analyze the impact of this new information provided by FEMA in comments on a draft of this report. We will report the methodology and results of our estimate separately. FEMA did not report such estimates from 1978 through 2001.\nFor the period before 2002, we analyzed a prior GAO report, FEMA’s annual actuarial review, and a PricewaterhouseCoopers study commissioned by FEMA and present qualitative information about the cost of subsidies. Additionally, because of the limited historical program data from FEMA, developing a sufficiently reliable year-by-year or state- by-state estimate of cost to NFIP as a result of remaining subsidized policies is not possible.\nTo estimate the total losses incurred by subsidized properties since the establishment of NFIP and compare these with the total losses incurred by all structures charged a nonsubsidized premium rate, we analyzed NFIP claims database as of June 30, 2012, to determine total losses attributable to remaining subsidized and nonsubsidized policies. Data were not available before 2002 that would allow us to determine whether a policy had the characteristics of a remaining subsidized policy. For years prior to 2002, we estimated the proportion of claims for previously subsidized policies that were attributable to remaining subsidized policies, based on the average proportion in the claims data in the latest 10 years.\nTo determine the premium income collected by NFIP as a result of subsidized policies, compared with premium income collected from properties charged a nonsubsidized rate, we analyzed annual NFIP premium data and data broken out by subsidy to determine the annual premiums of remaining subsidized and nonsubsidized policies. We estimated the proportion of previously subsidized premiums attributable to remaining subsidized policies based on the average proportion in the latest 10 years of NFIP policy data.", "To determine the options to reduce the financial impact of remaining properties with subsidized policies, we analyzed NFIP’s legislative history and reviewed FEMA documents as well as documents from insurance industry organizations and academic institutions to gather information on options to eliminate or reduce the financial impact of subsidized policies on NFIP. In addition, we interviewed NFIP officials and representatives of insurance industry organizations and floodplain managers. We also interviewed a nationally recognized academic knowledgeable about the financial impact and the public policy challenges associated with catastrophic events, and discussed previous studies on NFIP and other relevant studies on flood insurance issues.\nFor all data sets used we performed data testing and gathered information from issuing entities about possible data limitations. For the ACS, Zillow, and NFIP data sets, we interviewed officials on usability and reliability. We determined that each data set used was sufficiently reliable for our intended purposes.\nWe conducted this performance audit from September 2012 to July 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "We compared various characteristics of the remaining subsidized policies and nonsubsidized policies in SFHAs in selected counties. In addition, we conducted more detailed analysis of five counties for illustrative purposes.", "For our analysis of the financial characteristics of subsidized and nonsubsidized policies in SFHAs, we selected 351 counties that represented 78 percent of all remaining subsidized policies nationwide, 77 percent of all remaining subsidized policies for single-unit primary residences, and 77 percent of all NFIP policies. We selected all counties with more than 500 remaining subsidized policies for single-unit primary residences and the five counties in every state (and Puerto Rico) with the most remaining subsidized policies, regardless of number. Figure 8 shows the 351 selected counties and the number of remaining subsidized policies for single-unit primary residences under NFIP.\nFor both remaining subsidized policies and nonsubsidized policies, a larger percentage of policies in V zones (coastal areas with a high risk of flooding) had the maximum coverage amount than policies in A zones (noncoastal areas with a high risk of flooding) (see fig. 9). Also for both types of policies, V-zone policies represented a very small fraction of all policies in SFHAs. For example, 1.6 percent of remaining subsidized policies and 0.8 percent of nonsubsidized policies in SFHAs were in V zones.\nWe analyzed NFIP coverage amounts (for remaining subsidized policies and nonsubsidized policies in SFHAs for single-unit primary residences) and county median home values together and determined that higher coverage amounts were associated with higher county median home values. Counties with higher median home values had higher percentages of remaining subsidized policies and nonsubsidized policies with the NFIP maximum coverage of $250,000 than counties with lower median home values (see table 7). In addition, counties with lower median home values generally had higher percentages of remaining subsidized policies and nonsubsidized policies with lower amounts of coverage (less than $100,000) than counties with higher median home values. However, nonsubsidized policies consistently had higher amounts of coverage. Specifically, in every decile of county median home value, a larger percentage of nonsubsidized policies had the maximum amount of NFIP coverage than remaining subsidized policies. Also in every decile of county median home value, a smaller percentage of nonsubsidized policies had lower amounts of coverage (less than $100,000) than remaining subsidized policies.\nWe analyzed home value and household income indicators together and found that counties with the highest median household incomes and highest median home values had higher percentages of remaining subsidized policies than nonsubsidized policies in SFHAs. For example, 78 of the 351 selected counties were in the highest decile in both median home value and median household income (see table 8).\nAbout 26 percent of remaining subsidized policies compared with 7 percent of nonsubsidized policies in SFHAs were in these counties (see table 9). Remaining subsidized policies were also found in higher percentages than nonsubsidized policies in counties with lower median income and lower median household counties (lowest 6 deciles). Counties with higher median household income generally also had higher median home values, but counties with higher median home values did not always have higher median incomes.\nWe performed five case studies to illustrate results in specific counties (see fig. 10). We selected the counties based on the number of relevant NFIP policies, location, and reliability of city-level data. Case studies were chosen to offer a more in-depth, within county view (how things vary across cities within select counties). We performed the NFIP coverage and median home value analyses, but also used publicly available real estate data to examine city-level median home values within the county. We compared remaining subsidized and nonsubsidized policies in SFHAs (A and V flood zones are designated as SFHAs).These cases cannot be projected nationwide, and the results of our analysis from each county are independent of each other. Some of the results from these case studies matched our earlier results, and some did not.\nLos Angeles County, California; Ocean County, New Jersey; and Cook County, Illinois; had median home values in the top 10 percent of all counties. Consistent with our earlier results for counties with the highest median home values, Cook and Los Angeles Counties had more remaining subsidized policies than nonsubsidized policies (95 percent and 71 percent of all policies for Cook County and Los Angeles County, respectively); however, Ocean County had fewer remaining subsidized policies (about 44 percent). Los Angeles and Ocean Counties had high percentages of both subsidized and nonsubsidized policies with maximum NFIP coverage and a low percentage of both types of policies at lower levels of coverage. However, Cook County had low percentages of maximum coverage policies.\nPinellas County, Florida, and Pima County, Arizona had median home values in the second decile of all counties. Although Pinellas County had many more policies than Pima County, both had slightly more remaining subsidized policies than nonsubsidized policies (55 percent and 57 percent of all policies for Pinellas County and Pima County, respectively). Pinellas County had lower percentages of policies at maximum coverage than Los Angeles and Ocean Counties but higher percentages than Pima and Cook Counties.\nConsistent with our analysis of NFIP coverage amounts, all five counties had lower percentages of remaining subsidized policies at maximum building coverage than nonsubsidized policies. Ocean County had the largest difference between nonsubsidized policies and remaining subsidized policies (77 percent versus 47 percent), and Pima County had the smallest difference (41 percent versus 26 percent). All counties had a higher percentage of remaining subsidized policies than nonsubsidized policies with building coverage less than $100,000, but in some counties the differences were smaller.\nThe results of our analysis of the city median home value were mixed. In all counties except Los Angeles County, higher percentages of remaining subsidized policies than nonsubsidized policies were in cities in the lowest quartile of median home value, but in Cook and Pinellas Counties the differences were larger. In Pinellas County 59 percent of the remaining subsidized policies were in cities in the lowest quartile of median home value. In the counties with V-zone policies (Los Angeles, Ocean, and Pinellas) a slightly higher percentage of remaining subsidized policies were in cities in the highest quartile of median home value than nonsubsidized policies. In Ocean County more than 30 percent of remaining subsidized and nonsubsidized policies were in cities in the highest quartile, while in Pima County, very few policies of either type were in cities in this quartile. In Los Angeles and Pima counties, most policies of either type were in cities in the second and third quartiles. In Cook County policies were not concentrated in any quartile.\nAdditionally, fewer than 2 percent of policies were in V zones. Specifically, in the three counties with V-zone policies (Los Angeles, Ocean, and Pinellas) there were about 1,290 V-zone policies compared with about 72,000 A-zone policies. In each county, more V-zone policies were remaining subsidized policies than nonsubsidized policies. In Ocean and Los Angeles Counties, most V-zone policies of either type were in cities with median home values in the top quartile within the county. In Pinellas County the V-zone policies were located in cities in all quartiles of median home value.", "", "", "", "In addition to the contact named above, Jill Naamane and Patrick Ward (Assistant Directors); William Chatlos; Barb El Osta; Christopher Forys; Isidro Gomez; Cathy Hurley; Jacquelyn Hamilton; Karen Jarzynka- Hernandez; Courtney LaFountain; May Lee; Barbara Roesmann; Jena Sinkfield; Melvin Thomas; Frank Todisco; Sonya Vartivarian; and Monique Williams made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 2, 2, 2, 1, 2, 1, 1, 2, 2 ], "alignment": [ "", "", "", "h0_title h1_title", "h0_full h1_full", "h0_full", "h1_title h3_title", "h3_full h1_full", "", "h1_full", "h2_full h3_title", "", "h3_full", "h2_full", "h0_full h1_full", "h2_full", "h2_full", "h3_full", "h3_full", "", "h3_full", "h0_full", "", "", "", "", "" ] }	{ "question": [ "How did the Biggert-Waters Act affect NFIP policies?", "How is the number of NFIP policies likely to change in the future?", "How will subsidies be retired?", "How are the remaining subsidies distributed across states?", "What differences in characteristics were found between subsidized and nonsubsidized policies?", "Why is FEMA's cost-estimating ability limited?", "What FEMA data is lacking?", "How is FEMA attempting to gather this information?", "Why is obtaining this data critical for FEMA?", "How do FEMA's attempts to gather data comply with federal standards?", "What were GAO's recommended options for reducing the financial impact of subsidies on NFIP?", "What option would be the most advantageous?", "What was GAO's final recommendation?", "How did FEMA respond to GAO's recommendation?", "To what extent are NFIP policies subsidized?", "How do subsidized policies affect the NFIP?", "Why has GAO placed NFIP on its high-risk list?", "How did the Biggert-Waters Act affect the NFIP?", "What does this report cover?", "How did GAO source its data for this report?" ], "summary": [ "The Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) immediately eliminated subsidies for about 438,000 National Flood Insurance Program (NFIP) policies, but subsidies on an estimated 715,000 policies across the nation remain.", "Depending on factors such as policyholder behavior, the number of subsidized policies will continue to decline over time.", "For example, as properties are sold and the Federal Emergency Management Agency (FEMA) resolves data limitations and defines key terms, more subsidies will be eliminated.", "GAO analysis found that remaining subsidized policies would cover properties in every state and territory where NFIP operates, with the highest numbers in Florida, Louisiana, and California.", "In comparing remaining subsidized and nonsubsidized policies GAO found varying characteristics. For example, counties with the highest and lower home values had a larger percentage of subsidized versus nonsubsidized policies.", "Data constraints limit FEMA's ability to estimate the aggregate cost of subsidies and establish rates reflecting actual flood risks on previously subsidized policies.", "FEMA does not have sufficient historical program data on the percentage of full-risk rates that subsidized policyholders have paid to estimate the financial impact--in terms of the difference between subsidized and full-risk premium rates--to NFIP of subsidies. Also, because not all policyholders are required to provide documentation about their flood risk, FEMA generally lacks information needed to apply full-risk rates (as required by the Biggert-Waters Act) on previously subsidized policies.", "FEMA is encouraging these policyholders to voluntarily submit this documentation.", "Without this documentation, the new rates may not accurately reflect a property's full flood risk, and policyholders may be charged rates that are too high or too low relative to their risk of flooding.", "Federal internal control standards state that agencies should identify and analyze risks associated with achieving program objectives and develop a plan for obtaining needed data.", "Options from GAO's previous and current work for reducing the financial impact of subsidies on NFIP include (1) adjusting the pace of subsidy elimination, (2) targeting assistance or subsidies based on financial need, or (3) increasing mitigation efforts, such as relocation or elevation that reduce a property's flood risk.", "However, these options have advantages and disadvantages. Moreover, the options are not mutually exclusive, and combining them could help offset some disadvantages.", "FEMA should develop and implement a plan to obtain flood risk information needed to determine full-risk rates for properties with previously subsidized rates.", "FEMA agreed with the recommendation.", "FEMA, which administers NFIP, estimated that in 2012 more than 1 million of its residential flood insurance policies--about 20 percent--were sold at subsidized rates; nearly all were located in high-risk flood areas.", "Because of their relatively high losses and lower premium rates, subsidized policies have been a financial burden on the program.", "Due to NFIP's financial instability and operating and management challenges, GAO placed the program on its high-risk list in 2006.", "The Biggert-Waters Act eliminated subsidized rates on certain properties and mandated GAO to study the remaining subsidized properties.", "This report examines (1) the number, location, and characteristics of properties that continue to receive subsidized rates compared with full-risk rate properties; (2) the information needed to estimate the historic cost of subsidies and establish rates for previously subsidized policies that reflect the risk of flooding; and (3) options to reduce the financial impact of remaining subsidized policies.", "GAO analyzed NFIP data on types of policies, premiums, and claims and publicly available home value and household income data. GAO also interviewed representatives from FEMA, insurance industry associations, and floodplain managers." ], "parent_pair_index": [ -1, 0, 0, -1, -1, -1, 0, 1, 2, -1, -1, 0, -1, 2, -1, 0, -1, -1, -1, 4 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3, 3, 0, 0, 0, 0, 0, 0 ] }
CRS_R43680	{ "title": [ "", "Introduction", "Why Did Deficits Rise and Then Decline?", "How Large Are Projected Deficits Under Current Policy? What Might Change These Projections?", "How Much Deficit Reduction Is Necessary?", "How Quickly Should the Deficit Be Reduced?", "Policy Options for Deficit Reduction", "Federal Spending", "Discretionary Spending", "Mandatory Spending", "Revenues" ], "paragraphs": [ "", "The federal budget has been in deficit (i.e., spending has exceeded revenues) since 2002, and deficits were significantly larger from 2009 to 2012 than in any other year since World War II. As a result, the federal debt held by the public increased from 39% of gross domestic product (GDP) in 2008 to 72% of GDP in 2013, which was its highest share of GDP since after World War II.\nFrom 1946 to 2008, budget deficits averaged 1.7% of GDP and exceeded 5% of GDP only three times (equaling 7.2% in 1946, 6.0% in 1983, and 5.1% of GDP in 1985). The budget deficit was 10.1% of GDP in 2009, falling to 7% of GDP in 2012. The fiscal outlook has improved significantly since then, although the budget is projected to remain in deficit under current policy. In 2014, the baseline deficit is projected to be $492 billion or 2.8% of GDP. Not since the end of World War II has the deficit fallen so much, so quickly. Despite the improvement, the deficit still remains above its historical average.\nIn the past, persistent deficits have proven sustainable because periods of moderate growth in the debt relative to GDP have been followed by periods when debt fell relative to GDP (typically, because the debt grew more slowly than GDP). Current policy is unsustainable because projected deficits are large enough to cause the federal debt to continuously grow faster than national income. This increase is projected to be gradual—the debt does not increase relative to GDP until 2019, is five percentage points higher by 2024, and reaches 100% of GDP by 2036 or sooner. At some point, spending cuts or revenue increases will be needed to restore fiscal sustainability, although the recent decline in the deficit has provided policymakers more flexibility on the timing of these changes.\nCongress has expressed interest in examining policy options to reduce the deficit. The Congressional Research Service (CRS) does not take a position on the best way to reduce the deficit. This report organizes and presents information to help policymakers frame the debate. This report first discusses the size of projected budget deficits, then discusses how much the deficit would need to be reduced to return to long-term sustainability, then analyzes alternative time frames for reducing the deficit, and finally discusses broad policy choices for reducing the deficit. This report assumes a familiarity with basic budget terms and concepts; for an overview, see CRS Report R43472, The Federal Budget: Overview and Issues for FY2015 and Beyond , by [author name scrubbed].", "The budget deficit increased by almost $1 trillion between 2008 and 2009. As shown in Table 1 , this increase was not anticipated—two months before FY2009 began, CBO projected that the 2009 baseline deficit would be slightly lower than the 2008 deficit (for more information on the baseline, see the text box below). From 2012 to 2014, deficits declined by a similar amount—the 2014 deficit is currently projected to be about $1 trillion lower than the 2009 deficit. Table 1 explains what factors caused this sharp increase and subsequent decrease in the deficit. Because the same policy generates different levels of spending and revenue in different fiscal years, it is not possible to say what \"caused\" the deficit to increase or decrease from one year to the next. However, it can be determined with precision what caused the actual deficit in any given fiscal year to be smaller or larger than what CBO had previously projected. The exact shares assigned to each category will be sensitive to the chosen starting point, however. Table 1 uses the September 2008 projection because of the dramatic increase in the deficit relative to the projection that occurred after that date.\nActual budgetary outcomes can turn out differently than previously projected for three reasons—the subsequent enactment of legislation (\"legislative changes\" in Table 1 ), differences in CBO's projections attributable to economic forecast errors (\"economic changes\" in Table 1 ), and all other differences (\"technical changes\" in Table 1 ). For example, if more people received a tax credit or entitlement program than predicted for a given level of GDP, absent any legislative change, that would be classified as a technical change that increased the deficit. Because this table is based on the CBO baseline, policies that maintain current policy but change current law, such as extending expiring tax provisions, are classified as legislative changes.\nLegislative changes since 2009 can be broken down into three broad categories, with the major changes provided for each:\nC hanges that temporarily increased the deficit. Legislation was enacted during or following the 2008-2009 recession that temporarily increased the deficit. This legislation either resulted in a one-time increase in spending (the Troubled Asset Relief Program [TARP, created by P.L. 110-343 ], the American Reinvestment and Recovery Act [ARRA; P.L. 111-5 , popularly known as the 2009 \"Economic Stimulus Act\"]) or was a temporary program that was in place for a finite period of time (extended unemployment insurance , payroll tax cut , assistance to the government sponsored enterprises [GSEs].)\nMost financial stabilization outlays in the federal budget occurred within the TARP or on transfers to two GSEs, Fannie Mae and Freddie Mac. These programs had a mostly one-time effect on the deficit due to improvements in financial markets and the expiration in 2010 of Treasury authority to enter into new contracts with regard to TARP and the GSEs. In 2009, outlays of $243 billion were recorded for TARP and the GSEs. In 2010 and 2011, transfers to the GSEs declined and, due to budgetary conventions, TARP recorded negative outlays that reduced the deficit. CBO included transfers to the GSEs in technical, not legislative changes, although their entry into receivership was a policy decision.\nThe temporary spike in spending caused by ARRA peaked in 2010 had mostly dissipated by 2012. ARRA was intended to be only a temporary boost to spending to stimulate the economy, and Congress allowed budget authority to return to near pre-ARRA levels in nominal terms. (ARRA also temporarily reduced taxes, but those provisions were subsequently extended.)\nExtended unemployment insurance was in place from July 2008 through 2013. Payroll taxes were temporarily reduced by two percentage points from 2011 to 2012. This was the only major legislative change affecting revenues that was allowed to expire.\nC hanges that permanently reduced the deficit . Two policy changes since September 2008 have permanently reduced the deficit—the Budget Control Act (BCA; P.L. 112-25 ) as amended since 2012 and the winding down of overseas contingency operations (OCO) beginning in 2009.\nBudget authority for OCO has fallen from a peak of $187 billion in 2008 to $93 billion in 2013 as overseas operations, primarily in Iraq and Afghanistan, have been scaled back. This has reduced discretionary defense spending relative to the September 2008 baseline, which assumed that such spending would increase at the rate of inflation each year.\nFor 2012 to 2021, the Budget Control Act (BCA; P.L. 112-25 ) reduced discretionary spending and mandatory spending relative to the baseline. The BCA implemented spending cuts through statutory caps for defense and non-defense discretionary spending for 2012 to 2021 and sequestration for mandatory spending for 2013 to 2021. The BCA exempted most mandatory spending programs from sequestration and capped Medicare cuts at 2%. On the discretionary side, the BCA exempted military OCO, disaster spending, and emergency spending from the spending caps. The BCA did not provide any details as to what discretionary programs would absorb the cuts needed to adhere to the defense and non-defense caps, however, and Congress has struggled to reach a consensus on that issue each year since the BCA was enacted. Through 2014, total discretionary spending has ended up higher than envisioned under the BCA because of subsequent legislation reversing some of the BCA spending cuts and because spending in categories exempt from the caps was higher than envisioned.\nOverall, discretionary spending was $75 billion lower in 2013 and is projected to be $120 billion lower in 2014 than the September 2008 baseline level. The BCA cuts to mandatory spending were not large enough to offset other legislative changes that increased mandatory spending in 2013 or 2014.\nC hanges that permanently increased deficit. Various legislative changes since September 2008 have permanently increased the deficit. The major changes involve the extension of expiring tax provisions and temporary extensions of the \"doc fix.\"\nCongress temporarily extended expiring tax provisions, including major tax cuts enacted in 2001 and 2003, numerous times. Most provisions from the 2001 and 2003 tax cuts were permanently extended in the American Taxpayer Relief Act (ATRA; P.L. 112-240 ) in January 2013. ATRA also temporarily extended ARRA's tax cuts until 2017 and reduced revenues overall by $3.9 trillion over 10 years. On net, all legislative changes to revenues made since September 2008 have increased the budget deficit by $1,750 billion from 2009 to 2014 compared with the current law baseline. To the extent that these tax provisions involved refundable tax provisions, which are classified as mandatory spending, extending expiring provisions also increased mandatory spending. Compared with a current policy baseline, ATRA reduced the deficit because it allowed the payroll tax cut and certain provisions affecting high-income taxpayers to expire at the end of 2012. OMB estimated that the expiration of provisions affecting high-income taxpayers increased revenues by $618 billion over 10 years compared with a current policy baseline.\nMedicare's sustainable growth rate (SGR) system is intended to constrain Medicare payments to physicians. Congress has temporarily prevented the SGR from reducing physician payments each year since 2003 (called the \"doc fix\"). If Congress continues the policy that has been in place since 2003, it will permanently increase the deficit, even if there has technically been no permanent policy change so far.\nAll legislative changes that increase (decrease) the deficit also increase (decrease) net interest payments on the debt in future years. Combined, legislative changes to revenue, mandatory spending, and discretionary spending have increased net interest by $277 billion from 2009 to 2014.\nIn sum, several major legislative changes were enacted that increased the deficit between 2009 and 2012 by increasing discretionary or mandatory spending. These changes were temporary and had little effect on the deficit after 2012, except for the fact that they increased interest payments on the debt. By contrast, the (mostly permanent) extension of expiring tax cuts increased the deficit relative to current law, by $1,750 billion over six years. Policies enacted during this time that permanently reduced the deficit, notably the tapering of OCO spending and the BCA as modified, did so primarily by reducing discretionary spending. In 2013 and 2014, legislative changes reduced total discretionary spending relative to CBO's September 2008 projection, but the resulting deficit reduction was more than offset by legislative changes to mandatory spending and revenues that increased the deficit.\nEconomic changes, related to the recession and the sluggish recovery, added around $100 billion each year to the deficit in 2009, 2010, 2011, and 2013, and added smaller amounts in 2012 and 2014. Revenues automatically rise and certain mandatory spending automatically fall as the economy moves from recession to full employment. Economists refer to these changes as \"automatic stabilizers.\" Revenues automatically fall in a recession because taxable income falls. Recessions cause spending on certain means-tested programs, such as unemployment insurance, to automatically increase due to increased eligibility. Overall, CBO estimates that automatic stabilizers at their peak added 2.7 percentage points of GDP ($409 billion) to the budget deficit in 2010. The role of automatic stabilizers has since diminished, but is still exerting some upward pressure on the deficit.\nTechnical changes were a major contributor to the actual deficit from 2009 to 2012, but had little effect in 2013 or 2014. These technical changes reflect the uncertainty inherent in the multitude of assumptions underlying budget projections, putting aside economic uncertainty. The joint effects of economic and technical changes illustrates that even if no legislation had been enacted since September 2008, the actual deficit would have turned out much larger than projected each year and would have increased sharply from 2008 to 2009 and remained large in 2010. There was no year between 2009 and 2014 where economic and technical changes combined exceeded legislative changes, however. Overall, the effect of legislative changes on the deficit was more than twice as large as economic and technical changes combined from 2009 to 2014, and would have been larger if assistance to the GSEs was classified as a legislative change.", "In the CBO baseline projection, budget deficits fall from 4.1% in 2013 to 2.8% of GDP in 2014, reaching a low of 2.6% of GDP in 2015. (The decline in 2015 is attributable to baseline assumptions and would not occur under different assumptions.) They then rise each year until reaching 4.0% of GDP in 2022. The debt held by the public declines each year until it reaches 72.4% of GDP in 2017, and then increases each year, reaching 78.1% of GDP in 2024. Long-term projections indicate that budget deficits would eventually become very large relative to GDP outside the projection window under current policy. Under a long-term projection of current policy, CBO projects deficits would exceed 10% of GDP by 2073.\nThese projections are highly uncertain, both because of forecast errors and the underlying assumptions made about future spending and revenues. Budget projections are subject to a high degree of uncertainty—based on history, actual outcomes are likely to be much better or worse than projections, even after accounting for policy changes. Projections are often inaccurate even over short-time frames, but small changes in assumptions compound to large changes in budget projections over the long run. For that reason, forecasting errors become larger further into the future. For example, OMB estimates that the absolute average errors for its budget deficit projections are 1.4% of GDP for the next budget year and 3.6% of GDP for five years in the future.\nWere GDP growth lower or interest rates higher than projected, the primary deficit (i.e., deficit before interest payments) would have to be smaller in dollar terms to be sustainable, and vice versa. By historical standards, CBO's projections of economic growth over the next 10 years are relatively modest, but this is mostly because CBO projects that the labor supply will grow much more slowly than it has historically due to the aging of the population. More problematic is the role of the business cycle on budget projections. CBO's economic forecast only accounts for the short-term effects of the business cycle on the budget in the first few years of the budget window. After that, it assumes that the economy will grow at a steady rate. As a result, CBO's current projection assumes that there is no recession at any point in the next 10 years. Given that the economy has been in expansion since 2009, this projection in effect assumes that the economy will experience the longest uninterrupted economic expansion in the history of the United States. The projection would seem to account for the business cycle by assuming a growth rate that averages out the potential ebbs and flows in the business cycle. The budget has proven to be disproportionately affected by past recessions, however. In other words, were a recession to occur in the next 10 years, it would likely increase cumulative budget deficits over the course of the budget window by more than the baseline projection of steady growth, even after accounting for higher than projected growth in expansion years.\nCBO's and OMB's projections assume that interest rates will remain at relatively low levels by historical standards over the next 10 years. CBO estimates that if interest rates rose to their average level from 1991 to 2000, the budget deficit would be an average of $144 billion higher per year over the next 10 years. If interest rates rose to their average level from 1981 to 1990, the budget deficit would be an average of $627 billion higher per year over the next 10 years.\nBesides forecast errors, the baseline projection is based on a number of policy assumptions when alternative assumptions could be employed that would be equally valid. Changing these assumptions would increase or decrease deficit projections. The following examples involve ambiguity about how to define current policy (in contrast to projections about future legislative changes, not meant to be captured in the baseline).\nWar spending —The baseline assumption that current discretionary spending levels (adjusted for inflation) will be maintained is likely to prove inaccurate when circumstances are expected to change significantly. An example is discretionary spending on overseas contingency operations (OCO). A planned reduction in the American troop presence in Iraq and Afghanistan may reduce future OCO spending from current levels (which are already at half of their peak 2008 level), but the baseline assumes that 2014 spending levels will continue. On the other hand, these projections also assume that no new military conflict will require additional budgetary resources over the next 10 years. D isaster spending —Like OCO spending, disaster spending is extrapolated at current year levels adjusted for inflation. Disaster spending varies significantly from year to year, however. In some years, disaster spending is minimal; in years with major disasters, it can exceed $50 billion. Disaster spending is limited by the BCA by a formula based on a 10-year average; however, the BCA also allows any discretionary spending to be designated as emergency spending. For any particular year, an amount based on the prior 10 years is arguably reasonable, but, based on historical experience, disaster spending is likely to significantly exceed that amount at least once in the next 10 years. E mergency spending designation —For most categories of discretionary spending that are exempt from the statutory caps, the BCA defines eligible spending by budget account or limits the amount. One notable exception is emergency spending, which is designated by Congress and the BCA does not constrain. In effect, any type or amount of discretionary spending can be designated as emergency spending. To date, the emergency spending designation has been used in one out of the three years that caps have been in effect—$41.6 billion in 2013, related to Hurricane Sandy relief. Going forward, CBO assumes emergency spending will be zero, but any amount is possible under current law. SGR (\"doc fix\") —As discussed above, Congress has enacted the \"doc fix\" on a temporary basis, rather than repealing the SGR. As a result, the CBO baseline assumes that the SGR will be in effect in future years. If Congress continues to prevent the SGR from coming into effect, budget deficits would be $148 billion higher over 10 years. E xpiring tax provisions ( \"extenders\") —Many provisions of the tax code are scheduled to expire under current law. Congress routinely extends some, but not all, of these provisions, often for one year at a time. If all expiring provisions were permanently extended, budget deficits would be $1.1 trillion higher over 10 years.\nUnforeseen circumstances and inaccurate assumptions played a major role in the movement from projected baseline surpluses to actual deficits in the last decade. Historically, emergencies and other unforeseen events have typically been deficit financed. The baseline could not anticipate events, such as war in Iraq and Afghanistan, Hurricane Katrina, and two recessions, that were major contributors to last decade's budget deficits. Furthermore, baseline assumptions (some of which are set in statute) that were unrepresentative of past events—such as assumptions that discretionary spending would grow only at the rate of inflation (in years without statutory caps) and tax provisions would expire as scheduled—proved unrepresentative of future events, and this caused baseline deficit projections to repeatedly undershoot. This experience raises the question of the utility of relying on projections, particularly over longer budget windows. Another conclusion is that if budget plans do not use realistic assumptions or build in assumptions about unforeseen contingencies, they are unlikely to prove accurate.\nIn addition to ambiguity about how to best capture current policy in a baseline, it is useful to remember that, on a conceptual level, the baseline does not attempt to account for policy changes even if they are likely or predictable. For example, Congress has intervened to prevent the full effects of the Budget Control Act's automatic spending cuts from occurring each year (although it has not eliminated them entirely). One might conclude it is not only possible, but probable, that future Congresses may similarly intervene to reduce these spending cuts. Because the baseline measures current law, it assumes that those cuts will be implemented in their entirety.\nTo account for some of these issues caused by baseline assumptions, CBO also presents an Alternative Fiscal Scenario that assumes that the doc fix and expiring tax provisions do not expire and that the BCA's automatic spending reductions do not come into effect. Under the Alternative Fiscal Scenario, the budget deficit continues to rise and peaks at 5.1% of GDP in 2022 and the debt held by the public rises as a share of GDP each year, reaching 86.7% of GDP by 2024. Deficits reach 10% of GDP in 2032 and the debt held by the public reaches 100% of GDP by 2029.", "There is no clear answer to the question of how much the deficit should be reduced because the targeted amount of deficit reduction depends on the policy goal.\nA balanced budget could be pursued so that the government would have a neutral effect on the national saving rate (by accounting identity, budget deficits reduce the national saving rate). Since the United States has a low national saving rate relative to other countries and relative to domestic investment needs, it could be argued that the government should at least not continue to reduce the national saving rate by running budget deficits in the future. If the policy goal were for the government to increase the national saving rate or reduce the federal debt in dollar terms, then the government could target a budget surplus. A desire to achieve generational equity, so that government spending on present age cohorts was not disproportionately paid for by future age cohorts, would require large budget surpluses today because of the interaction between an aging population and the pay-as-you-go structure of elderly entitlement programs. Some economists call for a balanced structural budget (i.e., a budget that would be balanced if the economy were at full employment), which would allow for modest deficits in downturns and budget surpluses in boom times. This would avoid deficit reduction during a recession that added contractionary pressures on the economy. For 2012, a structurally balanced budget would have allowed for an actual deficit of about 2.3% of GDP. A less ambitious policy goal would be to place fiscal policy on a sustainable path in the medium to long term. History demonstrates that budget deficits can be sustained indefinitely as long as they are small enough that government debt does not continuously grow more quickly than GDP. The budget is not projected to be on a sustainable path under current policy in the long term because the debt held by the public would continuously grow more quickly than GDP. Economists view this as unsustainable because it would imply that an ever-growing portion of national income would be needed to meet interest payments. Under the baseline, the debt would reach 79% of GDP in 2024 and 106% of GDP in 2039. Under the Alternative Fiscal Scenario, the debt grows modestly relative to GDP in the short run and reaches 163% of GDP by 2039. As long as investors remain willing to finance large deficits, there is no barrier to the debt continuing to grow relative to GDP, and there has been no difficulty in financing it to date.\nBecause deficits are projected to continue to grow in the long run, growing reductions in spending or increases in taxes would be required over time to maintain sustainability. Cutting spending or raising taxes sooner rather than later would reduce the need for future changes. CBO projects that spending would need to be cut or revenues increased by 1.8% of GDP immediately and permanently to stabilize the debt-to-GDP ratio over the next 75 years, or 7.4% of GDP under the alternative fiscal scenario. Today's debt levels, high by historical standards, leave policymakers less room to maneuver to cope with future challenges—both anticipated, such as the retirement of the baby boomers, and unanticipated.", "The state of the economy is an important factor to consider in determining the desired timing of deficit reduction. All else equal, mainstream economic theory predicts that reducing the deficit would have a contractionary effect on GDP in the short run, whether through tax increases or spending reductions (which is a component of GDP). During a period of robust economic growth, that contractionary effect would be more easily offset by other sectors of the economy, and the expansion would likely be sustained. During a period of high unemployment, reducing the budget deficit would be expected to make unemployment higher (or fall more slowly) than would otherwise be the case, all else equal. The economy is now closer to full employment than it has been since the recession, but there is considerable disagreement among economists as to how close and growth has not yet been robust.\nOn the other hand, deficit reduction will eventually be needed to achieve sustainability, and given that the effect on the economy is proportional to the size of the deficit reduction, it could be argued that avoiding unwanted contractionary effects suggests a gradual approach to deficit reduction. Furthermore, policy changes can be phased in such a way that they have little contractionary effect in the short run. Waiting until deficits have become larger leaves less latitude for phasing in changes.\nThe U.S. fiscal outlook is not a purely long-term issue, however—deficits are already above average today, and while projected deficits outside the 10-year budget window are larger than today's deficits, they are also more uncertain. Deficits are also a long-term issue in the sense that most observers believe fundamental reforms to outlays and revenues would be necessary to put the budget on a sustainable path; however, any delay to implementing those changes increases the eventual budgetary cost of returning to a sustainable fiscal path, all else equal.\nThe deficit is a long-term issue in that any negative economic consequences from running large deficits have been minor to date, but there is the risk that the deficit's effect on the economy could become negative at any time. Although economic theory suggests that larger deficits provided a stimulative boost to the economy during the recent recession by partially offsetting the contraction of private spending, continued deficits would be expected to eventually have a negative effect on the economy. At some point, the economy is expected to return to full employment (i.e., practically all existing labor and capital resources are in use). When it does, government budget deficits are expected to \"crowd out,\" or compete with, private-investment spending in the standard macroeconomic model. Setting aside foreign capital flows for the moment, borrowing can only be financed through saving, and government borrowing competes with business borrowing for the same pool of national saving. By increasing the demands on that pool of national saving, government borrowing pushes up the cost of all borrowing through higher interest rates, causing businesses to finance less capital spending than they otherwise would. Business borrowing finances capital spending on plant and equipment, and lower capital spending results in lower potential gross domestic product, and hence lower future national income, than would otherwise occur.\nThe financial crisis and Great Recession led to a marked decline in private-investment spending and increase in private saving. Both of these factors reduced the potential for large government deficits to crowd out private-investment spending. Low interest rates since the recession began support the view that the deficit caused little crowding out to occur.\nWith international capital mobility, borrowing can also be financed by foreign saving. In the standard macroeconomic model with perfect capital mobility, the boost in aggregate spending from the stimulus would cause the trade deficit to rise as foreign capital is attracted to higher domestic interest rates. Net foreign borrowing is equivalent to the trade deficit because one country can borrow from the rest of the world only if it imports more than it exports. The availability of foreign credit would avoid the crowding out of domestic capital investment. But the boost to aggregate spending from the budget deficit would be negated (or \"crowded out\") by the higher trade deficit (in the form of lower exports, higher imports, or both). The United States relies heavily on foreign borrowing, and this is another reason that large budget deficits could be less effective at stimulating the economy. Since the recession began, the trade deficit has fallen substantially, so a problem of crowding out from the trade deficit is not apparent at this time.\nDespite the significant decline in the budget deficit since 2012, crowding out and higher interest rates will likely become a more pressing issue as the economy returns to full employment because of the anticipated increase in business investment back to historically normal levels, particularly if the increase in private saving following the recession proves not to be permanent. If that is the case, the decline in the trade deficit may reverse. Interest rates have already increased modestly as the economy has strengthened, although they remain low compared with those prevailing in recent decades.", "Budget deficits can be reduced through cuts in spending, higher taxes, or a combination of both. Plans to reduce the deficit that are narrowly targeted require commensurately larger spending cuts or tax increases to targeted programs or provisions. To that end, deficit reduction proposals can start with the observation that Social Security, Medicare, net interest (which cannot be changed), and defense discretionary make up almost two-thirds of total spending. Figure 1 compares the projected deficit to overall spending and revenues in 2014. It shows that the deficit is about two-fifths the size of all non-interest spending outside of Social Security, Medicare, and defense discretionary. It is about one-sixth the size of total revenues.\nBudget deficits are the result of the shortfall between spending and revenue. In 2009, spending reached its highest share of GDP since 1945 and revenues reached their lowest share of GDP since 1950. As seen in Figure 2 , from 1946 to 2008, outlays averaged 19.6% of GDP and were generally below 20% of GDP until 1975, above 20% of GDP from 1975 to 1996, and below 20% of GDP from 1997 to 2005. From 2009 to 2011, outlays averaged 24.1% of GDP. From 1946 to 2008, revenues averaged 17.8% of GDP, showing no long-term upward or downward trend from 1952 to 2007. Revenues were at least 17% of GDP in each year during that period except for 1955, 1959, 2003, and 2004, when they were between 16% and 17%. From 2009 to 2012, revenues were below 16% of GDP.\nOver the next 10 years, revenues are projected to be near their historical average at 18.1% of GDP. Outlays are projected to be 21.5% of GDP, above their historical average of 19.6% of GDP and comparable to their level from 1975 to 1996. However, the composition of outlays is projected to be significantly different, as discussed below.\nJust as recent deficits are the combination of all past outlay and revenue decisions, returning the budget to balance would be difficult without a combination of outlay and revenue changes. For instance, to return the budget to balance while maintaining baseline revenue levels would require that outlays decline to a share of GDP last seen in the early 1970s. Likewise, to balance the budget while maintaining baseline outlay levels would require revenues to rise to their highest share of GDP ever.", "Total spending has fallen from an average of 24% of GDP from 2009 to 2011 to 21% of GDP in 2013. It is projected to rise to 22% of GDP from 2020 to 2024 under current policy. From 1946 to 2008, there were only three years when outlays were above 23% of GDP. Spending rises under the baseline projection despite discretionary spending falling to its lowest share of GDP since data were first collected because mandatory spending and net interest on the federal debt are projected to grow relative to GDP. The projected increase in net interest is due to the growth in the federal debt and the return to more normal interest rates from the current below-average rates.", "Discretionary spending has fallen from 12.3% of GDP in 1962 to a projected 6.8% of GDP in 2014. Discretionary spending was at high levels relative to GDP from 2009 to 2012, but not historically high levels since data were first available in 1962, as seen in Figure 3 . Over time, the two components of discretionary spending, defense and non-defense, have followed different paths. Defense discretionary spending was lower from 2009 to 2012 than it was in all but two years from 1962 to 1992 as a share of GDP. From 1963 to 2001, defense discretionary spending generally fell relative to GDP, but rose in nominal dollars. It then began to grow, when overseas military operations expanded. In 2014, defense discretionary spending is projected to fall to its lowest share of GDP since 2002.\nNon-defense discretionary spending has shown no long-term upward or downward trend relative to GDP—except for an elevated period from 1975 to 1983, it has always stayed within 3% to 4% of GDP. Over the late 1990s, it fell to its lowest level of GDP since data have been collected, and then rose from that low base in the 2000s. It was above its long-term average from 2009 to 2012, but still below the levels prevalent from 1975 to 1981. Since 2009, much of the growth in non-defense discretionary spending was a result of the 2009 stimulus (ARRA). Most discretionary spending provided under this act was completed by 2011. In 2014, non-defense discretionary spending is projected to fall back to the historically low levels of the 1990s, which is well below its share of GDP before the 1990s.\nIn the CBO baseline, discretionary spending declines significantly relative to GDP over the next 10 years to its lowest share of GDP ever since data were first collected in 1962, as shown in Figure 3 . The baseline, based on current law, assumes that discretionary spending will adhere to the levels set in the Budget Control Act (BCA) through 2021 and discretionary spending not subject to the caps (notably, OCO) will rise at the rate of inflation. In long-term projections, CBO assumes discretionary spending will remain at its 2024 share of GDP. Because discretionary spending is held constant, it becomes a smaller share of spending over time and therefore does not contribute to the growth of the long-term budget deficit. If assumed instead that discretionary spending remained at its current share of GDP, non-interest spending would be 1.5 percentage points higher annually and long-term deficits would be even larger.\nDiscretionary spending fell in nominal terms (i.e., not adjusted for inflation) each year from 2011 to 2014. From 1963 to 2010, discretionary spending fell in nominal terms in only four years, most recently in 1996. Adjusted for inflation, both defense and non-defense spending fell in real terms each year from 2011 to 2013, and they are projected to continue falling each year through 2018. The decline is caused by the decline in the BCA caps in real terms and, through 2014, in OCO spending. This contrasts to the significant growth in discretionary spending that occurred from 2000 to 2010, as shown in Table 2 .\nOne macroeconomic implication of reducing discretionary spending is that most federal spending on physical capital (e.g., infrastructure) and human capital (e.g., education) is located in the discretionary portion of the budget. Economic theory predicts that a lower future capital stock would result in a smaller economy from what it otherwise would be in the long term, all else equal.\nTo achieve further deficit reduction through discretionary spending would involve reducing discretionary spending even lower as a share of GDP than the all-time low already achieved under the BCA. By 2030, if discretionary spending were reduced to zero, there would still be a deficit in the extended baseline scenario. For defense, the timing and magnitude of any potential drawdown in overseas military operations could cause military spending to decline relative to the baseline, but traditionally such changes have not been motivated by the desire for deficit reduction. Even if current operations are reduced, future geopolitical events could require military personnel to be deployed elsewhere in the next 10 years, so the baseline does not necessarily overestimate future defense spending.", "Unlike discretionary spending, mandatory spending has grown as a share of GDP since 1962. Net of offsetting receipts, it doubled relative to GDP from 1962 to 1975, increasing from 4.7% to 9.4% of GDP. It then fluctuated in a range of 8.7% to 10.4% of GDP from 1975 to 2007, peaking in recession years in part because of automatic stabilizers. It peaked at 14.5% of GDP in 2009, marking its highest share of GDP since data were first compiled in 1962. Mandatory spending has fallen as a share of GDP since, but has remained above its pre-crisis share of GDP.\nIn contrast to discretionary spending, mandatory spending is projected to continue to grow faster than inflation and exceed 13% of GDP over the next 10 years under current policy. Since 1962, mandatory spending fell in nominal terms in only one year, 2010; outside of TARP and deposit insurance, which recorded negative outlays that year, all other mandatory spending grew in 2010.\nOutside of health and retirement programs, outlays on other mandatory programs are projected to decline relative to GDP over the next 10 years. As the economy improves, \"automatic stabilizer\" spending has declined significantly: spending on income security programs more than doubled in nominal terms between 2007 and 2010, but is projected to decline from $438 billion in 2010 to $219 billion in 2014. Over its 75-year projection, CBO assumes that other mandatory spending will fall from 2.7% of GDP in 2013 to 0.8% of GDP by 2088. Since data were collected in 1974, it has never been lower than 1.9% of GDP.\nOver the long term, however, the upward trend in mandatory spending in the past and future is dominated by entitlement spending on the elderly (Social Security, Medicare, and Medicaid), which accounted for about three-quarters of total mandatory spending in 2010. Social Security has risen from 3.7% of GDP in 1974 to 4.9% of GDP in 2013, its highest share of GDP ever. Major mandatory health programs (Medicare, Medicaid, the Children's Health Insurance Program, and health insurance exchange subsidies, net of offsetting receipts) rose from 1% of GDP in 1974 to 5% of GDP in 2011, its highest share of GDP ever, before falling to 4.6% of GDP in 2013.\nWithin the 10-year baseline, Social Security and major health spending each exceed total discretionary spending for the first time. In long-term budget projections, rising budget deficits are driven primarily by the growth in entitlement programs for the elderly, particularly health spending. Social Security outlays are projected to rise from 4.9% of GDP today to 6.3% of GDP in 2039, and federal health outlays (mainly on Medicare and Medicaid) are projected to rise from 4.9% today to 8.0% of GDP in 2039. By 2066, outlays on Social Security and health programs would exceed projected total revenues in 2014 as a share of GDP.\nIn long-term projections, health spending per capita is projected to continue to grow faster than GDP per capita because it has historically grown much more quickly. If health spending per capita grew at the same rate as GDP per capita (technically, this is referred to as an excess cost growth rate of zero), one-third of the increase in federal health spending would be avoided through 2039, although spending would still grow somewhat because of demographic changes—namely, the retirement of the baby boomers—that increased the number of recipients. Figure 5 illustrates that if there was zero excess cost growth over the next 75 years, spending on major health programs would decline from 14% of GDP to 7.7% of GDP in 2089. The difference between the two is significantly larger than the baseline primary deficit (2.6% of GDP) in 2089. Therefore, if health spending were to grow at the rate of GDP instead, the budget would be on a sustainable path.\nThe growth in elderly entitlement spending makes deficits unsustainably large in the long run. In part, the link between entitlement spending and deficits is driven by the assumptions that go into these projections—other spending is assumed to gradually fall relative to GDP in the long run, revenues are projected to gradually rise relative to GDP because of bracket creep, while health spending per capita is projected to continue to grow faster than GDP per capita. Restraining the future growth rate of elderly entitlement spending would not result in significant deficit reduction in the short run, however. Most proposals to reform elderly entitlement programs would generate significant budgetary savings in the long run, but little budgetary savings in the short run, partly because most proposals exempt current retirees from reform and partly because the savings from these changes would compound over time. For example, immediately reducing excess cost growth for federal health spending to zero would reduce federal spending by 2% of GDP after 20 years, but by 0.3% of GDP after 5 years.\nMandatory spending could be reduced by restricting benefits or eligibility. For retirement programs, it is straightforward to do so through a change in the benefit formula. For health programs, it is less straightforward, and there is a lack of consensus on how excess cost growth, which has persisted for decades, can be effectively minimized. On a positive note, excess cost growth has shown a downward trend over time. However, CBO's projections already assume the decline will continue, and it still results in an unsustainably large budget deficit.", "In 2009 and 2010, revenues were at historically low shares of GDP across all major categories—individual income taxes were at their lowest share of GDP since 1950, corporate income taxes were at their lowest share of GDP since the 1930s, social insurance receipts were at their lowest share of GDP since the 1970s, and excise taxes were at their lowest share of GDP since 1934, the first year for which data are available. Total revenues remained at historically low shares of GDP in 2011 and 2012, as shown in Figure 2 . In recent years, most revenues have come from the individual income tax and social insurance categories. In 2013, revenue as a share of GDP returned closer to historically average levels because of the economic recovery and because of the expiration of the payroll tax cut and certain provisions from the 2001 and 2003 tax cuts.\nRevenues in the CBO baseline are projected to equal about 18% of GDP from 2015 on, around their historical average. Total revenues would gradually increase relative to GDP over the next 10 years due to the improvement in the economy (initially) and \"real bracket creep,\" returning to their historical average around 2014. \"Real bracket creep\" refers to the fact that the same tax structure generates more revenue relative to GDP when incomes rise. Bracket creep does not lead to a significant increase in revenues relative to GDP over a 10-year projection, but it does over a 75-year projection. In CBO's Long-Term Budget Outlook, projected revenues increase by 1.8 percentage points to 19.4% of GDP as a result of bracket creep in 2039. By 2089, revenues would reach 23.9% of GDP, which would represent their highest share of GDP ever. Revenues also increase by 0.3 percentage points by 2039 because it is assumed that temporary provisions will be allowed to expire, although many are routinely extended. An argument could be made that current law does not represent current policy in long-term projections, because current law would make revenues reach an unprecedented share of GDP. If argued instead that the revenues equal to current share of GDP represented current policy, then the long-term fiscal gap would be much larger because revenues would not rise in tandem with spending as a share of GDP.\nIf policymakers decided to increase revenue to reduce the deficit, five broad choices are often discussed:\nredesigning the structure of the tax system; adding new revenue sources, such as a carbon tax or a value added tax (VAT); increasing existing taxes; \"broadening the tax base\" by eliminating tax expenditures (deductions, exemptions, and credits); or allowing tax cuts to expire as scheduled.\nRedesigning the tax system or adding new revenue sources could theoretically improve economic efficiency and might be more appealing to some than increasing existing taxes, but in practice, compensating those made worse off from these changes may result in those policies raising little additional revenue. Generally, economists favor eliminating tax expenditures over raising marginal tax rates on efficiency grounds, although some specific expenditures may promote economic efficiency. Tax expenditures have also been criticized on the grounds of equity and complexity." ], "depth": [ 0, 1, 1, 1, 1, 1, 1, 2, 3, 3, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full", "h2_full h1_full", "h2_full", "h3_full", "h3_full", "h0_full h3_full h2_title", "h0_title h3_title", "h3_full", "h0_full h3_full", "h2_full" ] }	{ "question": [ "How does the 2009-2012 federal budget deficit compare to historical deficits?", "Why has the deficit grown so large?", "How has the deficit changed since 2012?", "How will the deficit likely change in the future?", "Why has the deficit declined recently?", "How was spending cut?", "How has the deficit changed since 2008?", "How accurate are the deficit projections?", "How accurate have past deficit projections been?", "What events can majorly affect the deficit?", "How could unexpected legislation changes affect the deficit?", "How can the debt be kept at a sustainable level?", "How effective is postponing action?", "To what extent is the current debt sustainable?", "What are major sources of such unsustainability?", "How are spending and revenue projected to change in the future?" ], "summary": [ "The federal budget deficit was the largest it has been since World War II as a percentage of GDP from 2009 to 2012, peaking at 10.1% of GDP.", "This occurred because spending reached its highest share of GDP since 1945 and revenues reached their lowest share of GDP since 1950.", "Since then, the deficit has declined to a projected 2.8% of GDP in 2014, which is still above the 1946 to 2008 average.", "Over the next 25 years, deficits are projected to become very large again under current law.", "The recent decline in the deficit is partly due to improvements in the economy, the expiration of temporary measures taken in response to the recession, and spending cuts (mainly to discretionary spending).", "Spending was cut by the Budget Control Act of 2011 (BCA; P.L. 112-25) and the reduction in overseas contingency operations (OCO), primarily in Iraq and Afghanistan.", "Since September 2008, legislative changes to spending have added a cumulative $1.12 trillion to deficits and legislative changes to revenues, mainly the extension of expiring tax provisions, have added $1.75 trillion to deficits, excluding resulting interest costs.", "Looking forward, several uncertainties are inherent in the baseline that may lead to different outcomes than projected.", "There have been large errors to budget projections historically, in part because economic forecasting is subject to large errors.", "The budget has also proven to be highly sensitive to recessions, and CBO does not project a recession in its 10-year projection. Budget projections also do not assume any significant changes in spending on future wars or disasters.", "The baseline projection follows current law, assuming that the \"doc fix\" and tax \"extenders\" will expire as scheduled. If Congress temporarily extends either, as it has done regularly in the past, the deficit will be larger than projected.", "In the long run, legislative changes will be needed to reduce spending or increase taxes to keep the debt on a sustainable path.", "Postponing action requires larger changes to be made in the long run, and limits the ability to phase in changes gradually.", "Economists view the debt as currently unsustainable because it is projected to grow faster than gross domestic product (GDP) indefinitely under current policy, causing an ever growing share of national income to be devoted to servicing the debt.", "The main source of long-term fiscal unsustainability is the growth in elderly entitlement spending. In particular, spending on major health programs, such as Medicare and Medicaid, is assumed to continue to grow faster than GDP, as it has historically.", "Overall, mandatory spending has grown as a share of GDP, rising from 4.7% of GDP, when data were first compiled in 1962, to a projected 12.3% of GDP in 2014, and is projected to continue rising. By contrast, discretionary spending has fallen from 12.3% of GDP in 1962 to a projected 6.8% of GDP in 2014, and under the baseline it is projected to decline to its lowest share of GDP ever, primarily because of the BCA's statutory caps. Revenues are projected to stay near their historical average over the next 10 years." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, -1, -1, 0, -1, -1, -1, 0, 0, 2, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3 ] }
CRS_R41800	{ "title": [ "", "Introduction", "Background", "The National DNA Index System (NDIS) and the Combined DNA Index System (CODIS)", "DNA Profiles", "DNA Backlog", "Forensic Casework", "Convicted Offender and Arrestee Samples", "Federal Law", "Quality Assurance and Proficiency Testing Standards", "Index to Facilitate Law Enforcement Exchange of DNA Identification Information", "Collection of DNA Samples from Certain Federal, District of Columbia, and Military Offenders", "Postconviction DNA Testing", "Preservation of Biological Evidence", "Grants for DNA-Related Programs", "Debbie Smith DNA Backlog Grant Program", "Kirk Bloodsworth Post-Conviction DNA Testing Grant Program", "Sexual Assault Forensic Exam Program Grants", "DNA Research and Development Grants", "DNA Training and Education for Law Enforcement, Correctional Personnel, and Court Officers" ], "paragraphs": [ "", "Deoxyribonucleic acid, or DNA, is the fundamental building block for an individual's entire genetic makeup. DNA is a powerful tool for law enforcement investigations because each person's DNA is different from that of every other individual (except for identical twins). By analyzing selected DNA sequences (called loci), a crime laboratory can develop a profile to be used in identifying a suspect.\nDNA can be extracted from a number of sources, such as hair, bone, teeth, saliva, and blood. Because the human body contains so many copies of DNA, even a minuscule amount of bodily fluid or tissue can yield useful information. Obtaining a DNA sample is not complicated; it can be as simple as a swab of the inside of the mouth to obtain cheek cells and white blood cells in saliva.\nState and federal DNA databases have proved instrumental in solving crimes, reducing the risk of convicting the wrong person, and establishing the innocence of those wrongly convicted. DNA evidence is used to solve crimes in two ways:\nIn cases where a suspect is known, a sample of that person's DNA can be compared to biological evidence found at a crime scene. The results of this comparison may then help establish whether the suspect was at the crime scene or whether he/she committed the crime. In cases where a suspect is not known, biological evidence from the crime scene can be analyzed and compared to offender profiles contained in existing DNA databases to assist in identifying the perpetrator. Through the use of DNA databases, biological evidence found at one crime scene can also be connected to other crime scenes, linking them to the same perpetrator or perpetrators.\nThis report provides an overview of how DNA is used to investigate crimes and help protect the innocent. It also reviews current statutory law on collecting DNA samples, sharing DNA profiles generated from those samples, and providing access to postconviction DNA testing. The report also includes a summary of grant programs authorized by Congress to assist state and local governments with reducing DNA backlogs, provide postconviction DNA testing, and promote new technology in the field.", "Federal law authorizes the Federal Bureau of Investigation (FBI) to operate and maintain a national DNA database where DNA profiles generated from samples collected from people under applicable legal authority and samples collected at crime scenes can be compared to generate leads in criminal investigations. Statutory provisions also authorize the collection of DNA samples from federal offenders and arrestees, District of Columbia offenders, and military offenders. State law dictates which arrestees and convicted offenders will have profiles entered into state DNA databases, but federal law dictates which profiles entered into state databases can be uploaded into the national DNA database.\nIncreased awareness of the power of DNA testing to solve crimes has led to increased demand for DNA analysis, which has resulted in a backlog of casework for laboratory personnel. In addition to solving crimes, DNA analysis can also help exonerate people incarcerated for crimes they did not commit.", "As early as the 1980s, states began enacting laws that required DNA samples from offenders convicted of certain sexual offenses and other violent crimes. The samples were then analyzed and their profiles entered into state databases. In the late 1980s, the FBI Laboratory convened a working group of federal, state, and local forensic scientists to establish guidelines for the use of forensic DNA analysis in laboratories. The group proposed guidelines that are the basis of current national quality assurance standards, and it urged the creation of a national DNA database. In 1994, Congress authorized the FBI to establish and oversee the National DNA Index System (NDIS). When the NDIS launched in 1998, nine states participated. Currently, laboratories in all 50 states, the District of Columbia, the federal government, Puerto Rico, and the U.S. Army Criminal Investigation Laboratory participate in the NDIS. The NDIS contains the DNA profiles provided by federal, state, and participating local crime laboratories.\nDNA profiles generated by laboratories operated by local law enforcement agencies are stored in Local DNA Index Systems (LDIS). DNA profiles generated by state laboratories, along with authorized profiles stored in participating LDIS, are uploaded into State DNA Index Systems (SDIS). Each state has its own laws specifying which profiles can be included in the SDIS. DNA profiles generated by federal laboratories, along with authorized DNA profiles in participating SDIS, are uploaded into the NDIS. Federal law dictates which DNA profiles can be stored in the NDIS (see below). The NDIS allows participating laboratories to compare DNA on the national level while the SDIS allows each state to compare DNA profiles stored at the state level. Federal, state, and local laboratories upload and compare DNA profiles using the Combined DNA Index System (CODIS) software produced and distributed by the FBI.\nCODIS searches three indexes (convicted offenders, arrestee, and forensic) to generate investigative leads. The convicted offender index contains DNA profiles developed from samples collected from convicted offenders; the arrestee index contains DNA profiles developed from samples collected from arrested but not yet convicted individuals; and the forensic index contains DNA profiles developed from samples collected at crime scenes. CODIS searches across these indexes to look for potential matches (also referred to as \"hits\"). Matches can occur between either the convicted offender or arrestee indexes and the forensic index, thereby providing law enforcement with the identity of one or more suspects. Also, matches can occur between DNA profiles in the forensic index, thereby linking crime scenes to each other and identifying serial offenders. Matches between multiple samples in the forensic index can allow law enforcement agencies in different jurisdictions to coordinate their efforts and share leads. No names or other personal identifiers for offender and arrestee DNA profiles are stored in the NDIS, so when a match is made in CODIS, the laboratories that submitted the DNA profiles to the NDIS are notified of the match and they contact each other to verify the match and coordinate their efforts.", "DNA profiles entered into CODIS are based on 13 core short tandem repeat (STR) loci selected by the FBI. Currently, the 13 STR loci used by the FBI are non-coding, meaning that they have not been shown to be associated with human attributes such as height, eye or skin color, or susceptibility to a particular disease. Each locus has two alleles, and it is these 13 pairs of alleles that are compared to match samples in the forensic index with profiles in either the offender or arrestee indexes. The 13 core loci chosen by the FBI provide a high level of discriminatory power. The probability that two unrelated individuals would share all 13 pairs of alleles is estimated to be one in several hundred billion. Two random Americans will, on average, share two or three alleles.\nIt is important to ensure the quality of the DNA profiles entered into the NDIS. If the profiles are not accurate, they are of little use for making matches between forensic and offender or arrestee profiles. The FBI helps ensure the quality of DNA profiles included in the NDIS by signing memorandums of understanding with state laboratories whereby the laboratory agrees to adhere to the FBI's Quality Assurance Standards (QAS, see below). Laboratories submitting DNA profiles to the NDIS must be accredited and audited annually. Annual audits can be conducted by either an internal or external auditor, but laboratories must be audited by an external agency at least once every two years. Laboratories that do not pass the annual audit can be prevented from entering DNA profiles in CODIS. Currently, most labs in the United States are to be audited by the American Society of Crime Laboratory Directors and its Laboratory Accreditation Board (ASCLD/LAB) and Forensic Quality Services (FQS). In addition, DNA analysts must undergo semiannual proficiency testing. DNA analysts who do not pass their semiannual proficiency tests are not to be allowed to enter profiles into CODIS. Laboratories are also required to conduct two reviews of all DNA profiles before they are entered into CODIS.\nCurrently, as prescribed by federal law (see below), only public laboratories that comply with the QAS can submit DNA profiles to the NDIS. However, public laboratories are allowed to outsource casework to private laboratories. All private laboratories that conduct DNA testing for public laboratories must be accredited, be audited annually, and adhere to the requirements of the QAS. Public laboratories are required to conduct an initial site visit to each private laboratory they contract with to conduct DNA analyses. If the public laboratory signs a contract with a private laboratory that is longer than one year, the public laboratory must conduct an annual site visit. Public laboratories are also required to review all outsourced DNA profiles generated by private laboratories. The review by the public laboratory is in addition to the two reviews private laboratories are required to conduct per the QAS.\nAn offender or arrestee profile in a DNA database consists of 26 numbers representing each of the two alleles for the 13 STR loci, an agency identification number, a sample identification number, and an identifier for the analyst that entered the information. However, most jurisdictions retain the DNA sample used to generate the profile placed in CODIS. DNA samples are usually retained for quality assurance purposes, such as confirming a hit made using the NDIS, and it allows jurisdictions to retest the sample if new technology is developed in the future. Privacy advocates are concerned that stored DNA samples include a wealth of genetic information that could be misused. States and the federal government have sought to prevent the unauthorized use of DNA samples. Some states have criminal penalties in place for individuals who misuse DNA samples collected for law enforcement purposes. Under current law, anyone who misuses a DNA sample collected under federal authority is subject to a fine of up to $250,000, or imprisonment for up to one year.\nThe number of offender profiles included in the NDIS has increased as Congress has allowed states to include DNA profiles from a broader range of convicted offenders and persons arrested for certain crimes to be included in the database. States have also amended their DNA collection laws to reflect this expanded authority. Approximately 15.6 million new convicted offender and arrestee profiles have been added to NDIS since 2000. In addition, approximately 795,000 new forensic profiles have been included in the NDIS since 2000. The additional offender and forensic profiles have increased the number of investigative leads generated by DNA databases. Since the creation of NIDS, hits generated by searches of the NDIS have aided in the investigation of nearly 381,000 crimes.", "Delays in processing DNA evidence can result in delays in apprehending or prosecuting violent or serial offenders, or they can result in wrongfully convicted individuals serving time in prison for crimes they did not commit. In addition, persistent backlogs can result in crime laboratories prioritizing DNA analysis for violent offenses, such as homicide or sexual assault, over other offenses, such as property crimes, or they can result in law enforcement agencies establishing policies stating that biological evidence is not to be collected for minor offenses. Not analyzing or collecting DNA samples for minor offenses could prevent law enforcement from apprehending offenders who may go on to commit more serious crimes.\nContext is important when evaluating data on DNA backlogs. Backlogs are best considered in the context of each crime laboratory's capacity, size, and workload. For example, if there are two laboratories and the first laboratory has a backlog of casework that is three times the size of the casework backlog in the second laboratory, the backlog for the first laboratory might not be as daunting if the first laboratory's turnaround time is twice as fast as the second laboratory and the analysts in the first laboratory are more productive (i.e., each analyst analyzes more cases per month).", "The most recent data available on the size of DNA backlogs are from a November 2016 report published by the Bureau of Justice Statistics (BJS). Data presented in the report come from BJS's 2014 Census of Publicly Funded Forensic Crime Laboratories (CPFCL). In the report, BJS compares data from the 2014 census to data taken from the 2009 CPFCL to show how requests for DNA analysis have changed.\nIn 2009, there were an estimated 103,500 backlogged forensic casework analyses, while in 2014 there were an estimated 107,800 backlogged analyses. However, the estimated increase in backlogged forensic casework analyses is not statistically significant. BJS data show that public crime laboratories completed more forensic casework samples in 2014 than 2009. In 2014, public crime laboratories completed an estimated 296,000 requests for forensic casework analysis, up from an estimated 239,000 in 2009. While crime laboratories were able to process more cases, the requests received for forensics casework analysis increased from an estimated 260,000 in 2009 to an estimated 333,000 in 2014.", "Data from BJS show that there was a significant decrease in the backlog of requests for analysis of convicted offender and arrestee samples. The backlog of these samples decreased from 502,500 in 2009 to 64,800 in 2014. Public crime laboratories processed an estimated 1,027,000 convicted offender and arrestee samples in 2009 and an estimated 904,000 samples in 2014, but the difference in processed samples is not statistically significant. However, there was a statistically significant decrease in requests for analysis of convicted offender and arrestee samples (1,053,000 requests were received in 2009 compared to 908,000 in 2014).", "While state law dictates which profiles will be included in each state's DNA database, federal law provides for the collection of DNA samples from certain federal offenders for analysis and inclusion in the NDIS. Federal law also dictates which profiles included in SDIS can be uploaded into the NDIS. Federal law also states that agencies participating in the NDIS must meet certain specified standards. In addition, federal law provides for postconviction DNA testing for federal offenders. The following section summarizes current federal law as it pertains to DNA used in a criminal justice capacity.", "Under current law, the FBI is required to issue (and revise from time to time) Quality Assurance Standards (QAS), including standards for testing the proficiency of forensic laboratories and forensic analysts in conducting DNA analyses. By law, the QAS must specify the criteria for quality assurance and proficiency tests to be applied to the various types of DNA analyses conducted by forensic laboratories. The Rapid DNA Act of 2017 (Rapid DNA Act, P.L. 115-50 ) also requires the FBI to issue standards and procedures for the use of rapid DNA instruments and the resulting analyses. The QAS must include a system for grading proficiency testing performance to determine whether a laboratory is performing acceptably. Under current law, FBI personnel who perform DNA analyses must undergo semiannual external proficiency testing by a DNA proficiency testing program that meets the standards set in the QAS.\nAccording to the FBI, the QAS describe the minimum standards for a laboratory's quality assurance program if it is performing forensic DNA analysis and/or databasing. The minimum standards cover the following areas: organization, personnel, facilities, evidence or sample control, validation, analytical procedures, equipment calibration and maintenance, reports, review, proficiency testing, corrective action, audits, safety, and outsourcing.", "The Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ) authorized the FBI to establish an index of DNA profiles (i.e., NDIS). Under current law, the NDIS can contain the DNA profiles of samples\ntaken from individuals convicted of or charged with a crime, or collected under applicable legal authorities (e.g., people arrested for crimes), except for DNA samples that are voluntarily submitted solely for elimination purposes; recovered from crime scenes; recovered from unidentified human remains; and voluntarily contributed from relatives of missing persons.\nThe NDIS can only include DNA profiles\nbased on analyses performed by or on behalf of a criminal justice agency or the Department of Defense (DOD) in accordance with available standards that satisfy or exceed the FBI's published QAS; that are prepared by laboratories that (1) have been accredited by a nonprofit professional organization of persons actively involved in forensic science and nationally recognized within the forensic science community, and (2) undergo external audits, not less than once every other year, that demonstrate compliance with the FBI's QAS; that are prepared by criminal justice agencies using rapid DNA instruments approved by the FBI in compliance with the standards and procedures the FBI is required to publish per the Rapid DNA Act; and that are maintained by federal, state, and local criminal justice agencies or the DOD pursuant to rules that allow the disclosure of profiles only to other criminal justice agencies for identification purposes, judicial proceedings, criminal defense purposes, and, if personally identifiable information is removed, for research and quality control purposes.\nUnder current law, the FBI is required to expunge the DNA profile of an individual who had a DNA profile entered into the NDIS on the basis of being convicted for a qualifying federal offense (see below) if the individual provides a certified copy of a final court order showing that the conviction was overturned. Also, the FBI is required to expunge the DNA profile of an individual who had a DNA profile entered into the NDIS on the basis of being arrested under the authority of the United States if the individual provides a certified copy of a final court order that establishes that the charge was dismissed or resulted in an acquittal, or that no charge was filed within the applicable time period. As a condition of having access to the NDIS, states must also have in place a procedure whereby the state will expunge a profile from the state's database based on the same conditions applicable to a profile being expunged from the NDIS. Also, under current law the Department of Defense is required to expunge the DNA profile of an individual who had a DNA profile entered into the NDIS on the basis of being convicted of a qualifying military offense (see below) if the individual provides a certified copy of a final court order showing that the conviction was overturned.", "Under current law, the Attorney General is permitted to collect DNA samples from \"individuals who are arrested, facing charges, or convicted of a crime or from non-United States citizens who are detained under the authority of the United States.\" In addition, the Bureau of Prisons (BOP) is required to collect a DNA sample from each federal prisoner who is, or has been, convicted of a felony, a sexual abuse crime under chapter 109A of title 18 of the U.S. Code, a crime of violence, or any attempt or conspiracy to commit any of these crimes. Federal probation offices responsible for supervising individuals on probation, parole, or supervised release are required to collect DNA samples from individuals who are, or have been, convicted of any of the crimes outlined above. Collected samples are required to be submitted to the FBI for analysis and their resulting DNA profiles are included in the NDIS. The Rapid DNA Act allows the FBI to waive the requirement that DNA samples be submitted to the FBI for analysis if the analysis is conducted with a rapid DNA instrument and the results are included in the NDIS.\nCurrent law contains similar provisions regarding the collection of DNA samples from District of Columbia offenders. BOP is required to collect a DNA sample from each prisoner who is, or has been, convicted of a qualifying District of Columbia offense. In addition, the Court Services and Offender Supervision Agency for the District of Columbia is required to collect DNA samples from individuals on probation, parole, or supervised release, who are, or have been, convicted of any qualifying District of Columbia offense. The government of the District of Columbia may determine which offenses under the District of Columbia Code are considered qualifying offenses for the purposes of supplying a DNA sample. Collected samples must be submitted to the FBI for analysis and their resulting DNA profiles are included in the NDIS. The Rapid DNA Act also allows the FBI to waive the requirement that DNA samples be submitted to the FBI for analysis if the analysis is conducted with a rapid DNA instrument and the results are included in the NDIS for District of Columbia offenders.\nUnder current law, the DOD is required to collect DNA samples from each member of the Armed Forces who is, or has been, convicted of an offense under the Uniform Code of Military Justice for which a sentence of confinement of more than one year can be imposed, or of any other offense under the Uniform Code of Military Justice that is comparable to the offenses for which a DNA sample can be collected from a federal offender (see above). DOD is required to conduct an analysis of the collected sample and submit the results to the FBI for inclusion in the NDIS.", "The Justice for All Act of 2004 ( P.L. 108-405 , as amended) established procedures for postconviction DNA testing in federal courts. Under current law, upon a written motion from an individual sentenced for a federal offense (hereinafter, \"applicant\"), the court must order DNA testing of evidence if all of the following apply:\nThe applicant asserts, under penalty of perjury, that the applicant is actually innocent of the federal crime for which the applicant was sentenced, or another federal or state offense, if (1) \"the evidence was entered during a federal death sentence hearing and exoneration for the offense would entitle the applicant to a reduced sentence or a new sentencing hearing\"; or (2) \"in the case of a [s]tate offense, the applicant demonstrates that there is no adequate remedy under [s]tate law to permit DNA testing of the … evidence … and, to the extent available, the applicant has exhausted all remedies available under [s]tate law for requesting DNA testing of … evidence.\" The specified evidence to be tested was secured in relation to the investigation or prosecution of the federal or state crime for which the applicant claims to be innocent. The evidence to be tested (1) \"was not previously subjected to DNA testing and the applicant did not knowingly fail to request DNA testing of that evidence in a prior motion for postconviction DNA testing\"; or (2) \"was previously subjected to DNA testing and the applicant requests DNA testing using a new method or technology that is substantially more probative that prior testing.\" The evidence to be tested \"is in the possession of the [g]overnment and has been subject to a chain of custody and retained under conditions sufficient to ensure that such evidence has not been substituted, contaminated, tampered with, replaced, or altered in any respect\" that would affect the DNA testing. The proposed DNA testing is \"reasonable in scope, uses scientifically sound methods, and is consistent with accepted forensic practices.\" The applicant \"identifies a theory of defense that is not inconsistent with an affirmative defense presented at trial and would establish the actual innocence of the applicant.\" If the applicant was \"convicted following a trial, the identity of the perpetrator was at issue in the trial.\" The proposed DNA testing may produce new material evidence that would support the affirmative defense theory presented at trial and raise a reasonable probability that the applicant did not commit the crime. The applicant certifies that he or she will provide a DNA sample for comparison purposes. The motion is made in a timely fashion.\nIf the court orders DNA testing, the testing is carried out by the FBI. However, the court can order DNA testing to be conducted by another \"qualified laboratory if the court makes all necessary orders to ensure the integrity of the … evidence and the reliability of the testing process and results.\" The cost of any DNA testing is borne by the applicant, unless the applicant is indigent; in that case, the cost of the DNA testing is borne by the government.\nThe results of any DNA test must be simultaneously provided to the court, applicant, and U.S. Attorney's office. If the DNA test excludes the applicant as the source of the biological evidence, the DNA profile is required to be run through CODIS, assuming that the analysis was conducted in a manner consistent with the FBI's QAS, to see if the probative sample matches any profiles in the NDIS. The results of this search are to be simultaneously provided to the court, applicant, and U.S. Attorneys office. If the test results ordered by the court are \"inconclusive or show that the applicant was the source of the tested evidence, the applicant's DNA profile may be retained in the NDIS.\" Moreover, if the test results show that the applicant was not the source of the tested evidence, and a comparison of the applicant's DNA profile with other forensic profiles in the NDIS results in a match, DOJ is to contact the appropriate agency and preserve the applicant's DNA sample. However, if the test results exclude the applicant as the source of the tested evidence, and a comparison between the applicant's DNA profile and forensic profiles in the NDIS does not result in a match, DOJ must destroy the applicant's DNA sample and ensure that the applicant's DNA profile is not stored in the NDIS if there is no other legal authority to retain the profile in the NDIS.\nIf the results of the DNA test are inconclusive, the court can order further testing, if appropriate, or it can deny the applicant relief. If the results of the DNA test demonstrate that the applicant was the source of the evidence tested, the applicant is denied relief, and on a motion of the government, the court can determine whether the applicant's claim of actual innocence was false. If the court finds the claim was false, it can\nhold the applicant in contempt of court; assess against the applicant any cost of DNA testing; forward the findings to BOP, who may wholly, or in part, deny the applicant's good conduct time; if the applicant is eligible for parole, forward the finding to the U.S. Parole Commission so the commission can deny parole on the basis of the finding; or if the test results relate to a state offense, forward the findings to the appropriate state official.\nUnder current law, if the applicant is convicted of making false assertions relating to postconviction DNA testing, the applicant is to be sentenced to no less than three years' imprisonment, to run consecutively with any other term of imprisonment the applicant is serving.\nIf the results of the DNA testing demonstrate that the applicant was not the source of the tested evidence presented as a part of the case against the applicant, the applicant can file a motion for a new trial or resentencing, as appropriate, notwithstanding any law that would bar the motion as untimely. Under current law, a court shall grant a motion for a new trial or resentencing, as appropriate, if DNA test results, when considered with all other evidence in the case (regardless of whether such evidence was introduced at trial), establish by compelling evidence that a new trial would result in an acquittal of\nin the case of a motion for a new trial, the federal offense for which the applicant is sentenced to imprisonment or death; and in the case of a motion for resentencing, another federal or state offense, if evidence of such offense was admitted during a federal sentencing hearing and exoneration for the offense would entitle the applicant to a reduced sentence or a new sentencing hearing.", "The Justice for All Act of 2004 ( P.L. 108-405 , as amended), among other things, established standards for preserving biological evidence. Under current law, the federal government is required to preserve biological evidence that was secured in the investigation or prosecution of a federal offense, if a defendant was imprisoned for the offense, unless\n\"after a conviction becomes final and the defendant has exhausted all opportunities for direct review of the conviction, the defendant is notified that the evidence may be destroyed and the defendant does not file a motion [for post-conviction DNA testing] within 180 days of receipt of notice\"; \"the evidence must be returned to its rightful owner, or it is of such size, bulk, or physical character as to render retention impracticable and the [g]overnment takes reasonable measures to remove and preserve portions of the evidence sufficient to permit future DNA testing\"; or the evidence has been the subject of postconviction DNA testing (see above) and the results of the testing demonstrate that the defendant was the source of the evidence.", "Several grant programs provide assistance to state and local governments for forensic sciences. A bulk of the programs focus on providing state and local governments with funding to reduce the backlog of forensic and convicted offender samples waiting to be processed and entered into the NDIS. However, some grant programs provide funding for other purposes, such as offsetting the cost of providing postconviction DNA testing. This section of the report provides a brief overview of grants for forensic sciences.", "The Debbie Smith DNA Backlog Grant Program (hereinafter, \"Debbie Smith grants\") provides grants to state and local governments for five major purposes: (1) conducting analyses of DNA samples collected under applicable legal authority for inclusion in the NDIS, (2) conducting analyses of forensic DNA samples for inclusion in the NDIS, (3) increasing the capacity of state and local laboratories to carry out DNA analyses, (4) collecting DNA samples from people required to submit them and forensic samples from crimes, and (5) ensuring that analyses of forensic DNA samples are carried out in a timely manner. The Katie Sepich Enhanced DNA Collection Act of 2012 ( P.L. 112-253 ) amended the Debbie Smith program to set aside up to $10 million of the amount appropriated for Debbie Smith grants for FY2013-FY2015 to assist states with the costs associated with collecting DNA samples from arrestees (assuming there is statutory authority in the state to collect DNA sample from people arrested for certain offenses). The Sexual Assault Forensic Evidence Reporting Act of 2013 (the SAFER Act of 2013, Title X of P.L. 113-4 ) added two new purposes for which Debbie Smith grants can be used: to conduct an audit of sexual assault evidence samples in the possession of a state or unit of local government that are awaiting testing and to ensure that the collection and processing of DNA evidence by law enforcement is carried out in a timely manner and in accordance with the protocols and practices the FBI is required to develop under the act.\nThe Attorney General is required to award these funds using a formula. The formula distributes funds among state and local governments to maximize the effective utilization of DNA technology to solve crimes and protect public safety. The formula must also allocate funding among state and local governments to reduce backlogs by considering the number of offender and forensic samples awaiting DNA analysis in the jurisdiction along with the population and number of violent crimes in the jurisdiction. Current law requires DOJ to award not less than 0.5% of the total amount appropriated each fiscal year to each state and the District of Columbia. The territories are to receive 0.125% of the total appropriation.\nAgencies receiving a grant under the program are required to certify that DNA analyses are conducted in laboratories that satisfy the FBI's QAS and are operated either by a state or local government or by a private laboratory under contract with the state or local government. Grants for conducting analyses of DNA samples collected under applicable legal authority for inclusion in the NDIS, conducting analyses of forensic casework for inclusion in the NDIS, and ensuring that analyses of forensic DNA samples are carried out in a timely manner can be made in the form of a contract or voucher for laboratory services that can be redeemed by nonprofit or for-profit laboratories that satisfy the QAS and have been approved by the Attorney General.\nState and local governments receiving funding under the program are required to submit a report to DOJ with a summary of the activities carried out under the grant and an assessment of whether such activities are meeting the needs identified in the grant application, as well as other information the Attorney General may require. DOJ may award not more than 1% of grant funding each fiscal year to states, units of local government, and nonprofit professional organizations of persons actively involved in forensic science and nationally recognized within the forensic science community to help offset the cost of accrediting and auditing laboratories.\nThe SAFER Act of 2013 established a series of conditions for states or units of local government receiving a grant under the Debbie Smith program for the purposes of conducting an audit of sexual assault evidence. The act, among other things, requires states and local governments receiving grants for this purpose to (1) submit a plan for performing an audit of samples, (2) provide an estimate of the number of samples, (3) complete the audit within one year of receiving the grant, and (4) submit a report to DOJ every 60 days for at least one year after the audit is completed that provides data on the number of samples in the state's or unit of local government's possession along with data on new sexual assault evidence the state or local government receives and how those samples are being processed.\nThe SAFER Act of 2013 also requires the FBI, in consultation with federal, state, and local law enforcement agencies, to develop protocols and practices for the accurate, timely, and effective collection and processing of DNA evidence, including protocols and practices specific to sexual assault cases. The protocols and practices are required to address (1) what evidence should be collected by law enforcement and forwarded for testing and the order in which that evidence should be tested, (2) a reasonable period of time for evidence to be forwarded to a laboratory for testing, (3) a reasonable period of time in which each stage of laboratory testing should be conducted, (4) a system to encourage communication between actors in the criminal justice system (e.g., law enforcement, courts, and laboratory personnel and crime victims) about the status of evidence testing, and (5) standards for audits of sexual assault evidence in the possession of state and local governments.\nDebbie Smith grants were originally authorized under the Justice for All Act of 2004 ( P.L. 108-405 ). This law amended the DNA Backlog Elimination Act of 2000, authorizing appropriations of $151 million for each of FY2004-FY2009. The program was reauthorized under the Debbie Smith Reauthorization Act of 2008 ( P.L. 110-360 ), which includes authorized appropriations of $151 million for FY2009-FY2014. The Debbie Smith Reauthorization Act of 2014 ( P.L. 113-182 ) extended the $151 million per fiscal year authorization until FY2019.", "The Kirk Bloodsworth DNA Post-Conviction DNA Testing Grant program was authorized by the Justice for All Act of 2004 ( P.L. 108-405 ). The act authorized the Attorney General to make grants to states to help defray the costs of postconviction DNA testing programs. The act authorized appropriations of $5 million for FY2005-FY2009. The Justice for All Reauthorization Act of 2016 ( P.L. 114-324 ) reauthorized appropriations for this program at $5 million per year for FY2017-FY2021.", "The Sexual Assault Forensic Exam Program Grants were authorized under the Justice for All Act of 2004 ( P.L. 108-405 ). The program provides grants for training, technical assistance, education, equipment, and information relating to the identification, collection, preservation, analysis, and use of DNA samples and evidence by medical personnel and those treating victims of sexual assault. Under the program, entities eligible to receive grants include states, units of local government, and sexual assault examination programs. The act authorized appropriations of $30 million for each of FY2005-FY2009. P.L. 110-360 extended the same authorized amount through FY2014. The Debbie Smith Reauthorization Act of 2014 ( P.L. 113-182 ) extended the $30 million per fiscal year authorization until FY2019.", "The Justice for All Act of 2004 authorized grants for research and development for improving forensic DNA technology, including increasing the accuracy and efficiency of DNA analysis, decreasing the time and expense of conducting DNA analysis, and increasing its portability. In addition, the law authorized grants for demonstration projects to evaluate the use of DNA technology in conjunction with other forensic analyses. The act authorized funding of $15 million for each of FY2005-FY2009. The Justice for All Reauthorization Act of 2016 ( P.L. 114-324 ) reauthorized appropriations for this program at $5 million per year for FY2017-FY2021.", "Under this program, the Attorney General is required to make grants to provide training, technical assistance, education, and information regarding the identification, collection, preservation, analysis, and use of DNA samples and evidence by law enforcement personnel, court officers, forensic science professionals, and corrections personnel. The program was originally authorized under the Justice for All Act of 2004 ( P.L. 108-405 ), which authorized $12.5 million for each of FY2005-FY2009. P.L. 110-360 extended the same authorized amount through FY2014. The Debbie Smith Reauthorization Act of 2014 ( P.L. 113-182 ) extended the $12.5 million per fiscal year authorization until FY2019." ], "depth": [ 0, 1, 1, 2, 2, 2, 3, 3, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h1_title", "h0_full h1_full", "h0_title h1_full", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What is DNA?", "Why is DNA useful for law enforcement?", "How can DNA be collected?", "How is the collection of DNA mandated in some cases?", "How were the standards for the use of forensic DNA analysis established?", "How was the national DNA database created?", "How does the FBI have the authority to maintain a national DNA database?", "From whom are DNA samples typically collected?", "How is the scope of each database determined?", "How is DNA analysis being used in new ways?" ], "summary": [ "Deoxyribonucleic acid, or DNA, is the fundamental building block for an individual's entire genetic makeup.", "DNA is a powerful tool for law enforcement investigations because each person's DNA is different from that of every other individual (except for identical twins).", "DNA can be extracted from a number of sources, such as hair, bone, teeth, saliva, and blood.", "As early as the 1980s, states began enacting laws that required the collection of DNA samples from offenders convicted of certain sexual and other violent crimes. The samples are analyzed and their profiles entered into state databases.", "In the late 1980s, the Federal Bureau of Investigation (FBI) Laboratory convened a working group of federal, state, and local forensic scientists to establish guidelines for the use of forensic DNA analysis in laboratories. The group proposed guidelines that are the basis of current national quality assurance standards, and it urged the creation of a national DNA database.", "The criminal justice community began to utilize DNA analyses more often in criminal investigations and trials, and in 1994, Congress enacted legislation to authorize the creation of a national DNA database.", "Federal law (34 U.S.C §12592(a)) authorizes the FBI to operate and maintain a national DNA database where DNA profiles generated from samples collected from people under applicable legal authority and samples collected at crime scenes can be compared to generate leads in criminal investigations.", "Statutory provisions also authorize the collection of DNA samples from federal offenders and arrestees, District of Columbia offenders, and military offenders.", "State laws dictate which convicted offenders, and in some states arrestees, will have profiles entered into state DNA databases, while federal law dictates the scope of the national database.", "Some jurisdictions have started to use their DNA databases for familial searching, which involves using offender profiles to identify relatives who might be perpetrators of crimes. In addition to solving crimes, DNA analysis can also help exonerate people incarcerated for crimes they did not commit." ], "parent_pair_index": [ -1, -1, 1, 1, -1, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 0, 1, 1, 1, 1 ] }
CRS_RL34310	{ "title": [ "", "China's Foreign Aid to Southeast Asia", "China's Aid to the Least Developed Countries in the Region", "Burma", "Cambodia", "Laos", "Vietnam", "China's Aid to the More Developed Southeast Asian Countries", "Indonesia", "The Philippines", "A Comparison of U.S. and Chinese Economic Relations With ASEAN", "Comparing U.S. and Chinese Trade With ASEAN", "Energy", "The Importance to ASEAN of its Economic Ties With China and the United States", "Foreign Direct Investment", "Tourism", "China's Efforts to Boost Economic Ties with ASEAN", "U.S. Efforts to Bolster Trade with ASEAN", "U.S. Policy Implications", "Trends, Effects, and Implications for the United States", "Policy Options" ], "paragraphs": [ "Foreign policy observers often attribute China's growing influence in Southeast Asia, and other parts of the world, to its use of \"soft power\"—diplomacy, foreign assistance, trade, and investment, and the view of China as a vast, potential market. As part of its \"charm offensive\" in the region, the People's Republic of China (PRC) has projected a \"benign national image\" through adopting a more accommodating foreign policy, actively participating in regional organizations, providing significant amounts of foreign assistance, and boosting its economic ties, with considerable benefits accruing to Southeast Asian states. According to some analysts, China's rising soft power has become all the more striking in relation to tepid or inconsistent U.S. attention to the region.\nThe term \"soft power,\" as originally conceived by Harvard Professor Joseph Nye, Jr., referred to the ability to affect the behaviors of other countries by attracting and persuading others to adopt one's goals. By contrast, \"hard power\" was described primarily as military might. The United States has exerted both hard and soft power in Southeast Asia. In terms of soft power, many Southeast Asian peoples historically have been attracted to U.S. popular culture, democratic values and institutions, human rights policies, free market system, high living standards, technological advances, and internationally renowned institutions of higher learning. The United States also remains influential as a large market for Southeast Asian exports. However, according to some indicators, in the past decade, many of these forms of U.S. soft power have declined in both absolute and relative terms.\nFor many analysts, China's growing influence or soft power in Southeast Asia and elsewhere is mostly economic rather than military (hard power), cultural, or political. China's growing ability to affect the actions of state actors largely stems from its role as a major source of foreign aid, trade, and investment. The PRC has also wielded power in the region through diplomacy and, to a lesser extent, admiration of China as a model for development and ancient culture, and an emphasis on \"shared Asian values.\" In addition, overseas Chinese communities have long played important parts in the economies, societies, and cultures of Southeast Asian states. Along with offering economic inducements, China has allayed concerns that it poses a military or economic threat, assured its neighbors that it strives to be a responsible member of the international community, and produced real benefits to the region through aid, trade, and investment.\nChina may be gaining on the United States in the areas of cultural and political soft power as well, at least in some countries in the region. A 2007 Pew Research poll found that only 29% of Indonesians and 27% of Malaysians polled had a favorable view of the United States as opposed to 83% of Malaysians and 65% of Indonesians who had favorable views of China. Americans themselves are more popular than their country, with 42% of Indonesians having a favorable view towards Americans in 2007. The figure for Indonesia is up slightly from a favorable view of only 15% in 2003 but remains well below the 2000 rate of 75%. One striking exception to this trend is the Philippines, which ranks first in the world in trusting the United States to act responsibly in global affairs, according to a 2007 survey. Such trends in polls led Joseph Nye to state that \"... although China is far from America's equal in soft power, it would be foolish to ignore the gains it is making.... It is time for the U.S. to pay more attention to the balance of soft power in Asia.\"\nChina's Diplomacy in Southeast Asia\nChina's posture in Southeast Asia has undergone a transformation in the past decade. The PRC's support for various communist insurgencies in the region during the Cold War, its military response to Vietnam's incursion into Cambodia in 1979, and its forceful claims to disputed islands in the South China Sea during the 1990s, created strains with its neighbors in the region. However, since the Asian financial crisis of 1997, China increasingly has emphasized mutual benefits, or soft power over hard power, or the threat of hard power, in its relations with Southeast Asian states. In 1997, during the Asian financial crisis, China won praise in the region when it refrained from devaluing its currency, which helped to stabilize the region's economy. In 2002, China and other claimants to disputed islands signed an agreement and a Declaration on the Conduct of Parties in the South China Sea, which greatly reduced tensions on this issue. While there is a general agreement that China's tactics have changed to a more accommodating posture with an emphasis on soft power, there is less certainty regarding its implications and whether China's goals have changed accordingly.\nBilateral and Sub-Regional Relations\nAn analysis of China's bilateral relations with Southeast Asia leads to a sub-regional division between its relatively more influential position with mainland Southeast Asian states, particularly Burma, Cambodia, and Laos, and its relatively less influential position with maritime Southeast Asian states (Indonesia, the Philippines, and Singapore). Thailand, while more independent than Burma, Laos, and Cambodia, and along with the Philippines a major non-NATO ally of the United States, appears to be relatively more comfortable with close relations with China than other regional states. Muslims in the region (Indonesia, Malaysia) look not so much to China as they do to the rest of the Muslim world for models outside their national settings. Given that Muslims represent approximately half the population of Southeast Asia, and are concentrated in maritime Southeast Asia, this should place limits on the extent of Chinese soft power influence there. Vietnam's unique historical relationship with China, which includes past domination by China and a more recent border war, will also place limits on the extent to which those two nations will likely come together. Singapore, the most strategic thinking and trade dependent state in the region, has promoted a balanced approach to the involvement of great powers in its region.\nA core difference between China's and America's soft power in Southeast Asia is the organizing principle of their respective approaches. Both countries' foreign policy approaches to the region contain elements of an array of priorities including geopolitical, security, and trade interests. That said, the U.S. approach places an emphasis on democracy and related objectives along with its main theme of promoting U.S. security interests. By contrast, China's \"non-interference\" policy is less intrusive in the domestic affairs of regional states. While this approach may not garner widespread admiration, it is more palatable to relatively authoritarian regimes in the region, and sometimes earns public appreciation because it appears respectful of national sovereignty.\nChina's changed bilateral relations with Australia are an interesting parallel to recent dynamics in Southeast Asia and demonstrate how the economic aspect of soft power can transform a bilateral relationship with a state that is a close treaty ally of the United States. Australia's strong economic growth in recent years has been to a large extent based on exports of raw materials to China. This has produced a reticence to adopt policies that could anger China. It has even led to some discussion of whether the Australia-New Zealand-United States alliance pertains to potential future conflict over Taiwan. Australia clearly does not want to be forced to choose between its robust and important security alliance with the United States and its rapidly growing and lucrative trade with China.\nRegional Organizations\nChina has been an increasingly active player in multilateral organizations that include Southeast Asian states such as ASEAN plus three—ASEAN, China, Japan, and South Korea—and the East Asia Summit (EAS), which includes China, Japan, South Korea, India, Australia, and New Zealand, as well as the ASEAN states. The diplomacy surrounding the formation of the EAS in 2005 is particularly noteworthy. The lack of U.S. involvement with the EAS contrasts sharply with the central role that the United States has played in the Asia Pacific Economic Cooperation (APEC) group.\nThe formation of the EAS also demonstrated the differing levels of comfort that ASEAN member states have with China. Some ASEAN states preferred bringing in India, Australia, and New Zealand as a non-American balance to Chinese influence. One factor that appears to be in China's favor is increased regional support for a \"more Asia-oriented grouping.\" This reflects the desire on the part of some regional states for a more Asia-centered focus rather than a trans-Pacific group that would include the United States. Movement in this direction can be traced back to former Prime Minister Mahathir Mohammad of Malaysia who advocated an Asian state-only grouping through the East Asia Economic Caucus.", "China's foreign aid has had a growing, tangible impact in many countries in Southeast Asia, although it is difficult to quantify, due to a lack of data and to the unique characteristics of Chinese assistance. In comparison to major bilateral donors in the region, China provides relatively little development assistance and lacks a formal system for determining development goals and allocating aid. The PRC administers a wider range of economic assistance that includes non-development aid and low-interest loans, as well as trade and investment agreements. According to some analysts, when these kinds of assistance are added, China becomes one of the largest bilateral aid donors in Southeast Asia.\nFurthermore, because China offers assistance without the conditions that other donors frequently place on aid (i.e. democratic reform, market opening, and environmental protections), it often garners appreciation disproportionate to the size of its aid, and thus has a large impact on recipient governments. China's policy of \"non-interference in domestic affairs\" often wins friends not only among Southeast Asian governments but also by many peoples in the region because it is regarded as respectful of their countries' sovereignty. Although PRC assistance reportedly is often not carried out as pledged, such aid, announced at lavish receptions with toasts to the recipient countries, often carries great symbolic value. Many PRC aid projects, such as government buildings, infrastructure, and energy facilities, often funded by loans from the China Import-Export Bank and built by Chinese companies, are high profile efforts that primarily benefit capital cities or the governments in power. Many foreign aid experts, non-governmental organizations (NGOs), and local groups have criticized Chinese aid for failing to promote democracy, widespread, sustainable development, and environmental conservation.", "Many reports of PRC aid in the region focus on Burma, Cambodia, and Laos, the poorest countries in Southeast Asia and ones that have had relatively unfriendly relations with the United States. China is considered the \"primary economic patron\" of these countries and provides an \"implicit security guarantee.\" China also provides considerable assistance to Vietnam, although its influence upon its former adversary appears limited compared to other countries. The United States has a major aid presence in Cambodia and Vietnam. However, according to data of official development assistance, which does not include China, Japan is the largest bilateral aid donor among these countries.\nMany observers fear that China's unconditional and non-transparent aid efforts and growing economic integration in Southeast Asia negate efforts by western nations to promote political and economic reform, reduce corruption, and protect the environment in mainland Southeast Asia. Others counter that, on balance, Chinese aid promotes development in Southeast Asia and that it does not exclude other countries' aid programs and objectives. Furthermore, in many cases, China reportedly takes on aid projects that other donor countries have avoided due to difficulty or hardship. In recent years, China has financed many infrastructure and energy-related projects in Burma, Cambodia, and Laos that rely upon Chinese materials and technical expertise as well as labor. Often these projects help China access raw materials and oil. There are some indications that Chinese aid in this part of the region is diversifying, including support to counter-trafficking in persons and counter-narcotics efforts, programs involving Chinese youth volunteers (Laos), elections (Cambodia), and historical preservation (Cambodia).", "According to some reports, China has been the largest source of economic assistance to Burma, including $1.4 billion to $2 billion in weaponry to the ruling junta since 1988 and pledges of nearly $5 billion in loans, plants and equipment, investment in mineral exploration, hydro power and oil and gas production, and agricultural projects. China has helped the Burmese to build roads, railroads, airfields, and ports. Following the imposition of U.S. trade sanctions against Burma in 2003, China reportedly announced a loan to Burma of $200 million. In 2006, China promised another $200 million loan, although some experts say that such funds were never actually provided. U.S. aid to Burma (an estimated $12 million in 2007), is restricted primarily to humanitarian, health, education, and democracy programs for Burmese migrants and refugees living along the Burma-Thailand border. In terms of official development assistance, Japan reportedly is the largest bilateral donor to Burma, providing a yearly average of $26 million (2004-2005).", "Japan, the United States, France, Australia, and Germany are the largest bilateral sources of ODA to Cambodia. Foreign aid to Cambodia is coordinated through the Consultative Group (CG) for Cambodia, a consortium of international financial organizations and donor countries under the auspices of the World Bank. Since 1996, the CG has met annually to extend aid packages averaging $500 million per year. China provides relatively little development assistance but may be one of the largest sources of aid when including loans and support for public works, infrastructure, and hydro-power projects in the kingdom. In 2006, PRC Prime Minister Wen Jiabao pledged $600 million in aid and loans to Cambodia.\nIn 2007, for the first time, China offered aid through the Consultative Group's pledging process. The CG pledged $689 million in assistance to Cambodia, including $91.5 million from China. For the 2007-2009 period, China pledged $236 million in unspecified aid compared to Japan's $337 million and the EU's $215 million. Cambodia is a relatively large recipient of U.S. assistance. The United States provided approximately $55 million annually in 2006-2007 for health care, HIV/AIDS programs, basic education, civil society, de-mining, counterterrorism efforts, and other activities, mostly through non-governmental organizations (NGOs) in Cambodia.", "Laos receives approximately $250 million in foreign aid per year (20% of GDP), including loans from the Asian Development Bank (ADB) and the World Bank worth $80 million and $40 million, respectively. According to one report, in 2001-2002, China was the second biggest aid donor to Laos. The top sources of official development assistance to Laos, on an average annual basis (2004-2005), are Japan ($65 million), France ($21 million), Sweden ($19 million), Germany ($15 million), and Australia ($12 million). Since the late 1990s, China has provided Laos with critical grants, low-interest loans, high profile development projects, technical assistance, and foreign investment. Development and other forms of aid include transportation infrastructure, hydro power projects worth $178 million, youth volunteers engaged in medical and educational programs, and agricultural training. In 2006, Chinese President Hu Jintao visited Vientiane and offered $45 million in economic and technical cooperation and debt forgiveness. The United States is a relatively small aid donor, providing an average annual total of approximately $4.5 million between 2005 and 2007.", "According to some reports, China may be the second largest source of foreign aid to Vietnam (including grants and loans). In 2005, the PRC reportedly offered nearly $200 million in grants and loans. In 2006, Beijing provided loans to Vietnam for railways, hydro-power development, and ship building facilities. Japan and France are the largest donors of ODA to Vietnam, providing an annual average of $670 million and $116 million, respectively (2004-2005). According to some experts, compared to Burma, Cambodia, and Laos, China's influence in Vietnam is relatively limited. In December 2006, Beijing halted aid to Vietnam in response to the Vietnamese government's formal invitation to Taiwan, a major investor in the country, to attend the APEC November 2006 summit in Hanoi.", "China also has provided considerable aid to the large and more developed countries in the region, such as Thailand, Indonesia, and the Philippines. However, these countries also have extensive security, economic, and aid ties with the United States. Since 2001, the United States has dramatically increased development, security, and military assistance to Indonesia and the Philippines as part of the global war on terror. Furthermore, Japan likely far surpasses both the United States and China in foreign aid to these countries, particularly Thailand. China has few reported aid projects in Thailand. However, after the United States government imposed sanctions on military and security-related assistance to Thailand worth approximately $29 million following the September 2006 military coup, China reportedly offered $49 million to Thailand in military aid and training.", "According to the Organization for Economic Cooperation and Development (OECD), the largest bilateral donors to Indonesia, on an average annual basis (2004-05), are Japan ($963 million), Germany ($191 million), the United States ($163 million), Australia ($145 million), and the Netherlands ($128 million). Between 2002 and 2007, annual U.S. assistance to Indonesia totaled about $136 million. According to one expert, in 2002, China's aid to Indonesia was roughly twice that of the United States. In 2005, PRC President Hu Jintao and Indonesian President Susilo Bambang Yudhoyono signed a declaration proclaiming a \"strategic partnership\" that was accompanied by a promise of preferential loans worth $300 million. Some foreign aid experts criticized China's relatively limited offers of disaster relief following the 2004 Indian Ocean earthquake and tsunami. The PRC pledged $63 million to Indonesia compared to Taiwan's $50 million and the United States' $405 million.", "The top five bilateral ODA donors to the Philippines in 2004-2005, on an average annual basis, were Japan ($706 million), the United States ($114 million), Germany ($60 million), Australia ($38 million), and the Netherlands ($20 million). In 2006, the United States extended $115 million in development, security, and military assistance to the Philippines. According other sources, the PRC has become a major source of financing for development projects in the Philippines, and in 2003, China's aid to the Philippines, including loans, was roughly three times U.S. assistance. In January 2007, PRC Premier Wen Jiabao and Philippines President Gloria Macapagal-Arroyo signed 20 economic agreements, including a contract for a Chinese company to build and renovate railroads, investment in agriculture, and loans for rural development.", "Over the past decade, China's trade with the 10 countries that comprise the Association of Southeast Asian Nations (ASEAN) has expanded sharply in terms of trade volume, percentage increase, and size relative to U.S. trade levels. According to Chinese data, from 1997-2006, its exports to, and imports from, ASEAN countries grew by 450% and 625% respectively. The importance of China to the economies of ASEAN in terms of trade, investment, and tourism has also increased sharply. These trends are expected to continue in the years ahead as economic ties continue to deepen as a result of the implementation of the China-ASEAN Free Trade Agreement (FTA) and other cooperative initiatives. China's soft power in the region is expected to grow as Southeast Asian economies become more dependant upon or integrated with the PRC. Although the United States remains an important partner for ASEAN in terms of trade, the relative importance of that trade to ASEAN has declined.", "According to Chinese data, its imports from ASEAN from 1997 to 2006, rose from $12.4 billion to $89.5 billion, while U.S. imports from ASEAN (according to U.S. trade data) grew from $71.0 billion to $111.2 billion. China's exports went from $12.7 billion to $71.2 billion, while U.S. exports increased from $48.3 billion to $57.3 billion. Total U.S. trade (exports plus imports) with ASEAN in 2006 was slighter larger than that of China's ($168.5 billion versus $160.9 billion). Based on China's rapid trade growth over the past few years, it is likely that its trade with ASEAN will exceed that of the United States in 2007 and beyond. While China had a $178 billion trade surplus with the world in 2006, it had a $18.2 billion trade deficit with ASEAN; the U.S. trade deficit with ASEAN totaled $53.9 billion.\nTaken as a whole, ASEAN's rank as a destination for Chinese exports was 4 th in 1997 and 2006, which was also the case for U.S. exports. As a source of Chinese imports, ASEAN's rank increased from 5 th to 3 rd , while its rank for U.S. imports fell from 4 th to 5 th . The share of China's exports going to ASEAN grew rather modestly, from 7.0% to 7.4%, while the share of U.S. exports to ASEAN dropped from 7.0% to 5.5%. The share of China's imports from ASEAN rose from 9.0% to 11.3%, while the share of U.S. imports from ASEAN dropped from 8.2% to 6.0% (see Table 1 ).", "China's mineral fuel imports from ASEAN rose from $3.3 billion in 1997 to $7.4 billion in 2006. However, China's mineral fuel imports from ASEAN as a percent of China's total mineral fuel imports declined from 26.8% in 1997 to 8.2% over this period. Despite this drop, China has been active in developing ties with ASEAN countries on a number of energy related projects. To illustrate:\nIn January 2007, the Xinhua News Agency reported that China National Petroleum Corporation signed production sharing contracts with Myanmar's Ministry of Energy covering crude oil and natural gas exploration projects in three deep-water blocks off the western Myanmar (Burma) coast; Reuters reported that a Chinese oil company would join with two other foreign firms in investing $5.5 billion to produce biofuels in Indonesia; and Dow Jones Chinese Financial Wire reported that the Vietnamese government had recently authorized state-owned PetroVietnam to begin joint oil and gas operations with China National Offshore Oil Corporation in the Gulf of Tonkin. In April 2007, the Xinhua News Agency reported that China would build a pipeline from the Myanmar (Burma) port city of Sittwe to Kunming, China, to transport natural gas. In May 2007, BBC Monitoring reported that two Chinese firms planned to invest $343 million in an oil refinery and a gas processing plant in Pahang, Malaysia. In June 2007, the Xinhua News Agency reported that China's National Offshore Oil Corporation signed a production-sharing contract with the Cambodian National Petroleum Authority to explore for oil and natural gas. In July 2007, Interfax China reported that Chinese oil companies planned to invest as much as $14 billion in Indonesia's oil and gas exploration sectors; and the Vietnam News Brief Services announced that the government planned to jointly build a $360 million oil refinery with China in Vietnam. In September 2007, the Xinhua News Agency reported that China would build an oil pipeline from Myanmar (Burma) to Chongqing, China.", "From ASEAN's perspective, China is becoming a major trading partner. Using ASEAN data, China ranked as ASEAN's 5 th largest trading partner in 2005 (the U.S. ranked 2 nd ) its 5 th largest export market (the U.S. was 2 nd ) and its 3 rd largest source of its imports (the U.S. ranked 4 th ).\nASEAN data show total trade with the United States and China in 2006 at $174.4 billion and $143.8 billion, respectively. As Table 2 indicates, ASEAN exports to China as a share of total ASEAN exports rose from 2.1% in 1995 to 8.9% in 2006 (while the U.S. share fell from 18.5% to about 13.9%). The share of ASEAN's imports from China rose from 2.2% to 11.4% (while the share from the United States fell from 14.6% to 10.3%).", "Although the importance of the United States to ASEAN trade has declined somewhat relative to China, it is still a major source of ASEAN's foreign direct investment (FDI). From 2002-2006, U.S. FDI flows to ASEAN were $13.7 billion (or 8.0% of total), making the United States ASEAN's 4 th largest source for FDI. Over this period, China's FDI totaled $2.3 billion or 1.3% of total, making China the 10 th overall source of ASEAN's FDI (see Table 3 ). In 2006, U.S. FDI in ASEAN totaled $3.9 billion versus $937 million for China.", "According to ASEAN tourist data, China was the 3 rd largest for source of tourist arrivals from 2001 to 2005 at 13.8 million, accounting for 6.2% of total. The United States ranked 8 th at 9.8 million, accounting for 4.4% of total. In 2005, arrivals from China were 3.0 million versus 2.3 million from the United States.", "China entered into Dialogue relations with ASEAN in 1991 and obtained full ASEAN Dialogue Partner status in 1996. In 2000, Chinese officials suggested the idea of a China-ASEAN FTA. In November 2002, ASEAN and China signed the Framework Agreement on Comprehensive Economic Co-operation to create an ASEAN-China Free Trade Area (ACFTA) within 10 years. In November 2004, the two sides signed the Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Co-operation between the Association of Southeast Asian Nations and the People ' s Republic of China, which included a schedule of tariff reductions and eventual elimination for most tariff lines (beginning in 2005) between the two sides. For example, for the relatively more developed \"ASEAN6\" nations (Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand), tariffs lines of over 20% are to fall to 20% in 2005, 12% in 2007, 5% by 2009, and zero by 2010. Tariffs between 15% and 20% are to fall to 15% in 2005, 8% in 2007, 5% by 2009, and zero by 2010. Certain \"sensitive\" products have longer phase-out periods. ASEAN-China cooperation covers a variety of areas, including agriculture, information and communication technology, human resource development, two-way investment, Mekong Basin development, transportation, energy, culture, tourism and public health.\" In January 2007, China and ASEAN signed the Agreement on Trade in Services of China-ASEAN Free Trade Area which is intended to liberalize rules on trade in services.\nIn a 2005 speech to commemorate the 15 th anniversary of the China-ASEAN Dialogue relations, Chinese Premier when Jiao Bao listed four main conclusions that he drew from the growth in bilateral relations:\nPeaceful development is the prerequisite for the growth of China-ASEAN relations. Both sides pursue a policy of good neighborliness and friendship, see each other as cooperative partners and take each other's development as an opportunity, not a threat. Equality and mutual trust are the foundation of China-ASEAN relations. Both sides treat each other as equals and endeavor to develop consensus by seeking common grounds while putting aside differences. Win-win cooperation is the goal for China-ASEAN relations. People's support is the driving force behind China-ASEAN relations, in part because cooperation helps reduce poverty, narrow [the] development gap, speed up growth and delivers a better life.\nIn 2006 Ong Keng Yong, Secretary General of ASEAN, described growing ASEAN-China economic ties this way:\nASEAN views China as a close neighbor and an important Dialogue Partner with tremendous potential to offer. With its rapid economic growth and a population of about 1.3 billion people, China is a huge consumer of ASEAN products and also a source of future FDI to the region. In addition, ASEAN is benefitting from the large number Chinese tourists visiting the region and vice-versa.", "In October 2002, the Bush Administration launched the Enterprise for ASEAN Initiative (EAI), with a stated goal of seeking closer economic ties with ASEAN countries, including the possibility of bilateral free trade agreements with countries that are committed to economic reforms and openness. A potential FTA partner would need to be a member of the World Trade Organization (WTO) and have concluded a Trade and Investment Framework Agreement (TIFA) with the United States, a forum designed to resolve major trade and investment disputes. The United States has signed TIFA agreements with Brunei, Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. It has an FTA with Singapore (effective 2004) and is the process of negotiating one with Malaysia. FTA talks with Thailand were suspended in 2006, due to the political crisis there and public opposition. On August 25, 2007, USTR Susan Schwab signed a TIFA with ASEAN. In September 2007, President Bush met with seven ASEAN leaders attending the APEC summit in Australia and announced that the United States would nominate an ambassador to ASEAN.", "", "According to some analysts, China's rising influence has coincided with a period of episodic and inconsistent U.S. attention toward Southeast Asia, or even a developing power vacuum, during the past decade. Since September 11, 2001, the U.S. government has become somewhat more diplomatically engaged in the region and increased foreign aid funding, but with a focus largely limited to counterterrorism. The perception of U.S. inattentiveness to the region has continued to be reinforced. In 2007, Secretary of State Condoleezza Rice bypassed the annual ASEAN Regional Forum (ARF) gathering, and instead traveled to the Middle East, while President Bush postponed the U.S.-ASEAN summit, set for Singapore in September, and left the APEC summit a day early reportedly because of commitments related to the Iraq war, renewing \"concerns about the U.S. commitment to the region.\"\nDespite a possible decrease in relative influence, however, the United States continues to exert both hard and soft power in Southeast Asia. In terms of soft power, for example, the United States maintains multi-faceted foreign aid programs with clear objectives and large development and humanitarian components. The United States was also a major contributor to countries hit by the 2004 Indian Ocean tsunami, which affected several Southeast Asian countries. The United States remains ASEAN's 2 nd largest trading partner (China ranks 5 th ) and its 4 th largest source of foreign direct investment (China ranks 10 th ), and has sought free trade agreements with several countries in the region.\nWhile there is a general agreement that China's tactics have changed to a more accommodating posture with an emphasis on soft power, there is less certainty regarding its implications and whether China's goals have changed accordingly. According to one view, China is pursuing a zero sum game where expansion of its influence is, or will be, at the expense of the United States. Joshua Kurlantzick writes that \"China may want to shift influence away from the United States to create its own sphere of influence, a kind of Chinese Monroe Doctrine for Southeast Asia [where] countries would subordinate their interests to China's, and would think twice about supporting the United States.\"\nBy contrast, some analysts argue that, on balance, China's growing economic influence of the past decade has been beneficial to the region and not detrimental to U.S. interests. Regarding China's goals, some observers contend that China's most pressing concerns, at least in the medium term, are likely to be domestic (focusing on economic growth and social stability) and that Beijing favors a stable periphery and appreciates the dominant U.S. role in helping to maintain regional security. Regional stability serves as a foundation for Southeast Asian and Chinese economic development. China may seek to isolate Taiwan and to increase its influence in the region, but only to forestall the possible \"containment\" of China rather than to replace the United States.\nAnother view suggests that regardless of China's intentions in Southeast Asia, its capabilities often are exaggerated, its soft power is limited, and its friendships in the region are transient. In 2007, for example, as concerns rose throughout many parts of the world regarding the safety of Chinese products, officials in Indonesia, Malaysia, and the Philippines reportedly complained that the PRC government was pressuring them not to raise the issue, even when such imported goods were found to be dangerous. When they banned the sale of unsafe items from China, the PRC government reportedly threatened and/or imposed retaliatory actions, causing consternation among many Southeast Asian leaders.\nEven some of the main beneficiaries of China's largesse in Southeast Asia remain wary of the PRC or seek to dampen its growing influence in the region. For example, many Cambodians, mindful of the PRC's former support of the Khmer Rouge, reportedly feel antagonistic towards China. The Lao government maintains close ties with both China and Vietnam, while the Vietnamese government reportedly has quietly encouraged Lao leaders to cultivate better ties with the United States as a means to counteract Chinese power. Vietnamese citizens held anti-China demonstrations, likely with the encouragement of the Vietnamese government, in Hanoi and Ho Chi Minh City in December 2007, to protest Chinese military exercises simulating invasions of the disputed Spratly Islands in the South China Sea and the creation of a new PRC administrative unit that would include the islands.", "Discussion of how to address China's expanding soft power in Southeast Asia soon leads to a broader discussion of Chinese strategic objectives. As noted above, there is general agreement among analysts and observers that China has moved away from hard power to soft power over the past decade as it has sought to promote its interests in the region. It remains unclear if this shift in tactics also connotes a shift at the strategic level to more positive sum approaches relative to the United States and its interests in the region. Concern over China's rising influence in Southeast Asia, and beyond is leading some in the United States to be increasingly wary of China and its motives out of a fear that if China's power and influence continue to increase, Beijing will eventually seek to constrain and/or undermine America's ability to promote and protect its interests in the region. However, there also appears to be a real danger that American responses could lead to a self-fulfilling prophesy as hedging strategies evolve into what could be perceived by Beijing as efforts to contain or constrain China.\nThere are a range of options that could be employed to address China's growing soft power in Southeast Asia. On one side are policy-makers who tend to not see China's rise in zero sum or threatening terms and who would favor policies that are basically status quo oriented. They advocate minor changes to refine existing U.S. policy positions. Furthermore, according to these analysts, U.S. moves to contain China could be counterproductive if they push regional states away from the United States.\nOn the other side are those who are more concerned about China's increasing regional influence. They can be grouped roughly into two schools of thought. One school favors enhanced engagement with regional states as a means of maintaining U.S. power while accepting China's rise. Another school favors strategies that would offset, or balance, Chinese power in the region and/or hedge against the possibility that China's rise may be more aggressive in the future.\nThe following are possible policy options.\nPlace renewed emphasis on reinvigorating America's alliance relationships in the region while not emphasizing a policy of containing China. While some of America's alliance relationships in Asia, such as with Australia and Japan, as well as our Strategic Framework Agreement with Singapore, are relatively robust, others in Southeast Asia, such as with Thailand and the Philippines, are not as close as they once were. New initiatives to reinvigorate these relationships could not only take into account American interests but also genuinely seek to accommodate our strategic partners' concerns. Reach out to other regional states and seek to develop closer relationships on a bilateral basis through trade agreements and other means of engagement. Increase foreign assistance funding and/or develop a foreign aid approach that addresses the attractiveness of China's policy of \"non-interference in domestic affairs.\" Develop new programs to assist emerging democracies in the region, particularly Indonesia. Use American soft power as a champion of democracy to gain influence with emerging democracies in the region. The United States could sign the Treaty of Amity and Cooperation (TAC) and seek to join the East Asia Summit process. The TAC binds signatories to peaceful coexistence and respect for the principles of sovereignty, territorial integrity, and non-interference. The United States reportedly has been reluctant to sign the TAC for fear that it could constrain U.S. military freedom of action. Raise the priority given to regional and multilateral engagement. The lack of high level diplomatic attention sends the wrong signal to regional states and increases attention paid by regional states to China. The United States would have to consistently participate in regional fora to continue to be taken seriously by regional states. The United States would also likely achieve more of its regional goals by engaging ASEAN states not only on American priorities but on ASEAN ones as well. Establish a new dialogue process with China with the goal of reassuring China that the United States does not seek to counter China in Southeast Asia or to contain China more broadly. Such an approach could have the effect of diverting China from strategies aimed at neutralizing American regional influence. Although hedging strategies may be prudent to deter what could possibly be a less than peaceful rise by China, reinvigorating and expanding confidence building measures and other forms of engagement that seek to reassure China that the United States and its allies are not trying to contain China may be equally important to prevent China from adopting a strategic posture that would lead to strategic rivalry between the United States and China in the region and beyond. Initiate a new program aimed at engaging regional Muslim states and populations in a way that both supports moderate Islam in its struggle against radical Islam and brings the United States closer to regional Muslim states. Welcome Indian, Japanese, and Australian involvement in the region, where regional states desire such involvement, as a means of multilateralizing external power engagement and preventing it from being perceived in bi-polar terms between the United States and China. Pursue FTA negotiations with ASEAN and /or provide greater effort to obtain a broad trade agreement within APEC. Pursue more robust hedge strategies through enhanced cooperation among allies and friends. Some have advocated the use of the trilateral group of Australia, Japan, and the United States as a starting point for such cooperation. Others have also suggested the inclusion of India into such a group. Recent political change in Australia, Japan, and India make such an approach less likely to gain approval by these states if it appears to be aimed at containing China." ], "depth": [ 0, 1, 2, 3, 3, 3, 3, 2, 3, 3, 1, 2, 3, 2, 3, 3, 2, 2, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h1_full", "h1_full", "", "", "", "", "", "", "", "h2_full h1_full", "h2_full", "", "h2_title", "h2_full", "", "", "", "h0_title h1_title h3_title", "h0_full h3_full h1_full", "h0_full h3_full h1_full" ] }	{ "question": [ "How has Chinese \"soft power\" affected U.S. foreign policy?", "How has China's use of \"soft power\" affected its image in Southeast Asia?", "How has China improved relations with Southeast Asian states?", "How does China's growing influence affect U.S. influence in the region?", "What does this report discuss?", "What information is left out of the report?", "How extensive is Chinese aid in Southeast Asia?", "How important is Chinese aid to Southeast Asian states?", "How does Chinese trade with ASEAN countries compare to U.S. trade?", "How does Chinese trade with ASEAN countries contrast with its overall trade?", "How has China established trade in the region more quickly than the United States?", "How has the role of the United States in ASEAN trade changed due to Chinese influence?", "What are China's long-term goals in Southeast Asia?", "What are possible Chinese long-term intentions?", "How could the U.S. limit Chinese growth in the region?", "How will this report be updated?" ], "summary": [ "China's growing use of \"soft power\" in Southeast Asia—non-military inducements including culture, diplomacy, foreign aid, trade, and investment—has presented new challenges to U.S. foreign policy.", "By downplaying many conflicting interests and working collaboratively with countries and regional organizations on such issues as territorial disputes and trade, Beijing has largely allayed Southeast Asian concerns that China poses a military or economic threat. China's diplomatic engagement, compared to the perceived waning or limited attention by the United States, has earned the country greater respect in the region.", "Its rise as a major foreign aid provider and market for Southeast Asian goods has also enhanced its relations with Southeast Asian states.", "Many analysts contend that China's growing influence may come at the expense of U.S. power and influence in the region.", "This report provides evidence and analysis of China's soft power in Southeast Asia.", "It does not discuss the considerable U.S. military presence in the region.", "Although China's foreign aid to Southeast Asia, as in other regions, is difficult to quantify and includes a broader range of economic assistance than official development assistance (ODA) offered by major industrialized nations, it is believed to be relatively large.", "China is considered to be the \"primary economic patron\" of the small but strategically important nations of Burma, Cambodia, and Laos, and also provides considerable economic aid to Indonesia and the Philippines.", "China's trade with ASEAN countries is less than U.S. trade with the region ($160.9 billion compared to $168.5 billion in 2006), but is expected to exceed that of the United States in 2007 and beyond.", "Furthermore, although China runs a trade surplus with the world, it runs a trade deficit with ASEAN countries ($18.2 billion compared to the U.S.-ASEAN trade deficit of $53.9 billion).", "China appears to have moved more quickly than the United States in promoting trade with the region through establishing free trade agreements (FTAs).", "However, although the importance of the United States to ASEAN trade has declined somewhat relative to that of China, the United States is still a major source of the region's foreign direct investment (FDI), ranking 4th from 2002 through 2006 compared to China (ranking 10th).", "Analysts differ over China's longer-term intentions in Southeast Asia and their implications for the United States.", "Some observers argue that the consequences of China's growing soft power, and Beijing's aim, is the decline of U.S. influence in the region. Others contend that the implications of China's rise are not zero sum, and that, at least in the next 15-25 years, Beijing's priority will be economic development and that China's leaders, as well as the leaders of other Southeast Asian countries, view the United States' continuing leadership role in the region as beneficial.", "Competing U.S. policy approaches include continuing the current level of U.S. political and economic engagement in the region, containing China's rise, or bolstering the U.S. diplomatic, foreign aid, and economic presence in tandem with China's rise.", "This report will be updated as events warrant." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, -1, 2, -1, 0, 0, 0, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
CRS_RL33966	{ "title": [ "", "Background: The Juvenile Justice System", "Procedural Due Process Rights", "Kent v. United States", "In re Gault", "In re Winship", "McKeiver v. Pennsylvania", "Right to Jury Trial Revisited" ], "paragraphs": [ "As attention continues to focus on juvenile offenders, some question the way in which they are treated in the U.S. criminal justice system. Since the late 1960s, the juvenile justice system has undergone significant modifications as a result of United States Supreme Court decisions, changes in federal and state law and the growing perception that juveniles were increasingly involved in more serious and violent crimes. As a result, federal and state juvenile justice systems have focused less on rehabilitation and more on punishment, which may have significant ramifications for juvenile offenders once they reach adulthood. For example, recidivist statutes such as the Armed Career Criminal Act (ACCA) impose mandatory minimums based on prior convictions, including juvenile adjudications. As such, adult criminal defendants are exposed to longer terms of imprisonment based on prior juvenile misconduct. Despite this shift in focus to one more closely resembling the adult criminal justice system, juvenile offenders are not generally afforded the full panoply of rights provided to adult criminal defendants.", "The establishment of a juvenile court in Cook County, Illinois, in 1899 marked the first statewide implementation of a separate judicial framework whose sole concern was the problems and misconduct of children. The juvenile court was designed to be more than a court for children. The underlying theory behind a separate juvenile court system was that the state has a duty to assume a custodial and protective role over individuals who cannot act in their own best interest. As such, the separate system for juvenile offenders was predicated on the notion of rehabilitation—not punishment, retribution, or incapacitation. Because the juvenile court focused on protection rather than punishment, the juvenile proceeding was conceptualized as a civil proceeding (not a criminal one), with none of the trappings of an adversarial proceeding.\nBy the mid-20 th century, questions arose regarding the fairness and efficacy of the juvenile justice system and its ability to effectively rehabilitate young offenders. Concerns that the differences between the adult and juvenile systems were illusory prompted the need to preserve the legal rights of children adjudicated in the juvenile justice system. As such, state courts began to expand the legal rights of juvenile offenders. The emerging focus on juveniles' rights in the state courts prompted intervention from the U.S. Supreme Court, which had traditionally deferred to the states.", "Beginning in the mid-1960s, the Court examined the due process rights of minors in four landmark cases: Kent v. United States , In re Gault , In re Winship , and McKeiver v. Pennsylvania . Through these cases, the Court left an indelible mark on the juvenile justice system by restricting the discretion of juvenile court judges and enumerating the constitutional rights retained by juveniles during adjudication. These decisions resulted in a hybrid juvenile justice system that renders some of the procedural rights afforded to adult criminal defendants. Some argue that this hybrid system blurs the historical distinction between the juvenile justice and adult criminal systems.", "The Court first recognized that the U.S. Constitution guaranteed juveniles due process rights in Kent v. United States . In Kent , the Court reviewed a District of Columbia case in which the petitioner challenged the validity of the juvenile court's decision to waive jurisdiction over him, on the ground that the procedure used by the court in reaching its decision constituted a denial of due process of law. The U.S. Supreme Court held that the waiver of jurisdiction was a \"critically important\" stage in the juvenile process and must be attended by minimum requirements of due process and fair treatment required by the Fourteenth Amendment. In reaching its decision, the Court expressed concern that the non-criminal nature of the juvenile proceeding was an invitation to \"procedural arbitrariness\" including broad judicial fact-finding.", "In In re Gault , the Court held that the informal procedures of juvenile courts amount to a denial of juveniles' fundamental due process rights. Although the Court recognized that juvenile courts were attempting to help juveniles, it reasoned that this worthy purpose failed to justify informal procedure, particularly when a juvenile's liberty was threatened. After a thorough examination of the history of the juvenile court system, the Court reiterated much of the criticism it raised in Kent , specifically expressing concern about the juvenile court's informality and the broad discretion of its judges. To ensure that juveniles receive the essentials of fair treatment during an adjudicatory hearing, the Court found that juveniles were entitled to certain due process rights afforded to adult criminal defendants under the U.S. Constitution. These rights include the right to reasonable notice of the charges, the right to counsel, the right to confrontation, and the right against self-incrimination.", "In In re Winship , the Court continued to expand the rights of juveniles by holding that the state must show proof beyond a reasonable doubt to adjudicate a minor as delinquent for an act that would be a crime if committed by an adult. The state of New York charged Samuel Winship with delinquency for stealing $112 from a woman's pocketbook in a furniture store. Having already established that juvenile proceedings must conform to due process and fair treatment, the Court considered a single issue: whether due process and fair treatment require a state to demonstrate proof beyond a reasonable doubt to hold a juvenile accountable for committing an adult criminal act.\nAlthough a New York juvenile court found Winship to be delinquent under a statute that required the state to show guilt merely by a preponderance of the evidence, the Court reversed, emphasizing that criminal charges have always required a higher burden of persuasion than civil cases. The Court expressly held that the Due Process Clause of the Fourteenth Amendment protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he or she is charged. Finding that juveniles are constitutionally entitled to the reasonable doubt standard, the Court stated, \"[t]he same considerations that demand extreme caution in fact-finding to protect the innocent adult apply as well to the innocent child.\" The Court rejected the state's argument that the delinquency adjudication is a civil proceeding that did not require due process protections, calling this argument the \"civil label of convenience.\"", "By 1970, the Supreme Court had ruled that the due process notion of fundamental fairness entitled juveniles to various procedural protections in juvenile court. However, in McKeiver v. Pennsylvania , the Court held that juveniles do not have a fundamental right to a jury trial when being adjudicated in the juvenile justice system. McKeive r was a consolidation of three similar appeals involving minors adjudicated delinquent in juvenile court by judges who had rejected their requests for a jury to serve as fact-finder at their hearing. The Court narrowed the issue presented to whether the Due Process Clause of the Fourteenth Amendment ensured the right to trial by jury in the adjudicative phase of a juvenile court delinquency proceeding. After reviewing its previous juvenile court jurisprudence, the Court first considered whether the right to a jury was automatically guaranteed to minors by the Sixth and Fourteenth Amendments. Although it had never expressly characterized juvenile court proceedings as criminal prosecutions within the meaning and reach of the Sixth Amendment, the Court reiterated that the juvenile court system reflected many of the adult criminal court's punitive aspects.\nHowever, a plurality of the Court rejected the argument that adjudicatory proceedings were substantively similar to criminal trials, reasoning that a jury trial was only constitutionally required if due process required fact-finding by a jury. In support of its conclusion that a jury is unnecessary for fair fact-finding, the plurality noted that equity cases, workmen's compensation cases, probate matters, deportation cases, and military trials, among others, had been traditionally decided by judges without juries. In reaching its decision, the Court expressed doubt as to whether imposing such a right would improve the fact-finding ability of juvenile courts. In addition, the Court reasoned that imposing such a right would jeopardize the unique nature of the juvenile system and blur the distinctions between juvenile court and adult criminal court. To do so would make the juvenile system obsolete. The plurality's holding signaled the Court's return to the more paternalistic approach it had rejected in its previous opinions and marked the end of the era of expansion of procedural rights in juvenile adjudications.", "Arguably, the absence of a jury trial requirement in adjudicatory proceedings presents a host of questions that may warrant a reexamination of the issue. First, some are likely to argue that the increasingly punitive nature of cases adjudicated in the juvenile justice system calls into question the validity of the Court's reasoning underlying its holding in McKeiver that juveniles are not entitled to the right to a jury trial. When the Court decided McKeiver , it did so to maintain the civil and rehabilitative nature of the juvenile justice system. At the time of the decision, juvenile adjudication hearings were closed to the public, the system was informal, and the records of the juvenile adjudications were confidential and not relied on in criminal prosecutions. Currently, some juvenile adjudication hearings are open to the public, the system is more formal and adversarial, and juvenile adjudications are frequently used in criminal prosecutions for sentence enhancement. From their perspective, the civil and rehabilitative nature of the juvenile justice system has shifted to a more punitive one which more closely resembles the adult criminal justice system.\nCentral to the McKeiver ' s holding was the Court's conclusion that juries were not essential to accurate fact-finding. However, this premise may be called into question in light of the Court's reemphasis on the importance of a jury. In a series of cases, the U.S. Supreme Court has recognized and emphasized the important role that juries play in criminal proceedings. In Duncan v. Louisiana , the U.S. Supreme Court held that the right to jury trial is fundamental and guaranteed by due process. In Williams v. Florida , the Court reaffirmed that the \"purpose of the jury trial ... is to prevent oppression by the Government.\" The U.S. Supreme Court recognized the superiority of group decision-making over individual judgments in Ballew v. Georgia , which defined the constitutional minimum number of jurors that a state must empanel in a criminal prosecution. In Ballew , the Court, relying on empirical data, found that a jury composed of less than six members was less likely to foster effective group deliberation and more likely to lead to inaccurate fact-finding and incorrect application of the community's common sense to the facts. In addition, the court concluded that a smaller panel could increase the risk of convicting an innocent person. More recently, the Court has stressed the constitutional necessity of juries, rather than judges, making factual determinations upon which sentences are based. The Court's reasoning in Ballew and subsequent cases regarding fact-finding by juries during sentencing may call into question the Court's conclusion in McKeiver that a jury would not improve the fact-finding ability and fairness of juvenile courts.\nAn argument can also be made that the absence of a jury trial in the adjudicatory process could lead to inequities in other criminal proceedings. For example, recidivist statutes such as the Armed Career Criminal Act impose mandatory minimums based on prior convictions, which by definition include juvenile adjudications. As such, adult criminal defendants are subjected to longer terms of imprisonment based on prior juvenile misconduct. Some state and lower federal courts have found that equating juvenile adjudications with a conviction as a predicate offense for the purposes of state recidivism statutes subverts the civil nature of the juvenile adjudication to an extent that makes it fundamentally unfair and, thus, violative of due process. One way to remedy the perceived inequities in using non-jury juvenile adjudication as sentence enhancements, critics of the current system maintain, might be to grant juveniles a right to a jury trial during adjudicatory hearings." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h0_full h2_full h1_title", "h0_full", "", "", "h0_full h2_full h1_full", "h2_full h1_full" ] }	{ "question": [ "Why has the juvenile justice system changed since the 1960s?", "How has the main goal of the system changed?", "How do juvenile rights compare to adult rights?", "What does the Constitution state regarding juvenile criminal rights?", "How has the Court limited juvenile criminal rights?", "What does the Sixth Amendment guarantee?", "How did Duncan v. Louisiana uphold the Sixth Amendment?", "How has the Court since limited the scope of their decision?", "How does the lack of a right to a jury trial affect other aspects of the juvenile justice system?", "What questions have been raised about the juvenile justice system?", "How does this report help address these questions?", "How will this report be updated?" ], "summary": [ "Since the late 1960s, the juvenile justice system has undergone significant modifications resulting from U.S. Supreme Court decisions, changes in federal and state law, and the growing belief that juveniles were increasingly involved in more serious and violent crimes.", "Consequently, at both the federal and states levels, the juvenile justice system has shifted from a mostly rehabilitative system to a more punitive one, with serious ramifications for juvenile offenders.", "Despite this shift, juveniles are generally not afforded the panoply of rights afforded to adult criminal defendants.", "The U.S. Constitution requires that juveniles receive many of the features of an adult criminal trial, including notice of charges, right to counsel, privilege against self-incrimination, right to confrontation and cross-examination, proof beyond a reasonable doubt, and double jeopardy.", "However, in McKeiver v. Pennsylvania, the Court held that juveniles do not have a fundamental right to a jury trial during adjudicatory proceedings.", "The Sixth Amendment explicitly guarantees the right to an impartial jury trial in criminal prosecutions.", "In Duncan v. Louisiana, the U.S. Supreme Court held that this right is fundamental and guaranteed by the Due Process Clause of the Fourteenth Amendment.", "However, the Court has since limited its holding in Duncan to adult defendants by stating that the right to a jury trial is not constitutionally required for juveniles in juvenile court proceedings.", "Some argue that because the Court has determined that jury trials are not constitutionally required for juvenile adjudications, courts should not treat or consider juvenile adjudications in subsequent criminal proceedings. In addition, some argue that the use of non-jury juvenile adjudications in subsequent criminal proceedings violates due process guarantees, because juvenile justice and adult criminal proceedings are fundamentally different.", "Has the juvenile justice system changed in such a manner that the Supreme Court should revisit the question of jury trials in juvenile adjudications? Are the procedural safeguards in the juvenile justice system sufficient to ensure their reliable use for sentence enhancement purposes in adult criminal proceedings?", "To help address these questions, this report provides a brief background on the purpose of the juvenile system and discusses procedural due process protections provided by the Court for juveniles during adjudicatory hearings.", "It also discusses the Court's emphasis on the jury's role in criminal proceedings and will be updated as events warrant." ], "parent_pair_index": [ -1, 0, -1, 2, 2, -1, 0, 0, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2 ] }
CRS_R41060	{ "title": [ "", "Introduction", "Work Stoppages in Selected Professional Sports Leagues", "1982 National Football League Strike", "Congressional Response", "H.Res. 597 and H.Res. 5984 (97th Congress)", "S. 3003, Organized Professional Team Sports Labor Dispute Resolution Act of 1982 (97th Congress)", "1987 National Football League Strike", "Congressional Response", "1994 Major League Baseball Strike", "Congressional Response", "S. 2380, H.R. 4965, and S.Amdt. 2601 to H.R. 4649, Baseball Fans Protection Act of 1994 (103rd Congress)", "S. 2401, National Commission on Major League Baseball Act of 1994 (103rd Congress)", "H.R. 4994, Baseball Fans and Communities Protection Act of 1994 (103rd Congress)", "H.R. 5095, Major League Play Ball Act (103rd Congress)", "Hearing on Baseball's Antitrust Exemption and the Strike (103rd Congress)", "H.R. 45, Baseball Fans and Communities Protection Act of 1995 (104th Congress)", "H.R. 105, H.R. 106, H.R. 365, and H.R. 1612 (104th Congress)", "H.R. 120, Baseball Fans and Communities Protection Act of 1995 (104th Congress)", "H.R. 386, Professional Baseball Antitrust Reform Act of 1995 (104th Congress)", "H.R. 397, Major League Play Ball Act (104th Congress)", "H.R. 735, National Commission on Professional Baseball Act of 1995 (104th Congress)", "H.R. 74962 (104th Congress)", "H.R. 870 and S. 376, Major League Baseball Restoration Act (104th Congress)", "S. 15, National Pastime Preservation Act of 1995 (104th Congress)", "S. 415, Professional Baseball Antitrust Reform Act of 1995, and S. 416, Major League Baseball Antitrust Reform Act of 199566 (104th Congress)", "S. 627, Major League Baseball Antitrust Reform Act of 1995 (104th Congress)", "White House Efforts to Aid in Resolving the Strike", "2011 National Football League Lockout", "Congressional Response", "Discussion" ], "paragraphs": [ "", "Initially, this report was written in anticipation of a possible strike by National Football League (NFL) players, or a possible lockout by the NFL, in 2011. At that time, developments in professional football's labor-management relations had prompted questions regarding how, when, and in what manner a new collective bargaining agreement (CBA) might be drafted. Interest in this matter included, on the part of some observers, questions about how Congress responded to previous work stoppages in professional sports.\nThis report examines congressional activity related to the three most recent National Football League (NFL) work stoppages, which occurred in 1982, 1987, and 2011, and the 1994 Major League Baseball (MLB) strike. Although the latter strike involved another professional sports league, it is potentially instructive given the extent of congressional activity surrounding the 1994 strike.", "Work stoppages involving professional sports, whether caused by the players going on strike or the owners imposing a lockout, are by their very nature contentious and not always resolved quickly or easily. Through mid-2012, the four major professional sports leagues in the United States—Major League Baseball (MLB), National Basketball Association (NBA), National Football League, and National Hockey League (NHL)—had experienced a total of 21 work stoppages. Table 1 , Table 2 , Table 3 , and Table 4 list the work stoppages for each sport.\nMajor League Baseball has experienced the greatest number of work stoppages (eight), followed by the NFL (five), NHL (four), and NBA (two). While both NBA work stoppages were lockouts, the other three leagues have experienced a combination of strikes and lockouts. Major League Baseball has had five strikes and three lockouts, and the NHL one strike and three lockouts. The NFL is somewhat unusual in that two of its five work stoppages began as lockouts and concluded as strikes (1968 and 1970). The average length of work stoppages for each league is as follows: MLB, 46 days (excluding the 232-day strike, the average is 20 days); NBA, 139 days; NFL, 31 days; and NHL, 138 days (excluding the 10-day strike, the average is 203 days). The medians for the four leagues are as follows: MLB, 17 days; NBA, 149 days; NFL, 24 days; and NHL, 103 days.\nIn the following three sections, this report describes congressional responses to the 1982 and 1987 NFL strikes and the 1994 MLB strike, respectively. The latter section also includes a discussion of the Clinton Administration's attempts to facilitate the resolution of the baseball strike. A summary of the circumstances of each strike is followed by a table that identifies relevant legislative measures, and an overview of Members' comments and report language regarding the strike, which were drawn from congressional hearings and reports, and remarks made on the House or Senate floor. This information shows the extent of actual, or intended, congressional involvement and how some Members viewed congressional involvement in the strike. A summary of NFL labor-management history may be found in Appendix A . Appendix B provides an overview of key aspects of labor-management relations and sports, and Appendix C includes a discussion of antitrust exemptions applicable to professional sports.", "On September 20, 1982, NFL players voted to strike after negotiations for a new collective bargaining agreement broke down. The previous CBA had expired on July 15, 1982. Initially, the NFL Players Association (NFLPA) sought 55% of the owners' gross revenues. The NFL rejected the players association's demands and offered to share $1.6 billion with the NFLPA over five years. The dispute was resolved when the players association accepted the owners' offer to share $1.28 billion over five years and to provide $60 million to the union to compensate players for salaries not paid during the strike. The season resumed on November 21, 1982. On December 5, 1982, the players association and the owners signed a new five-year CBA. After the strike was resolved, the season resumed with a seven-game regular season schedule and an expanded playoff bracket, which culminated in Super Bowl XVI on January 30, 1983.", "Table 5 shows the legislative measures that were introduced in response to the strike.", "Either resolution, if passed, would have urged the parties to take steps to promptly settle the strike and resume the season.", "Although no hearings were held, the bill's sponsor, Senator Ted Stevens, offered a rationale for congressional involvement when he introduced S. 3003 . Noting that \"Congress has clearly established a history of promoting the public interest in professional sports,\" he then mentioned several instances when legislation involving professional sports was enacted:\nFor example, in 1973, we adopted legislation calling for the telecasting of sold-out home games of professional sports teams. We also enacted legislation encouraging the stability of professional sports leagues by confirming, in 1961, the right of professional sport leagues to jointly sell their television rights to the national networks. In 1966, we authorized the consolidation of the American Football League and the National Football League so that football franchises could continue to operate on a stable basis in their resident communities. Thus we have long recognized the public interest in encouraging professional sports, and have affirmatively acted to encourage the financial stability of the leagues.\nSenator Stevens also noted the adverse economic consequences of the football strike, mentioning that the \"strike produced major economic disruptions and losses in all of the communities which host NFL teams.\"", "The 1982 CBA expired on August 31, 1987, and shortly thereafter negotiations broke down between the NFLPA and the NFL over the issue of free agency and other matters. The union voted to strike on September 22, 1987. The owners cancelled the games scheduled for September 26 and September 27, 1987, while announcing their intention to resume the season on October 4, 1987, with replacement players. NFL players who did not share the union's concerns regarding free agency, or who needed the money, played alongside the replacement players.\nThe striking players voted to return to work on October 15, 1987, even though there was no CBA. Team owners, however, banned players who had not agreed to return to work by the owner-imposed deadline of October 14, 1987, from participating in that week's scheduled games. Thus, striking players who did not return to their teams until after the NFLPA vote lost an additional week of pay. Replacement players were released as the regular players returned to their jobs. The 1987-1988 season concluded on January 31, 1988, when the Super Bowl was held at Jack Murphy Stadium in San Diego.", "Table 6 shows the legislative measure that was introduced in response to the strike.\nS.Res. 294 , which was agreed to without amendment by a voice vote, called on both parties—the players association and the NFL Management Council—to resume negotiations.\nAlthough S.Res. 291 (100 th Congress), which addressed the telecasting practices of the NFL, was not a response to the NFL players' strike, the subject was broached during a hearing on the resolution. Following his introduction of Pete Rozelle, then-commissioner of the NFL, the subcommittee's chairman initiated the following exchange with Rozelle regarding the ongoing strike:\nSenator METZENBAUM. Mr. Rozelle, as I indicated to you before the hearing, I think for us to have you before this hearing and not inquire of you as to why you as the Commissioner have not been heard from in connection with some effort to settle the strike between the players and the NFL, would be surprising to the many people in this country that are asking that question. I wonder if you would be good enough to tell us why you as the Commissioner have not seen fit to move in and at least attempt to mediate the issue.\nMr. ROZELLE. I have had meetings with the President of the Players' Association, Gene Upshaw, and phone conversations. I have attempted to stay close to the situation, of course, on the owners' Management Council side. There has been a very, very strong disagreement on several issues that have inhibited the negotiating process. I am pleased now that I think that perhaps certain pressures are involved on both sides, and I understand they are going to be meeting promptly to get back into negotiating. I think it is unfortunate they could not have accomplished more back in May, June and July, but it was all the thrust at once when the season came on us.\nSenate METZENBAUM. Well, I might say I think that all of us are pleased to know that management and players are going back to the negotiating table. I never heard of a strike that was settled without direct negotiations, oftentimes through some mediator—whether it is from the U.S. Mediation and Conciliation Service or someone else.... The American people have a strong interest in this issue. They do not have an ownership right, but they feel they have some type of right in professional football. And I think the sooner the matter gets resolved and the parties themselves meet together and resolve it, I think the happier the American people will be. I think it will be one less issue to be on the top of the news in the nightly news every night.\nIn an exchange that occurred later in the hearing, Senator Arlen Specter similarly encouraged the NFL commissioner to assist in settling the strike. The relevant excerpt is as follows:\nSenator SPECTER. Okay. I would like to disagree with Senator Hatch, even though he is gone, on one small point. That is about the adequacy of the substitute games on this past Sunday. I would join my colleague, Senator Metzenbaum, Commissioner Rozelle, in urging you to do everything you could personally to lend your good offices to settle the strike. You have been a very powerful force in the National Football League for many, many years. I believe you became Commissioner in the 1950s.\nMr. ROZELLE. 1960, Senator.\nSenator SPECTER. 1960. Okay. But you have been the Commissioner for 27 years, one of the toughest jobs around, pulled together the National Football League in an era of extraordinary growth and extraordinary complexity, and you have appeared before this Judiciary Committee on many occasions in my short tenure in the United States Senate. I think you have always done a very able job, and I think you have done a very able job here this morning. I would very much like to see your talents used this afternoon to settle the football strike.\nMr. ROZELLE. I would love to, believe me. It is so terribly frustrating, Senator.\nMr. MODELL. I would like to add a thought in that regard. Yes, I echo your sentiments on what he has done for 26, 27 years. But if the players were to accept him as a neutral Commissioner, which he really is, this strike never would have gotten off the ground. They view him as an owners' appointee, and that gives us great difficulty.\nSenator SPECTER. Well, the strike has gotten off the ground, but I think it is a little different ball game today than it was a week ago. We have had a week of substitute players. I think the American public is totally dissatisfied with that. There have been incidents around the league which are not a credit for anybody. And I think it is time it came to a close. If there is one man who could probably do it better than anyone else, if anybody could do it, it is Commissioner Rozelle. So we are going to let you go early, Commissioner.", "Unable to reach an agreement with the owners on a new CBA in summer 1994, major league players voted, on August 12, 1994, to strike. Approximately one month later, on September 14, 1994, Major League Baseball cancelled the remainder of the season. The decisions to strike and to cancel the season followed several months of negotiations over a number of issues, including baseball's revenue sharing plan. Beginning in fall 1994, the Clinton Administration attempted to facilitate negotiations between the parties. The work stoppage ended in early 1995 following then-U.S. District Court Judge Sonia Sotomayor's issuance of an injunction that had been \"requested by the National Labor Relations Board ordering baseball owners to restore bidding on free agents, a resumption and salary arbitration and the anti-collusion rules which were a part\" of the CBA that had expired the previous year. Shortly after Judge Sotomayor issued the injunction, which occurred on March 31, 1995, major league baseball owners \"accepted the players' offer to return to work.\" Although the commencement of the 1995 season was delayed, beginning on April 26 instead of April 3, which was the original opening day, the season was played without interruption and the postseason concluded with the World Series.", "Table 7 shows the legislative measures that were introduced in response to the strike.", "Senator Howard Metzenbaum introduced S. 2380 and offered S.Amdt. 2601 . H.R. 4649 was a companion bill to S. 2380 .\nSenator Metzenbaum believed that \"revoking the owners' antitrust immunity is the best long-term solution to the mess the players and the owners have made of major league baseball,\" but he decided to offer instead what he characterized as a \"compromise bill.\" He went on to explain his reasoning as follows:\nIt [ S. 2380 ] does not eliminate the players right to strike, or the owners right to lock them out. Instead, the bill allows the antitrust laws to be invoked if the owners impose a salary cap or any other terms and conditions on the players. This should take away the owners' incentive to play hard ball and impose unilateral conditions. It should also relieve players' fear that they need to strike in order to prevent a salary cap from being shoved down their throats when the season ends. Once the owners and players resolve their differences and sign a new agreement, the bill expires....\nRight now, the big league players cannot use the antitrust laws. If they could, the owners would have to deal with them fairly or face the consequences in a court of law. In other words, what this bill does is give the players another tool they can use to avoid striking, or to bring a strike to a quick end. The last seven times the baseball players and owners have met at the bargaining table there has been a work stoppage: A strike or lockout. This has not happened in other professional sports because those players could use the antitrust laws to settle labor disputes.... If the antitrust laws applied to baseball, the owners could not force the players to accept unreasonable terms and conditions if their labor negotiations hit impasse. The players could challenge the owners unreasonable demands by launching an antitrust suit instead of shutting down the season.\nSenator Orrin Hatch, who co-sponsored S. 2380 , encouraged both sides to resolve their differences, and, unlike Senator Metzenbaum, did not support the blanket repeal of major league baseball's antitrust immunity. Couching the barriers to resolution as the result of a \"legal anomaly,\" Senator Hatch offered the following explanation of his position:\nOn the one hand, professional baseball enjoys a unique and longstanding immunity from the antitrust laws. I have opposed repeal of this immunity, and I continue to do so. On the other hand, the owners retain the right under our current labor laws to impose unilaterally new terms and conditions of employment once an impasse in the bargaining has been reached. I am concerned that the unique combination of these two legal roles, which occurs in no other industry, has the effect of inviting delay and of discouraging prompt resolution of the pending labor dispute. The Baseball Fans Protection Act that Senator Metzenbaum and I are introducing would correct this legal anomaly.\nThe sponsor of H.R. 4965 , Representative Major R. Owens, did not provide any remarks when he introduced his bill.", "Introduced by Senator Dennis DeConcini, S. 2401 , if enacted, would have established a commission on professional baseball. Major League Baseball did not have a commissioner at the time of the strike, and Senator DeConcini envisioned the panel serving as an \"impartial commissioner\" that would \"give the fans a much needed voice in the debate.\" Among the many responsibilities he set forth for the proposed commission, he noted that \"[m]ost importantly ... is the Commission's power to conduct binding arbitration of a labor impasse. Given that we are currently in the eighth work stoppage in the past 22 seasons, it is unfortunate, but obvious, that baseball can not put its own house in order.\" Continuing with the theme that intervention was necessary to resolve the dispute, Senator DeConcini, in the following excerpt, also defended government involving itself in the matter:\nMany people might wonder why, or if, Government should involve itself in this matter. But the Government is already involved and has, in effect, created a baseball monopoly.... This exemption allows baseball to operate as one large entity which operates free of the threat of competition, despite the fact that competition is the hallmark of American free enterprise. In other instances where we create a monopoly, such as utilities, no one questions the Government's authority to regulate the industry. In essence we grant the monopoly, but we do so with the understanding that this rare exception has conditions, one of which is the Government's right to regulate.\nWhile Senator DeConcini acknowledged that some thought Congress ought to repeal baseball's antitrust exemption, he \"[thought] the larger issue [was] ... whether or not the game [could] ... police itself—I have not seen much recently to suggest that it can.\"", "Upon introducing H.R. 4994 , Representative Mike Synar noted that it was \"designed to spur the now stagnant negotiations between the players and owners of major league baseball. This bill is specifically designed to allow the players to get back to the field while all parties to the strike have their rights and bargaining positions protected through the application of the antitrust laws.... [G]iving the players antitrust remedies will preserve their bargaining [position] during the upcoming negotiations without having to resort to a strike.\"\nThe committee report that accompanied the bill set forth the same reasoning, as shown by the following excerpt from the report:\nH.R. 4994 would subject Major League Baseball owners and players to the Nation's antitrust laws in the event one of those parties unilaterally imposes an anticompetitive term or condition on the other. While the case for a far broader repeal of the antitrust exemption is compelling, at this late juncture in the 103d Congress, the Committee opted to respond legislatively to the most urgent competitive problem facing Major League Baseball[:] its failure to be subject to the same antitrust rules as the other sports in the event of a breakdown of the collective bargaining process and the unilateral imposition of terms by one of the parties. As such, the legislation was specifically drafted so that it would not implicate issues relating to other activities, such as the operation of the minor leagues or franchise relocation.\nThe Committee's formal action of partially repealing the nonstatutory antitrust exemption which Congress never initiated or endorsed but by which it has been saddled for over 70 years is really the first step in ending a legal fiction about the game created and perpetuated by the Supreme Court, as perhaps one of its greatest indulgences. That indulgence, fueled first by sentimentality and then by risk-aversion, has now vested such complete power over the sport by its financial owners as to enable them to end the game at will.\nThe Committee now acts to end the illusion which has spawned very real economic consequences. It does so by partially repealing the nonstatutory exemption created by the 1922 decision in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs. In so doing, the Committee responds to the current phase of a recurring crisis in baseball in a very limited, yet crucial, way: by subjecting the traditional parties to Major League Baseball's collective bargaining agreement the players union and owners to the Nation's antitrust laws in the event one party unilaterally imposes an anticompetitive term or condition of employment on the other.\nOther members of the Judiciary Committee disagreed, objecting to, among other things, congressional involvement in the matter. They wrote:\nWe continue to be concerned about both the propriety and timing of this legislation and oppose its enactment. Simply put, Congress should not intervene in an ongoing collective bargaining dispute unless a national security interest is involved. Clearly, as important as baseball is to our national psyche, a baseball strike is not a national security matter. The decision to legislatively move ahead on this matter at this point is also highly questionable. It would make more sense for Congress to revisit the basic issue of baseball's antitrust exemption next year, when the emotion and acrimony surrounding the current strike hopefully will have subsided.\nThe dissenting members of the committee also tackled the claim that the antitrust exemption served as a barrier to resolving the ongoing dispute between baseball players and owners. They noted that the other three professional sports leagues (basketball, football, and hockey) did not have the same antitrust exemption that baseball has, yet \"all three … have seen considerable labor strife, not dissimilar to that which we are witnessing with respect to baseball. It would appear that labor strife in professional sports has more to do with economics, than it has to do with the applicability of the federal antitrust laws.\"", "A September 1994 hearing on H.R. 5095 offers some insight into how several members of the House Committee on Education and Labor, Subcommittee on Labor-Management Relations viewed the role of Congress in the strike. The following passages show that the chairman of the subcommittee, Representative Pat Williams, acknowledged, and concurred with, the committee's long-standing opposition to binding arbitration, but then explained why he chose to support congressional intervention in this instance:\nI want to tell our witnesses that you are appearing before a committee which has historically opposed binding arbitration. The Labor Committee is the committee that believes that collective bargaining works in America and should be allowed to continue unhampered by Federal intervention. That is my own belief, but this is baseball. However, for this committee to be encouraging binding arbitration is historic and virtually unprecedented.\nRepresentative Williams's comments at the hearing echoed the statement he made upon introducing the bill. An excerpt of the statement is as follows:\nThis bill addresses the inability of the owners and players to collectively bargain effectively given the antitrust exemption for baseball.... Collective bargaining in this country works very well. Government should intervene in that process only at times of crises, and then only when it is clear that continued voluntary negotiations will not succeed. My legislation is introduced in that spirit.\nSeveral other subcommittee members followed suit in supporting the use of binding arbitration to settle the strike. Similar to the chairman's approach, each of these other subcommittee members implied or suggested that collective bargaining is preferable, but that binding arbitration, or congressional intervention, is acceptable when parties are unable to reach an agreement.\nExcerpts from Representative Donald M. Payne's, Representative Matthew G. Martinez's, and Representative Eliot L. Engel's statements, respectively, are as follows:\nI support the Chairman's initiative because I believe that collective bargaining is a positive tool in this country. The government should step in the picture when it is evident that continued voluntary negotiations are futile. If this bill [H.R. 5095] can alleviate some of the problems that resulted from the baseball strike this summer, then this legislation has my full support. [Payne]\nBinding arbitration, I think, is one way to settle these things when there are disputes like that, and while I am a strong labor supporter, I have never really felt that even with labor that there are times when a third party shouldn't step in and see things in a reasonable, objective way when the negotiating parties can't. [Martinez]\nI urge the parties to resolve their differences so that congressional intervention is not necessary, but I assure you that we will get involved in order to protect the interests of fans, local business owners, and, as they say, the best interests of baseball. [Engel]\nAnother subcommittee member who supported this bill, Representative Major R. Owens, believed that the preferable, long-term solution was to repeal baseball's antitrust exemption. In the following excerpt, he provides his reasoning:\nWhile I fully support this bill, of course, it only provides a temporary solution to a long-term problem. The Congress really must take stronger action. Baseball's antitrust exemption has provided the owners with a monopoly through which players have been denied the rights enjoyed by employees in every other industry. Continuing Congress' past inaction on this issue would be tragic.... Since Justice Blackmun rendered that court's opinion [in 1922], baseball's antitrust exemption has paved the way for seven work stoppages to occur, and presented with a chance to act, Congress has balked each time. The season may be over, but the opportunity for Congress to act is not. I urge all Members, of course, to fully support this effort by Congressman Williams, but I think we should go further and I urge all Members of Congress to support the efforts going forward in the Judiciary Committee to finally cure this problem once and for all by taking away the antitrust exemption from baseball.\nTaking a different tack, other subcommittee members suggested that the baseball strike did not warrant congressional involvement, and that it should be resolved through collective bargaining. Excerpts from the statements of Representatives Peter Hoekstra, Steve Gunderson, and Harris W. Fawell, respectively, are as follows:\nI would encourage Congress at this point in time to stay out of this situation. I would encourage the witnesses to go back to the bargaining table to solve their problems. If we are going to get involved, we should wait until after this strike is solved, and we should not do anything in a short period of time. We have much more pressing problems to deal with. [Hoekstra]\nAs a Republican and a State legislator, I joined with the labor movement in Wisconsin to support binding arbitration, mandatory binding arbitration to eliminate the possibility of a work stoppage among the public schoolteachers in our State. I believe there was clearly a national interest or at least a State interest that required us to do that, and in that context we then had to look at an alternative to resolving the labor disputes. My question, very frankly, is to what degree and how do we determine whether there is a similar national interest with America's pastime, and if so, then what ought to be the conditions for an alternative remedy?.... As I indicated earlier, I am not one who is philosophically opposed to the concept of binding public arbitration when there is an overriding public interest. My question to the players or to your representative is, because you seem to be the supporters of this legislation, what is the overriding public interest which would compel the United States Congress to order final and binding arbitration in this situation? [Gunderson]\nI generally agree with the Chairman in not believing that we should mandate settlements. I think that probably as rough as this may be, it should be allowed to play out, and who knows what the next chapter of baseball may be. \" \"I speak as somebody who has played ball all my life, I love the game, it is fascinating, but I don't believe in the final analysis it is an economic tragedy in this Nation.... I basically take the view that we ought not to break into this collective bargaining process as long as it is there. Antitrust laws are not involved anyway.... The strike has got to be settled, I believe, by the players, by the owners getting together and recognizing that each has some trust and some basis to their stands. [Fawell]\nAt least two of the subcommittee members who supported the imposition of binding arbitration raised yet another issue: the possible financial impact of the strike on stadium or team employees. Representative Martinez stated that the work stoppage was \"an economic disaster to the people who make a living from baseball.... [T]he people that sell the peanuts in the stands, the beer, and the people that work in the concessions.\" Echoing Representative Martinez's concern, Representative Engel noted that \"[t]housands of people, many of them my constituents, rely on Major League Baseball for their livelihood. They are the ticket takers, hot dog vendors, and small business owners in the community.\"", "In September 1994, the House Committee on the Judiciary, Subcommittee on Economic and Commercial Law held a hearing on Major League Baseball's antitrust exemption and its relationship to the ongoing strike.\nAs shown by the following passages, Representative Jack Brooks, chairman of the subcommittee, linked the two issues—baseball's antitrust exemption and the strike—and concluded that legislation was necessary.\nNow, Congress doesn't serve the function of mediator who shuttles between private parties to resolve individual disputes. But we are, however, policymakers, policymakers with a long memory.... They [the owners] may have shut it [baseball and the World Series, in particular] down for the first time since 1904, but you might be underestimating Congress' ability to respond to the debacle we have witnessed since August 12. They would be wise to remember there is a different rhythm to congressional deliberations and actions. The 406 games that have been lost, the 12.6 million people who have not enjoyed paying and going to a game have moved the issue of baseball's antitrust exemption to this committee's radar screen as never before.\nAs a result of the spectacle this Nation was forced to endure in the last few months and my very grave concerns for the future of the institution [baseball], I have come to the conclusion that legislation is needed to restore the principles of competition and fair play to the business of baseball. I am well aware that there may be insufficient time to pass a stand alone bill in the House before Congress adjourns, but I would remind the parties that the 104 th Congress is schedule to convene well before spring training begins and well before the scheduled season opening on April 2. In addition, if before adjournment the Senate acts to attach a limited repeal of the exemption on other legislation and sends it to the House, I would be very open to allowing it to proceed directly to the President.\nExpressing similar sentiments, Representative John Conyers Jr. said: \"We are not negotiators. We are not bargainers, but we do make the law. We are responsible for our antitrust law. And it seems to me that unless something happens before the end—the beginning of the season next year, I think Congress is going to have a very heavy obligation to move in one of these directions.\"\nRepresentative Patricia Schroeder, in the following excerpt, characterized Congress's lack of action regarding baseball's antitrust exemption as implicitly creating a link between Congress and major league baseball.\nI have seen the polls that the owners are circulating that tell us the public does not favor Congressional involvement in the current dispute between the players and the owners. I would suggest that each year that Congress allows the [antitrust] exemption to stand is another year of Congressional involvement. By doing nothing, we are allowing the owners a special entitlement.\nOffering another, yet related, perspective, Representative Sherwood Boehlert talked of Congress's responsibility for professional baseball. He said: \"We believe that because of the unique station that baseball holds in American society, and because of the legal privileges it has been granted by Congress, we have a special responsibility to ensure that the game endures.\"\nAlthough Representative Brooks concluded the hearing by citing the need for legislation, he and at least two other subcommittee members (Representatives Conyers and Hamilton Fish Jr.) encouraged the heads of the players union and Major League Baseball—both of whom testified at the hearing—to resolve their differences through collective bargaining. Their comments (Brooks, Fish, and Conyers, respectively) were as follows:\nYou know, we deal with problems all the time up here where I may have this position, somebody else has another position, and we are hard set in them and we are going to go with them. Yet very often in Congress people get together and realize that there are third and fourth positions and what you thought was such a wonderful idea really is not that significant, that important, and that you could have been wrong. I could have been wrong. We could have done something else, and we reach those alternatives often here. That is what compromise is, that is what politics is all about. That is what negotiations are all about, and I would hope that you all would experience that opportunity. You have that opportunity any time. [Brooks]\nI don't think anybody has missed the fact that the chairman and I would very much like the parties here to resolve this dispute themselves and get on with the game. [Fish]\nGentlemen, this has been an important hearing so far because it sounds like we might be able to get negotiations going again. I don't want to be overoptimistic, but I would certainly want to urge that if anything could come out of this hearing, the first thing that I think we would all rejoice about would be the fact that you were able to get back to the bargaining table, and I hope that could occur. [Conyers]", "In introducing H.R. 45 , Representative Conyers identified baseball's antitrust exemption as being \"at the root of the current strike,\" and suggested that Congress was in a position to intervene. Specifically, he said that \"[w]e have the opportunity and ability to rescue the national pastime from its current dispiriting condition. Let's not allow this opportunity to pass by or be deferred. I urge all colleagues to join in the effort.\"", "In the absence of introductory statements or hearings, it is not known whether these bills were efforts to address the baseball strike, or reflect the Members' general interest in professional baseball. The bills and their titles and sponsors are as follows: H.R. 105 , Baseball Antitrust Restoration Amendment of 1995, Representative Michael Bilirakis; H.R. 106 , Representative Michael Bilirakis; H.R. 365 , Baseball Fans and Communities Protection Act of 1995, Representative Charles Schumer; and, H.R. 1612 , Major League Baseball Antitrust Reform Act of 1995, Representative Jim Bunning.", "Although he did not mention his bill specifically, Representative Bunning stated that \"[m]ajor league baseball has to have this exemption removed for the good of the fans, the game, and anybody else that wants a season in 1995.\"", "Similar to other Members who believed that the antitrust exemption was at the root of the strike, Representative James A. Traficant Jr. believed that \"[r]emoving this [antitrust] exemption may be the only way to end the strike and save the 1995 season. That's why today I am introducing the Professional Baseball Antitrust Reform Act of 1995.\"", "While proposing a partial, or complete, repeal of baseball's antitrust exemption was a relatively common response to the strike, Representative Pat Williams, in the following excerpt, recommended binding arbitration: \"I have today introduced legislation to provide mandatory and binding arbitration if the parties fail to reach agreement. Collective bargaining in this country works very well. The public, through their government, should intervene only in a crisis. We now have reached a crisis in the well-being of our national pastime.\"", "Representative John J. LaFalce, in discussing the rationale for his bill, noted that someone (that is, Congress) needed to protect the fans' interests, and proposed that regulating baseball was one way to do this. Excerpts from Representative LaFalce's statement are as follows:\nIt is clear that baseball owners and players will continue to look out only for their own needs. But there is a crying need for someone to look out for the interests of fans, of taxpayers and of the communities in which both major league and minor league baseball is played. It is time for Congress to take steps to return baseball to the American people. The legislation I am introducing today seeks to accomplish this by creating an independent National Commission on Professional Baseball. The Commission would serve as a temporary regulatory body and impartial arbitrator to oversee the conduct of professional baseball until the legal status of major league baseball can be redefined either by negotiation or by congressional legislation.\nMy legislation does take the position that baseball's antitrust exemption is, in effect, a government-granted monopoly in much the same manner as a local public utility or transportation authority. And like any other publicly-sanctioned monopoly, my bill would require public oversight to assure that self-interest is not put above the interests of the public and consumers. In this regard, the proposed commission would be similar to the Federal Communications Commission, or any other public body with oversight over a restricted industry or market. An important difference, however is the fact that the authority of the proposed Commission is intended to be temporary during a period of deregulation of baseball from the current market restrictions imposed by baseball's current antitrust exemption. Since Federal law has permitted a restricted national market for major league baseball, the Federal Government has both the right and the responsibility to regulate this market, just as we regulate other monopolies, to assure that the public's interests are protected.", "Advocating an approach also favored by several of his colleagues, Representative Estaban Edward Torres introduced legislation to repeal baseball's antitrust exemption. He provided the following reasons for doing so: \"For the short term, I believe repealing the antitrust exemption will accelerate the end of the baseball shutdown, which threatens the livelihoods of thousands of Americans and the economies of cities and towns across the country. For the long term, I believe repealing the antitrust exemption will restore fairness to the fragile relationship of labor and management in professional baseball.\"", "As discussed below, President Clinton forwarded proposed legislation to Congress in 1995. His proposal became H.R. 870 , which was introduced by Representative Pat Williams, and S. 376 , which was introduced by Senator Edward M. Kennedy.\nAfter noting that Congress generally prefers to let parties involved in labor disputes reach a settlement on their own, Senator Kennedy offered several reasons why it was desirable for Congress to intervene in the baseball strike. In the following excerpts from his remarks, he touched on Congress's authority to regulate interstate commerce and the special status of baseball in America.\nGenerally, Congress is reluctant to inject itself in labor disputes. All of us hope that the parties will find a way to end the impasse and settle their differences voluntarily. But there are rare instances in which Congress has a role to play in settling such disputes, and this may well be one of those times.\nThere is no doubt that Congress' constitutional authority to regulate interstate commerce gives us the power to enact legislation to settle this dispute. Many aspects of major league baseball affect commerce between the States....\nObviously, Congress does not intervene in every labor dispute that burdens interstate commerce, but baseball is different and unique. It is more than a nationwide industry. It is our national sport. Baseball is part of American life.\nWe in Congress as representatives of fans throughout the country should not remain silent while baseball is damaged by a strike that the owners and players seem unable to resolve themselves. Clearly, Congress has the power to act. The question is who speaks for Red Sox and millions of other fans across America. At this stage in the deadlock, if Congress does not speak for them, it may well be that no one will.\nFor all these reasons, Congress can act and should be prepared to act. Legislation to end the strike would not set a precedent for injecting Congress into other labor disputes. There is still time for the owners and players to resolve this dispute on their own or to act voluntarily to establish a safety mechanism for doing so.", "S. 15 was yet another bill that, if enacted, would have repealed baseball's antitrust exemption. Its sponsor, Senator Daniel Patrick Moynihan, made the following remarks when he introduced the bill:\nAs a result of this anomaly [baseball's antitrust exemption] in American law, Mr. President, the World Series was cancelled in 1994 for the first time since 1904. With none of the legal restraints that prevent other businesses from engaging in anticompetitive behavior, the baseball team owners are free to act as a cartel. To end this monopoly, Congress must remove baseball's antitrust exemption and subject the game to the same rules of law that apply to all other major league sports.... Many Members of Congress have begun to examine this issue more closely in view of the strike. My Friend Senator Orrin Hatch, the new chairman of the Judiciary Committee, has indicated that he supports repealing the exemption and is prepared to move a bill quickly through his committee.", "In February 1995, the Senate Committee on the Judiciary, Subcommittee on Antitrust, Business Rights, and Competition held a hearing on baseball's antitrust exemption and two bills, S. 415 and S. 416 , that would apply antitrust laws to professional baseball. At the hearing, several Members offered diverse views regarding whether the proposed repeal of baseball's antitrust exemption ought to be linked to the strike and the desirability of congressional intervention in the strike.\nSenator Strom Thurmond, who introduced S. 416 , did not link the partial, or complete, repeal of baseball's antitrust exemption to the ongoing strike. The following are excerpts from his remarks:\nThe Thurmond-Leahy legislation addresses baseball's antitrust exemption, but is not specially drafted in an attempt to solve the current baseball strike.... Some Members of Congress believe that we should not get involved during the current strike, while other Members have asserted that in the absence of a strike there is no need for the Congress to take action on this issue. Whether there is a strike or not, it is my belief that it is proper for the Congress to consider this antitrust issue as a matter of public policy.\nRegarding the purpose of the February 1995 hearing, Senator Thurmond said that it was \"intended to focus on the policy implications of baseball's antitrust exemption, rather than the details of the current baseball strike and the course of the unsuccessful negotiations. Although the ongoing strike raises questions about the antitrust exemption, the problems in major league baseball go deeper than this one strike.\" Senator Thurmond added that he \"intend[ed] to continue working on this issue, even if the strike were to end today.\"\nSenator Thurmond also shared his thoughts on the circumstances under which it might be acceptable for government to intervene in a matter such as the baseball strike, indicating it depended upon whether the public interest would be served. In the following passage, the Senator also commented on Congress's implicit involvement in baseball's antitrust exemption.\nDespite our interest in seeing the players return to the field, we must be ever mindful of the need to limit Federal Government intervention into matters best left to private remedies. The Congress should determine how much Federal involvement, if any, serves the public interest in this area. But as long as the special antitrust exemption remains in place for baseball, the Congress is involved. The Congress has an impact on the sport by simply permitting the special exemption to remain long after the factual basis for it has disappeared.\nSenator Orrin G. Hatch, who introduced S. 415 , was one of several subcommittee members that linked the ongoing baseball strike to professional baseball's antitrust exemption, and, accordingly, supported eliminating the exemption. Senator Hatch's comments were as follows:\nUnlike other legislation that has been proposed, my bill would not impose a big-government solution. On the contrary, it would get government out of the way by eliminating a serious Government-made obstacle [baseball's antitrust exemption] to settlement....\nA limited repeal of this antitrust immunity is now in order. Labor negotiations between owners and players are impeded by the fact that baseball players, unlike all other workers, have no resort under the law if the baseball owners act in a manner that would, in the absence of the immunity, violate the antitrust laws. This aberration in the antitrust laws has handed the owners a huge club that gives them unique leverage in bargaining and discourages them from accepting reasonable terms. This is an aberration that Government has created, and it is an aberration that Government should fix....\nThis legislation would not impose any terms of settlement on the disputing parties, nor would it require that they reach a settlement. Rather, it would simply remove a serious impediment to settlement—an impediment that is the product of an aberration in our antitrust laws. In short, far from involving any governmental intrusion into the pending baseball dispute, the legislation would get Government out of the way.\nAlthough Senator Patrick Leahy was Senator Thurmond's cosponsor, he is one of the Members who asserted that the antitrust exemption played a role in the strike. However, he also identified, in the following comments, two other factors that he asserted contributed to the ongoing dispute.\nThere is a public interest in the resumption of true, major league baseball. The current situation derives at least in part from circumstances in which the Federal antitrust laws have not applied, Congress has provided no regulatory framework to protect the public, and the major leagues have chosen to operate without a strong, independent commissioner who could look out for the best interest of baseball. Thus, competing financial interests continue to clash, with no resolution in sight.\nSenator Daniel Patrick Moynihan, although an original cosponsor of S. 415 , favored resolution of the labor-management dispute through collective agreement. Excerpts from his remarks are as follows:\nClearly baseball is a business engaged in interstate commerce, and should be subject to the antitrust laws to the same extent that all other businesses are. But the greater point is that the strike must be settled through good-faith bargaining between the parties. I will support this and any other effort that will move the parties forward toward a collective bargaining agreement—and the resumption of baseball in America as soon as possible.\nAs a former Assistant Secretary of Labor under Presidents Kennedy and Johnson, I agree with Senator Hatch, Senator Kassebaum, and others who have said Congress ought not interfere in the collective bargaining process—in baseball or any other industry. Absent some compelling national interest, Congress has always been reluctant to intervene in labor disputes, and properly so. Yet by our inaction with regard to the antitrust exemption, we have been interfering with baseball for half a century.\nOther members of the subcommittee offered reasons why Congress should refrain from intervening in the strike. Senator Arlen Specter simply stated that he did not \"think that the Congress ought to intervene when a dispute is in process, and certainly not to order binding arbitration.\" Senator Howell Heflin, who said he had \"great reservations about Congress intervening in any labor dispute,\" described two of them in the following passage:\nReservations, No. 1, as to whether or not we are equipped to be the decisionmaker and whether we ought to take action which might be favorable or unfavorable to one side or the other. I have also questions as to whether or not in any labor dispute anything other than the economic pressures that come to bear should have a substantial interest or controlling interest in the determination of the settlement of the dispute or the terms that come up. On the other hand, I want to see baseball played. I want to see the fans' interest in it gratified.\nRaising questions regarding, for example, Congress's priorities and the expected effectiveness of the proposed legislation, Senator Nancy Landon Kassebaum said the following:\nAt the outset, let me say that I believe it would be a mistake for Congress to intervene in the current dispute between the Major League Baseball owners and players. It is not the role of Congress—absent a national emergency—to force a settlement or take sides in a private labor dispute. To make an exception in this case would establish a very dangerous precedent.... Let me outline briefly my three principal objections to the Hatch-Moynihan bill.\nFirst, the Hatch-Moynihan bill [S. 415]—by its own terms—would be a direct intervention by Congress in the current baseball labor dispute.... Again, I believe it is a mistake for us to intervene by changing the rules in the middle of the game.\nSecond, not only would Hatch-Moynihan intervene in the current dispute, it would, worse still, take sides.... Hatch-Moynihan would treat the baseball owners less favorably than any other industry by excluding baseball's collective bargaining process from federal antitrust laws. This would allow the players to take the dispute to court, a right nonlabor organization now enjoys....\nFinally, it is my view that consideration of this or any legislation, at this time, will only impede further negotiations and decrease the likelihood of a settlement. As long as one side or the other believes there is a possibility that Congress will step in, meaningful negotiations will not occur.", "Having introduced S. 415 previously, Senator Hatch, along with four colleagues, including Senator Thurmond, introduced a new bill, S. 627 , in March 1995. Senator Hatch's and Senator Thurmond's positions remained unchanged regarding whether the purpose of the legislation was to facilitate the resolution of the strike (Hatch's position), or to terminate Congress's connection to baseball's antitrust exemption (Thurmond's position).\nDuring a hearing on S. 627 , several members of the Senate Committee on the Judiciary provided a variety of reasons why Congress ought not to intervene in the strike. Questions about congressional priorities, the potential for legislation to disrupt collective bargaining efforts, and concern that congressional action would be viewed as favoring one party to the dispute over the other were put forth as reasons for Congress not to act. Senator Specter's, Senator Paul Simon's, and Senators Hank Brown and Dianne Feinstein's comments were as follows, respectively:\nWhatever the merits of eliminating major league baseball's broad, judicially created exemption from the antitrust laws, Congress should not act while the labor situation remains uncertain. Any action we take is certain to be viewed as favoring one side to the dispute or the other. In such instances, Congress acts best when it does not act at all. The complex labor problems that have characterized baseball for the past years ought to be resolved by the parties without congressional interference.... Whether or not that [baseball's] exemption ought to be retained, I believe strongly that given the current state of play, it would be a mistake for Congress to enact this bill. This bill would only upset the current situation, making it less likely that the parties to baseball's labor strife will be able to resolve their dispute between themselves. We should not lose sight of the fact that voluntary collective bargaining is the basis of labor relations in this country. The parties should be left to settle their current impasse themselves without interference from Congress. [Specter]\nIn approving a repeal of major league baseball's longstanding antitrust exemption, this Committee has decided to alter the balance of power in an ongoing labor dispute between millionaires while the truly pressing problems facing our nation remain unresolved. Congress should be devoting its time and resources to other matters rather than inserting itself into a controversy for which both sides deserve blame. Indeed, of the many labor disputes ongoing in America today, I can think of few, if any, that are less deserving of our attention than this one.... The variety of problems facing our professional sports leagues demonstrates that even if professional baseball is a deserving subject of Congress's attention, such consideration should not take place on an ad hoc basis, in response to one 'crisis' or another, but should be part of an overall and careful reexamination of professional sports under the law. Only by studying the issue raised by S. 627 in this broader context can Congress avoid the justifiable criticism that it is simply playing favorites in a rancorous dispute that, but for the parties' stubbornness and lack of reason, should have been resolved long ago. [Simon]\nThe current bill intervenes in a continuing labor dispute. The majority report justifies this legislation on the basis that it 'would help resolve baseball's labor problems.' This conclusion is dubious at best. The middle of an ongoing labor dispute is not the right time to change the rules of the game. Both President Clinton and his chosen mediator, William Usery, repeatedly stated that the problems of baseball should be decided at the negotiating table. But, every time this issue comes before Congress, the parties drop what they are doing, leave the negotiating table, and focus their efforts on legislation. Proponents of the legislation suggest that all of the labor discord in Baseball can somehow be attributed to the existence of the exemption and that its elimination would be a labor panacea. Nothing could be further from the truth. In fact, all that its elimination would cause is unbridled litigation. [Brown and Feinstein]", "On October 14, 1994, the Secretary of Labor, Robert Reich, announced that former Labor Secretary William Usery had \"agreed to mediate the labor dispute between Major League Baseball players and owners. And the players and owners have agreed to resume negotiations with Bill Usery as special mediator.\"\nOn January 26, 1995, President Clinton issued a statement, saying that he had asked Mr. Usery \"to bring the owners and the players back to the table, and to step up the pace and intensity of his mediation efforts. I have asked him to report back to me by February 6 with the progress they have made.\" While the President said that \"[i]t has always been my belief—and continues to be—that the baseball strike, like any labor dispute, should be settled through good-faith bargaining between the parties,\" he added \"[b]ut we cannot wait indefinitely.\"\nOn February 7, 1995, President Clinton \"summoned the two sides to the White House … for a last-ditch negotiating session,\" which, ultimately, was unsuccessful. Speaking in the briefing room at the White House shortly before 11:00 p.m. on February 7, President Clinton provided the following update:\nClearly they are not capable of settling this strike without an umpire. So I have now concluded, since I have no legal authority in this situation, as all of you know and have known for some time, that I should send to the Congress legislation seeking binding arbitration of the baseball dispute. This is not a request for a congressionally imposed solution. It is a request for the only process we have left to us to find a solution through neutral parties.\nAfter acknowledging that Congress has \"other pressing business,\" the President added, \"[a]t least when the bill [I propose] goes to the Congress, the American people can make themselves heard one way or the other on the legislation and Congress can consider it.\"\nThe next day, President Clinton transmitted proposed legislation, \"Major League Baseball Restoration Act,\" to Congress. As discussed above, Representative Williams and Senator Kennedy introduced the bill in the House of Representatives ( H.R. 870 ) and the Senate ( S. 376 ), respectively. The President's rationale for proposing legislation included the following reasons: \"If the dispute is permitted to continue, there is likely to be substantial economic damage to the cities and communities in which major league franchises are located and to the communities that host spring training. The ongoing dispute also threatens further serious harm to an important national institution.\"", "The National Football League's previous collective bargaining agreement took effect on March 8, 2006, and was to expire on the \"last day of the 2012 League Year.\" As described in the following excerpt from the CBA, however, either party to the agreement could opt to terminate it prior to the established expiration date:\nSection 3. Termination Prior to Expiration Date:\n(a) Either the NFLPA [NFL Players Association] or the Management Council may terminate both of the final two Capped Years (2010 and 2011) by giving written notice to the other on or before November 8, 2008. In that event, the 2010 League Year would be the Final League Year, and the Agreement would continue in full force and effect until the last day of that League Year, except for the provisions related to the Draft, which would expire as prescribed in Article XVI, Section 1 [of the CBA].\nIn May 2008, NFL team owners voted unanimously to opt out of the CBA and negotiate a new agreement for the 2011 season and subsequent seasons. Following unsuccessful efforts by the league and the union to negotiate a new agreement, both parties accepted, in February 2011, an invitation from the director of the Federal Mediation and Conciliation Service (FMCS) to mediate their dispute. Seventeen days of mediation took place, between February 17 and March 11, under the auspices of the FMCS. On March 11, the FMCS issued a press release stating that the agency's director and deputy director had determined that \"no useful purpose would be served by requesting the parties to continue the mediation process at this time.\" On March 11, the NFLPA notified the NFL that it had \"decertified,\" and the following day the NFL announced that it was imposing a lockout. Following additional negotiations, the NFL and NFLPA announced, at a joint press conference on July 25, 2011, that the two parties had reached an agreement. During that same week, team facilities were opened to players and training camp began. The first preseason games are scheduled for August 11-15.", "Table 8 shows the legislative measure that was introduced in response to the lockout.\nUpon introducing this bill, Representative John Conyers, Jr., stated that its purpose was to ensure that \"a congressionally granted antitrust immunity is never again misused to build up an improper 'war chest' to gain leverage in a football lockout....\" According to Representative Conyers, when the NFL had negotiated its television contracts in 2008, the league had \"insisted on provisions that would shield it from the economic impact of a lockout.\"", "As measured by the number of legislative measures introduced and hearings held, and as shown in Table 9 , Congress was most active during the 1994 strike. The 232-day baseball strike lasted much longer than the two NFL strikes and included the loss of the 1994 World Series. The 1982 and 1987 strikes were relatively short by comparison, lasting 57 days and 24 days, respectively. Although the 1987 strike involved the use of replacement players for several games during the regular season, the season was capped by the Super Bowl. The 1982 Super Bowl also was held.\nTable 10 organizes the legislative measures according to the method proposed for resolving the dispute. S. 3003 (97 th Congress) is included in two columns (impose binding arbitration and require league and players to resume activities) because it included two noteworthy provisions.\nThree methods were proposed for ending the 1982 or 1987 NFL strikes—impose binding arbitration, encourage the parties to reconcile their differences, or require the league and players to resume normal activities (that is, resume playing games). Neither of the latter two options was proposed for baseball. Major league baseball enjoys a unique status as the only professional sport in the United States that has a broad antitrust exemption, and 15 legislative measures targeted the exemption, attempting to eliminate or modify it. Four measures were introduced that would have imposed binding arbitration on baseball; two measures would have established a commission to oversee baseball; and one measure would have amended the Sports Broadcasting Act regarding professional baseball.\nThe following table shows the disposition of the legislative measures introduced or offered in response to the 1982 NFL strike, the 1987 NFL strike, the 1994 MLB strike, and the 2011 NFL lockout.\nAmong the 26 legislative measures introduced, the only one that was approved was S.Res. 294 (100 th Congress), which encouraged NFL players and management to return to the bargaining table. Four bills, all related to the 1994 baseball strike, were placed on a Senate or House calendar. The one amendment ( S.Amdt. 2601 to H.R. 4649 (103 rd Congress)) that was offered was withdrawn. Most of the measures (20) were not reported by committee.\nAppendix A. Summary of NFL Labor History\nAppendix B. Sports and Labor-Management Relations\nThe National Labor Relations Act (NLRA) governs labor-management relations in the private sector and applies generally to professional sports employers. Under the NLRA, employers and unions are required to bargain in good faith with respect to wages, hours, and other terms and conditions of employment. Employers and unions are required to bargain over these mandatory subjects of bargaining to the point of impasse. The NLRA does not obligate either party, however, to agree to a proposal or to make a concession. In fact, collective bargaining presupposes the availability of certain economic weapons as part of the negotiating process. For example, employees are permitted to strike if collective bargaining fails to achieve higher wages or improved working conditions. Similarly, during certain work stoppages, an employer may use replacement workers to continue the operation of its business.\nAlthough the NLRA contemplates possible strikes by employees, it does provide for mediation and conciliation services to settle certain disputes. The NLRA authorizes the Federal Mediation and Conciliation Service (FMCS) to provide mediation and conciliation services upon its own motion or upon the request of one or more of the parties to a dispute whenever \"in its judgment such dispute threatens to cause a substantial interruption of commerce.\" The FMCS is directed, however, to avoid mediating disputes that would have only a minor effect on interstate commerce, if state or other conciliation services are available to the parties. Where the FMCS is involved in a dispute, it is limited to providing only mediation and conciliation services, and may not issue a binding arbitration decision.\nAs noted earlier in this report, numerous measures were introduced in Congress in 1982 and 1994 to prescribe binding arbitration to resolve the NFL and MLB strikes. In general, these measures would have established a board or panel to take testimony, conduct hearings, and review relevant books and records. The board or panel would then consider various factors in conjunction with the information it received before rendering a final decision or agreement that would bind the parties and replace the expired collective bargaining agreement. Some of the factors that would have been considered include the history of collective bargaining agreements between the parties, the changes in circumstances of the parties, and an owner's ability to pay. Unlike recent legislation, such as the Employee Free Choice Act, that would have amended the NLRA to prescribe binding arbitration if certain conditions are not met in any private labor negotiation, many of the NFL and MLB measures would have established a panel or board to resolve a specific strike. It appears that the panel or board would have ceased to operate once a decision was reached.\nArbitration is often favored by disputing parties because it allows generally for the selection of arbitrators who have expertise in the industry in which the dispute arises. Unlike judges who may or may not be familiar with certain industry concepts, arbitrators may be people who have worked as officials or regulators in the relevant community. Indeed, at least one of the MLB measures would have established an arbitration board consisting of one representative of the owners of major league baseball selected by the owners, one representative of the major league baseball player's association selected by the association, and a third individual selected in accordance with the procedures of the American Arbitration Association or procedures otherwise agreed to by the parties.\nSupporters of arbitration have also maintained that it provides for faster dispute resolution because it is not subject generally to the rules and procedures that exist with litigation. Increasingly, however, the use of lawyers is becoming more common in arbitration. Consequently, whether arbitration is really a cost-effective alternative to litigation has been questioned. It has also been noted that arbitration fees may be costly.\nAppendix C. Antitrust Exemptions Applicable to Professional Sports\nThere is one statutory exemption from the antitrust laws applicable generally to professional sports, the Sports Broadcasting Act, and two non-statutory exemptions: the so-called \"baseball antitrust exemption\" describes the fact that major league baseball, alone among professional sports, is not covered by the antitrust laws; the judicially created labor-antitrust exemption is utilized by all professional sports leagues inasmuch as it is applicable to the collective bargaining agreements between players and their teams. Each will be briefly summarized in the following paragraphs, after which an element in many, if not most, professional team-sports contracts—the \"reserve\" clause —will be noted and briefly discussed. Finally, there will be a short section on the 1998 congressional attempt to limit the \"baseball antitrust exemption.\" Further, or more specific, information may be obtained directly from the author(s).\nSports Broadcasting Act (SBA)\nThe SBA's five sections include the following:\nThe first section of the act (15 U.S.C. §1291) authorizes professional sports teams (including football teams) to pool, by \"joint agreement,\" their broadcasting (\"sponsored telecasting\") rights in their games in order that their leagues may sell or transfer those rights; and specifically makes the federal antitrust laws inapplicable to such joint agreements and sales or transfers. (In 1988, the U.S. Court of Appeals for the Second Circuit ruled that the provision does not limit the antitrust exemption to a single, pooled-rights contract with a single television network. )\n15 U.S.C. Section 1292 clarifies that the antitrust exemption granted in Section 1291 does not apply to contracts for the sale of telecasting rights that seek to limit the buyer's right to telecast games into any territory, except that a league may prohibit the telecasting of games into the home territory of any team when that team is playing a home game.\nThe other three sections of the SBA (1) carve out Friday evenings (after 6 o'clock) and all day Saturdays between the second Friday in September and the second Saturday in December for high school and college games by specifically noting that the antitrust exemption provided in Section 1291 does not apply to contracts that permit the telecasts of professional games during those times if the high school or college games were announced prior to August 1 of the applicable year as \"regularly scheduled for such day and place\" (§1293); (2) clarify that with the exception of the exemption granted in Section 1291, the applicability of the antitrust laws to \"organized professional team sports\" remains unchanged (§1294); and (3) define \"persons\" as meaning individuals, partnerships, corporations, or \"unincorporated association[s] or any combination\" of them (§1295).\n\"Baseball Antitrust Exemption\"\nThe so-called \"baseball antitrust exemption\"—a convenient and much-used shorthand phrase—is, technically, not accurate because it implies positive action by Congress to grant an exemption. In fact, the \"exemption\" is the result of an historical accident: the first case to come before the Supreme Court alleging a violation of the antitrust laws occurred prior to the Supreme Court's expansive interpretation of the Commerce Clause. In that case, the Court held that the business of putting on \"exhibitions of baseball\" could not be considered commerce for purposes of federal antitrust jurisdiction; and although the Court has had several opportunities to reverse its position that the antitrust laws are not applicable to professional baseball, it has never done so, preferring that the change be made specifically by Congress.\nWhile the fact of an antitrust exemption for professional baseball has been recognized since 1922, the extent and scope of that exemption, however, has been the subject of some lower court discussion. At least one court has interpreted the Supreme Court's holdings and language as limiting the exemption to baseball's \"reserve system,\" noted, infra, pursuant to which player movement from team to team may be restrained.\nLabor-Antitrust Exemption\nThe judicially created labor-antitrust exemption holds that Congress's desire to foster collective bargaining is best furthered by permitting employees who wish to jointly negotiate the terms of their employment contracts to do so without fear of violating the antitrust laws. The exemption is not completely open-ended, however, specifying that the practices negotiated must (1) inherently constitute mandatory subjects of collective bargaining (i.e., be bona fide terms or conditions of employment); (2) be no more restrictive than necessary to realize the goal(s) it/they purport(s) to achieve; and (3) be embodied in a valid, genuinely negotiated (i.e., arm's-length) collective bargaining agreement. In addition, some courts have indicated that another factor to be evaluated is whether the restraint embodied in the agreement affects only or primarily the parties to the agreement (as opposed to competitors of either). If the labor-antitrust doctrine is applicable, it covers the management as well as labor parties to a collective bargaining agreement. As the Supreme Court explained in Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100,\nThe nonstatutory exemption has its source in the strong labor policy favoring the association of employees to eliminate competition over wages and working conditions. Union success in organizing workers and standardizing wages ultimately will affect price competition among employers, but the goals of federal labor law could never be achieved if this effect on business competition were held a violation of the antitrust laws. The Court therefore has acknowledged that labor policy requires tolerance for the lessening of business competition based on differences in wages and working conditions.\nThe \"Reserve\" Clause in Professional Sports; Congress's Attempt to Address the Issue in the Context of the \"Baseball Antitrust Exemption\"\nUnder most circumstances, the value of an offered service (e.g., the services of a professional athlete) would be determined by the market. Prospective buyers of that service would bid on it and bargain with the seller, who, if he has an especially unique or valuable commodity to sell, would profit from his ability to exploit the competition among potential buyers. Once a professional athlete is under contract to a sports team, however, the \"reserve\" clause in professional sports prohibits that interplay among market participants by, in essence, binding the athlete to the team that has him under contract—at least in the year following the contract's expiration. The argument that \"the restriction of competition for players' services is not a type of restraint proscribed by the Sherman Act\" has been made and rejected.\nBut that same court would not dismiss the utility of the NFL's \"Rozelle\" rule, noting that the \"'ostensible purposes' of the rule are to maintain competitive balance among … teams and protect the clubs' investment in scouting, selecting and developing players.\" Even the district court hearing the relatively recent challenge to baseball's \"reserve\" clause observed:\nClearly the preponderance of credible proof does not favor elimination of the reserve clause. With the sole exception of plaintiff [Curt Flood] himself, it shows that even plaintiff's witnesses do not contend that it is wholly undesirable; in fact they regard substantial portions meritorious.\nThus, the various \"reserve\" clauses have not been struck down completely; they have, however, been modified to conform to judicial criticism of their enforcement and/or lack of bona fide bargaining—most \"reserve\" clauses are simply imported from the leagues' constitutions and bylaws and inserted in their standard player contracts.\nIn the years after the Supreme Court's Flood decision refusing to alter or remove baseball's antitrust exemption, Congress had made several attempts to act on the Court's invitation in that case to correct the historical accident of baseball's antitrust exemption, but none was successful until the passage of the Curt Flood Act by the 105 th Congress. The Curt Flood Act is applicable to major league baseball players, clarifying that they are covered by the antitrust laws in transactions concerning their employment to the same extent as are other professional athletes. Among the issues specifically not covered or affected (in addition to employment relations with minor league players) is \"the agreement [known as the 'Professional Baseball Agreement'] between organized professional major league baseball teams and the National Association of Professional Baseball Leagues.\"\nWe are not aware of any litigation brought pursuant to the Curt Flood Act: although the act does get major league professional baseball players past the courthouse door by denying their employers the \"we're-not-covered-by-the-antitrust-laws-so-this-case-must-be-dismissed\" argument, as the foregoing material has indicated. Once in court many professional athletes have been frustrated in their attempts to challenge practices they consider onerous if those practices are embodied in valid collective bargaining agreements. The Curt Flood Act neither prevents the courts from recognizing the nonstatutory labor-antitrust exemption, nor provides guidance on the interpretation of that exemption." ], "depth": [ 0, 1, 2, 1, 2, 3, 3, 1, 2, 1, 2, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 3, 2, 1, 2, 1 ], "alignment": [ "h0_title h1_title", "", "", "", "", "", "", "", "", "h1_title", "h1_title", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_full", "h1_full", "h1_full", "", "", "h0_full h1_full" ] }	{ "question": [ "How did the 1994 baseball strike compare to other sporting strikes?", "What legislative attention did the other strikes draw?", "What legislative attention was given to the 1994 baseball strike?", "To what extent were these legislative measures approved?", "To what extent do Members agree that congressional intervention is warranted?", "How might repealing the antitrust exemption affect baseball?", "To what extent do Members believe that this is a worthy use of Congress's time?", "What other arguments have Members raised?" ], "summary": [ "Compared to the 1994 baseball strike, the 1982 and 1987 football strikes and the 2011 lockout did not garner much attention from Congress in terms of legislative measures and hearings.", "Three legislative measures were introduced in response to the 1982 strike; one each was introduced in response to the 1987 strike and the 2011 lockout.", "Members introduced or offered 22 legislative measures and held five hearings that were related to the baseball strike.", "With one exception (S.Res. 294, 100th Congress), none of these measures was approved by either house.", "Disagreeing that congressional intervention was warranted, other Members offered several reasons why Congress ought not to intervene.", "For example, one Member suggested that repealing baseball's antitrust exemption would alter the balance of power in professional baseball.", "Other Members believed that more pressing matters deserved Congress's attention.", "At least one Member suggested that a particular bill, if enacted, would have the effect of favoring the players over the owners." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 0, 0 ], "summary_paragraph_index": [ 1, 1, 1, 1, 3, 3, 3, 3 ] }
GAO_GAO-16-719T	{ "title": [ "Background", "Selected States Faced Challenges in Detecting Benefit Fraud, and FNS Lacked Reliable Data about State Efforts", "To Detect Fraud, Selected States Employed Tools Such As Data Matching, Referrals, Analysis of Transaction Data, and Website Monitoring", "In 2014, Most Selected States Reported that Their Investigations’ Effectiveness was Hindered by Limited Staffing and Caseload Increases, but Some Leveraged Additional Resources", "In 2014, Selected States Reported Limited Effectiveness in Using Automated Monitoring Tools for Detecting Online Fraud and Replacement Card Data as a Detection Tool", "Targeted Analysis of Excessive Replacement Cards Found Potential Recipient Trafficking", "In 2014, We Reported that FNS Had Increased Its Oversight of State Anti- Fraud Activities but Lacked Reliable Data on These Efforts", "FNS Is Working to Address GAO Recommendations to Enhance Detection Tools and Reporting", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "The goal of SNAP, formerly known as the federal Food Stamp Program, is to help low-income individuals and households obtain a more nutritious diet and help alleviate their hunger. It does so by supplementing their income with benefits to purchase allowable food items. The federal government pays the full cost of the benefits and shares the responsibility and costs of administering the program with the states. Specifically, FNS is responsible for promulgating program regulations and ensuring that states comply with these regulations by issuing guidance and monitoring their state activity. FNS headquarters officials are assisted in this oversight work by federal officials in seven regional offices. FNS also determines which retailers are eligible to accept SNAP benefits in exchange for food and investigates and resolves cases of retailer fraud. State officials, on the other hand, are responsible for determining the eligibility of individuals and households, calculating the amount of their monthly benefits and issuing such benefits on an electronic benefit transfer (EBT) card in accordance with program rules. States are also responsible for investigating possible violations by benefit recipients and pursuing and acting on those violations that are deemed intentional.\nTrafficking is an intentional program violation that includes acts of fraud, such as making false or misleading statements in order to obtain benefits and trafficking (i.e., using benefits in unallowable ways, such as by exchanging benefits for cash or non-food goods and services or attempting to do so). For example, recipients can traffic benefits by selling EBT cards to another person, exchanging the EBT card and the corresponding Personal Identification Number (PIN) for cash or non-food goods or services (e.g., rent or transportation). These sales can occur in person or by posting offers on social media and e-commerce sites. Recipients can then contact state agencies to report the sold EBT cards as lost or stolen and receive new cards which can be used for future trafficking transactions, for example, when the benefits are replenished the next month.\nAccording to a September 2012 U.S. Department of Agriculture Office of Inspector General (USDA OIG) report, the magnitude of program abuse due to recipient fraud is unknown because states do not have uniform ways of compiling the data that would provide such information. As a result, the USDA OIG recommended that FNS determine the feasibility of creating a uniform methodology for states to calculate their recipient fraud rate. FNS reported that it took action on this recommendation but ultimately determined that it would be infeasible to implement as it would require legislative authority mandating significant state investment of time and resources in investigating, prosecuting and reporting fraud beyond current requirements.", "", "In the selected states we reviewed in 2014, officials told us they were using well-known tools for detecting potential recipient eligibility fraud, such as data matching and referrals obtained through fraud reporting hotlines and websites. Specifically, at that time, all 11 states that we reviewed had fraud hotlines or websites, and all matched information about SNAP applicants and recipients against various data sources to detect those potentially improperly receiving benefits, as FNS recommended or required. (See table 1.)\nBeyond the required and recommended data matches, at the time of our report, Florida, Texas, Michigan, and one county in North Carolina used specialized searches that checked numerous public and private data sources, including school enrollment, vehicle registration, vital statistics, and credit reports to detect potential fraud prior to providing benefits to potential recipients. Florida officials we interviewed shifted the majority of their anti-fraud resources to more cost-effective and preventive efforts in identifying potential fraud by developing tools geared towards detecting eligibility fraud and improper benefit receipt, such as identification verification software and profiles that case workers could use to identify error-prone applications. These state officials stated that this focus on preventive efforts was key to helping them manage recent constraints on their investigative budgets.\nTo track potential trafficking, officials in the 11 states reported that they analyzed patterns of EBT transactions and monitored replacement card data and online postings pursuant to FNS’s requirements and guidance. (See table 2.)", "At the time of our 2014 report, most of the selected states reported difficulties in conducting fraud investigations due to either reduced or stagnant staff levels while SNAP recipient numbers greatly increased from fiscal year 2009 through 2013. (See figure 1.) Furthermore, state investigators in all 11 states we reviewed were also responsible for pursuing fraud in other public assistance programs, such as Medicaid, Temporary Assistance for Needy Families and child care and housing assistance programs.\nHowever, at the time of our report, some states implemented a strategy to leverage their available investigative resources. Specifically, four of the states we reviewed—Florida, Massachusetts, Michigan and Nebraska— had implemented and two states—Maine and North Carolina—were in the process of implementing state law enforcement bureau (SLEB) agreements. According to FNS officials, the agency was supportive of states’ efforts to establish these agreements between state SNAP agencies and federal, state, and local law enforcement agencies, which would enable state SNAP investigators to cooperate in various ways with local, state, and federal law enforcement agents, including those within the USDA OIG. For example, under these agreements, law enforcement agencies can notify the SNAP fraud unit when they arrest someone who possesses multiple EBT cards, and SNAP agencies can provide “dummy” EBT cards for state and local officers to use in undercover trafficking investigations. Officials in one county in Florida told us at the time of our report that this type of cooperation allowed local police officers to make 100 arrests in its first undercover operation of recipients who were allegedly trafficking SNAP benefits.\nAt the time of our report, some state officials suggested changing the financial incentives structure to help support the costs of investigating potential SNAP fraud because some investigative agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits. According to GAO’s Fraud Prevention Framework, investigations, although costly and resource-intensive, can help deter future fraud and ultimately save money. Officials in one state told us that it would help its anti-fraud efforts if FNS would provide additional financial incentives for states to prevent potential fraud at the time of application beyond what is currently provided for recovered funds. Specifically, when fraud by a recipient is discovered, the state may generally retain 35 percent of the recovered overpayment, but when a state detects potential fraud by an applicant and denies the application, there are no payments to recover.", "In our 2014 report, we found that, upon testing, FNS’s recommended approaches to detecting online fraud were of limited utility and selected states had limited success with using FNS’s required approach to replacement card monitoring. Specifically, we found that FNS provided states with guidance on installing free web-based software tools for monitoring certain e-commerce and social media websites for online sales of SNAP benefits, but some officials from the selected states reported problems with these detection tools. According to FNS, these tools could automate the searches that states would normally have to perform manually on these websites, which states reported as being cumbersome and difficult given limited resources. Of the 11 states we reviewed, officials from only one reported that the tool worked well for identifying SNAP recipients attempting to sell their SNAP benefits online. At the time of our review, FNS officials acknowledged that there were limitations to the monitoring tools, and stated that they provided these tools at the request of states to help with monitoring efforts.\nIn 2014, we tested these automated detection tools for certain periods of time on selected geographical locations covering our selected states and found them to be of limited effectiveness for states’ fraud detection efforts. For example, our testing of the recommended automated tool for monitoring e-commerce websites found that the tool did not detect most of the postings found through our manual website searches. Specifically, out of 1,180 postings we reviewed manually, we detected 28 postings indicative of potential SNAP trafficking. Twenty-one of these 28 postings were not detected by FNS’s recommended monitoring tool. We also found the automated tool for monitoring social media websites to be impractical for states’ fraud detection efforts, given that, for example, it could not be tailored to a specific location. We concluded that this could have potentially limited a state’s ability to effectively determine whether the postings detected were relevant to the state’s jurisdiction.\nIn 2014, we also reported that FNS required that states examine replacement card data as a potential indicator of trafficking, but state officials we interviewed reported difficulties using the data as a fraud detection tool. In 2014, FNS finalized a rule requiring states to monitor replacement card data and send notices to those SNAP households requesting excessive replacement cards, defined as at least four cards in a 12-month period. Officials we interviewed in the 11 states reviewed reported tracking recipients who make excessive requests for replacement EBT cards, as required by FNS, but said they had not had much success in detecting fraud through that method. Specifically, officials in 4 states reported that they had not initiated any trafficking investigations as a result of the monitoring, officials in 5 states reported low success rates for such investigations, and officials in 1 state reported that they had just started tracking the data. Officials in only 1 state reported some success using the data to detect potential trafficking. Furthermore, officials from 7 of the 11 states we reviewed reported that the current detection approach specified by FNS often led them to people who had made legitimate requests for replacement cards for reasons such as unstable living situations or a misunderstanding of how to use the SNAP EBT card. At the time of our report, FNS was aware of states’ concerns about the effectiveness of this effort, but continued to stress that monitoring these data was worthwhile.", "We found that while all of the selected states reported analyzing SNAP replacement card data to detect fraud as required by FNS, a more targeted approach to analyzing high-risk replacement card data potentially offered states a way to better use the data as a fraud detection tool. Specifically, we analyzed fiscal year 2012 replacement card data in three selected states—Michigan, Massachusetts, and Nebraska—using an approach aimed at better identifying SNAP households requesting replacement cards that are at higher risk of trafficking benefits. Our approach took into account FNS’s regulation that defined excessive replacement cards as at least four requested in a 12-month period. However, we also considered the monthly benefit period of replacement card requests by focusing on SNAP households receiving replacement cards in four or more unique monthly benefit periods in a year. Based on our analysis, we determined that because SNAP benefits are allotted on a monthly basis, a recipient who is selling the benefits on their EBT card and then requesting a replacement card would generally have only one opportunity per month to do so. Thus, if a SNAP recipient was requesting a replacement card because they had just sold their EBT card and its associated SNAP benefits, it was unlikely that there would be more benefits to sell until the next benefit period. As a result, we determined that additional replacement card requests in the same benefit period may not indicate increased risk of trafficking.\nUsing this approach in the three selected states, our 2014 analysis reduced the number of households that should be considered for further review compared to the FNS requirement that states look at replacement cards replaced four or more times in 12 months. We then reviewed fiscal year 2012 transaction data for this smaller number of households to identify suspicious activity that could indicate trafficking. We identified 7,537 SNAP recipient households in these three selected states that both received replacement cards in four or more monthly benefit periods in fiscal year 2012, and made at least one transaction considered to be a potential sign of trafficking around the time of the replacement card issuance, as shown in the table below. We found that these 7,537 households made over $26 million in total purchases with SNAP benefits during fiscal year 2012. (see table 3.)\nWe also found that by comparing the number of benefit periods with replacement cards and the total number of transactions flagged for potential trafficking, states may be able to better identify those households that may be at higher risk of trafficking. For example, as shown in the figure below, while there were 4,935 SNAP households in Michigan that received an excessive number of replacement cards, we identified just 39 households that received excessive replacement cards and made transactions resulting in 10 or more trafficking flags. We concluded in 2014 that while state SNAP officials may not want to limit their investigations to such a small number of households, this type of analysis may help provide a starting point for identifying higher priority households for further review. Furthermore, we reported that our more targeted approach may also be particularly helpful given that states had limited resources for conducting investigations.", "In 2014, we reported that FNS had increased its oversight of state anti- fraud activities in recent years by issuing new regulations and guidance, conducting state audits, and commissioning studies on recipient fraud since fiscal year 2011. For example, in fiscal year 2013, for the first time, FNS examined states’ compliance with federal requirements governing SNAP anti-fraud activities through Recipient Integrity Reviews. These assessments included interviews with state officials, observations of state hearing proceedings, and case file reviews in all 50 states and the District of Columbia. Following these reviews, FNS regional officials issued state reports that included findings and, where appropriate, required corrective actions.\nDespite these efforts, at the time of our report, FNS did not have consistent and reliable data on states’ anti-fraud activities because its reporting guidance lacked specificity. For example, through our review of the 2013 Recipient Integrity Review reports, we also found that FNS had a nationwide problem with receiving inaccurate data on state anti-fraud activities through the Program and Budget Summary Statement (Form FNS-366B). Some federal and state officials we interviewed recognized that there was not a consistent understanding of what should be reported on the FNS-366B form because the guidance from FNS was unclear. For example, on the form in place during the time of our report, FNS instructed states to report investigations for any case in which there was suspicion of an intentional program violation before and after eligibility determination. According to state and federal officials we interviewed, this information did not clearly establish a definition for what action constitutes an investigation and should then be reported on this form.\nAfter reviewing states’ reports, we found examples of inconsistencies in what states reported as investigations on the FNS-366B forms. Specifically, in fiscal year 2009, one state had about 40,000 recipient households, but reported about 50,000 investigations. During the same year, another state that provided benefits to a significantly larger population (about 1 million recipient households) reported about 43,000 investigations. Officials from the state that served the smaller population, but had the larger number of investigations, explained that they included investigative activities such as manually reviewing paper files provided by the state’s Department of Labor for each SNAP recipient with reported wages in the state. Officials from the state that served the larger population said that they counted the number of times a potential fraud case was actively reviewed by investigators, including interviews with witnesses and researching of related client information. Given these differences, state officials said that FNS and states were not able to compare program integrity performance because there was no standardization of data collection across states.", "As a result of our 2014 findings, we made several recommendations, and FNS officials agreed with all of these recommendations and are taking actions to address them. Specifically, we recommended that the Secretary of Agriculture direct the Administrator of FNS to: explore ways that federal financial incentives can better support cost- effective state anti-fraud activities; establish additional guidance to help states analyze SNAP transaction data to better identify SNAP recipient households receiving replacement cards that are potentially engaging in trafficking, and assess whether the use of replacement card benefit periods may better focus this analysis on high-risk households potentially engaged in trafficking; reassess the effectiveness of the current guidance and tools recommended to states for monitoring e-commerce and social media websites, and use this information to enhance the effectiveness of the current guidance and tools; and take steps, such as guidance and training, to enhance the consistency of what states report on their anti-fraud activities.\nWhile FNS agreed with the recommendations and is taking steps to address them, it has yet to fully develop the detection tools and improved reporting methods that would address these recommendations.\nTo explore ways to provide better federal financial incentives, FNS reported it published a Request for Information in the Federal Register in 2014 to solicit state and other stakeholder input on how it could more effectively incentivize states to improve overall performance, including in the area of program integrity, with new bonus awards. However, more recently, FNS officials reported that, based on the feedback from this process, they have decided not to pursue bonus awards for anti-fraud and program integrity activities at this time. At the time of our 2014 report, FNS officials also stated they could not make changes in the state retention rate for overpayments without a change to federal law.\nFNS officials reported that they have provided states with technical assistance for how to effectively utilize replacement card data as a potential indicator of trafficking. Specifically, FNS has worked with seven SNAP state agencies: New York (Onondaga County), Pennsylvania, South Carolina, Wisconsin (Milwaukee County), California (Los Angeles County), Kansas, and Texas to help these states more effectively identify SNAP recipient trafficking, using models that incorporate predictive analytics. FNS officials stated that the models use a variety of eligibility and transaction data, including replacement card data, and have demonstrated a significant improvement in effectiveness in these states. According to FNS officials, over 90 percent of South Carolina’s investigations of potential trafficking resulted in disqualifications from SNAP, which FNS officials stated is an increase of 29 percent from the state’s investigation success rate prior to using FNS’s model. Based on these state results, FNS officials stated that FNS was targeting four additional states in fiscal year 2016 for technical assistance in implementing the model: Arizona, the District of Columbia, Utah, and Washington. Furthermore, as of May 2016, FNS officials had reported that FNS is conducting a training program for state technical staff to teach them how to build predictive models that incorporate the use of card replacement data.\nFNS officials also reported that they continue to provide technical assistance to states on the effective use of social media and e-commerce monitoring and have further studied the use of these tools. Most recently, FNS officials reported that, in 2016, the agency conducted an analysis to evaluate states’ current use of social media in their detection of SNAP trafficking. Based on the information gained through this analysis, FNS officials reported that they plan to determine how best to present further guidance to state agencies on using social media to combat trafficking.\nAs of May 2016, FNS had also redesigned the form FNS-366B used to collect consistent recipient integrity performance information and submitted a draft to the Office of Management and Budget (OMB). FNS officials anticipate OMB approval of the revised form prior to the end of fiscal year 2016, and the form is expected to be implemented in fiscal year 2017. FNS reported it published an interim final rule on January 26, 2016, (effective March 28, 2016), changing the reporting frequency of the form from an annual submission based on the state fiscal year to a quarterly submission based on the federal fiscal year. To date, FNS officials reported that they provided 4 separate trainings to approximately 400 state agency and FNS regional office personnel, covering the new and modified elements of the final draft form and the corresponding instructions. - - - - - In conclusion, the challenges that states have faced in financing and managing recipient anti-fraud efforts heighten the need for more efficient and effective tools for safeguarding SNAP funds. In order to provide useful guidance to best guide states in these efforts, FNS officials need reliable information on what can currently be done with available federal and state resources. As of May 2016, FNS officials have reported progress in studying current anti-fraud approaches and developing better data on them but are still in the process of developing the final tools and guidance for enhancing the integrity of the SNAP program.\nChairmen Meadows and Lummis, Ranking Members Connolly and Lawrence, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions you may have at this time.", "If you or your staff have any questions about this statement, please contact Kay Brown, Director, Education, Workforce, and Income Security Issues, at 202-512-7215. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include James Bennett, Kate Blumenreich, Alexander Galuten, Danielle Giese, Scott Hiromoto, Kathryn Larin, Flavio Martinez, Jessica Orr, Deborah Signer, Almeta Spencer and Shana Wallace.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 2, 2, 2, 2, 2, 1, 1 ], "alignment": [ "", "h0_title h2_title h1_title", "h0_full h2_full", "h0_full", "h1_full", "h2_full h1_full", "", "h2_full", "" ] }	{ "question": [ "What did GAO find regarding how states detect SNAP fraud?", "What tools did the studied states make use of?", "What challenges did the selected states face?", "What other limitations did GAO find?", "How may some FNS requirements be unnecessary?", "How could potential fraud be detected more accurately?", "How would this new analysis process work in practice?", "How could this targeted analysis help states in their investigations?", "What does this testimony cover?", "How did GAO source data for its report?", "To what extent are these results generalizable to all states?", "How does this report consider the actions FNS has taken on the recommendations?" ], "summary": [ "In 2014, GAO found that selected states employed a range of tools to detect potential Supplemental Nutrition Assistance Program (SNAP) recipient fraud, but they faced challenges, including inadequate staffing levels, that limited the effectiveness of their actions, and the Food and Nutrition Service (FNS) lacked data about the states' efforts.", "The 11 states GAO studied reported using detection tools required or recommended by FNS, among others, to combat SNAP recipient fraud.", "However, 8 of these states reported difficulties in conducting fraud investigations due to reduced or stagnant staff levels and funding despite program growth, and some state officials suggested changing the financial incentives structure to help support the costs of investigating potential fraud.", "GAO also found limitations to the effectiveness of website monitoring tools and the analysis of card replacement data states used, under the direction of FNS, for fraud detection. Specifically, GAO found FNS's recommended website monitoring tools to be less effective than manual searches and impractical for detecting internet posts indicative of SNAP trafficking—the misuse of program benefits to obtain non-food items.", "Further, although FNS required states to monitor SNAP households that request at least four replaced electronic benefit transfer (EBT) cards in a year, GAO found that multiple EBT card requests in the same benefit period may not indicate increased risk of trafficking.", "GAO found that, by adjusting the analysis to focus on SNAP households that both requested cards in at least four different monthly benefit periods and engaged in suspicious transactions, states could possibly detect potential fraud more accurately.", "For example, in 2014, GAO found that 4,935 SNAP households in Michigan received at least 4 replaced EBT cards in a year. However, out of these householders, GAO identified 39 households that both received multiple replacement cards in at least four different monthly benefit periods and engaged in suspicious transactions indicative of SNAP trafficking, resulting in 10 or more trafficking flags.", "GAO reported that this type of targeted analysis may help provide states with a starting point for identifying higher priority households for further review, which can be particularly helpful given that states had reported having limited resources for conducting investigations.", "This testimony summarizes: (1) findings from GAO's 2014 report and (2) the steps FNS has taken since then to address GAO's recommendations.", "For its 2014 report, GAO reviewed relevant federal laws, regulations, guidance, and documents; interviewed officials in 11 states; interviewed federal officials; tested fraud detection tools using fiscal year 2012 program data, the most recent available at the time of GAO's report; and monitored websites for potential trafficking online.", "Although GAO's results are not generalizable to all states, the selected states served about a third of SNAP recipient households.", "For this statement, GAO reviewed FNS's actions to date on its recommendations." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, 2, 2, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 3, 3, 3, 3, 3, 1, 1, 1, 1 ] }
CRS_R42774	{ "title": [ "", "Overview", "Congressional Engagement on U.S. Policy Toward the Sudans", "Background", "The Separation", "Outstanding Issues and Disputes", "Financial Arrangements", "Debts and Debt Relief", "Disputes along the North-South Border", "Abyei", "Southern Kordofan and Blue Nile", "Normalizing Relations Between the Sudans", "South Sudan: Persistent and Emergent Challenges", "Governance and Development Challenges", "Security Issues", "Humanitarian Access in South Sudan", "Sudan: Economic and Center-Periphery Tensions", "Political and Economic Pressures", "Conflict in Darfur", "U.S. Policy Toward the Sudans", "Obama Administration Policy and Engagement", "U.S. Sanctions and Economic Engagement", "U.S. Assistance", "Outlook for Congress and U.S. Policy" ], "paragraphs": [ "", "The United States Congress has a long history of engagement on U.S. policy toward Sudan—since the end of apartheid in South Africa, there is no country (now countries) in Africa on which Congress has focused greater attention. This sustained, bipartisan focus has been driven in part by diverse advocacy groups and public awareness campaigns on issues in Sudan ranging from famine to modern-day slavery, religious persecution, genocide, and other violations of human rights and humanitarian law. Terrorism concerns have overlapped with these policy debates.\nPeace and stability within and between Sudan and South Sudan remain among the highest U.S. foreign policy priorities in Africa, yet these goals remain elusive, even after several years of seemingly positive momentum and multiple peace accords. In 2005, Sudan's Islamist government in Khartoum and the southern insurgency known as the Sudan People's Liberation Movement/Army (SPLM/A) signed a peace agreement to end Africa's longest running civil war. That deal paved the way for a southern referendum on self-determination, after which South Sudan, led by the SPLM in Juba, seceded in July 2011. Violence and insecurity continue to plague the two countries, however, as evidenced by the presence of roughly one-third of the U.N. peacekeepers deployed worldwide, who are stationed in the two Sudans as part of three different operations. In both countries, overlapping conflicts between security forces and armed groups, among ethnic groups, and between nomadic and farming communities have caused extensive displacement and human suffering. International actors continue to press the Sudans to resolve their outstanding disputes so post-war recovery and reconciliation can proceed.\nThe 2005 peace agreement did not resolve several significant issues between the governments in Khartoum and Juba. They have continued deliberations on once-shared resources, such as oil; disputed areas along their shared 1,200 mile border; and other related security issues. Progress in the talks has been halting since separation, with a partial agreement on security and economic cooperation reached on September 27, 2012 (see Appendix A ). The parties have agreed to a demilitarized border zone and a joint border verification and monitoring mission designed to defuse tensions along the border. The two countries' security forces remained heavily deployed along or beyond their respective sides of their shared border after separation and have clashed on several occasions. The implementation of agreements previously reached by the parties has not kept pace with international expectations, leading to some skepticism about this latest accord. The September agreement failed to resolve the status of several contested border areas, including the disputed Abyei region. The deployment of peacekeepers to Abyei in mid-2011 defused a violent stand-off between Sudanese and South Sudanese forces, but the majority of Abyei's residents remain displaced, and a political resolution remains outstanding.\nConflict has escalated in the past year in the Sudanese border states of Southern Kordofan and Blue Nile , between Sudan's military and the SPLM-North, insurgents once formally aligned with South Sudan's ruling party. Fighting in these states is driven by local grievances against Khartoum and has severely affected more than half a million people. Access by relief agencies is extremely limited. Another 205,000 have fled as refugees to South Sudan and Ethiopia. U.N. and independent human rights investigations suggest that the Sudanese military may be responsible for war crimes in the two states. These conflicts and the ongoing hostilities in Sudan's western Darfur region complicate U.S. relations with both countries and have led the Obama Administration to defer efforts to begin normalizing relations with Sudan.\nCritics of current mediation efforts suggest that a piecemeal approach to Sudan's overlapping conflicts has led to a focus on resolving one conflict at the expense of another, thus prolonging the violence. Some in Congress and the Administration have called for a comprehensive agreement that promotes democratic reform and \"lasting peace throughout all of Sudan.\" Khartoum has long resisted efforts to combine discussions with various opponents to the regime, preferring to negotiate separately with the SPLM, the Darfur groups, and others. This approach has yielded some positive outcomes, but it has also resulted in partially implemented agreements that do not fully address regional grievances or resolve disputes that are fundamentally national issues. In Darfur, a 2011 peace agreement supported by the international community has failed to incorporate the region's largest armed groups. Deteriorating security conditions in Darfur have prompted the State Department to question Sudan's commitment to implement the agreement. Independent observers suggest that the conflict \"is far from approaching a sustainable resolution,\" despite a relative reduction in violence from the height of the crisis. U.S. Special Envoy for Sudan and South Sudan Princeton Lyman outlined his view of the challenge in August 2012:\nSudan cannot deal with the ongoing troubles in Darfur, Southern Kordofan, Blue Nile, the east, and elsewhere in the country with a system that does not meet the demands for greater political space, for greater sharing of wealth and opportunity and for greater democracy. Trying to suppress those demands militarily has led to continued conflicts. And the conflicts have in turn led to new accusations of human rights violations. This is a vicious circle that keeps Sudan from a new dawn.\nGroups opposed to the ruling party in Khartoum have yet to unite behind a clearly articulated common vision for the country's future. The major armed groups have, however, pledged cooperation toward their near-term goal of regime change in Khartoum.\nThe Sudans appeared to engage in what some termed an economic \"war of attrition\" with each other for much of 2012, creating mounting hardship and domestic pressure on both sides. South Sudan halted oil production in January 2012 because of unresolved disputes with Sudan over export arrangements and revenues from once-shared reserves, leaving both countries facing massive budget shortfalls and inflation. The two sides reached a preliminary agreement in August 2012 on financial arrangements, including southern oil exports; the September deal may allow production and exports to resume by mid-2013.\nGiven their revenue losses, both governments have pursued austerity budgets in 2012 and prioritized security spending, leaving little for social services or development. As Appendix B indicates, population displacement and food insecurity are significant problems in both countries. Both governments have looked to donors and lenders to make up the near-term fiscal gap created by lost oil revenue, thus pushing the United States and others to make difficult decisions regarding fundamental strategic interests in the region and the relative priority of their objectives.", "Congressional action has often influenced U.S. policy toward Sudan. U.S. relations with Sudan have long been turbulent, with the two countries routinely taking opposing positions on Middle East and Africa issues. U.S. foreign aid to Sudan had risen substantially starting in the late 1970s when Sudan was seen as a Cold War ally, but in the wake of the 1989 coup that brought Omar al Bashir and the National Islamic Front (NIF) to power, diplomatic relations were downgraded and aid was cut off. The Clinton Administration designated Sudan as a state sponsor of terrorism in 1993. By 1999, some Members of Congress who were sympathetic to the cause of Sudan's southern insurgents initiated efforts to tighten sanctions. At the same time they pushed to authorize not only food aid but development assistance, including programs to build local administrative capacity, for areas outside of Khartoum's control—namely areas held by the SPLM. In 2002, Congress also appropriated non-lethal assistance for the National Democratic Alliance, a coalition of armed and unarmed opposition forces (including the SPLM), to \"strengthen its ability to protect civilians from attacks.\" At the same time, Congress expressed support for Bush Administration efforts to seek a negotiated settlement to Sudan's civil war.\nSeveral years later, conflict and human rights abuses in the diverse and historically volatile Darfur region captured international attention and galvanized a campaign that led Congress and President George W. Bush to accuse Khartoum of genocide and further tighten sanctions. Congress added Darfur to the areas outside government control eligible to receive U.S. foreign aid and required the President to develop a contingency plan for delivering relief aid to any areas where the government denied access. In 2006, after the north-south war had ended, Congress introduced additional economic and diplomatic sanctions on Khartoum to press for a resolution of the Darfur conflict. It also authorized assistance to implement the north-south agreement, including military aid to support the SPLA's transformation from a guerilla movement into a professional army. Congress later supported the efforts of U.S. state and local governments to divest any assets in companies that conduct certain business operations in Sudan, and required U.S. government contracts to meet similar standards. Today, Members continue to explore various policy tools to press the Sudanese government to end abuses and to facilitate a peaceful future for both Sudans.\nThroughout this period of strained relations, the United States has remained the largest bilateral donor of humanitarian assistance to the people of both Sudan and South Sudan. The United States also contributes the largest share of funding for the three U.N. peacekeeping operations. Statutory restrictions limit U.S. development assistance to Sudan to humanitarian, health, demining, and democracy aid. By contrast, South Sudan ranks among the largest U.S. aid recipients in sub-Saharan Africa. The United States has invested substantially in efforts to make the world's newest country viable, given its massive humanitarian and development needs. In total, U.S. spending on both Sudans has approached $2 billion annually in recent years—most of it for humanitarian aid and international peacekeeping operations. As fiscal constraints and competing domestic priorities present Congress and the Administration with complex budget decisions, the levels and types foreign aid to both Sudans may attract increasing attention and debate.", "For more than fifty years, north and south Sudan were unified as a country, but divided internally. Together they constituted the largest country in Africa, with territory roughly equal in size to the United States east of the Mississippi River. Their separation in 2011 followed decades of civil war described broadly as a conflict between the \"Arab\" Muslim north and \"African\" Christian and animist south. Ongoing conflict and unrest within and between the now-separate countries is indicative of the complex political and cultural divisions that have plagued Sudan for decades.\nAfter Sudan gained independence from Anglo-Egyptian rule in 1956, successive governments in Khartoum perpetuated development disparities between the north and south that were, in part, a legacy of colonial administration. Northern-led regimes espousing Islamist ideals have dominated much of Sudan's modern political history, often pressing policies aimed at forcing distant provinces to conform to the center—Khartoum—rather than working to accommodate the local customs and institutions of the country's diverse population. Instead of forging a common Sudanese identity, these policies exacerbated Sudan's racial, cultural, and religious differences. Government attempts to Arabize and Islamize the countryside (the so-called \"periphery\") met with resistance, not only from southerners, but from various ethnic and regional groups that felt marginalized by central authorities. Dissatisfaction in the south sparked two related insurgencies against Khartoum (1955-1972 and 1983-2005). Groups in other regions rose up periodically against the government, citing local grievances, and some ultimately joined the southern rebels.\nRevenues from Sudan's oil reserves, which were discovered in 1978 and are largely concentrated in the south, primarily benefitted the north, in particular state elites in Khartoum. Oil money also financed the government's countering of domestic insurgencies with force—first in the south, and then also in the west and east. Sudan's counter-insurgency campaigns did not discriminate between fighters and civilians, and the government repeatedly questioned the neutrality of international aid agencies and restricted their access to affected populations. The rebel groups persisted, and among them the SPLA was the most successful in gaining ground against the more heavily armed Sudanese military. The SPLA faced internal divisions in the 1990s, largely along ethnic lines, that Khartoum fueled these splits by financing and arming from breakaway factions. Along the north-south border, Khartoum also used its oil revenues to finance local Arab militias, collectively referred to as the Popular Defense Forces (PDF), as a front line against the south.\nCivil war took the heaviest toll on the south—more than two million deaths; massive, long-term displacement; and decades of suspended development—but it also came at a significant cost to Khartoum. By 2002, as the government and the SPLM prepared to sign the first in a series of accords that would end the war three years later, another armed uprising was brewing, in Darfur. In response, as it had done with the PDF, Khartoum trained and armed local Arab militia, often referred to as the Janjaweed , to join with the military to conduct what then-Secretary of State Colin Powell termed in 2004 a \"scorched earth policy toward the rebels and the African civilian population.\" Secretary Powell and President Bush declared these actions to constitute genocide. The conflict triggered a humanitarian emergency in which some two million Darfuris were displaced and another 250,000 became refugees in neighboring Chad. As with the north-south war, casualty estimates in the Darfur conflict vary extensively. Studies suggest that between 100,000 and 500,000 died in the conflict's early years, some directly in violence and many more from malnutrition and disease. For international actors pressing for a north-south peace agreement, Darfur considerably complicated efforts to engage Khartoum.", "On July 9, 2011, South Sudan declared its independence. This came more than six years after the SPLM and the government of Sudan signed the Comprehensive Peace Agreement (CPA) to bring an end to over two decades of civil war between north and south. The CPA was based on a stated commitment by both parties to a democratic system of governance, through which the SPLM and the ruling National Congress Party (NCP) formed a unity government. The CPA enshrined the south's right to self-determination at the culmination of a 6.5 year implementation period (hereafter \"the CPA period\"). Some saw the CPA as a framework for addressing southern grievances within a unified Sudan, in part by devolving some authority to a semi-autonomous southern government. It failed to do so, and southern Sudanese voted overwhelmingly in a January 2011 referendum to secede from the north. Six months later, the Republic of South Sudan was recognized as the world's 195 th country, first by the government of Sudan, and then by the United States, the African Union (AU), the United Nations, and others.\nTo the surprise of many observers, the January 2011 referendum and South Sudan's July independence day passed without conflict between north and south. Relations between the two countries subsequently deteriorated, however, with the rhetoric on both sides increasingly bellicose and uncompromising as tensions mounted in the borderlands.\nTalks between the two sides have continued, and the negotiators have made some concessions that are considered promising. Underlying security issues, however, continue to complicate their relationship. South Sudan accuses Khartoum of backing \"proxy\" militias in its territory, as the latter was widely believed to have done during the war. Likewise, Sudan accuses the SPLM, now South Sudan's ruling party, of providing support for insurgent groups operating within the north—namely former divisions of the SPLA now known as the SPLA-N, as well as armed groups in Darfur. Since late 2011, the Sudanese Armed Forces (SAF) have conducted periodic air strikes across the South Sudan border, including in the vicinity of refugee camps, purportedly in pursuit of SPLA-N and Darfuri rebels. In April, this prompted the SPLA to seize and temporarily occupy Heglig, a disputed oil production area claimed by Sudan, from which South Sudan accused Sudan of launching attacks. The SPLA later withdrew under international pressure.", "Despite their formal separation, Sudan and South Sudan remain linked by—and divided over—a range of shared interests and outstanding disputes. The CPA did not define the relationship between north and south in the event of a southern vote for separation, and arrangements on multiple issues were left unresolved when Sudan split. Among the disputed issues are those related to their shared border, citizenship, and financial arrangements, including those pertaining to revenues from the sale of South Sudanese oil that transits Sudan for export. Other arrangements called for in the CPA, such as resolution of the final status of the contested border region of Abyei and the implementation of \"popular consultation processes\" for the people of Southern Kordofan (see below), have yet to be fully implemented.\nNegotiations on these issues began in Ethiopia in 2010, under the auspices of the AU High-Level Implementation Panel on Sudan (AUHIP), led by former South African President Thabo Mbeki. Donors who had played a key role in the peace process, including the United States, offered incentives to encourage Khartoum to recognize the result of the south's referendum and ensure a peaceful transition. Sudan's military operations in the borderlands and related human rights violations have discouraged the delivery of support to Khartoum. On both sides, many other potential peace dividends have remained out of reach.", "The secession of South Sudan was a major financial blow to Sudan, which lost 75% of its five billion barrels of known oil reserves. Throughout the war, the south received little benefit from its oil resources, which were controlled by Khartoum. From 2005 to 2011, per the CPA, revenues derived from southern oil were to be split evenly between north and south. Prior to separation, when the revenue sharing arrangement expired, oil represented 90% of Sudan's export earnings and 60% of government revenues. Once oil revenues began to accrue to Juba under the CPA, they comprised 98% of the south's total revenues. When the land-locked south became independent, it remained reliant on northern infrastructure to export its oil, which was pumped through pipelines to the northern city of Port Sudan on the Red Sea for refining and export.\nAs the CPA period drew to a close in 2011, deliberations on the future management of South Sudan's petroleum sector, including pipeline rental, transit fees, port services, and joint development options, were ongoing, and they were considered pivotal to other negotiations between Juba and Khartoum. Sudan, seeking to offset the loss of its 50% share of the south's oil revenues, demanded oil transit and processing fees of $32-36 per barrel. South Sudan's significantly lower counter-offers of under $1 per barrel were more in line with international standards for transit fees, according to the U.S. Energy Information Administration, but did little to address Sudan's massive revenue loss. With South Sudan dependent on Sudan's refining and export infrastructure to get its primary commodity to market, the international community views the two countries as economically co-dependent, at least in the near term, and initially assumed that this co-dependence could be a stabilizing factor in their relationship. In the past year, both governments have demonstrated in decisions and public statements the flaws in this assumption.\nThe extent to which the relationship between the Sudans had soured after separation became apparent in January 2012, when South Sudan shut down all of its oil production. Juba accused Khartoum of detaining outbound tankers and diverting more than $800 million worth of oil as it was being exported through Sudan. By this time, South Sudan reported that it had not received oil revenues for several months. Sudan acknowledged diverting oil, claiming that South Sudan owed roughly $1 billion in unpaid transit fees—a figure Khartoum based on the fee rates it was demanding in the negotiations. Days after halting production, South Sudan signed an agreement with Kenya to build a new pipeline to the Kenyan port of Lamu as an alternative export route. It has also explored the possibility of a pipeline through Ethiopia to Djibouti's Red Sea port. Most experts, however, surmise that South Sudan will struggle to find capital for such projects unless new oil discoveries are made. By many estimates, construction of a new pipeline and new port facilities will take years even if capital is forthcoming, leaving both governments with a massive loss of much-needed revenue unless southern oil exports through Sudan resume.\nThe parties have discussed additional incentives that Sudan considers necessary to address its so-called \"financial gap\"—the near-term economic impact of losing the south's resources. The two sides came to a tentative agreement in August 2012 that was finalized in late September, based in part on Juba's offer of a direct cash transfer of more than $3 billion to compensate Khartoum for lost revenues, in addition to the payment of transit fees. The package represents roughly one-third of Sudan's estimated financial gap. Khartoum will be responsible for filling another third and expects the international community to cover the remainder through grants and debt forgiveness. Khartoum also anticipates increased income from renewed trade opportunities when economic sanctions are lifted. Advocacy groups have called for international actors to insert conditionality into any financial support to Khartoum. South Sudan's concession to offer Sudan the $3 billion, which amounts to roughly 15% of its own revenues over a 3.5 year period, is unprecedented—one of the world's least developed countries would become, at the same time, both a major aid recipient and a major donor. Some analysts have suggested that the offer may be perceived by the people of South Sudan as a \"multi-billion dollar lifeline\" to President Bashir.\nSouth Sudan's oil fields remained inactive after the August deal—both sides had tied its implementation to the conclusion of talks on security issues. The September agreements address some, but not all of those issues, but the parties have agreed that oil flows will resume in the interim (see Appendix A ). Experts say it will take months for production and exports to restart; repairs to some facilities, which were reportedly damaged in air strikes, may take up to a year. In the interim, both countries are likely to require short-term external assistance and/or loans. Both countries are opening new blocks to exploration in the search for new revenues, which Juba hopes will result in new finds that might spur investment for the construction of alternative pipelines.", "With separation, Sudan retained the full burden of its extant sovereign debt. Khartoum has repeatedly endeavored to link that debt, estimated at more than $40 billion—much of it in arrears—to the oil talks. Juba has refused to assume part of the debt, arguing that the south received no benefits from the loans incurred by Khartoum during the war. Almost 90% is owed to bilateral and commercial creditors, and Khartoum, having lost most of its oil revenues, is now struggling to make debt payments. Some donors, including the United Kingdom, to which Sudan owes $1 billion, and the United States, to which it owes more than $2 billion, have pledged debt forgiveness if certain criteria are met. The State Department requested $250 million in its FY2013 budget to meet potential U.S. bilateral debt relief commitments under the Heavily Indebted Poor Country (HIPC) framework (should Sudan become eligible). The $250 million package is the estimated cost of forgiving 100% of Sudan's debt to the United States. The obligation of funds, currently prohibited by Congress through March 2013, would depend on Sudan's ability to meet both congressionally imposed requirements tied to debt relief, including those related to human rights and state sponsorship of terrorism, and Administration conditions such as the resolution of outstanding CPA issues. These are unlikely to be met under current circumstances, forcing Khartoum to negotiate with its traditional financiers—the Gulf States and China.", "Sudan and South Sudan have generally agreed to use the administrative dividing line between north and south that the British used until Sudan's independence in 1956 as their common border. That borderline has yet to be demarcated, however, and approximately 20% remains disputed. The borderlands were the front lines of the civil war, and negotiations to conclusively define the precise location of the border have been complicated by grievances and distrust among the communities who live along it, and by the concentration of oil reserves in these areas. The African Union has proposed that the Sudans maintain a \"soft border\" that would allow social and economic interaction and promote peaceful coexistence among border communities. In three border regions, Abyei and the states of Southern Kordofan and Blue Nile, heavy military deployments and unresolved political issues—fueled by local disputes over governance, land, and natural resources—reignited simmering conflicts toward the end of the CPA period. Southern Kordofan and Blue Nile remain in open conflict. As a result, Sudan closed the north-south border in 2011, halting the movement of civilians and all cross-border trade, and instituting harsh penalties, including capital punishment, for violations. The parties agreed in the September 2012 accord to re-open the border.", "This region between Sudan and South Sudan was accorded \"special administrative status\" under the CPA, and it has repeatedly been a flashpoint for violence between north and south. Under the terms of the CPA, the residents of Abyei were to determine, through a referendum, whether to retain their special status in Sudan or to join South Sudan. The referendum has yet to occur. Abyei is home to the Ngok Dinka, a subset of South Sudan's largest ethnic group, who were heavily displaced during the war. The area has also long been used by the Misseriya, an Arab nomadic group, who migrate south through Abyei seasonally to graze their cattle. Many Misseriya fought in PDF militias allied with Khartoum during the civil war, while most Ngok Dinka supported the SPLM. The Ngok Dinka accuse Khartoum of settling tens of thousands of Misseriya in the area and arming them to fuel instability. During the CPA period, Khartoum accused the SPLA of building its presence in the area and arming the local population. Territorial claims to Abyei were once considered particularly contentious because of its oil reserves, estimated in 2004 to represent almost a quarter of Sudan's annual oil production. Production in Abyei subsequently declined, however, and in 2009 an international court of arbitration ruled that region's major oil fields, including Heglig, were outside the area under consideration in Abyei's referendum. Today, Abyei's significance is driven much more by politics and cultural attachment than by oil.\nThe Abyei referendum was to have been held simultaneously with that of South Sudan, but disputes related to the region's border and voter eligibility delayed the process, and talks were repeatedly postponed. Clashes between southern Sudanese forces and the SAF in May 2011, and the SAF's subsequent occupation of Abyei town, displaced some 100,000 people, most into South Sudan, where many remain today. In response to the violence, escalating tensions, and population displacement, and following vigorous negotiations led by Ethiopia, the U.N. Security Council passed UNSCR 1990 in June 2011, authorizing a new peacekeeping operation, the U.N. Interim Security Force for Abyei (UNISFA), composed of Ethiopian troops. In late 2011, the Security Council authorized UNISFA to also take on broader border monitoring responsibilities across the entire north-south border, in coordination with Sudan and South Sudan. Both sides were slow to respond to efforts to commence monitoring, due to disagreement on the borderline.\nWith the presence of UNISFA, the security situation in Abyei has remained tense but stable; however, only a fraction of the displaced have returned. In 2012, the annual Misseriya migration was peaceful for the first time in years. Sudanese and South Sudanese security forces maintained a presence in the area in contravention of U.N. resolutions and a June 2011 agreement between the parties until mid-2012, when South Sudan, and then Sudan, withdrew their forces. South Sudan alleges that some Sudanese soldiers remain in Abyei disguised as \"oil police,\" whom Khartoum has refused to withdraw. The two countries have yet to establish a local civilian administration and police service, despite agreeing to do so; this has discouraged residents from returning. As the parties continue to negotiate on Abyei's final status, options reportedly discussed include Khartoum ceding Abyei to South Sudan—through referendum or otherwise—in exchange for Misseriya grazing rights and financial incentives, partitioning the area between the Sudans, or placing the region under international administration.", "Southern Kordofan and Blue Nile, like Abyei, are resource-rich, culturally diverse areas along the north-south border that received special administrative status under the CPA. The conflict that has plagued these states for decades is emblematic of center-periphery struggles that have characterized most of Sudan's modern history. Unlike Abyei, however, the two states were not granted the option of self-determination under the CPA, given that both lie north of the 1956 border. Instead, the CPA proposed a \"popular consultation\" process, an ambiguous mechanism intended to offer greater autonomy for these states within Sudan.\nMany residents of these states, driven by their own grievances against Khartoum, sided with the SPLA in the civil war. Southern Kordofan's Nuba Mountains region was devastated by SAF air and ground assaults and PDF militia attacks in the 1990s, when severe human rights violations were reported by the State Department and others. Khartoum denied aid agencies access to the region for 15 years. As a result, the population, which was forced into the hills by bombings and largely unable to farm, had to rely on unauthorized relief flights outside the Operation Lifeline Sudan (OLS) system. Congress was active in trying to get aid into these restricted areas from the mid-1990s through the 2002 ceasefire brokered by the United States and Switzerland.\nMany people in the affected areas felt abandoned by the SPLM in the final CPA deal. Local SPLM leaders remained popular, however, and together with other northern SPLM members they formed a new political party, the SPLM-N. Mistrust of Khartoum remained high among SPLM-N supporters throughout the CPA period. The areas also remained heavily militarized, with large troop deployments by both sides, in contravention of the CPA. In Blue Nile, the CPA-mandated political processes, including the state elections and popular consultation effort proceeded, albeit with delays, under the leadership of a former SPLA commander, elected Governor Malik Agar.\nIn Southern Kordofan, state elections, which were a precursor to the popular consultation process, were repeatedly postponed, and tensions were high when they were finally held in May 2011. Khartoum's candidate, Southern Kordofan Governor Ahmed Haroun, who is sought by the International Criminal Court (ICC) for war crimes in Darfur, defeated the SPLM-N candidate, Abdul Aziz al Hilu, in a bitterly contested election. The Sudanese military then demanded that local SPLA forces, who had remained stationed in the two states throughout the CPA period (some as part of joint units), be immediately withdrawn to South Sudan. The SPLM-N rejected Sudan's demand, given that these fighters were residents of the two states, rather than of South Sudanese origin; they argued that CPA-mandated processes for addressing their status remained unfulfilled. Fighting broke out in Southern Kordofan in early June 2011, when Haroun ordered that the fighters be forcibly disarmed. The SPLA-N quickly made territorial gains that appear to have given them a military advantage against the SAF, despite heavy aerial bombardment.\nAccess to both states has been extremely limited since hostilities began in 2011, but reports by the media and human rights groups suggest that the SAF and allied militia may be responsible for grave human rights violations. According to a U.N. report from the first month of the fighting,\nInstead of distinguishing between civilians and combatants and accordingly directing their military operations only against military targets, the SAF and the paramilitary forces have deliberately targeted civilians and civilian objects including churches, and have engaged in acts or threats of violence for the sole purpose of terrorizing them through targeted killings, abductions, arbitrary arrests and detentions, and aerial bombardments resulting in forced movements of the people of Southern Kordofan out of their homes and out of the state.\nThe U.N. Office of the High Commissioner for Human Rights released a report in August 2011 stating that actions by the Sudanese military \"may constitute war crimes and crimes against humanity.\" High Commissioner Navi Pillay has reiterated concerns about the government's \"indiscriminate aerial bombardments and scorched earth policies\" in more recent statements.\nThe security situation in Blue Nile initially remained stable after the outbreak of hostilities in Southern Kordofan, but the issue of SPLA disarmament triggered violence in Blue Nile in early September 2011, prompting President Bashir to declare a state of emergency in Blue Nile and dismiss Governor Agar. Agar and Aziz, along with several Darfuri rebel groups, subsequently formed the Sudan Revolutionary Front (SRF), with Agar chosen as the alliance's chairman. Its stated aim is to overthrow the National Congress Party and establish a democratic state in Sudan.\nAU efforts to mediate directly between Khartoum and the SPLM-N have been unsuccessful to date. A framework agreement on political and security arrangements reached between the parties' negotiators in late June 2011 was subsequently rejected by President Bashir. In May 2012, the U.N. Security Council called on the parties to reach a negotiated political settlement, rather than a military solution, based on that agreement. The Security Council adopted UNSCR 1997 (2011) to establish a peacekeeping operation in the two states; Sudan has not consented to such a presence.\nThroughout the current conflict, access by relief agencies to populations in both states has been extremely limited, and humanitarian conditions have deteriorated dramatically. The violence over the past year has kept residents from harvesting crops, and government restrictions have prevented the flow of food and medicines. Khartoum has restricted aid access in government-controlled areas and denied access to areas held by the SPLM-N. Experts suggest that the condition of refugees arriving at camps across the border in South Sudan and Ethiopia is likely indicative of conditions inside the two states—refugees who fled in 2011 were primarily fleeing the violence and moving in anticipation of coming food shortages. By mid-2012, when the rate of arrivals increased dramatically, the lack of food became an increasing motivation for flight. New arrivals to the camps are malnourished, leaving them particularly vulnerable to disease. AU, U.N., and Arab League representatives have, to date, been unable to secure access to SPLM-N areas from Khartoum under a so-called \"Tripartite Proposal\" for independent third-party monitors and relief agencies, although several agreements toward this end have been signed. In the absence of a ceasefire, a full-scale relief effort for the conflict zones appears unlikely.", "The working relationship built between the NCP and the SPLM during the CPA period has deteriorated dramatically in the past year. Inflammatory rhetoric, such as President Bashir's vow at a rally in April to free the south from the \"insect\" SPLM government and \"eliminate this insect completely,\" has fueled mistrust, as have cross-border incursions, be they SAF air strikes in the south or the SPLA assault on Heglig. Alleged support for rebels in each other's territory further complicates their relationship. Prior to the September 2012 deal, Khartoum had insisted that no deal on outstanding issues, including southern oil exports, would be implemented until security arrangements were in place to address South Sudan's alleged support for Sudanese rebel groups.\nThe relationship between South Sudan's ruling party and the SPLM-N today is ambiguous. They formally became two separate organizations on July 9, 2011, but remain tied by historic bonds and close relationships. Senior SPLM-N officials were members of the SPLM leadership prior to the south's separation, and SPLM-N Secretary-General Yasir Arman was the SPLM's presidential candidate in the 2010 national elections. SPLM officials have expressed solidarity with marginalized groups in Sudan, including the SPLM-N, but the government denies any formal link with the insurgency. The relationship between the SPLA and the SPLA-N (the armed wing of the SPLM-N) is equally complicated. Until separation, the armed units in Southern Kordofan and Blue Nile comprised the 9 th and 10 th battalions of the SPLA. Many experts argue that Juba likely no longer maintains command and control over these forces, and the Small Arms Survey, an independent research unit based in Geneva, reports that while evidence suggests that the SPLA-N has received some military support from the SPLA, \"the majority of its supply derives from the capture of SAF weapons on the battlefield.\" Allegations of South Sudanese military support for other SRF groups remain unverified, but multiple reports suggest the groups do enjoy safe haven in South Sudan, despite a stated commitment by both Sudans not to harbor or support rebels.\nThe U.N. Security Council has maintained a significant focus on Sudan-South Sudan issues and has committed itself to a vision of \"two economically prosperous states living side-by-side in peace, security, and stability.\" In May, the Security Council adopted UNSCR 2046 (2012), outlining expectations that the parties reach agreement on outstanding issues by August 2, 2012; that deadline passed without agreement. The September agreement addresses some, but not all, of these issues, and the Security Council is expected to deliberate in October on the way forward.", "The Republic of South Sudan emerged in 2011 not only as the world's newest nation, but also as one of its least developed. After almost 40 years of nearly continuous war, during which more than four million people were displaced, its human development indicators are among the world's lowest, infrastructure is sparse, and literacy rates are extremely low. Almost half the population may face food insecurity in 2012. South Sudan enjoys a bounty of natural resources and its agricultural potential is enormous. However, with only one paved highway (funded by USAID), running roughly 120 miles from Juba to the Ugandan border, accessing regional and world markets will require years of large-scale investment. The government's decision to halt oil production and consequently cut its 2012 development budget, is expected to significantly delay the pace of post-war recovery, despite considerable international good will and donor resources. The majority of the population has appeared ready to give the government latitude and support, in spite of rising pessimism about the economy and the government's ability to deliver services.", "South Sudan's development challenges loom large, particularly given the extremely low rates of literacy in the government and civil service. Despite its agricultural potential, the population remains heavily dependent on rain-fed, subsistence farming, and output falls far short of needs. Conflict and population displacement in parts of the country, inflows of southern returnees and refugees from Sudan, and various environmental shocks place additional stress on South Sudan's limited resources and contribute to widespread humanitarian needs. The lack of government revenues until oil exports resume places further strain on already limited service delivery and massive demands on diminished development funding. Austerity measures will further delay the government's plans to develop primary transit corridors, which are unpaved and become impassable in the rainy season. Infrastructure delays and security concerns may deter foreign investment in the near term. The government has given priority to security and the rule of law in its latest budget, but without new loans or grants it may be unable to fund even these sectors, should the oil deal's implementation be delayed. Donors look to South Sudan to take greater steps toward fiscal discipline and transparency before they will consider additional direct support.\nThe United States, which is the single largest donor to South Sudan, has invested significant resources in the country's development. In December 2011, one month before the oil shutdown, the United States hosted an International Engagement Conference for South Sudan, providing a forum for Juba to showcase its development priorities and opportunities to foreign investors. The United States and other donors continue to work with the government to improve its capacity to govern and deliver social services transparently and effectively. In April 2012, South Sudan became a member of the World Bank and the International Monetary Fund (IMF), both of which were already providing technical assistance. South Sudan is eligible for grants and concessional financing from the World Bank and the IMF, although financing from any of the multilateral financial institutions is not expected to provide the short-term relief Juba seeks in 2012. East African countries are also contributing to the effort—several hundred civil servants from neighboring countries have been detailed to Juba to provide skills training and fill capacity gaps.\nHigh-level corruption is a major challenge. In May 2012, President Salva Kiir sent a letter to 75 senior officials who are reportedly suspected in the disappearance of several billion dollars in government revenues. The exact amount missing is subject to debate, but South Sudan's Auditor-General has confirmed that the government cannot account for at least $1 billion in revenues. A sizeable portion of the missing funds is linked to a three-year old scandal involving grain imports that were ordered to address food shortages but never received (this prompted a leadership change at the Finance Ministry, but no officials have been prosecuted). President Kiir, who reportedly stated in the letter that \"the credibility of our government is on the line,\" offered amnesty to those who returned missing funds. Senior officials are required by law to report their income, assets, and liabilities to a new anti-corruption commission, but it has little capacity to verify submissions.\nSouth Sudan's government is dominated by the SPLM, which won the presidency as well as the majority of state and regional elections in April 2010. The next elections are scheduled for 2014. The State Department reports that \"newly-established governance institutions and systems remain extremely fragile and vulnerable to corruption, while the responsibilities and expectations of the national government have increased substantially.\" In short, the challenges facing the government are great, and its capacity is limited. Among its many tasks are adopting a permanent constitution and transitioning to fully elected national and local governments, as required by the current transitional constitution. The State Department views support for South Sudan's development of democratic governance and its ability to deliver services and ensure the rule of law as critical. South Sudan is under pressure from human rights groups and donors to hold security forces and officials responsible for reported abuses. The development of legal and regulatory frameworks to protect basic rights and freedoms, such as freedom of speech, and to address issues of property ownership and labor rights, may serve as important benchmarks for donors and investors alike.", "South Sudan faces a range of persistent and emergent security threats that will pose challenges for years to come. The potential for localized insecurity in some areas is high. South Sudan is awash in small arms, and armed cattle raids and violent disputes over land and water rights are common. Inter- and intra-ethnic fighting claims thousands of lives annually. The SPLM was driven by an internal battle in the 1990s, largely along ethnic lines, and the ethnic grievances that sparked that conflict still lie beneath the surface of South Sudanese politics. Boundary disputes with Sudan remain a significant concern. Both sides have large numbers of troops deployed near the border, increasing the possibility that isolated skirmishes could quickly devolve into broader conflict. In the event of SAF military operations, the SPLA has limited ability to defend against air strikes.\nMilitias remain active in parts of the country, complicating stabilization and recovery efforts. As part of its reconciliation efforts with various southern political and armed groups, South Sudan's military has absorbed tens of thousands of fighters from the militias, some of which were allegedly backed by Khartoum during the war. Several militia leaders were given amnesty. The 2010 elections, however, spurred the creation of new militias, as some who felt excluded from the political process resorted to armed resistance against the state.\nIn Jonglei, South Sudan's most populous state, a militia led by David Yau Yau is causing increasing concern. The SPLM has accused Khartoum of providing Yau Yau with material support, namely weapons. Militias in Unity and Upper Nile states also remain a threat. The formerly Ugandan-based armed group, the Lord's Resistance Army (LRA), once also reportedly supported by Khartoum, continues to threaten and displace South Sudanese communities near the borders of the Central African Republic and the Democratic Republic of Congo, although the threat it poses is localized in comparison to other armed groups. South Sudan and Uganda publicly accused Khartoum of resuming support for the LRA in 2012 and suggest that LRA leader Joseph Kony may be hiding in the border area between the Sudans.\nIn parts of South Sudan, the number of deaths due to interethnic violence, sometimes related to cattle raiding, has increased dramatically in recent years, and the violence appears increasingly politicized. In Jonglei, retaliatory attacks between the Lou Nuer and the Murle ethnic communities have resulted in large-scale population displacement and humanitarian need in the past year. Local authorities have limited capacity to address these conflicts. The U.N. Mission in South Sudan (UNMISS), which was established in 2011 and is smaller than its predecessor, UNMIS, has faced major logistical challenges such as poor roads and a shortage of helicopters as it has worked to deploy peacekeepers to the area. The SPLA has conducted a civilian disarmament campaign in the state with mixed reviews; some communities have raised concerns that disarmament is not being equitably enforced. Possible linkages between the militia activity in Jonglei and rising tensions among the Nuer and Murle communities raise questions about the capacity of the government, and UNMISS, to protect civilians should the situation deteriorate.\nThe police service in South Sudan lacks the capacity to address many of these threats, leaving the SPLA to play a significant internal security role. The State Department reports that some SPLA stabilization and civilian disarmament activities have caused tensions with communities who claim that the SPLA is neither politically neutral nor well disciplined; some of these operations have reportedly resulted in displacement and deaths. The State Department has also documented various human rights violations by SPLA troops. Some, but not all, of those accused of serious abuses have faced military justice. Some analysts suggest that the continued presence of senior SPLA officers at all levels of the South Sudanese government obscures the concept of democratic civilian control. Given the many years of war from which South Sudan is emerging, the development of truly civilian leadership may take time. Donors are pursuing programs to promote governance skills along with a broader understanding of democratic concepts.", "Access to much of South Sudan is severely constrained during the rainy season, given the poor state of roads. As a result, humanitarian operations there are among the most expensive in the world. Communities throughout the country have been affected by recent flooding. The lack of all-weather roads to the camps where refugees from Southern Kordofan and Blue Nile have concentrated has forced aid agencies to airlift relief at significant expense. In some camps the rains have also contributed to the spread of water-borne diseases among the already vulnerable population. The U.N.'s refugee agency reports that mortality and malnutrition rates at the camps are above emergency thresholds. Aid groups are currently working to improve water, sanitation, and hygiene conditions. Yida camp in Unity state is the largest refugee settlement, with more than 60,000 people who have fled Southern Kordofan. Aid agencies can currently only access the camp by air, and its proximity to the Sudan border is a serious security concern for aid officials. Refugees have resisted calls to move. The SAF bombed Yida in November 2011; no casualties were reported. Insecurity in parts of the country periodically impedes access to other populations that have been internally displaced. Aid agencies report that isolated incidents of harassment of relief workers have become an increasing problem; donors have registered complaints with Juba.", "The Republic of Sudan faces an array of social, political, and economic challenges that are in many ways as daunting as those confronting its new southern neighbor. President Bashir's National Congress Party has thus far staved off the large-scale popular protests that several North African and Middle Eastern counterparts faced during the \"Arab Spring,\" but economic pressure is mounting. Sudan's intelligence and security forces have been quick to respond to student-led uprisings that gained momentum in mid-2012. The government has reportedly warned against the public use of excessive force against protestors to avoid creating martyrs for the movement. Still, several protesters were killed by police in Nyala, in Darfur, in late July. Reports of torture and lengthy detention without trial have prompted criticism from the U.S. government and others. Some analysts suggest that rifts within the NCP and the armed services are increasingly apparent, and many contend that decision-making has been consolidated among hardliners in the military.", "As the government continues to struggle with multiple armed insurgencies in Darfur, the rebellions in Southern Kordofan and Blue Nile have opened a new southern front in Sudan's array of internal conflicts. These are costly engagements that the Sudanese government can scarcely afford—Sudan's economic growth is estimated by the IMF to have slowed 3.9% in 2011, and is expected to shrink by more than 7% in 2012. The government's willingness to use force against restive regions has drawn international condemnation and thus far precluded Sudan from normalizing relations with many Western countries, including the United States, despite significant counterterrorism cooperation, according to the State Department. Sudan continues to rely on other countries, such as China, Russia, and Qatar, for financing and arms acquisitions. Sudan has acknowledged a need to diversify its economy and to focus on the development of its agricultural potential, but the government's multiple military operations place an increased burden on an already tight government budget and may deter much-needed foreign investment.\nThe economic strain has placed increased political pressure on President Bashir and the NCP. By some accounts, many Sudanese hold Bashir personally responsible for the loss of South Sudan and its oil revenues, even within his own party. Some Islamist hardliners reject any concessions by Khartoum in the current north-south talks. An alliance of opposition parties known as the National Consensus Forces (NCF) continues its call for major political reforms, namely a new constitution that enshrines basic rights and protect pluralism. The NCF is composed of Sudan's historic opposition parties—the Sufi sectarian-based Umma Party and Democratic Unionist Party (DUP), and the Communist party—as well as former members of the National Islamic Front who broke with Bashir. According to the State Department, the 2010 elections, in which Bashir won the presidency, did not meet international standards. The NCF has called on the NCP to involve all parties, armed and unarmed, in a national dialogue and has urged the international community to press for a holistic approach to Sudan's myriad conflicts.\nSudan's opposition groups, including the NCF and the armed SRF, appear to share the short term aim of changing the government in Khartoum, but their parties' visions for post-NCP governance differ. Perhaps as a result, the young urban Sudanese who have led the anti-government protest movement, including members of Girifna (\"We're Fed Up\"), have no formal relationship with any particular opposition party or coalition, leaving some to question whether these seemingly disparate movements can mount a cohesive challenge to NCP rule. Many Sudanese see the traditional parties as weak and disorganized—in short, \"all talk and no action,\" and these parties have yet to launch a coherent campaign to capitalize on the rising economic discontent.\nWithin the NCP, reports of large-scale state corruption, including allegations directed at Bashir himself, have led to calls for internal party reform. Pragmatists within the party have stressed the need to draft a new permanent constitution, although many observers suggest such efforts are unlikely to lead to serious reforms in the way the NCP governs. The government appears increasingly sensitive to criticism, particularly of its austerity measures and subsidy cuts, as evidenced by multiple incidents of harassment of newspapers in 2012. Whether the SRF, the opposition parties, or the protest movement may pose a serious threat remains to be seen—some view the greatest potential threat to Bashir's rule as coming from rival party members or segments of the security forces. Bashir's position among Sudanese Islamists also continues to be challenged by his former ally turned political rival Hassan al Turabi, a member of the NCF.\nSudan has been designated for over a decade by the State Department as a Country of Particular Concern for its serious and systematic violations of religious freedom. Blasphemy and defamation of Islam are illegal and apostasy (conversion from Islam to another religion) is punishable by death. Laws against indecent dress and other offences against morality and public order are applied. After an interlude of improved religious tolerance during the CPA period, reports suggest that religious freedom violations are increasing, and that state-sanctioned \"hate speech\" by Islamic clerics is on the rise. The influence of Salafism is reportedly growing. Attacks on churches and Sufi Muslim sites are of concern, and some Salafist groups appear to be specifically targeting opposition groups. Salafist imams have issued fatwas and heretical charges against Turabi and Sadiq al Mahdi, who is head of the Umma party and the Ansar religious sect.\nSome observers suggest that the government has ignored, if not encouraged, the violent rhetoric of Salafist groups, and Khartoum's initial public response to calls for protests against Western embassies in September 2012 drew criticism from Europe and the United States. Protesters set fire to the Germany Embassy, and at least two protesters were killed by police in demonstrations on September 14 outside the U.S. Embassy. Reports suggest that an estimated 4,000 people were involved in the protests, which occurred after Friday prayers. Vice President Joseph Biden called his counterpart to assert the Sudanese government's responsibility to protect diplomatic facilities and ensure the protection of diplomats. Bashir's government deployed additional police to provide security near the embassies, but rejected a U.S. plan to deploy Marines to increase security of the embassy facilities and personnel. Non-emergency U.S. diplomatic personnel were temporarily evacuated from Khartoum, but the situation has since appeared to stabilize.", "The conflict in Darfur continues to elude resolution, despite successive peace agreements and the presence of the world's largest, and most expensive, peacekeeping operation. The central government has historically struggled to govern the distant region. Underlying tensions between Darfuri groups over land, water, and grazing rights had driven low-level violence in this arid land for decades. Arms flows to the region by both internal and external actors, including neighboring Libya and Chad, further fueled the violence. Described in 2004 by the State Department as \"the worst humanitarian and human rights crisis in the world,\" what began as a conflict primarily between Arab and non-Arab ethnic groups, namely the Fur, Massalit, and Zaghawa, quickly deteriorated into a civil war characterized by \"widespread and systematic\" rape, torture, killings, forced displacement, and the looting and destruction of hundreds of villages. The crisis drew a massive humanitarian response in the mid-2000s, stemming the casualties, but continuing insecurity in the region has discouraged almost two million displaced persons from returning to their homes. In effect, the conflict created a large semi-urban population with few means of sustaining themselves economically. Many of the displaced remain reliant on food aid to survive.\nEfforts to mediate peace accords in Darfur have been complicated by the repeated fracturing of rebel groups. The government of Sudan and one rebel faction, the Liberation and Justice Movement (LJM), signed the Doha Document for Peace in Darfur (DDPD) in July 2011. As a result of that agreement, which the United States has guardedly supported, President Bashir announced the establishment of two new states in the Darfur region: East and Central Darfur States (there are now five Darfur states, comprising an area roughly the size of Spain). The creation of new states and other political positions that are part of a new Darfur Regional Authority (DRA) has allowed Khartoum to accommodate a larger range of political actors, but promised investments in the region have yet to materialize. The U.N. Secretary-General reports that provisions of the DDPD have yet to be implemented despite \"modest progress,\" and that a shortage of government funding means that peace dividends remain unrealized. Critics of the new dispensation suggest that Khartoum has used the new territorial divisions to further dilute the influence of groups opposed to the government. Khartoum has also reportedly shifted its support from Arab militias to new non-Arab groups to spur tensions between ethnic communities over land and political power, significantly changing the conflict dynamics in the region.\nThe main Darfuri insurgent groups—the Justice and Equality Movement (JEM), which has been linked to Turabi's Popular Congress Party, and the two main factions of the Sudan Liberation Army (SLA)—rejected the DDPD. These groups have instead achieved a tentative rapprochement and aligned themselves with the SPLM-N under the banner of the Sudan Revolutionary Front, which has broadly outlined a national agenda for the groups' struggle against Khartoum.\nThe U.N. Security Council has required U.N. member states to maintain an arms embargo on Darfur since 2004, and yet, as the ongoing violence indicates, there is no shortage of weaponry in the region, much of it of Chinese, Russian, and Belarusian origin. One recent independent report suggests that \"arms supplies to Sudanese government forces and proxy militias in Darfur ... have been almost entirely unimpeded by the actions and policies of the international community, including the ineffectual U.N. arms embargo on Darfur.\" The Security Council extended and expanded the embargo in 2005 to include a ban on offensive military flights in the region, which Sudan has repeatedly violated. President Bashir's rapprochement with President Idriss Déby in Chad appears to be holding, with both sides having reportedly ceased their support for rebels operating in the other's territory. Consequently, weapons flows from Chad and Libya, formerly a destabilizing influence under Muammar Qadhafi, appear to have diminished.\nAccording to U.N. reports, the government has increasingly restricted the movements of the AU-U.N. Hybrid Operation in Darfur (UNAMID), impeding its ability to resupply and implement its mandate. UNAMID currently remains the largest and most expensive peacekeeping operation in the world. In July 2012, the U.N. Security Council voted to reconfigure and downsize the operation by more than 3,000 troops. When fully implemented, the reconfiguration will make UNAMID the second largest operation, after the one in the Democratic Republic of Congo.", "The United States has found itself pursuing multiple, and at times conflicting, aims in Sudan. Balancing these objectives has occasionally placed Congress and the Executive Branch at odds. Ending the human suffering and related human rights violations associated with Sudan's distinct but overlapping conflicts has been the overarching goal of U.S. policymakers for more than two decades. With finite attention and resources, however, U.S. policy toward Sudan has at times appeared to many to prioritize resolving one conflict at the expense of another.\nThe United States played a key role in facilitating the north-south peace process and ensuring that the parties signed the CPA. Critics of U.S. policy during the CPA period suggest, however, that the United States and other influential international actors shifted their focus from monitoring and maintaining progress on CPA implementation to the unfolding disaster in Darfur. In doing so, they failed to sustain pressure on Juba and Khartoum to meet certain critical benchmarks in the peace process. When attention shifted back to the south as its 2011 referendum approached, Darfur mediation efforts appeared to become a secondary priority. In late September 2012, as the United States and others cautiously welcomed the latest agreement between the Sudans, the SAF reportedly conducted air strikes against civilian targets in Southern Kordofan and North Darfur. Negotiating humanitarian access to afflicted communities during these conflicts has required compromise, and at times has moderated calls for a more confrontational approach toward Bashir's regime. Similarly, U.S. pursuit of counterterrorism objectives in the broader region has led successive administrations to seek dialogue and cooperation from Khartoum.\nU.S. policy toward Sudan evolved from one of isolation in the early 1990s under President Bill Clinton to a policy under President George W. Bush that focused on achieving reforms through increased diplomatic engagement with Khartoum. The Clinton Administration, which named Sudan a state sponsor of terrorism in 1993, identified Sudan as a \"rogue state\" and supported Ethiopia, Eritrea, and Uganda as \"frontline states\" to contain Khartoum, and to provide support to the SPLA. In 1996, under Western pressure, Sudan expelled Osama bin Laden from the country. Relations between Washington and Khartoum deteriorated further in August 1998, when, in response to the U.S. embassy bombings in East Africa, President Clinton ordered the bombing of a pharmaceutical factory in Khartoum purportedly linked to bin Laden.\nBy 1999, the U.S. policy approach was shifting, and President Clinton appointed former Member of Congress Harry Johnston to serve as a special envoy to work with allies in support of a new regional peace process for Sudan. In early 2001, under President Bush, the United States and Sudan began talks on terrorism, and the Bush Administration formed a Sudan Task Force to review and improve coordination of U.S. policy. President Bush appointed another special envoy, former Senator John Danforth, who took a new approach to the north-south war by proposing four confidence-building measures to the parties: a ceasefire in Nuba Mountains, days and zones of tranquility for humanitarian access in the south, the formation of a U.S.-led commission to investigate slavery, and the cessation of attacks on civilians. Both parties were receptive, and the peace process moved forward. Throughout the CPA talks, the U.S. government never expressed a preference for unity or separation, although sympathies for the southern cause were apparent. The U.S. Embassy in Khartoum, which had suspended operations in 1996, re-opened in 2002.\nBy spring 2004, attention on Darfur was building, coinciding with commemorations of the 10 th anniversary of the Rwandan genocide. In September 2004, based on an investigation into reported atrocities in Darfur, Secretary of State Colin Powell testified before Congress that the government of Sudan and the Janjaweed militias had committed genocide in Darfur. In his testimony, he noted a coordinated, \"consistent and widespread pattern of atrocities—killings, rapes, burning of villages—committed by Janjaweed and government forces against non-Arab villagers.\" Powell directly implicated the military in the attacks, and declared there to be evidence of a specific intent to destroy \"a group in whole or in part\" under the 1948 Convention on the Prevention and Punishment of the Crime of Genocide, to which Sudan is party. Meanwhile, an International Commission of Inquiry on Darfur established by the U.N. Security Council recommended that a list of individuals be investigated for possible crimes against humanity, leading to the Security Council's first referral to the ICC. The Commission of Inquiry differed with the U.S. determination that the situation in Darfur met the legal standard of genocide.\nFrom 2004 onward, the U.S. media focused substantial attention on Darfur, and the coverage, combined with advocacy pressure, led to calls for military intervention. Bush Administration officials weighed concerns that action on Darfur might undermine the north-south peace process, however, and the international community struggled to get Sudan's compliance to deploy a more robust peacekeeping operation to the region. Then-Deputy Secretary of State Robert Zoellick was sent to mediate a peace agreement for Darfur, but the violence continued. By late 2006, Bush envoy Andrew Natsios threatened a \"Plan B\" if attacks on civilians persisted and Khartoum continued to oppose the AU-U.N. force; the details of the plan were never made public.\nThe ICC issued its first arrest warrants related to Darfur in 2007, and in 2008 the Prosecutor applied to the court for an arrest warrant for Bashir. The Bush Administration, which had declined to veto the ICC referral despite its opposition to the ICC, rejected calls by Khartoum for the Security Council to suspend its referral of the ICC cases, prompting Sudan to deny a visa to then-Special Envoy Rich Williamson, who stated in congressional testimony:\nThe Government of Sudan, the Arab Militias, and rebel leaders all have blood on their hands. Make no mistake; this 'genocide in slow motion' continues.... Khartoum's policy in Darfur has been the same tactic they used in the South, to 'divide and destroy.' By manipulating tribal divisions, creating militias from Arab tribes, forcing people from their homes, and separating them from their tribal leaders, the government has created a lawless environment in Darfur that it can no longer control.", "The Obama Administration appeared poised to take a hard line against Khartoum when President Obama took office. His foreign policy team included outspoken advocates such as Samantha Power, who in 2004 criticized the United States and others as \"bystanders to slaughter\" in Darfur. Power argued at that time that U.S. officials should focus less on whether the killings in Darfur met the definition of genocide and instead focus on \"trying to stop them.\" A former Clinton Administration official, Susan Rice, who was appointed to serve as President Obama's U.S. Ambassador to the United Nations, had in 2007 called for the next President to impose tougher sanctions on Khartoum, \"support efforts to unify the rebel groups\" in Darfur and a seek a negotiated agreement to end the conflict, and \"implement and robustly enforce, with NATO, a no-fly zone.\" She also called on Congress to authorize the use of force \"in order to end the genocide.\" She and several others joining the Administration publicly expressed the view that the United States had a legal and moral responsibility to end the atrocities in Darfur.\nIn 2006, when they were Senators, Joseph Biden, now Vice President, along with Obama and Secretary of State Hillary Clinton, cosponsored S.Res. 559 , calling on then-President Bush to take immediate steps to stop the violence in Darfur, including through the implementation of a no-fly zone. As a presidential candidate, Obama referred to a \"moral imperative\" to bring an end to the violence in Darfur, saying \"we can't say never again and then allow it to happen again.\"\nPresident Obama appointed a new special envoy, retired Air Force Major General Scott Gration, in 2009. Gration initiated a policy review, and in October 2009, the State Department announced a new policy toward Sudan, under which the CPA, Darfur, and counterterrorism cooperation were each identified as primary priorities that would be addressed through a mix of pressures and incentives to achieve progress on all three. Among the incentives proposed was a pledge to investigate whether Sudan met the legal requirements to be removed from the state sponsor of terrorism list, in return for Khartoum allowing the south's referendum to proceed unimpeded. The Administration's strategy also stressed the need to engage with both allies and \"those with whom we disagree\" to advance peace and security in Sudan, and declared that decisions regarding incentives and disincentives would be based on \"verifiable changes in conditions on the ground,\" rather than \"process-related accomplishments\" such as the signing of agreements. The strategy further asserted that Sudan would not be able to use cooperation on counterterrorism objectives, while \"valued,\" as a \"bargaining chip\" against U.S. priorities toward Darfur and the CPA. The Administration sought assistance from Senate Foreign Relations Committee Chairman John Kerry, who had made multiple trips to Sudan, to reinforce this message.\nAfter South Sudan's independence, the Administration committed itself to a policy of \"supporting the emergence of two viable states at peace with one another and their neighbors.\" In April 2012, acknowledging the Sudans' deteriorating relationship, President Obama admonished both parties, saying \"Your future is shared. You will never be at peace if your neighbor feels threatened. You will never see development and progress if your neighbor refuses to be your partner in trade and commerce.\" The State Department has identified this message as the \"core\" of the Administration's policy toward the Sudans. The Administration has been publicly critical of both Sudan's aerial and artillery attacks against South Sudan and South Sudan's attack on Heglig, and has demanded that South Sudan cease any support for the SPLM-N. Administration officials also continue to register \"grave concern\" with the delayed implementation of agreements on humanitarian access in Southern Kordofan and Blue Nile, stressing Khartoum's responsibility to act with urgency. President Obama has welcomed the September 2012 accords between Juba and Khartoum, expressing the hope that they will spur the resolution of Sudan's other conflicts.", "The United States maintains an array of sanctions against Khartoum through Executive Orders and congressionally-imposed legal restrictions. Initial sanctions were imposed in 1988, when economic and security assistance was frozen because of Sudan's debt payment arrears to the United States. Additional limits on non-humanitarian aid were proposed by Congress in 1989 to protest government restrictions on aid access, and by early 1990 all non-humanitarian aid was suspended because of the military coup. Some sanctions date to the late 1990s, when Sudan was named a state sponsor of terrorism, a designation still in effect. Others relate to abuses conducted during the civil war. Further sanctions were imposed more recently—several relate specifically to the Darfur conflict. As a sovereign state, South Sudan is no longer subject to those restrictions. However, given the interdependence of some sectors of the two economies, U.S. businesses are prohibited from engaging in certain activities with South Sudan without prior approval from Treasury's Office of Foreign Assets Control (OFAC). U.S. sanctions related to Darfur prohibit transactions by U.S. nationals in Sudan's petroleum and petrochemicals sectors. U.S. law supports efforts by state and local governments, universities, and pension funds to divest from foreign companies operating in certain sectors of Sudan's economy. Legislation proposed in the House of Representatives would expand the sanctions regime to target governments or persons that assist Khartoum in human rights violations by providing Sudan with military equipment.\nIn an effort to expand trade with South Sudan, a key priority for U.S. engagement, OFAC issued two general licenses in late 2011: one to authorize activities relating to South Sudan's petroleum sector (including paying pipeline and port fees) and another to authorize the transshipment of goods, technology, and services through Sudan to and from South Sudan. South Sudan is now a beneficiary of the Generalized System of Preferences program, and Congress added it to the list of countries eligible for benefits under the African Growth and Opportunity Act (AGOA) in P.L. 112-163 ; South Sudan now awaits a presidential determination on its AGOA eligibility.", "Unified, pre-July 2011 Sudan was consistently among the top recipients of U.S. foreign aid, not only in Africa but globally, for over a decade. U.S. assistance, including bilateral aid, emergency humanitarian aid, and support for peacekeeping operations, has totaled over $1 billion annually in recent years. FY2013 is the first year for which the State Department and USAID have requested assistance separately for the new country of South Sudan. A breakout of U.S. assistance to the North and South respectively is available in Appendix C . The United States provided more than $274 million in humanitarian assistance to South Sudan in FY2012, and over $296 million to vulnerable populations in Sudan, two-thirds of which supported efforts in Darfur.\nThe State Department has referred to the consolidation and strengthening of the new nation of South Sudan as the biggest governance challenge in Africa in FY2013. U.S. assistance to the country is guided by a USAID transition strategy to increase internal stability. The bulk of proposed development assistance to the country aims to build government and civil society capacity and economic infrastructure, and to mitigate local conflict. According to the State Department's budget request, U.S. assistance to South Sudan in FY2013 would \"accelerate progress in the critical areas of governance, rule of law, conflict mitigation, economic development, delivery of basic services, and security sector reform.\" Efforts to build the country's agricultural capacity and reduce its dependency on food aid are a central component of economic growth objectives. USAID reports that its existing development strategy relied on a level of government ownership by South Sudan that may be unrealistic in view of Juba's current austerity budget, and some programs in the health and education sectors have been revised with the aim of preserving and protecting basic service delivery until oil revenues begin to accrue again. Some longer-term institution building programs in these sectors have been postponed. Proposed FY2013 aid funding would also continue State Department efforts to help transform the SPLA from a guerilla army to a professional military force subordinate to civilian leadership and protective of human rights, and to build the capacity of the nascent police force. Military assistance for both Sudans is subject to congressionally-mandated restrictions related to the use of child soldiers, although President Obama issued a presidential waiver in September 2012 exempting South Sudan (along with Libya and Yemen) from the restrictions.\nIn Sudan, where some forms of U.S. assistance remain constrained by congressionally-imposed restrictions, FY2013 development assistance is expected to focus on, among other priority areas, peace building and conflict mitigation in Southern Kordofan, Blue Nile, Darfur, and other marginalized areas. In addition to bilateral aid to the two Sudans, roughly 40% of the State Department's FY2013 request for global Contributions to International Peacekeeping Activities (CIPA, the foreign aid account that covers the U.S. share of assessed expenses for international peacekeeping operations and tribunals) is allocated for the three U.N. operations in the Sudans.", "The United States faces a complex range of policy options as it considers the way forward for engagement with the two Sudans. Members of Congress may debate whether they concur with the Administration's current approach or wish to guide U.S. policy toward either country in a different direction. Previous congressional action on Sudan may provide lessons and examples. Advocates and experts may have new ideas on the merits of various \"carrots\" and \"sticks,\" or other policy options to promote peace and stability in both countries.\nGiven the complexity of U.S. relations with the Sudans, President Obama has continued to use a special envoy to coordinate policy toward both countries. The envoy oversees an expanded team of State Department personnel that includes the Sudan and South Sudan country desks. The President appointed a U.S. Ambassador to South Sudan in 2011, after independence; the United States has not had an ambassador to Sudan since 1997. The Embassy in Khartoum is led by a chargé d'affaires. The appointment of an ambassador would likely be viewed by Khartoum as a key step toward improving relations, and some contend it would raise the caliber of the bilateral dialogue. Critics contend that such an appointment would signal that the United States accepts engagement with Khartoum, in spite of the regime's abuses. If the President were to appoint an individual for the post, the Senate nomination hearing and vote may serve as a venue for Congress to reexamine U.S. engagement with Sudan. Possible security concerns related to enhancing the U.S. diplomatic presence in Khartoum also may factor into executive branch and congressional decisions on this issue.\nTrust between Khartoum and the United States is low. Khartoum seeks to improve the relationship, cognizant that this might bolster its international standing and aid its efforts to reengage with multilateral financial institutions. In Sudan's view, the United States has repeatedly \"moved the goalpost\" on lifting sanctions. From the perspective of many U.S. officials, though, Sudan continues to commit \"violations of human rights and modern rules of war ... so grave as to make it impossible to proceed\" with efforts to modify the current sanctions regime. Sudan's history of partially implemented peace accords also remains a prominent consideration for many in Congress and the Administration. Should the Administration decide to ease certain sanctions against Sudan, possibly in exchange for concessions from Khartoum, changes to some restrictions would require congressional action. For the Administration to remove Sudan's state sponsor of terrorism designation, for example, the Secretary of State must report to Congress that there has been both a change in leadership and in policy in Khartoum. Public law requires that certain other restrictions against the government remain in place until Khartoum complies with specific conditions outlined in P.L. 108-497 , P.L. 109-344 , and current appropriations legislation.\nCongress continues to monitor ongoing reports of serious violations of human rights and humanitarian law in parts of Sudan. Khartoum's crackdowns on peaceful anti-government protests in 2012, its ongoing violations of basic rights and freedoms across the country, and its perceived tolerance for violent rhetoric espoused by Salafist clerics all complicate the U.S.-Sudan relationship, as do its repeated air strikes in South Sudanese territory. Khartoum continues to use its sovereignty as a shield—access by aid groups, human rights monitors, and peacekeepers to populations in conflict areas is routinely denied by the government, in contravention of international humanitarian law. The United States and the United Nations have condemned attacks against civilians and stressed the need for improved humanitarian access to Southern Kordofan and Blue Nile, but government restrictions on aid to opposition-held areas continue. The Obama Administration has called the humanitarian crisis \"profoundly unacceptable,\" and Khartoum's \"business-as-usual approach ... intolerable.\"\nSome in the advocacy community, invoking the \"responsibility to protect\" concept, contend that the international community should do more to protect civilians—namely increase diplomatic pressure to negotiate immediate humanitarian access. Should Khartoum continue to impede access, though, some proponents have urged collective measures such as imposing sanctions, establishing safe zones and/or no-fly zones, or deploying a protection force to the two states. Some have called for international actors to deliver aid across the borders of South Sudan and Ethiopia into the afflicted areas with or without Sudan's permission, as Congress first authorized the U.S. government to do in Sudan in 1999.\nThe U.N. Security Council remains divided on how to respond to Sudan's ongoing violations of human rights and UNSC resolutions. Proposals to extend the arms embargo and ban offensive military flights beyond Darfur would likely be opposed by some on the Council. Similarly, the deployment of a U.N.-mandated force to the two states without Khartoum's consent appears improbable, unless a ceasefire is reached. There appears to be little appetite for foreign military intervention, such as the implementation of a no-fly zone, an option once advocated for Darfur by individuals now in the Obama Administration. Russia and China, which abstained from voting to authorize a no-fly zone for Libya in 2011, now appear adamantly opposed to the concept in other conflict situations, such as Syria, viewing it as a potential vehicle to pursue regime change. Should Sudan and South Sudan fail to make further progress on negotiations, and should Khartoum continue to delay implementation of the Tripartite Proposal for humanitarian access, the Security Council may be inclined to impose economic sanctions on one or both parties.\nSome Members of the 112 th Congress have proposed additional punitive measures on Sudan. The Sudan Peace, Security, and Accountability Act of 2012, H.R. 4169 , which has been referred to committee, would direct the President to develop a strategy to end serious human rights abuses and promote peace and democratic reform in Sudan. It would impose sanctions on any person or government found to contribute to Sudan's capacity to commit abuses through the transfer of military equipment and on any ICC member state that fails to execute an ICC arrest warrant.\nWhile the relationship between Washington and Juba, which has been characterized by President Obama and Secretary Clinton as a \"partnership,\" is markedly warmer than that with Khartoum, it too is tempered by concerns about human rights abuses and corruption. The United States has invested considerable foreign assistance resources to lay the foundation for development of South Sudan. Tensions between Khartoum and Juba threaten that progress. Under austerity measures, Juba has allocated more than half its budget to security, much of which goes to salaries for soldiers and maintaining readiness. Some observers view this as emblematic of patronage to a bloated military at the expense of development priorities that are being met in part with U.S. assistance funds. Others, however, express concern that South Sudan's internal security situation has appeared increasingly fluid in the past year. They argue that maintaining the morale and loyalty of the army to the government may be key to ensuring stability and state viability in the near term, and to protecting donor investments in the country's development.\nAlleged support by South Sudan's government for insurgent groups in Sudan further complicates U.S.-South Sudan relations, and the Obama Administration maintains its position that the conflicts in Southern Kordofan, Blue Nile, and Darfur must be resolved peacefully, rather than militarily. Some Sudan watchers contend, however, that South Sudan's long armed struggle against Khartoum, and the pressure it placed on the government, was the only effective tool to ensure that the aspirations of southerners were achieved. The SPLM-N leadership argue that they are willing to negotiate with Khartoum, but that they, like the SPLA before them, have been forced to fight against government aggression for peace, democracy, and justice.\nThe goal of protecting civilians in South Sudan raises key questions for Congress, given ongoing insecurity in parts of the country. South Sudan's security forces have the primary responsibility for that role, but their capacity is limited. As Congress considers the Administration's security assistance requests for these forces, it may seek to assess the extent to which such support might both enhance their capacity and improve their behavior. Human rights groups continue to report abuses by some units, and incidents between various armed actors, including some elements of the SPLA, and relief agencies—ranging from the commandeering of vehicles and raiding of aid compounds to violence—are also of serious concern.\nUNMISS, which is charged with advising and assisting the South Sudanese forces to fulfill their civilian protection role, also has a mandate to directly protect civilians under imminent threat of violence, \"within its capabilities and in its areas of deployment.\" The lack of infrastructure in South Sudan and the peripheral areas of Sudan significantly complicates these efforts, as does the shortage of helicopters available for U.N. operations. Furthermore, some have questioned UNMISS's capacity to protect civilians from harm by the SPLA, should the need arise. Neither UNMISS nor the SPLA have the capacity to protect civilians from air strikes by Sudan—some, including a former U.S. Special Envoy, have suggested that the United States should provide South Sudan with anti-aircraft weapons to deter and defend against future attacks. Should the Administration take that step, it would undoubtedly worsen relations with Khartoum.\nAs discussed in this report, the deteriorating relationship between Juba and Khartoum in the past year led South Sudan to cease oil production, thereby cutting its primary source of revenue and further squeezing Sudan, which was already struggling under the loss of the south's resources. After decades of war, distrust between the two governments is high. The September 2012 agreements reached by the parties are a positive step, but the border remains a tinderbox. The two have spent more than a decade in negotiations, with some notable successes—namely the peaceful circumstances of their separation in 2011—but several previously signed agreements remain only partially implemented, thus fueling renewed conflict. The economic and political pressures on both governments are a reminder that the possibility of state collapse in either country cannot be discounted. In the near term, although they now exist as separate countries, Sudan and South Sudan remain bound together in U.S. policy, and executive and congressional decisions that affect U.S. relations with one country may, for better or worse, impact the other.\nAppendix A. Status of Negotiations\nAppendix B. The Humanitarian Situation\nAppendix C. U.S. Foreign Assistance to the Sudans\nAppendix D. Acronyms\nAcronyms\nAMIS: African Union Mission in Sudan\nAUHIP: African Union High-Level Implementation Panel\nCPA: Comprehensive Peace Agreement\nDDPD: Doha Document for Peace in Darfur\nDRA: Darfur Regional Authority\nDUP: Democratic Unionist Party (an opposition party in Sudan)\nJEM: Justice and Equality Movement (an insurgent group in Darfur)\nLJM: Liberty and Justice Movement\nNCF: National Consensus Forces (an alliance of opposition parties in Sudan)\nNCP: National Congress Party (Sudan's ruling party)\nNIF: National Islamic Front\nPCP: Popular Congress Party (an opposition party in Sudan)\nPDF: Popular Defense Forces (Sudanese government-backed militia)\nSAF: Sudan Armed Forces (the Sudanese military)\nSDBZ: Safe Demilitarized Border Zone\nSLM/A: Sudan Liberation Movement/Army (an insurgent group in Darfur)\nSPLM/A: Sudan People's Liberation Movement/Army (South Sudan's ruling party and its army, respectively)\nSPLM/A-N: Sudan People's Liberation Movement/Army – North (formerly a recognized opposition party in Sudan, became an insurgent group in 2011)\nSRF: Sudan Revolutionary Front (an alliance of insurgent groups in Sudan)\nUNAMID: United Nations – African Union Hybrid Mission in Darfur\nUNISFA: United Nations Interim Security Force for Abyei\nUNMIS: United Nations Mission in Sudan\nUNMISS: United Nations Mission in South Sudan\nAppendix E. Peacekeeping Operations" ], "depth": [ 0, 1, 2, 1, 2, 1, 2, 3, 2, 3, 3, 2, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full h1_full", "", "h0_full", "h0_full", "h2_title h1_title", "", "", "h2_title h1_title", "", "h2_full h1_full", "", "h1_title", "h1_full", "", "h1_full", "h2_title h1_title", "h2_full h1_full", "", "h0_full h2_title", "", "h2_full", "", "h0_full h2_full h1_full" ] }	{ "question": [ "What issues dominate the U.S. agenda in Sudan?", "What was Sudan's status as a unified country?", "What caused internal conflict?", "How did Sudan split in two?", "What issues currently exist between the two Sudans?", "To what extent did the split resolve other Sudanese conflicts?", "How large of an impact do these conflicts have?", "How susceptible to food instability are the Sudans?", "Why have aid groups been largely unable to help?", "Why have U.S.-Sudan ties been strained?", "Why is there increased support for normalizing relations with Sudan?", "How did the Obama Administration take action regarding relations with Sudan?", "How have alleged misdeeds by the Khartoum affected the U.S. effort?", "What other challenges exist in normalizing relations?" ], "summary": [ "Efforts to support an end to the country's myriad conflicts and human rights abuses have dominated the agenda, as have counterterrorism concerns.", "When unified (1956-2011), Sudan was Africa's largest nation, bordering nine countries and stretching from the northern borders of Kenya and Uganda to the southern borders of Egypt and Libya. Strategically located along the Nile River and the Red Sea, Sudan was historically described as a crossroads between the Arab world and Africa.", "Domestic and international efforts to unite its ethnically, racially, religiously, and culturally diverse population under a common national identity fell short, however.", "In 2011, after decades of civil war and a 6.5 year transitional period, Sudan split in two.", "Mistrust between the two Sudans—Sudan and South Sudan—lingers, and unresolved disputes and related security issues still threaten to pull the two countries back to war.", "The north-south split did not resolve other simmering conflicts, notably in Darfur, Blue Nile, and Southern Kordofan.", "Roughly 2.5 million people remain displaced as a result of these conflicts.", "Like the broader sub-region, the Sudans are susceptible to drought and food insecurity, despite significant agricultural potential in some areas. Civilians in the conflict zones are particularly vulnerable.", "Instability and Sudanese government restrictions have limited relief agencies' access to conflict-affected populations. Humanitarian conditions in Southern Kordofan and Blue Nile have been at crisis levels for months, but an estimated half a million people remain largely beyond the reach of aid groups. Logistical challenges constrain the delivery of relief for those who have fled, primarily to remote refugee camps across the border in South Sudan. The harassment of aid workers is a problem in both Sudans, further hindering aid responses.", "Those ties have long been strained over Khartoum's human rights violations and history of support for international terrorist groups.", "Among the arguments in favor of normalizing relations with Sudan has been the notion that the United States has few additional unilateral \"sticks\" to apply against Khartoum, given robust sanctions already in place. Applying certain \"carrots,\" such as easing sanctions, might encourage further political reforms, proponents say.", "The Obama Administration sought to improve the relationship with Khartoum in 2011, given South Sudan's successful referendum and separation from Sudan, and Sudan's cooperation on counterterrorism.", "The U.S. effort has been impeded by ongoing reports of abuses, including allegations that Khartoum continues to commit war crimes against civilians. Some observers argue that improving the relationship would reward bad behavior.", "Relations are also complicated by the fact that several government officials, notably President Omar al Bashir, have been accused of war crimes, crimes against humanity, and genocide at the International Criminal Court in relation to the Darfur conflict." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, 0, -1, 2, -1, 0, -1, 2, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 2 ] }
CRS_RL34002	{ "title": [ "", "Introduction", "Current Program Features and Issues", "Administration", "Local Discretion", "Eligible Uses of Funds", "Homeownership Vouchers", "Rent Structure14", "Calculation of Income25", "Eligibility30", "Work Requirements and Time Limits", "Inspections", "Portability", "Mobility", "Funding Allocation", "Recent Reform Proposals", "Moving to Work Expansion", "Voucher Reform Legislation", "112th Congress", "SEVRA", "SESA and AHSSIA", "Appropriations Proposals" ], "paragraphs": [ "", "The Section 8 Housing Choice Voucher program provides monthly rental assistance to around 2 million low-income households each year. It is administered at the local level by quasi-governmental public housing agencies (PHAs). While some form of Section 8 rental assistance has been in place since the mid-1970s, the modern program was shaped largely by the 1998 assisted housing reform act ( P.L. 105-276 ). More than a decade later, the Section 8 Housing Choice Voucher program has come under new scrutiny, with PHA industry leaders, low-income housing advocates, both the Bush and Obama Administrations, and some Members of Congress calling for reforms. Further, recent efforts to reduce domestic discretionary spending have resulted in constraints in funding for the program, which has intensified PHAs' calls for cost-saving administrative reforms. This report introduces the primary features of the Section 8 Housing Choice Voucher program, issues that have arisen, and recent reform proposals.", "", "The current Section 8 Housing Choice Voucher program and its approximately 2 million vouchers are administered by more than 2,500 local PHAs across the country. PHAs vary greatly in their size, jurisdiction, and capacity. Some administer as few as 10 vouchers, while one PHA, the New York City Housing Authority, administers almost 90,000. Roughly half of all PHAs administer 250 or fewer vouchers. Some PHAs have jurisdiction over all rural areas of a state or an entire county or city, while others have jurisdiction over only part of a city or county. Some PHAs have a full-time director and a large staff; others have one person serving part-time as both the director and sole staff.\nThis heterogeneity has been criticized at times by some researchers and housing advocates. They have argued that housing markets are regional, and thus housing programs should be administered on a regional level. Most other social service programs serving low-income families—such as Temporary Assistance for Needy Families, child care assistance, and the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps)—are administered at the state level. If the voucher program were administered at the state level, it is argued, it might be easier to coordinate it with other social services. A recent Government Accountability Office (GAO) report suggested that consolidated administration of the voucher program could increase efficiency; however, it could also result in reduced local control over the program.\nThe organizations representing PHAs have generally argued in favor of the current locally driven and focused system. Local PHAs have important local connections with entities ranging from landlords to zoning boards, connections that states, they contend, would not have. Furthermore, PHAs have the most experience in administering federal housing assistance for the poor, both through the voucher program and the federal public housing program.\nHUD has taken some steps to encourage consolidation of PHAs. For example, the department has provided guidance to PHAs on how to voluntarily transfer their voucher programs to another PHA.", "Many of the features of the program (described throughout this report) are set by federal statutes and regulations, such as the general eligibility requirements, maximum subsidy levels, minimum tenant contributions towards rent, and basic housing quality standards. However, PHAs are given discretion in some areas, such as managing and prioritizing their waiting lists for assistance and screening tenants for suitability. PHAs must describe their programs and how they are using their local discretion in five-year and annual PHA plans, as well as in administrative plans. All of these plans must be developed with public input and made available for public review. (For more information about PHAs' discretionary authority, see CRS Report R42481, The Use of Discretionary Authority in the Housing Choice Voucher Program: A CRS Study , by [author name scrubbed].)", "Today's voucher program provides a federally defined subsidy, called a voucher, which a family can use to help pay its housing costs in the private market. That voucher pays roughly the difference between a unit's rent and the tenant's contribution towards the rent. The bulk of voucher funds provided by HUD to PHAs is used to renew existing, previously funded and authorized vouchers. New vouchers are called incremental vouchers. No funds had been provided for new, general purpose incremental vouchers since 2002; however, the appropriations acts since FY2008 have all provided funding for incremental vouchers for targeted populations, including homeless veterans and families in the child welfare system.\nIn addition to receiving funding for the rent subsidies themselves, PHAs receive funding for the cost of administering the program. PHAs earn administrative fees on a per-voucher basis. They can use their administrative fee funding to cover the cost of administering the voucher program, and for other purposes, such as providing supportive services, downpayment or security deposit assistance, or housing search assistance.\nThe voucher program is governed by hundreds of pages of regulations and guidance that make it, some argue, costly, overly prescriptive, and difficult to administer. Past reform initiatives have proposed to convert the current program into something more akin to a block grant, redefining the concept of a voucher by instead providing funds that PHAs could use for rental assistance, homeownership assistance, and/or supportive services, as defined by the grantee. A \"voucher\" would no longer have uniform meaning, and PHAs could provide more or less generous assistance to families at their discretion, outside of some, if not all, current federal rules. Such a reform would be consistent with the 1996 welfare reform law that abolished the Aid to Families with Dependent Children (AFDC) program and replaced it with the broader-purpose Temporary Assistance for Needy Families (TANF) block grant.\nThe concept of block-granting the voucher program raises concerns among low-income housing advocates, who argue that block granting could lead to funding cuts, that block grants can lead to less federal oversight and less transparency about how funds are being spent, and that existing rules and regulations are necessary to protect tenants.\nTo some degree, the Moving to Work (MTW) Demonstration (discussed later in this report) has allowed some PHAs to receive their federal housing assistance funding (Section 8 and public housing) in block grant form. MTW has been popular with participating PHAs, who feel that the added flexibility allows them to innovate and run more efficient programs. Low-income housing advocates have criticized MTW for lacking transparency and clear program objectives and for allowing PHAs to adopt proposals—such as time limits and work requirements for recipients—that they argue are detrimental for assisted families. (For more information about MTW, see CRS Report R42562, Moving to Work (MTW): Housing Assistance Demonstration Program , by [author name scrubbed].)", "In some cases, families can use their vouchers to help pay the monthly costs of a mortgage, but only if their local PHA chooses to run a homeownership voucher program. There has been debate about how much of the voucher program should, and can realistically, be focused on promoting homeownership. The George W. Bush Administration made a priority of increasing the number of first-time homebuyers making purchases with homeownership vouchers. Successful homeownership can help lower-income families build assets and wealth, which can help their long-term financial security. However, the voucher homeownership program has minimum requirements that many families currently served by the rental voucher program may be unable to meet (minimum income standards, employment requirements). Furthermore, some voucher families, particularly those in low-wage and/or volatile employment markets may not have the financial stability necessary to successfully maintain homeownership. Given the recent turmoil in the housing market, the immediate future growth of the voucher homeownership option is uncertain. After a peak of nearly 2,800 closings in FY2004, the number of closings has averaged around 1,700 per year through the end of FY2010, and around 1,100 closings in FY2011 and FY2012.", "Under the current rules of the voucher program, families pay an income-based rent. Specifically, families are required to pay 30% of their adjusted incomes toward rent, although they may choose to pay more. Given this income-based rent structure, as tenants' incomes increase, the amount they are required to pay in rent increases, and as their incomes decrease, the amount they are required to pay in rent decreases.\nThe current income-based rent structure used in the voucher program—and most other HUD rent-assistance programs—is based on the concept of affordability. It is generally accepted that housing is affordable for low-income families if it costs no more than 30% of their adjusted gross income, on the assumption that low-income families need the full remaining 70% to meet other needs. However, this figure may be considered somewhat arbitrary. For some families with few costs for work, transportation, medical, child care, or other needs, 40% or even 50% of income might be a reasonable contribution toward housing costs. In fact, the current voucher program allows families to choose to pay up to 40% of their incomes toward housing costs initially, and even greater amounts upon renewal of a lease. For other families, with high expenses for work, transportation, medical, child care, or other outside costs, some percentage lower than 30% might be the most reasonable, or \"affordable,\" contribution. In fact, in the early years of the rent assistance program, the standard was set lower, at 25% of family income.\nCritics of the current rent calculation, including the former George W. Bush Administration and some PHA industry groups, have argued that PHAs should have the flexibility to modify the existing income-based rent system or adopt new systems partially or fully decoupled from income, such as flat or tiered rents. Under flat rents, families would pay a PHA-determined, fixed, below-market rent, based on unit size, regardless of their incomes. As income changed, rent would stay the same. Current law permits PHAs to set voluntary flat rents for public housing. Families are permitted to choose to pay flat rents, but must be permitted to switch back to income-based rents.\nUnder tiered rents, PHAs could set different flat rents for broad tiers of income. Families would pay the rent charged for their income tier, and only fluctuations in income that move them from one tier to another would change their rent. If PHAs set rent tiers very low, then fewer tenants would face an increase in rent, but PHAs could face higher voucher costs. If the tiers were set higher, then more tenants would face rent increases, but PHAs would see reduced voucher costs.\nShallower subsidies under flat or tiered rents would allow PHAs either to save money or serve more people with the same amount of money, depending on the authority provided by HUD and Congress. However, shallower subsidies would also result in greater cost-burdens for the lowest-income families.\nMany PHAs that have been given the choice to adopt alternative rent structures—those participating in the Moving to Work demonstration—have made that choice. According to data from HUD, nearly half of MTW PHAs have adopted flat or tiered rents.\nAnother argument in favor of moving away from an income-based rent structure concerns administrative ease. The current complicated rent calculation, paired with the difficulty of verifying the incomes of tenants, has led to high levels of error in the subsidy calculation. According to a HUD 2001 Quality Control study looking at data from 2000, over 60% of all rent and subsidy calculations contained some type of error. The report estimated the errors resulted in $1 billion in subsidy over- and under-payments. These errors led the Government Accountability Office (GAO) to designate the Section 8 program as a \"high risk\" program, meaning that it was particularly susceptible to waste, fraud, and abuse.\nHUD has undertaken a number of initiatives to try to reduce errors. Beginning with the FY2003 Consolidated Appropriations Act ( P.L. 108-7 ), HUD was given access to the National Directory of New Hires, a database that may allow PHAs to better verify income data. HUD has also implemented the Enterprise Income Verification system, a fraud-detection tool that makes income and wage data available to PHAs. It appears these efforts have resulted in some improvement. The FY2009 Quality Control study found a 60% reduction in erroneous payments from 2000, down to $440 million, but up from $400 million the prior year. About 42% of subsidies were erroneously calculated, down from 60% in 2000, but up from 39% in FY2008. In 2007, GAO removed the rental assistance program from its high risk series.\nAdopting flat or tiered rents could substantially reduce—if not eliminate—errors in rent calculations.\nA flat rent structure may also help reduce the work disincentives inherent in the current calculation. Since rent goes up as income goes up, families face an effective 30% tax on any increase in earnings and therefore they may have a disincentive to increase earnings and/or an incentive to under-report income. To help address this problem in the public housing program, Congress has instituted a mandatory earned income disregard that applies to new earnings for some families; however, no such mandatory disregard exists in the voucher program, except in the case of certain recipients who have disabilities. If PHAs administering the voucher program choose to voluntarily disregard increased earnings, they will not receive funding to cover the increased subsidy costs, or they may face sanctions from HUD for not accurately calculating subsidies. Under flat or tiered rents, families can generally increase their earnings without facing changes in their rents.\nLow-income housing advocates generally agree that the current rent-setting system is overly complicated, but still support income-based rents over flat rents. Flat rents are not as responsive to changes in family income as income-based rents, and their adoption could result in some families paying more toward rent than is generally considered affordable (30% of income). They argue that changes to the method of calculating income could do much to simplify the rent-setting process.", "Eligibility for a voucher is based on a family's annual gross income, and the amount of rent a family must pay is based on a family's annual adjusted income. The current system for calculating income, as noted earlier in relation to rents, has been criticized as cumbersome and prone to errors.\nAnnual income, which is used for determining eligibility and is the basis for determining adjusted income for rent-setting purposes, is defined as all amounts that are anticipated to be received by all members of a household during the subsequent 12-month period, with some exclusions (such as foster care payments). Anticipating low-income families' future incomes can be difficult, as their employment is often variable. The composition of a family may also be variable, with members joining or leaving the household over the course of a year. Further, PHAs are expected to verify families' incomes using third-party sources. While this process helps to ensure accuracy, it can be time-consuming for PHAs.\nOnce the total amount of a family's income has been determined, adjusted income is calculated for rent-setting purposes by applying various deductions. From total annual income, the family may qualify to have certain amounts deducted, such as $480 per dependent; $400 for elderly and disabled households; and reasonable child care expenses, disability expenses, and certain medical expenses of the elderly or disabled.\nThe complexity of the income determination system is a factor driving errors in rent determination. Many of the requirements are statutory, so changes would require congressional action. Some of the current requirements are regulatory, rather than statutory, and PHA groups have called on HUD to simplify the process. In the past, HUD has stated that it is looking at ways to improve the income calculation process, although no major administrative changes have been made.", "The current voucher program sets initial eligibility for assistance at the very low-income level (50% or below of local area median income (AMI)), with a requirement that 75% of all vouchers be targeted to extremely low-income families (30% or below local AMI). The targeting requirement was enacted as a part of the 1998 assisted housing reform law ( P.L. 105-276 ) and was designed to ensure that the neediest families received assistance.\nServing lower income families results in higher costs per voucher. In a limited funding environment, the higher the per voucher cost, the fewer the number of families that can be served. The difficult tradeoff between serving more families with less generous subsidies or serving fewer families with more generous subsidies can be found in most social programs and lies at the center of many of the voucher reform debates.\nThe George W. Bush Administration advocated loosening current targeting standards in an attempt to either serve more families or reduce the cost of the program. Low-income housing advocates have generally supported retaining current income eligibility and targeting requirements, arguing that the lowest-income households face the heaviest rent burdens and are the most in need of assistance.", "The voucher program does not currently have time limits or work requirements for applicants or recipients. Families that receive voucher assistance can retain that assistance until they choose to leave the program; they are forced to leave the program (due to non-compliance with program rules or insufficient funding); or their incomes rise to the point that 30% of their incomes equal their housing costs, at which point their subsidy is zero. The public housing program does have a mandatory eight-hour per month work or community service requirement for non-elderly, non-disabled tenants; however, many public housing residents are exempted.\nSome have advocated setting time limits for receipt of voucher assistance and making work a requirement for ongoing eligibility. They argue that under the current system, families have no incentive to increase their incomes or work efforts and leave the program. Adopting a work requirement in the voucher program may help encourage non-elderly, non-disabled households that are not currently working to go to work. Time limits and, particularly work requirements, have been at least partly credited with decreasing the size of the cash assistance caseload in the Temporary Assistance for Needy Families (TANF) program.\nAnother reason to consider time limits relates to the fact that many communities have long waiting lists for assistance. Since few new vouchers have been funded in recent years, turnover in the current program is the primary way to serve those families on the waiting lists.\nThere is some evidence that families with children, those most likely to be affected by work requirements and time limits, already leave the program relatively quickly. According to HUD research from 2003, the median length of stay for families with children is two and a half years. Further, while time limits and work requirements may help move families out of the voucher program, it is unclear whether such changes would increase families' incomes or lead to self-sufficiency. Research based on the 1996 welfare reform changes ( P.L. 104-193 ) indicates that for many poor families, increases in work do not necessarily translate into greater total income, and most households need work supports (such as child care and transportation assistance) in order to make them successful in becoming financially self-sufficient. Such supportive services are not currently a part of the voucher program, and would likely require additional funding. In fact, it is unclear how low-income families that are leaving the program now are meeting their housing costs. HUD conducted preliminary research looking at families with children who left the voucher program over a five-year period, and found that less than 1% of them had incomes sufficient to afford an apartment at the fair market rent in their community.\nLow-income housing advocates promote providing incentives for families to increase their work efforts and their incomes, rather than time limits and work requirements. For example, non-elderly, non-disabled families could be encouraged to find and increase work through expansions in the Family Self-Sufficiency program (FSS), which provides work supports for some tenants with vouchers and deposits participating tenants' increased rent payments (that result from increased earnings from work) into escrow accounts on their behalves. However, not every PHA runs an FSS program; as of 2008, 28,469 voucher program participants were enrolled in FSS programs. The full effects of FSS are unclear, as it has not been implemented using as a demonstration or in such a way as to test its impact. HUD has produced a couple of descriptive profiles of FSS participants, which found higher income increases experienced by FSS program participants compared to non-FSS participants.", "Before a PHA can make subsidy payments for a unit selected by a tenant, the unit must first be inspected to ensure that it complies with the HUD-adopted Housing Quality Standards (HQS). If the unit is approved, it must be reinspected at least annually. If the unit fails inspection, the PHA cannot make payments to the landlord until the unit is in compliance. These inspections are designed to protect tenants from living in substandard housing. However, the inspections themselves (or finding inspectors to conduct them) can add delays to the leasing process, which may result in landlords' reluctance to participate in the voucher program and families losing out on units in tight markets. Further, some HQS failures may be found for violations that a tenant might consider a \"minor\" violation (such as missing light-switch plates or a tear in the carpet that could be considered a tripping hazard), yet PHAs are still required to withhold payment. This may also contribute to landlords' reluctance to participate in the program.\nThe prevalence of substandard housing varies widely; for example, areas with a relatively new housing stock (particularly in the Southwest) may only need inspections every couple of years to ensure quality, whereas areas with a relatively old housing stock (such as the Northeast) may require more frequent inspections, perhaps even more than once a year, in order to ensure quality. Although there have been calls to change the inspection requirements, it has proven difficult to balance providing flexibility to PHAs to address the needs of specific communities with ensuring protection for tenants from substandard conditions.", "Section 8 vouchers are nationally portable, which means that families can take their vouchers and move from the jurisdiction of one PHA to the jurisdiction of another PHA. Once a family moves, the two PHAs come to an agreement on how to administer the voucher. The receiving PHA can \"absorb\" it, meaning the receiving PHA agrees to serve the family with one of its vouchers, freeing up the voucher for the originating PHA. Alternatively, the receiving PHA can also choose to \"bill\" the originating PHA for the voucher, meaning the receiving PHA will administer the voucher on behalf of the originating PHA, and will seek reimbursement from the originating PHA for any costs associated with the voucher. In a billing situation, the originating PHA will retain the voucher as a part of its stock, and if and when the family leaves the program, the originating PHA can reissue it.\nThere are advantages and disadvantages to both billing and absorbing. Receiving PHAs that bill only receive a partial (80%) administrative fee from the originating PHA, yet the administration can be complicated. Receiving PHAs that absorb vouchers have to serve the porting family before the next person on their own waiting list, a person who may have been on the waiting list for a long time already. Recognizing these problems, PHAs have the ability to limit portability. A PHA can require a family to live in its jurisdiction for up to one year upon initial receipt of a voucher and a PHA can deny a portability move if it will increase PHAs costs above what can be supported by federal appropriations.\nProposals have been offered to alter portability to make it administratively easier. They have ranged from limiting portability except between jurisdictions with preexisting agreements to having a national pool of vouchers that could be used to smooth out the absorption process. Proposals that limit portability result in limits to families' choices; proposals that involve national pools generally require additional funding.", "Portability offers the possibility for families with vouchers to move from areas of high concentrations of poverty, poor schools, and little employment opportunity to areas with low concentrations of poverty, good schools, and more employment opportunity. Research looking into the effects of mobility on families has found generally positive effects, but not in all cases or to the extent that researchers and proponents had expected. Advocates for low-income families have argued that the mobility potential of portability has not been fully reached. They argue for more funding for mobility counseling and performance standards that encourage mobility efforts. Advocates for state or regional administration of the voucher program argue that moving away from PHA-level administration could help improve mobility. (For more information, see CRS Report R42832, Choice and Mobility in the Housing Choice Voucher Program: Review of Research Findings and Considerations for Policymakers , by [author name scrubbed] and [author name scrubbed].)", "The cost of a voucher is equal to roughly the difference between the rent for a unit (capped by a maximum set by the PHA and called the payment standard) and the tenant's contribution toward the rent (generally, 30% of the tenant's income). The cost of a voucher fluctuates as a family's income and market rents increase or decrease. Prior to FY2003, HUD reimbursed PHAs for the actual cost of their vouchers, and each year, HUD would ask Congress for funding sufficient to cover what HUD anticipated it would take to fund PHAs' costs.\nDue partly to changes in the rental market and partly to changes in the rules of the voucher program (such as increases in the payment standard), PHAs' actual costs began rising rapidly in 2002 and 2003. This raised concerns for both the George W. Bush Administration and Congress about the cost of the program. Partly in response to these cost increases, the Bush Administration proposed potentially cost-saving changes in both the way that PHAs received funds and in the underlying factors that led to the cost growth, including the amount tenants were asked to contribute toward rent and the maximum payment standard.\nCongress reacted by changing only the way that PHAs received their renewal funding, without enacting other program reforms. In FY2005, Congress directed HUD to fund PHAs based on the amount of funding they received in the previous year, rather than their costs. This new funding formula, which was continued in FY2006, was more predictable for PHAs, similar to formulas used for other discretionary social programs, and easier for HUD to administer. However, it also led to funding problems for some PHAs, whose actual costs were still driven by the difference between rents and incomes in their communities, while their funding was capped. As a result, some PHA groups called for either a change back to an actual cost funding formula or changes to the structure of the voucher program that would allow them to better control their costs. In the FY2007 funding law ( P.L. 110-5 ), Congress reverted back to a funding formula based on actual costs and utilization. A similar formula has been adopted each year since. (For more information, see CRS Report RL33929, The Section 8 Voucher Renewal Funding Formula: Changes in Appropriations Acts , by [author name scrubbed].)\nIn recent years, as per voucher costs and the number of vouchers in use have risen, some Members of Congress have expressed concern about the rising cost of the Section 8 voucher program. These concerns have led to continued calls for program reforms to constrain future cost growth. A 2012 GAO report examined recent cost growth in the voucher program and found that it was largely driven by market factors; during the recent economic recession, tenant incomes have declined significantly and rents have increased significantly.", "", "In recent years there have been calls to expand the Moving to Work (MTW) Demonstration. MTW was authorized by Section 204 of the Omnibus Consolidated Rescissions and Appropriations Act of 1996 ( P.L. 104-134 ) in order to design and test ways to\npromote self-sufficiency among assisted families; achieve programmatic efficiency and reduce costs; and increase housing choice for low-income households.\nUnder Moving To Work, HUD can select up to 30 PHAs to participate in the demonstration and receive waivers of most rules that govern public housing and the Section 8 voucher program (those under the U.S. Housing Act of 1937 (P.L. 75-412, as amended)). With HUD approval, MTW agencies can merge their Section 8 voucher, public housing capital and public housing operating funds, alter eligibility and rent policies, modify their funding agreements and reporting requirements with HUD, and make other changes. Rules outside of the U.S. Housing Act cannot be waived under MTW, such as labor requirements and fair housing rules, nor can rules governing the demolition and disposition of public housing. Participating agencies must also agree to serve substantially the same number of people they were serving before the demonstration and they must agree to continue to serve low-income families.\nAgencies participating in MTW have used the flexibility it provides differently. Some have made minor changes to their existing Section 8 voucher and public housing programs, such as limiting reporting requirements; others have implemented full funding fungibility between their public housing and voucher programs and significantly altered their eligibility and rent policies. Some have adopted time limit and work requirement policies, similar to those enacted in the 1996 welfare reform law.\nSeveral of the national PHA industry groups support an expansion of MTW. They argue that the flexibility provided under MTW would permit PHAs to more efficiently and effectively manage their limited federal funding and make programmatic changes tailored to their local communities. Low income housing advocates, particularly the National Low Income Housing Coalition, have expressed opposition to an MTW expansion. Specifically, they are concerned that MTW agencies will choose to serve higher income families than they are permitted under the rules of the U.S. Housing Act and that the agencies will disconnect rent-setting policies from income with the result that tenants will pay increased rents. While the initial intent of PHAs may not be to charge higher rent or serve higher-income families, there is concern that in a restricted funding environment, such policy changes will have to be made in order to balance budgets.\nThe existing MTW program, while called a demonstration, was not implemented in a way that would allow it to be rigorously evaluated. Therefore, there is not sufficient information about different reforms adopted by MTW agencies to evaluate their effectiveness. There is some information available about how PHAs have implemented the program (as noted earlier); however, it is unclear whether PHAs implementing a modified MTW program in an environment where funding is limited would make the same choices that earlier MTW agencies made. (For more information, see CRS Report R42562, Moving to Work (MTW): Housing Assistance Demonstration Program , by [author name scrubbed].)\nSeveral bills were considered in the 110 th and 111 th Congresses to expand the MTW program, although none were enacted before the end of those Congresses. The Moving to Work Charter Program Act has been introduced in each of the past several Congresses, and was introduced again in the 112 th Congress ( S. 117 ). It proposed to expand and modify the MTW program, permitting the Secretary of HUD to enter into a new form of charter contract with up to 250 PHAs.\nThe Section 8 Voucher Reform Act, ordered reported by the House Financial Services Committee in the 111 th Congress and introduced in the 112 th Congress, included a provision that would have replaced the existing Moving to Work program with a new Housing Innovation Program (HIP). The HIP would have maintained several aspects of MTW, including the ability to blend public housing and voucher funding, but would make several major changes. HUD would have been required to designate up to 60 agencies to participate in HIP, with the option of adding another 20 under a modified version of the program. HUD would have been required to develop a selection process, based on priorities established under the bill, and select a diverse group of agencies (including a limited number of lower-performing agencies, but not troubled agencies). HUD would also have been required to establish performance standards and evaluate, or contract for the evaluation of, HIP participating agencies with the goal of developing successful models that can be adopted by other agencies. Unlike MTW, HIP would have included limits to some policies pursued by participating agencies, including guidelines for time limit and employment condition policies and limits on rent policies that result in higher rent burdens for tenants.\nAlso in the 112 th Congress, the House Financial Services Committee circulated a discussion draft of the Moving to Work Improvement, Expansion, and Permanency Act of 2011 . The discussion draft bill proposed to make the MTW program permanent and lift the cap on the number of participating agencies. It also proposed to modify the purposes of MTW to include promoting economic independence, flexibility and cost effectiveness, and housing choice. The draft bill included modifications to reporting requirements both for PHAs to HUD, and for HUD to Congress. It also included a mechanism to transition existing MTW agencies to the new model. The language from this draft bill was included in the draft Affordable Housing and Self Sufficiency Improvement Act (AHSSIA), discussed in the next section of this report.", "Since the early 2000s, Congress has considered reforms to the Housing Choice Voucher program each year.\nFrom 2003 through the end of its second term, the George W. Bush Administration proposed either eliminating the Section 8 voucher program and replacing it with a new initiative, or substantially reforming the program. Bills to enact President Bush's reforms were introduced in Congress, although no further action was taken. Legislative proposals in the 107 th and 108 th Congresses envisioned fundamentally reworking the voucher program, with initiatives including transferring administrative responsibilities from PHAs to the states, implementing time limits and work requirements, and allowing PHAs to experiment with various rent-setting policies.\nBipartisan reform bills from the past couple of years have been narrower in scope than the earlier reform proposals. They have proposed changes to the rules governing the existing program, rather than fundamentally altering it. In 2006, a bipartisan voucher reform bill, the Section 8 Voucher Reform Act of 2006 (SEVRA) ( H.R. 5443 , 109 th Congress) was approved by the House Financial Services Committee, but no further action was taken before the close of the 109 th Congress. Similar, bipartisan reform legislation was proposed in the 110 th Congress. The Section 8 Voucher Reform Act of 2007 ( H.R. 1851 , 110 th Congress) passed the House and the Section 8 Voucher Reform Act of 2008 ( S. 2684 , 110 th ) was introduced in the Senate. The bills were similar but had several key differences. Reform legislation was not enacted before the end of the 110 th Congress. A new version of SEVRA—the Section Eight Voucher Reform Act of 2009 ( H.R. 3045 )—was introduced in the 111 th Congress and reported out of the House Financial Services Committee, but not enacted before the 111 th Congress adjourned. Several Section 8 reform bills were again circulated, introduced, or considered in the 112 th Congress. No reform legislation has been introduced in the 113 th Congress.\nThe following section of the report summarizes reform efforts from the 112 th Congresses.", "", "A version of SEVRA very similar to the one approved by the House Financial Services Committee in the 111 th Congress was introduced by Representative Waters in the 112 th Congress. The bill proposed to simplify the income calculation process by streamlining deductions, permitting families on fixed incomes to self-certify their income for up to three years, and permitting PHAs to use tenants' prior-year income to calculate current year income. It would have modified the inspection process to permit PHAs to inspect units every other year, rather than every year. It proposed other changes, including requiring PHAs to absorb portability vouchers, allowing PHAs to establish alternative rent structures for non-elderly, non-disabled tenants (with limits on how much families could be required to pay), and making it possible for PHAs to use their voucher funding to provide downpayment assistance for first time homebuyers (without requiring direct appropriations). The bill would have established a new renewal funding allocation formula for PHAs, similar to the formula enacted in appropriations laws since FY2007, but including provisions for reallocating unused funds and permitting PHAs to borrow against future appropriations. It would have directed the Secretary to develop a new administrative fee formula as well as a new performance rating system (both within guidelines set in the bill). The major difference between the Section 8 Voucher Reform Act of 2011 ( H.R. 1209 ) and the version from the prior Congress is that the most recent version did not contain a controversial firearms provisions that had been added during committee consideration. SEVRA was not considered before the end of the 112 th Congress.", "On June 23, 2011, the Insurance, Housing and Community Opportunity Subcommittee of the House Financial Services Committee held a hearing entitled \"Legislative Proposals to Reform the Housing Choice Voucher Program.\" At that hearing, witnesses discussed a draft bill that has been circulated by the subcommittee, the Section Eight Savings Act of 2011 (SESA). On October 13, 2011, the subcommittee held another hearing entitled \" The Section 8 Savings Act of 2011: Proposals to Promote Economic Independence for Assisted Families,\" where a revised draft version of SESA was circulated. The two draft versions of SESA both included many provisions from SEVRA, but also made changes; most notably, neither version of SESA included an expansion of MTW.\nWith the start of the second session of the 112 th Congress, the House Financial Services Committee circulated a new draft reform bill. It contained many provisions from SEVRA and SESA, but with several changes, including a new name, which reflected the fact that all of these bills included provisions beyond the Section 8 voucher program: the Affordable Housing and Self Sufficiency Improvement Act of 2012 (AHSSIA).\nLike SEVRA, AHSSIA contained provisions that address inspection of units under the Section 8 voucher program. The primary difference is that SEVRA would have permitted PHAs to use rent payments withheld from property owners whose units had failed inspections to make repairs to the unit; AHSSIA would not permit the use of withheld rent to make repairs.\nBoth AHISSA and SEVRA proposed to change the way income eligibility and tenant rent are defined and calculated for families participating in assisted housing programs. AHISSA, unlike SEVRA, would have increased the minimum rent threshold, subjected it to future inflation increases, and required PHAs to use the new minimum rents.\nLike SEVRA, AHSSIA proposed an expansion of MTW. AHSSIA would have changed MTW from a demonstration to a HUD program, lifted the existing cap on the number of participants, required HUD to evaluate participating PHAs' progress in achieving the purposes of the program, and required HUD to evaluate the program to identify replicable program models.\nAHSSIA also contained several new provisions that were not included in SEVRA, including a title to modify the Family Self Sufficiency (FSS) program. Among other changes to FSS, the draft legislation proposed to combine the public housing and Section 8 voucher versions of the FSS program into one program and allow for it to be available to Section 8 assisted multifamily housing properties. It would have made participation in FSS mandatory for large PHAs (subject to the availability of funding), created a new formula for distributing funding, and prohibited PHAs from terminating tenancy for families because they fail to successfully complete the program. Under the same title of the draft legislation, AHSSIA would have required HUD to conduct a new rigorous demonstration to identify the most effective methods for promoting economic security among non-elderly, non-disabled assisted tenants.\nFurther, AHSSIA included an authorization for the Rental Assistance Demonstration (RAD) to convert certain assisted housing properties to a new form of Section 8 rental assistance. RAD was initially authorized in the FY2012 appropriations legislation. AHSSIA also contained a new provision to allow PHAs to have additional funding flexibility in their public housing programs.\nThe subcommittee on Insurance, Housing, and Community Opportunity marked up and approved a draft version of AHSSIA in early February 2012, but the bill was not formally introduced, nor was it considered by the full committee, before the end of the 112 th Congress.", "The President's FY2014 budget request to Congress, like his FY2012 and FY2013 requests, included proposals for several statutory changes that would affect HUD's rental assistance programs, including the Section 8 Housing Choice Voucher program. Specifically, HUD asked for language that would\nbroaden the definition of \"extremely low-income\" to reflect the higher of 30% of area median income or the poverty thresholds published by the Department of Health and Human Services (HHS); revise the deductions from income used to calculate rent for elderly or disabled families by increasing the standard deduction and increasing the threshold for deducting medical or related costs; cap the amount of utility allowance a family can receive based on the size of the family, rather than the size of the unit leased by the family; alter inspection requirements; and permit HUD to run a demonstration to test different models for setting rent in rental assistance programs.\nSimilar provisions were included in Section 8 voucher reform legislation considered in the 111 th Congress and included in SEVRA, SESA and, most recently, AHSSIA. HUD's FY2014 budget estimated that these changes would result in an overall reduction in the cost of HUD rental assistance programs." ], "depth": [ 0, 1, 1, 2, 3, 2, 3, 2, 2, 2, 2, 2, 2, 3, 2, 1, 2, 2, 3, 4, 4, 4 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h1_title", "h1_title", "h1_full", "", "", "", "", "", "", "", "", "", "", "h2_title h1_title", "h2_full h1_full", "h2_full h1_full", "h2_title", "h2_full", "h2_full", "h2_full" ] }	{ "question": [ "How does the Section 8 Housing Choice Voucher affect low-income households?", "How is the Section 8 Housing Choice Voucher administered?", "How was the Section 8 rental assistance program formed?", "How has the Section 8 voucher program been received?", "What does this report introduce?", "To what extent have the Section 8 voucher reforms attempted to change the program?", "How have these attempted reforms addressed administrative shortcomings?", "How can the program be reformed to focus on long-term, sustainable goals?", "How frequently has Section 8 voucher reform been suggested?", "How have these attempts at reform legislation planned on altering the Section 8 voucher programs?", "What would these bills have changed with relation to the MTW Demonstration?", "To what extent have reform attempts continued after SEVRA?", "How does this version of Section 8 voucher reform differ from the SEVRA?", "How has the 113th Congress attempted to continue Section 8 voucher reform?" ], "summary": [ "The Section 8 Housing Choice Voucher program provides monthly rental assistance to around 2 million low-income households each year and is the largest (both in terms of people served and annual cost).", "It is administered at the local level by nearly 2,500 quasi-governmental public housing agencies (PHAs).", "While some form of Section 8 rental assistance has been in place since the mid-1970s, the modern program was shaped largely by the 1998 public housing reform act (P.L. 105-276).", "More than a decade later, the Section 8 voucher program has come under new scrutiny, with PHA industry leaders, low-income housing advocates, and some Members of Congress calling for reforms.", "This report introduces the primary features of the Section 8 voucher program, issues that have arisen, and recent reform proposals.", "Many of the key features of the program have been considered for reform, including its administration; eligible uses of program funds; the method by which tenant income is determined and rents are calculated; who is eligible and what conditions are placed on receipt of assistance; and other features of the program such as portability and quality inspections.", "Some reform proposals have focused on changing aspects of the program seen as administratively cumbersome and prone to errors.", "Other proposals have focused on altering the incentives in the program in order to promote policy goals such as homeownership, mobility and family self-sufficiency.", "Section 8 voucher reform legislation has been considered in every Congress since at least the 108th Congress.", "One version of this reform legislation, called the Section 8 Voucher Reform Act (SEVRA), was introduced and considered in both the 110th and 111th Congresses (H.R. 1851 and S. 2684, 110th Congress; H.R. 3045, 111th Congress). These bills—which were largely similar, but with some changes—would have made modifications to several features of the Section 8 voucher program, including how income is calculated, how inspections are conducted, and how portability is treated, and they would have adopted a new funding formula.", "They also would have renamed, expanded, and modified the MTW Demonstration and permitted PHAs to implement alternate rent structures, within limits.", "A version of SEVRA that is very similar to H.R. 3045 was introduced in the 112th Congress (H.R. 1209) by Representative Waters.", "However, instead of taking up SEVRA, the House Financial Services Committee held hearings on new draft Section 8 voucher reform legislation, initially called the Section 8 Savings Act (SESA) and then titled the Affordable Housing and Self Sufficiency Improvement Act (AHSSIA). This draft legislation contained many of the same or similar provisions that have been included in SEVRA, including an expansion of a modified version of MTW.", "Reform legislation has not been introduced in the 113th Congress." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 0, -1, -1, 0, 1, -1, 3, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 3, 3, 3, 3, 3, 3 ] }
CRS_R42776	{ "title": [ "", "Introduction", "U.S. Contributions to the Global Fund", "Emerging Global HIV/AIDS Funding Trends", "Emerging Donors", "Issues for Congress", "Appendix. Spending on HIV/AIDS Treatment in PEPFAR Programs" ], "paragraphs": [ "", "In January 2003, former President George W. Bush proposed that the United States spend $15 billion over the next five fiscal years to fight three diseases worldwide—malaria, tuberculosis (TB), and HIV/AIDS—through the President's Emergency Plan for AIDS Relief (PEPFAR). The plan included $10 billion for programs to combat HIV/AIDS in 15 focus countries; $4 billion for bilateral HIV/AIDS activities in some 100 non-focus countries, global HIV/AIDS research, and international TB projects; and $1 billion for the multilateral Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund). In May 2003, Congress authorized $15 billion in support of the initiative through P.L. 108-25 , the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act (the Leadership Act).\nCongress reauthorized the plan through P.L. 110-293 , the Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 (the Lantos-Hyde Act). The act authorized $48 billion to be spent from FY2009 through FY2013 on fighting the three diseases; including $5 billion for international malaria programs, $4 billion for global TB efforts, and $2 billion for a contribution to the Global Fund in FY2009.\nThe Leadership Act and subsequent appropriations were considered groundbreaking. Congress had never authorized or appropriated such sums of funds for a global health endeavor. In the five years prior to the launch of PEPFAR, Congress appropriated approximately $3.1 billion for global HIV/AIDS programs. In the first phase of PEPFAR (FY2004-FY2008), the United States spent more than $18 billion on global HIV/AIDS initiatives, including the Global Fund. From FY2009 through FY2012, U.S. spending on international HIV/AIDS assistance reached nearly $26 billion. Since PEPFAR was launched, Congress has consistently provided more than the Administration requested for global HIV/AIDS programs ( Figure 1 ).\nUnless otherwise specified, references throughout this report to U.S. spending on global HIV/AIDS programs include contributions to the Global Fund. It is important to note, however, that U.S. contributions to the Global Fund support grants aimed at fighting HIV/AIDS, TB, and malaria. Donors contributions to the Global Fund can not be directed at any particular disease.\nIn the first authorization cycle, spending on global HIV/AIDS programs and the Global Fund exceeded the President's proposal by roughly $1.7 billion ( Figure 1 and Table 1 ). By the second phase, however, the trend reversed: requests outpaced spending levels, which no longer increased annually ( Figure 2 ). In FY2011 and FY2012, actual spending on global HIV/AIDS programs was less than the previous fiscal year. It remains to be seen how much Congress will make available in FY2013. Many HIV/AIDS advocates hope larger debates about foreign aid and the federal deficit will not negatively affect PEPFAR funding in the 113 th Congress.", "During the second phase of PEPFAR (FY2009-FY2013), Congress continued to debate the role of the Global Fund. Some observers are particularly concerned about the growing share of global HIV/AIDS resources allocated to the Global Fund ( Figure 3 ). Although bilateral HIV/AIDS funding has consistently exceeded Global Fund levels, skeptics question whether U.S. priorities can be maintained through an ever-deepening commitment to the Global Fund. Critics also point to concerns about mismanagement of Global Fund resources by some grantees. Supporters, on the other hand, assert the Global Fund complements U.S. efforts by leveraging contributions from other donors and is an important partner in the U.S. fight against global HIV/AIDS. Prompted in part by U.S. concerns, the Global Fund is undergoing reforms. The Board approved the reforms at its 27 th board meeting on September 2012.\nCongressional appropriations for the Global Fund exceeded requested levels during the Bush and Obama Administrations. The gap between requested and actual spending was the most pronounced, however, throughout the Bush Administration. Presidents Bush and Obama had different views on apportioning bilateral and multilateral HIV/AIDS funds. President Bush never requested that more than 10% of global HIV/AIDS funds be spent on the Global Fund, whereas President Obama requested that up to 27% of global HIV/AIDS funds be reserved for the Global Fund ( Figure 4 ).\nDespite this difference, both Presidents demonstrated support for the Global Fund. President Bush offered the inaugural pledge, and President Obama made the first U.S. multiyear pledge. The two presidents, however, suggested different funding levels for the Global Fund. While requests for the Global Fund did not exceed $300 million during the Bush Administration, President Obama requested the highest ever pledge to the Global Fund—$1.65 billion in FY2013. The FY2013 request is the final amount of the three-year pledge made by the Obama Administration in 2010 to contribute $4 billion to the Global Fund from FY2011 through FY2013 .", "Enthusiasm by donors to consistently increase spending on global HIV/AIDS projects has waned, due in part to a weak global economy. Overall spending on HIV/AIDS worldwide, however, has increased. Funding boosts have been driven primarily by budgetary increases among recipient countries. Between 2010 and 2011, funding from domestic public sources grew by more than 15%. Roughly 41% of that growth occurred in sub-Saharan Africa. Of the estimated $16.9 billion spent on fighting HIV/AIDS worldwide in 2011, roughly half was funded by lower- and middle-income countries (LMIC) and LMIC private entities ( Figure 5 ).\nDespite a more austere funding environment, the United States has remained the largest single donor in the world. Of the $16.9 billion spent worldwide on HIV/AIDS in 2011, the United States accounted for 24% of spending from all sources. Among donor countries, the United States provided roughly 60% of all funds for HIV/AIDS assistance contributions. When resources from multilateral organizations are considered, U.S. contributions account for roughly 48% of all foreign aid for HIV/AIDS and 32% of all Global Fund contributions.\nGreater spending by recipient countries on HIV/AIDS in recent years might have been precipitated by congressional mandates for stronger country ownership. In the Lantos-Hyde Act, Congress called for the creation of partnership frameworks to bolster country ownership and enhance the sustainability of U.S. investments. Per the legislation, the frameworks are to outline plans for increasing country ownership of the operation and funding of national HIV/AIDS plans. The U.S.-South Africa Partnership Framework Implementation Plan, for example, envisions gradually reducing PEPFAR aid from the FY2012 level of roughly $484 million to $250 million by FY2017. The framework is based on consistent increases in HIV/AIDS spending by the South African Government (SAG). According to the framework, SAG has raised its national HIV/AIDS budget from $576 million in 2008 to roughly $1.25 billion in 2012. As of August 8, 2012, OGAC has signed partnership frameworks with more than 20 countries.", "Processes for funding global HIV/AIDS programs are changing. Financial contributions from traditional donors are fluctuating, and some global health advocates fear international support for the Global Fund is waning. In November 2011, the Global Fund Board announced that inadequate resources from donors caused it to cancel the scheduled 11 th round of funding. The Global Fund does not expect to offer new funding for grants until 2014, after revisions of funding procedures have been completed.\nWhile there is some uncertainty about future funding levels from traditional donors, Brazil, Russia, India, China, and South Africa (BRICS) are playing a greater role in international HIV/AIDS assistance and are transforming from recipient countries into donor nations. Brazil, for example, is helping developing countries manufacture anti-retroviral medicines (ARVs). Russia is donating funds to its neighbors; in 2011, Russia donated $13 million for fighting HIV/AIDS (primarily to border states), and from 2007 to 2010, it contributed $88 million toward AIDS research. India is playing an increasingly important role in offering generic ART to developing countries and is accelerating technology transfer between its pharmaceutical sector and African manufacturers. China is emerging as one of the top five donors for HIV/AIDS research and development (R&D), having provided roughly $18.3 million for research on AIDS vaccines in 2011. South Africa is also increasing its investments in R&D, having spent $10 million on related research in 2011.\nAt the same time, BRICS have increasingly assumed control over their own national HIV/AIDS programs. Over the past five years, the South African government has boosted its national HIV/AIDS budget fivefold, reaching $1.25 billion in 2012. The Brazilian government has paid for all ART provided through its national programs. India committed to cover at least 90% of all HIV/AIDS expenses related to Phase IV of its National AIDS Control Program (2012-2017). China reportedly paid for roughly 80% of all national HIV/AIDS costs in 2011 after having increased spending on HIV/AIDS programs fourfold from $124 million in 2007 to $530 million in 2011.", "The international community has made tremendous advancements in the fight against HIV/AIDS, with the pace accelerating in recent years. In December 2002, one month before PEPFAR was announced, only 50,000 people of the estimated 4 million requiring anti-retroviral (ARV) medicines in sub-Saharan Africa were receiving treatment. By 2011, more than 8 million people living with HIV/AIDS in low- and middle-income countries were receiving antiretroviral treatment, some 20% more than 2010 levels (6.6 million people). Progress has been made as well in preventing mother-to-child transmission of HIV/AIDS. In 2011, approximately 57% of HIV-positive pregnant women in those regions received drugs to prevent HIV transmission; 48% had access to the therapies in 2010.\nPEPFAR has played an important role in the global fight against HIV/AIDS. UNAIDS estimates roughly half of all international assistance for combating HIV/AIDS was provided by the United States. Worldwide contributions for countering HIV/AIDS has remained strong even with the global recession and slight declines in HIV/AIDS assistance in 2009 and 2010. Nonetheless, observers question whether global funding for addressing HIV/AIDS will be sustained. Several issues may affect future support for PEPFAR and the global fight against HIV/AIDS, including:\nPEPFAR Reauthorization. The PEPFAR program has been authorized under two successive authorization acts: the Leadership Act, P.L. 108-25 , and the Lantos-Hyde Act, P.L. 110-293 . The acts authorized the provision of $15 billion and $48 billion, respectively, for fighting HIV/AIDS, TB, and malaria. Authorization for PEPFAR is set to expire at the end of FY2013. The U.S. Congress has become more divided over issues related to foreign aid in general since Lantos-Hyde was enacted. At the same time, key elements within the act remain controversial, including those related to family planning. It is uncertain whether these issues will be sufficiently resolved as to enable reauthorization in the 113 th Congress. If Congress does not extend authorization of PEPFAR, the program could continue to be funded through annual appropriations, but Congress could lose some of its opportunity to direct how its priorities are implemented. Increased Spending by Emerging Economies. The Lantos-Hyde Act emphasized country ownership. It is unclear whether U.S. funding levels for global HIV/AIDS programs will continue to rise as the United States and other donors continue to call on recipient countries to increase their contributions to national HIV/AIDS plans. Secretary of State Hillary Clinton has stated at a number of public events that the United States is invested in PEPFAR \"for the long haul.\" Nonetheless, several AIDS advocates are concerned that growing emphasis on transitioning ownership of programs implies declining support for PEPFAR programs. In 2011, fluctuations in donations for global HIV/AIDS were deflected by heightened spending within national coffers. BRICS countries and other emerging economies might also help to increase the global pool of available resources, as well as reduce the pressure on existing donors for fighting HIV/AIDS. Elevated Political Will Among Recipient Countries. In 2011, the United Nations General Assembly adopted a resolution on HIV/AIDS that, among other things, committed member states to ramp up investments aimed at eliminating HIV/AIDS and work toward closing the estimated $6 billion annual funding gap for combating HIV/AIDS. The declaration called particularly on African countries to allocate at least 15% of their national budgets to the health sector, per the Abuja Declaration and Framework for Action. Some countries, as discussed earlier, have made advancements in this area. Other countries, like Kenya, however, remain heavily reliant upon donors to fund their national HIV/AIDS plans. In 2011, 81% of Kenya's $709 million national AIDS plan was financed by development assistance. Support for the Global Fund. HIV/AIDS advocates are concerned about the fundraising challenges facing the Global Fund and fear that advancements made through the Global Fund and other donors will be compromised should it scale back operations. The Global Fund accounts for roughly 18% of spending by donors on HIV/AIDS in low- and middle-income countries. While the Global Fund did not collect sufficient capital to launch a new round of grants in 2012, support from the United States has not abated; it has grown. Since the United States offered the inaugural $200 million pledge for the Global Fund in 2001, U.S. pledges and contributions have increased significantly. In FY2012, Congress appropriated $1.3 billion for the Global Fund and the Administration requested $1.65 billion for the organization in FY2013. Although Congress has continued to increase resources for the Global Fund, it has included language in annual appropriations restricting portions of the contributions, citing concerns about transparency and fiscal malfeasance. Members of Congress continue to debate the appropriate roles of the Global Fund and PEPFAR. This debate is expected to continue in the 113 th Congress. Alternative Funding Streams. Several low-income countries are increasingly considering alternative approaches to financing their national AIDS plans. In January 2000, Zimbabwe launched an AIDS levy that collects a 3% tax on individual and corporate income. In 2011, some $26 million was collected through the AIDS levy, and an additional $30 million is expected to be raised by the end of FY2012. Finances collected through the AIDS levy initiative and from key donors (PEPFAR, Global Fund and the British aid organization Department for International Development [DFID]) is expected to enable Zimbabwe to achieve universal coverage (defined as at least 80% of people in need of treatment) by the end of 2012. Tanzania, Kenya, and Zambia are reportedly considering similar measures. Rwanda and Uganda have also imposed levies to fund national HIV/AIDS plans, but on mobile phone use.\nA non-governmental organization called UNITAID has partnered with several countries to develop innovative mechanisms for funding the global fight against HIV/AIDS. Partnering countries, for example, have agreed to invoke taxes on airline tickets, ranging from $1 for economy tickets to $40 for first-class travel. Roughly 70% of UNITAID's revenues are derived from the air levy for distribution in needy countries. UNITAID and other global health groups also advocate raising funds for global health and HIV/AIDS programs by taxing bonds and derivatives. It estimated that nearly $352 billion (€265 billion) could have been raised in 2010 had G20 nations instituted the levies. H.R. 755 , Investing in Our Future Act of 2011, proposes excising a 0.005% levy on currency transactions, in part to fund global health programs, including HIV/AIDS. The bill awaits action by the Committees on Ways and Means and on Foreign Affairs.\nCost of Treating HIV/AIDS . While the world has made tremendous advancements in expanding access to HIV/AIDS, two phenomena may raise the cost of treating HIV-positive people: (1) drug resistance and (2) changes in intellectual property rights. Growing resistance to ART medicine may increase the cost of treating HIV/AIDS as people graduate onto more expensive second-line treatments. In the 2012 UNAIDS report, the organization conceded one of the greatest challenges facing the world is \"the inevitably rising costs of drug resistance and the need to provide chronic care for people living with HIV over their lifetimes.\" Despite these concerns, the World Health Organization (WHO) maintains drug resistance rates remain relatively low in low- and middle-income countries at roughly 6.8%.\nThe cost of anti-retroviral treatments has fallen tremendously in developing countries over the past decade, from an average annual price of over $10,000 per person to $116 per person for WHO pre-qualified ART. This decline is a key reason global access to HIV/AIDS treatments has expanded. Indeed, per-patient spending on ART within PEPFAR programs has declined, due in large part to increased use of generic treatments ( Figure A-1 ). In FY2009, roughly 90% of all anti-retroviral drugs (ARVs) purchased in PEPFAR programs were generic formulations, up from approximately 15% in 2005. It is important to note, however, that several factors affect U.S. spending on treatment beyond purchase of anti-retroviral treatments, including investments in building renovation and construction, laboratory and clinical equipment and training of ARV providers ( Figure A-2 ).\nGeneric ARVs that are widely used in low-income countries are manufactured primarily in Brazil and India. Some groups, including UNAIDS, are concerned that emergent bilateral and multilateral trade agreements threaten special intellectual property laws that permitted the proliferation of generic ARVs. Of particular concern are developing agreements between the European Union and India that may limit India's capacity to continue producing generic ARVs.\nQuestions about the pricing of newer, more effective treatments have also prompted some consternation. Members of Congress wrote a letter to the Chairman and Chief Executive Officer of Gilead—a pharmaceutical company that manufacturers ARVs—urging them to consider the impact of elevated ART prices in light of the current economic climate.", "One of the greatest accomplishments of PEPFAR has been to increase the number of people receiving anti-retroviral (ARV) treatments worldwide, due in large part to increased use of generic formulations. In FY2009, roughly 90% of all ARVs purchased in PEPFAR programs were generics, up from approximately 15% in 2005. Annual per-patient spending in PEPFAR on ART fell from over $1,100 in 2004 to roughly $335 in 2011 ( Figure A-1 ).\nIt is important to note that spending on anti-retroviral therapy includes a range of activities. The purchase of ARVs comprises roughly 40% of all spending on HIV/AIDS treatment ( Figure A-2 ). Non-ARV recurrent costs include clinical staff salaries and benefits; laboratory and clinical supplies; non-ARV drugs for opportunistic infections; building utilities; travel; and contracted services. Investment costs include building renovation and construction; laboratory and clinical equipment; in-service training of ARV providers; and ARV buffer stock to support a reliable supply chain." ], "depth": [ 0, 1, 2, 1, 2, 1, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h1_full h2_full h4_title h0_full h3_full", "h4_full", "h4_full h3_title h0_title", "h0_full h3_full h4_full", "h0_full h3_full h2_full h1_full", "h0_full" ] }	{ "question": [ "To what extent have politicians joined across the aisle to support health initiatives?", "How does the initiative plan on improving global health?", "How successful was the initiative?", "To what extent was this initiative a novel idea in the international community?", "How was the funding for PEPFAR acquired?", "How were the allocated funds to be spent?", "To what extent did this funding proposal break previous norms?", "How were the funds spent during the first phase of the initiative?", "How has the Congressional outlook on this plan changed over time?", "How did some proposals plan on expanding PEPFAR?", "To what extent was the plan's funding expanded?", "How have funding levels changed with the latest administration?", "How likely is it that Congress will again extend PEPFAR?", "To what extent has support for PEPFAR changed recently?", "How are some Members concerned about PEPFAR expanding beyond its main goals?", "How does a growing support for fiscal conservatism affect potential funding?", "To what extent have the funding levels of PEPFAR changed?", "Why has funding growth decreased?", "To what extent has the funding of other international programs changed?", "How have the roles of traditional donors changed as a result?", "How have recipients of this aid adapted to global funding decreases?" ], "summary": [ "The President's Emergency Plan for AIDS Relief (PEPFAR) is the largest bilateral health initiative in the world.", "The 2003 pledge of President George W. Bush to spend $15 billion over five years on fighting HIV/AIDS, tuberculosis (TB), and malaria was considered groundbreaking.", "In December 2002, one month before PEPFAR was announced, only 50,000 people of the estimated 4 million requiring anti-retroviral (ARV) medicines in sub-Saharan Africa were receiving treatment. By the end of FY2004, 155,000 people were receiving treatment through PEPFAR.", "The initiative challenged the international community to reject claims that large-scale HIV/AIDS treatment plans could not be carried out in low-resource settings.", "Congress first authorized funds in support of PEPFAR in 2003 through P.L. 108-25, the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act (Leadership Act).", "The $15 billion authorization was to be spent on global HIV/AIDS, TB, and malaria programs from FY2004 through FY2008.", "Strong bipartisan support for PEPFAR in particular and global health in general led to annual appropriations amounts that exceeded authorized levels.", "During the first phase of PEPFAR (FY2004-FY2008), the Bush Administration spent $18.1 billion on global HIV/AIDS programs.", "As the expiration date of the Leadership Act approached, congressional support for PEPFAR remained enthusiastic.", "Members debated a range of issues (see CRS Report RL34569, PEPFAR Reauthorization: Key Policy Debates and Changes to U.S. International HIV/AIDS, Tuberculosis, and Malaria Programs and Funding), but ultimately authorized an extension of PEPFAR.", "The Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 (P.L. 110-293, Lantos-Hyde Act) authorized $48 billion to be appropriated from FY2009 through FY2013 for combating the three diseases.", "From FY2009 through FY2012, the Obama Administration obligated nearly $26 billion on global HIV/AIDS programs.", "As the September 30, 2013, expiration date for the authorization of the Lantos-Hyde Act approaches, it is unclear whether Congress will again authorize multiyear funding for PEPFAR.", "Bipartisan support for PEPFAR remains strong; nonetheless, congressional debate about key elements of the program has raised some concerns.", "For example, some Members question the extent to which family planning programs are integrated into global HIV/AIDS activities.", "At the same time, growing unease about the federal budget deficit minimizes the likelihood that past trends of ever-increasing appropriations for global HIV/AIDS programs will be sustained.", "Fiscal pressures may have influenced funding amounts that fluctuated (but mostly remained level) throughout the Obama Administration—a departure from the steady growth in spending seen during the Bush Administration.", "Financial constraints in the global economy have resulted in similar outcomes during the Obama Administration.", "Whereas many international donors consistently increased their pledges for fighting global HIV/AIDS throughout the Bush Administration, resources made available by key contributors (such as European nations and the Global Fund) began to stagnate and in some cases declined during the past few years.", "While contributions by traditional donors have mostly stabilized, Brazil, Russia, India, China, and South Africa (BRICS) are playing a greater role in international HIV/AIDS assistance and are transforming from recipient countries into donor nations.", "At the same time, some aid recipient countries are increasing investments in their own national HIV/AIDS plans." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, 2, -1, 0, -1, 2, -1, -1, 1, -1, -1, 0, -1, 2, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5, 6, 6, 6, 6, 6 ] }
GAO_GAO-13-831	{ "title": [ "Background", "DOD Has Identified Potential Minuteman III Follow-on Options but DOD and NNSA Are Not Preparing Complete Cost Estimates or Effectively Involving the Nuclear Weapons Council", "DOD Has Identified Capability Requirements and Alternative Basing Options to Be Analyzed in the Minuteman III Follow- on Study", "The Air Force and NNSA Are Not Developing Complete System Cost Estimates for the Nuclear Weapons Council", "The Air Force’s Draft Plan Does Not Effectively Involve the Nuclear Weapons Council", "DOD and DOE’s Long- Term Plan for the Nuclear Weapons Enterprise Incorporates Interoperable Warheads, but the Navy’s Participation in the Warhead Feasibility Study Has Been Limited", "The Nuclear Weapons Council’s Baseline Plan for the Nuclear Weapons Enterprise Incorporates Interoperable Warheads", "The Air Force and NNSA Have Begun Examining the Feasibility of the W78/88-1 Warhead with Limited Navy Participation", "The Navy Has Identified Resources for the Warhead Feasibility Study, but Its Long-Term Support for the Program Remains Uncertain", "Guidelines for Refurbishing Warheads Do Not Require Program and Resource Alignment for Joint Warhead Studies", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Comments from the Department of Defense", "Appendix III: Comments from the Department of Energy", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The Air Force presently deploys 450 Minuteman III ICBMs in fixed, land- based launch facilities (or “silos”), located on three bases that encompass vast regions of the United States. Three missile wings—the 90th Missile Wing, 91st Missile Wing, and 341st Missile Wing, which fall under the command of Air Force Global Strike Command—operate the ICBM force. Each ICBM carries up to three W78 warheads, or a single W87 warhead. In fiscal year 2007, the Air Force began deploying W87 warheads, while reducing the number of deployed W78 warheads. To support U.S. Strategic Command’s operational requirements, the Air Force maintains nearly all of the ICBMs on alert at any given time.\nDOD has not finalized the force structure and warhead requirements for the Minuteman III under the New Strategic Arms Reduction Treaty (New START). DOD last reported on its plans to implement the treaty in May 2012, when it informed Congress that the Air Force would deploy up to 420 Minuteman III ICBMs by 2018,Based on the 2010 Nuclear Posture Review Report, the Air Force plans to retain the ability to redeploy additional warheads on the Minuteman III in case technical problems occur with other strategic delivery systems or warheads. In April 2013, DOD informed Congress that the decision on how to meet the New START limits will be finalized before the beginning of fiscal year 2015. each carrying only a single warhead.\nLike the Air Force, the Navy also maintains and operates nuclear-armed ballistic missiles. Nuclear-armed Trident II SLBMs are deployed on 14 Ohio-class fleet ballistic missile submarines, 12 of which are operational at any given time, while 2 are in overhaul. Each submarine currently carries 24 SLBMs, and each SLBM carries either multiple W76-0/1 warheads or W88 warheads. NNSA is refurbishing the W76 warhead, and plans to upgrade key nonnuclear components of the W88 warhead beginning in fiscal year 2019. Unlike the Air Force, not all of the Navy’s ballistic missile force structure is on alert at any given time.\nSince 1994, the United States has retained a stockpile of nondeployed weapons, called the hedge, in order to mitigate risks posed by unforeseen technical problems with deployed weapons, or posed by changes in the international security environment. As of September 2012, the Air Force maintained both W78 warheads and W87 warheads in the hedge, and the Navy maintained W76-0/1 warheads in the hedge. All of the Navy’s W88 warheads are either operationally deployed or retained as spares to be used when deployed weapons are withdrawn for maintenance.\nAir Force and Navy warheads were designed with unique aeroshells, which differ in size, weight, and payload capacities. The W78 warhead is encased in the Air Force Mk12A aeroshell, and the W87 warhead is encased in the Mk21 aeroshell. The W88 warhead is encased in the Navy’s Mk5 aeroshell, which, while smaller than the Mk21, is comparable to the Mk21 in volume and payload capacity.\nA number of DOD and DOE organizations oversee the nuclear weapons enterprise, which includes the military forces, military and civilian organizations, nuclear weapons design laboratories, and nuclear weapons production plants that support DOD’s nuclear deterrence mission:\nDOD and DOE, specifically NNSA, share responsibility under the Phase 6.X process for nuclear weapons refurbishments and life- extension programs. In addition to the W78/88-1 life-extension program, NNSA is producing W76-1 warheads for the Navy, and plans to begin producing B61-12 gravity bombs for the Air Force in fiscal year 2019. NNSA also plans to initiate a life-extension program for a cruise missile warhead, with production beginning in 2024.\nThe Air Force and Navy develop strategic delivery systems such as ICBMs and SLBMs, and provide personnel, training, and equipment for nuclear operations. In addition to the effort to replace the Minuteman III ICBM, the Air Force plans to replace the nuclear-armed air-launched cruise missile and develop a new, nuclear- capable bomber. The Navy is acquiring a replacement for the Ohio- class submarine, and plans to replace the Trident II SLBM in the 2040s.\nAir Force Global Strike Command provides operational ICBM forces and is responsible for preparing the Minuteman III follow-on study, and the Air Force Nuclear Weapons Center oversees Minuteman III sustainment activities. The Air Force Nuclear Weapons Center also chairs the W78/88-1 Project Officers Group.\nNavy Strategic Systems Programs is the Navy’s technical authority for nuclear weapons systems and strategic forces; engages in activities for Navy SLBMs and warhead requirements and modernization; and chairs the project officers groups for Navy warheads. Strategic Systems Programs cochairs the W78/88-1 Project Officers Group with the Air Force.\nThe Commander of U.S. Strategic Command, following guidance and direction provided by the President, Secretary of Defense, and Chairman of the Joint Chiefs of Staff, develops an operational plan and identifies targets for nuclear forces.\nNNSA’s Office of Defense Programs plans and coordinates NNSA activities to maintain the nuclear weapons stockpile. A national complex of three nuclear weapons design laboratories, four production plants, and the Nevada National Security Site carry out the Office of Defense Programs’ mission. NNSA plans to modernize its plutonium and uranium processing capabilities at Los Alamos, New Mexico, and Oak Ridge, Tennessee, respectively. Lawrence Livermore National Laboratory, in California, Los Alamos National Laboratory, in New Mexico, and Sandia National Laboratories, in New Mexico and California, are involved in the warhead feasibility study.\nThe Nuclear Weapons Council is the joint DOD and DOE activity responsible for matters related to executive-level management of the nuclear weapons stockpile. Established by statute in 1986, the council facilitates cooperation and coordination between the two departments to evaluate, maintain, and ensure the safety, security, and control of the nuclear weapons stockpile. Among its responsibilities, the Nuclear Weapons Council prepares the Nuclear Weapons Stockpile Memorandum on behalf of the Secretaries of Defense and Energy, which is transmitted to the President and, if approved, serves as the basis for the Nuclear Weapons Stockpile Plan. In November 2012, to synchronize NNSA nuclear weapons life-extension programs, DOD platform modernization programs, and NNSA plans for recapitalizing key nuclear weapons production infrastructure, the Nuclear Weapons Council adopted a long-term baseline plan for the nuclear weapons enterprise. The council’s baseline plan featured the development of interoperable warheads, beginning with the W78/88-1 life-extension program.", "DOD has identified capability requirements and potential basing options for the Minuteman III follow-on ICBM; however, neither the Air Force nor NNSA are required to estimate the total system costs for both the missile and warhead for the Nuclear Weapons Council to review; moreover, the Air Force does not identify the council as a stakeholder to synchronize the Minuteman III follow-on study with the W78/88-1 life-extension program. The potential options under consideration in the Minuteman III follow-on study include maintaining the existing Minuteman III, upgrading the Minuteman III, and developing a new missile on mobile launchers. Although the Nuclear Weapons Council is responsible for coordinating budget matters pertaining to nuclear weapons programs between DOD and DOE, and is engaging in an effort to broadly synchronize warhead life-extension programs with delivery system modernization efforts, it has not requested that either the Air Force or NNSA estimate the total system costs of the missile and warhead. Moreover, neither the Air Force nor NNSA are required to prepare cost estimates that identify the total system costs for both the Minuteman III follow-on system and the W78/88-1 warhead for the Nuclear Weapons Council’s review. Furthermore, the Air Force has not identified the council as a stakeholder to provide guidance on synchronizing the Minuteman III follow-on study with the W78/88-1 life- extension program, even though it is responsible for coordinating the programming of nuclear weapons programs between DOD and NNSA, such as a nuclear weapon life-extension program. Without timely and relevant information on the projected costs and findings of the Minuteman III follow-on study, the Nuclear Weapons Council may be unable to provide guidance to the Air Force on the study, or consider the study’s implications and potential effects on other nuclear weapons modernization efforts as it revises its baseline plan.", "DOD has identified capability requirements and alternative basing options to be analyzed in the Minuteman III follow-on study, consistent with the 2010 Nuclear Posture Review Report. With this review, DOD was directed to study potential alternatives for the Minuteman III, with the objective of defining a cost-effective approach that supports continued reductions in U.S. nuclear weapons while maintaining stable deterrence. To prepare the initial capabilities document, the Air Force examined a range of potential scenarios involving nuclear combat between 2025 and 2075, and concluded that ICBMs provide a stabilizing influence through dispersed basing, alert posture, and high day-to-day readiness. However, the initial capabilities document also found that while the Minuteman III currently provides a robust deterrent, it is an aging weapon system that requires enhancement, recapitalization, replacement, or development of a new capability. The Air Force’s list of ICBM capability requirements is presented in table 1.\nThe Air Force plans to formally assess different alternatives to replace, recapitalize, upgrade, or evolve the existing Minuteman III ICBM during the follow-on study. In preparation for the study, the Air Force has developed a list of potential basing options, which it used to categorize the alternatives to be assessed in the follow-on study. As of March 2013, according to the Air Force Global Strike Command and Air Force Nuclear Weapons Center, the Air Force has identified five potential approaches for replacing the Minuteman III, as summarized in table 2. However, Air Force officials added that these basing options could change before the Minuteman III follow-on study begins later this year.\nThe Air Force recognizes that there are benefits and risks for each of the basing options. For example, the New Fixed, Mobile, and Tunnel approaches might enhance the system’s survivability, according to Air Force Nuclear Weapons Center documentation and officials from the Office of the Secretary of Defense. However, the Air Force recognizes that there are risks to each approach, noting for example that introducing new technologies to legacy systems could create technical risk for either the Baseline or Current Fixed approaches.\nAir Force officials expect that there will be a wide range of costs associated with each basing option. Air Force officials noted that they do not plan on ruling out options prior to the start of the Minuteman III follow- on study because of cost, but added that cost will likely play a considerable role during the study. For example, in 2005 during the Land Based Strategic Deterrent analysis of alternatives, the Air Force reviewed several basing options including mobile and rail variants. During that study, officials requested the Air Force to narrow its scope to finish the study more quickly, according to U.S. Strategic Command and Air Force Global Strike Command officials. The Air Force official added that the mobile and rail variants were quickly eliminated based on their estimated costs in order to meet this direction. As of March 2013, the Air Force plans on assessing mobile and underground rail options during the current study with a different set of assumptions than were used in the previous study, primarily the ability of options to maintain a resilient deterrent effect at lower force levels, according to Air Force Global Strike Command. Final direction on study options will occur when the analysis formally begins.", "The Nuclear Weapons Council is synchronizing DOD programs to modernize delivery systems with NNSA warhead life-extension programs, but neither the Air Force nor NNSA are preparing cost estimates that identify the total system costs for both the Minuteman III follow-on system and the W78/88-1 warhead. GAO’s work on cost estimating has found that a reliable cost estimate is critical to the success of any program because it provides the basis for informed decision making. Furthermore, it is important to provide such information early to effectively inform decision making in the acquisition process. The Nuclear Weapons Council needs such information to effectively synchronize DOD and NNSA budgeting plans for nuclear weapons modernization.\nAlthough the Nuclear Weapons Council should have estimates for the full system cost for the Minuteman III follow-on system, neither the Air Force nor NNSA are estimating such costs. Our review of the Air Force’s draft plan for estimating Minuteman III follow-on costs indicates that, if the plan is followed, the cost estimates will likely be well documented, accurate, and credible in terms of estimating costs for the missile system itself. However, from a system-wide perspective, the Air Force’s draft methodology is not comprehensive, because the Air Force is not including the costs for the W78/88-1 warhead in its estimate. DOD officials told us that the Air Force is not responsible for estimating the costs for the W78/88-1 life-extension program as it prepares the Minuteman III follow- on study. According to senior officials from the Office of the Secretary of Defense, Air Force, and NNSA, NNSA is responsible for planning, programming, and budgeting for the costs for the W78/88-1 warhead, regardless of whether or how the Air Force replaces the Minuteman III ICBM.\nFurther, NNSA believes it is premature to prepare cost estimates for the W78/88-1 warhead life extension because, according to NNSA officials, doing so requires making assumptions about the warhead’s design and mode of deployment. The federal program manager and other NNSA officials stated that reliable estimates for the warhead’s development and production costs could not be prepared until additional information was known about the specific nuclear explosive package design, enhanced safety features, and the Air Force’s basing of the Minuteman III follow-on system. NNSA officials told us that preliminary cost estimates for the W78/88-1 life-extension program, prepared in October 2012, for the Fiscal Year 2014 Stockpile Stewardship Management Plan, total about $12 billion in fiscal year 2012 dollars, but they noted that this estimate is uncertain and likely to change as both the Minuteman III follow-on study and the warhead feasibility study make progress over the next 2 years. NNSA officials expect to prepare long-term cost estimates for this and other warhead life-extension programs as NNSA develops its agency- wide stockpile management plan, but these estimates do not include cost estimates for DOD’s delivery system modernization efforts, and are not being prepared in conjunction with the Minuteman III follow-on study. The Nuclear Weapons Council directed the Project Officers Group—the group that exercises day-to-day management of the warhead feasibility study— to provide it with a semiannual program review on the study, and stated that nuclear enterprise life-cycle costs will be a key metric in selecting a design for the warhead. However, the Project Officers Group is not required to provide a final cost estimate to the council until December 2014.\nGiven the lack of synchronization between DOD’s and DOE’s cost estimate preparation, it is critical that the Nuclear Weapons Council understand the full potential system costs for replacing the Minuteman III and developing the W78/88-1 warhead. Without this understanding, the council will not have the key information it needs to synchronize planning and programming of nuclear weapons activities across DOD and DOE. Moreover, it is not clear which department will bear responsibility for the total system costs. For example, in 2010 DOD transferred $5.7 billion of budget authority to NNSA for nuclear weapons and naval reactor program activities from 2011 to 2015, including $784 million for the warhead life- extension program. DOD later augmented this $5.7 billion with an additional $2.2 billion to be allocated annually from fiscal year 2012 to fiscal year 2016. However, neither the Air Force nor NNSA are preparing total system costs estimates for the missile and warhead, or formally providing such estimates to the council.", "The Nuclear Weapons Council is responsible for coordinating programming and budget matters pertaining to nuclear weapons programs between DOD and DOE, but the Air Force’s draft plan does not identify the council as a formal stakeholder to synchronize the two studies. According to Air Force and NNSA officials, they are establishing procedures to synchronize the Minuteman III follow-on study with NNSA’s warhead feasibility study. Air Force officials noted that the Minuteman III follow-on study group is working with the W78/88-1 Project Officers Group to identify potential integration challenges. NNSA officials told us that the group will help both the Air Force and NNSA to anticipate key requirements for designing the communications interface between the new missile and its warhead. Air Force and NNSA officials added that these integration challenges are expected to be addressed in the future.\nAlthough the Air Force and NNSA are establishing relationships to ensure requirements are synchronized, the Air Force has not identified the Nuclear Weapons Council as a stakeholder in the Minuteman III follow-on study. An Air Force handbook on performing operations analysis indicates that organizations that are heavily invested in the outcome of an analysis should be given consideration as stakeholders. According to a senior official in the Office of the Secretary of Defense, the Minuteman III follow- on study’s ongoing status, potential recommendations, cost estimates, and program schedule for the new missile are important factors for the Nuclear Weapons Council to consider as it synchronizes the nuclear modernization efforts across DOD and DOE.\nRather than identifying the Nuclear Weapons Council as a key stakeholder, the Air Force’s November 2012 draft plan designates senior DOD and NNSA representatives as members of a specially created study advisory group, which is the only body authorized to change the study guidance, and thus the scope and direction of the Air Force’s analysis. Each of the Nuclear Weapons Council’s member offices is to be represented on the study advisory group and will receive periodic updates on the Minuteman III follow-on study’s progress and findings, according to the Air Force’s draft study plan. Some Air Force and U.S. Strategic Command officials told us that this process may be sufficient to obtain the council’s perspective.\nIn contrast, several other officials from across DOD and DOE stated that the Nuclear Weapons Council should be formally identified as a key stakeholder in the draft study plan to help ensure that the Air Force considers an enterprise-wide perspective as it conducts the study. For example, officials from the Office of the Secretary of Defense and some Air Force officials stated that the study advisory group members may not approach their responsibilities from an operational or DOD-wide policy perspective. Additionally, a senior official from the Office of the Secretary of Defense highlighted the need for the Nuclear Weapons Council to be cognizant of how NNSA’s life-extension program activities support the Air Force’s schedule for developing and fielding the Minuteman III follow-on system. Air Force Global Strike Command and other Office of the Secretary of Defense officials told us that it would be beneficial for the Nuclear Weapons Council to review the conduct and findings of the Minuteman III follow-on study to ensure the program is managed from an enterprise-wide perspective. NNSA officials added that including the Nuclear Weapons Council as a stakeholder would improve NNSA’s understanding of the Air Force’s priorities for the Minuteman III follow-on system relative to other Air Force modernization priorities. A senior official from the Air Force Nuclear Weapons Center stated that including the Nuclear Weapons Council as a stakeholder could bring focus and high- level attention to the council’s planning effort.\nWithout timely and relevant information on the progress and findings of the Minuteman III follow-on study, the Nuclear Weapons Council may not be able to provide guidance on synchronizing the Minuteman III follow-on program with the W78/88-1 life-extension program, or consider the study’s implications and potential effects on other nuclear weapons modernization efforts. The Nuclear Weapons Council expects to update and revise its baseline plan for the nuclear weapons enterprise in 2013 based on information obtained from ongoing weapons modernization programs and analyses. Such revisions could include adjusting the schedule of key weapons modernization programs, including the W78/88-1 life-extension program. In preparing the long-term baseline plan that it adopted in November 2012, the Nuclear Weapons Council recommended adjusting initial operational dates for multiple nuclear weapons systems and warhead life-extension programs. Absent accurate and reliable information on nuclear weapons programs such as the Minuteman III follow-on program, the Nuclear Weapons Council may be poorly positioned to consider such changes in the future.", "DOD and DOE, through the Nuclear Weapons Council, have prepared a long-term, baseline plan for the nuclear weapons enterprise that incorporates interoperable warheads, and the Air Force and NNSA have begun examining the feasibility of designing such a warhead, but the modernization of existing weapons is a higher Navy priority and has limited the Navy’s participation in the warhead feasibility study. The 2010 Nuclear Posture Review recommended that the Nuclear Weapons Council study options for extending the life of the W78 ICBM warhead, including the possibility of using the resulting warhead also on Navy SLBMs, and in June 2012 the Nuclear Weapons Council requested the Air Force, Navy, and NNSA to commit resources to the W78/88-1 life- extension program study. Although the Air Force and NNSA have been examining interoperable warhead concepts at the council’s direction, the Navy had not included funds in its fiscal year 2013 budget submission for the effort because the ongoing W76-1 life-extension program and other modernization efforts were higher priorities, and because the Navy had concerns about introducing changes to the design of Navy warheads. The Navy’s fiscal year 2014 budget submission did include funds for the study; however, according to the Air Force, the Navy’s limited participation to date has delayed the Project Officer Group’s review of key requirements. Moreover, unless the Navy identifies the resources needed to implement the later stages of the life-extension program, should the Nuclear Weapons Council approve the W78/88-1 interoperable design, the Navy may not be in a position to test and certify the resulting design or take other steps needed to prepare it for deployment. Lastly, if the guidance governing life-extension programs is not updated, the services may not be prepared to align their programs and resources in support of joint interoperable warhead studies.", "The Nuclear Weapons Council’s baseline plan for the nuclear weapons enterprise, adopted in November 2012, establishes a long-term vision for the stockpile that is built around the development of interoperable ballistic missile warheads. The first interoperable warhead, as shown in figure 1, would be produced beginning with the W78/88-1 life-extension program in 2025; a second interoperable ballistic missile warhead would be produced beginning in 2031; and a third type beginning in 2037, according to the Nuclear Weapons Council’s baseline plan.\nA key reason for developing the interoperable W78/88-1 warhead is that it would provide U.S. Strategic Command flexibility to adjust its nuclear war plan, should deployed warheads develop safety, security, or effectiveness problems due to age or unforeseen technical failure, according to DOD and NNSA. For example, as of September 30, 2012, SLBM W76-0/1 warheads accounted for a significant percentage of the deployed U.S. nuclear force. Should these weapons become unreliable, the Navy would not have replacements available because all of the W88 warheads in the stockpile are already factored into the nuclear war plan. Rather, DOD would have to deploy additional ICBM warheads and weapons carried by heavy bombers, which could create operational risks because ICBM warheads and bomber weapons have different operational characteristics—such as range, accuracy, yield, fuzing options, and responsiveness—than do SLBM warheads.warheads to the stockpile, DOD would have additional flexibility to ensure target coverage in the war plan if the W76-0/1 warheads were unexpectedly withdrawn from operations, because the Navy would have another type of SLBM warhead available to replace it.", "Even before the Nuclear Weapons Council adopted its nuclear weapons enterprise baseline plan, the Air Force and NNSA completed a concept study and initiated a feasibility study for the W78/88-1 life-extension program with limited Navy participation.W76-1 and other nuclear weapons modernization efforts are higher priorities than the W78/88-1 life-extension program and therefore Navy Strategic Systems Programs’ participation in the warhead feasibility study was unfunded. Moreover, the Navy understands the Nuclear Weapons Council’s requirement to enhance safety features, but has concerns that doing so would introduce uncertainty into the weapon’s design.\nIn September 2010, the Air Force and NNSA began a concept study to evaluate weapon design concepts that could be used in both the W78 and W88 life-extension programs. This effort focused on identifying options compatible with the Air Force’s Mk12A aeroshell, which encases the W78 warhead, and the Navy’s Mk5 aeroshell, which encases the W88 warhead. Separately, in January 2012, NNSA sponsored an internal study by the nuclear weapons laboratories to develop additional concepts.were potentially compatible with both Air Force and Navy ballistic missile systems.\nTogether, the two studies identified a dozen designs that Subsequently, the W78/88-1 Project Officers Group, the joint DOD-DOE body responsible for leading the feasibility study, has made progress in the study. By March 2013, the Nuclear Weapons Council had selected the Mk21 aeroshell, rather than the Mk12A aeroshell, for the Air Force version of the design. Group is expected to recommend using a single type of primary, which is a key component for the design. Moreover, the Project Officers Group has agreed to limit the number of potential interoperable warhead design options that it would recommend to the Nuclear Weapons Council at the conclusion of the study.\nBecause the Mk21 aeroshell is larger than the Mk12A, the feasibility study will have a broader range of options to consider for enhancing the safety and security of the design. The Navy version of the design would continue to be compatible with the Mk5 aeroshell, which is smaller than the Mk21. which is to be installed on the warhead over a 5-year period beginning in fiscal year 2019. By contrast, the W78/88-1 life-extension program is a longer-term effort than these programs and, from the Navy’s perspective, does not require the Navy’s attention until the mid-2020s and after these more pressing needs are met. Therefore the Navy did not program funds for the warhead feasibility study in its fiscal year 2013 budget submission.\nThe Navy has concerns about changing the warhead design. In its June 2012 approval of the start of the feasibility study, the Nuclear Weapons Council directed that the Project Officers Group investigate design options for an interoperable nuclear explosive package that included insensitive high explosive.because the interoperable warhead is expected to involve a new design, it would require extensive flight testing and certification. Recognizing the Navy’s concerns in November 2012, the Nuclear Weapons Council broadened the scope of the warhead feasibility study to also include options based on the existing W88 design, which does not use insensitive high explosive.", "The Navy has identified the required resources to support the study, but has not identified the long-term resource requirements needed to participate in later phases of the life-extension program, thereby making its commitment uncertain. In November 2012, the Navy offered to provide $43 million for the warhead feasibility study, but, according to Navy and Strategic Systems Programs officials, as of March 2013 the Navy had been unable to obligate any funds during fiscal year 2013 due to budget uncertainty and restrictions for operating under a continuing resolution.However, the fiscal year 2014 budget submission included $14 million for fiscal year 2014 and $7 million for fiscal year 2015 for the Navy’s participation in the study.\nIn the longer term, the Navy has not identified the resources needed to support the life-extension program, should the Nuclear Weapons Council approve of an interoperable design once the warhead feasibility study is completed. In preparing for the life-extension program’s initial concept study, which the Air Force began in September 2010, the Office of the Secretary of Defense convened a Joint Requirements Working Group that identified several critical factors that should occur even before the start of the feasibility study. Among these factors, the Joint Requirements Working Group recommended that the services and NNSA align their programs and identify and commit resources to the program early in the Phase 6.X process. The Air Force has established a program for the life- extension effort, and in January 2013 the Air Force Nuclear Weapons Center estimated the costs for fiscal year 2016 through fiscal year 2018 to be about $5.5 million per year, once the warhead feasibility study is complete. The Air Force lead project officer stated that these projected costs do not include additional funding needed for weapons system integration with the ICBM, adding that annual integration costs could grow to $20 million to $30 million by 2025, when the warhead is first being produced. By contrast, the Navy has not yet identified potential resource requirements beyond the feasibility study, and did not include such costs in its fiscal year 2014 budget submission.\nThe Navy’s participation in the later phases of the W78/88-1 life-extension program remains uncertain because it has not identified the long-term resources that would be needed if the interoperable warhead is adopted. For example, DOD has not issued an implementing document for the 2010 Nuclear Posture Review that would require the Navy to identify such resources, even though the Nuclear Posture Review Report recommended studying options for developing an interoperable warhead during the W78 life-extension program, according to officials from the Office of the Secretary of Defense and the Navy. An official from the Under Secretary of Defense for Policy told us that the Navy would be directed to commit resources for the feasibility study through DOD’s budgeting process, but the Navy has not been directed to identify the long-term costs associated with the effort.\nUnless the Navy identifies the resources needed to support the later stages of the W78/88-1 life-extension program, should the Nuclear Weapons Council approve this step, then the Navy will be poorly positioned to perform more-detailed analysis, certification, and testing needed to validate the approved design, resulting in program delays. The costs of testing and certifying an interoperable warhead would likely be considerable, according to Navy officials, given the expectation that the warhead’s design would be different than previously deployed warheads. During the phase of the 6.X process that comes after the feasibility and design definition and cost study phases, NNSA, in coordination with DOD, conducts tests, experiments, and analyses in order to validate the design options. At the end of this phase, the weapon’s design needs to be demonstrated to be feasible in terms of safety, use control, performance, reliability, and producibility. According to the NNSA federal program manager for SLBM warheads, significant differences exist between Air Force and Navy requirements, such that the Navy’s participation during this phase would be needed in order to validate an interoperable warhead’s design. Absent the Navy’s identification of long-term funds, Navy officials acknowledged that the interoperable warhead’s deployment on Navy systems could be delayed.", "The guidance that governs warhead refurbishments, including life- extension programs, does not require the services to align their programs and resources in support of joint-service concept and feasibility studies conducted under the Phase 6.X process. This is because neither the Nuclear Weapons Council’s Procedural Guideline for the Phase 6.X Process, nor DOD’s implementing instruction 5030.55, DOD Procedures for Joint DOD-DOE Nuclear Weapons Life-Cycle Activities, have been updated to reflect the need for the Air Force and Navy to align their programs and resources early in the life-extension process, as the Joint Requirements Working Group recommended in 2010. For example, both the Procedural Guideline and DOD Instruction 5030.55 currently demonstrate coordination and conferral between DOD and DOE with respect to nuclear weapons activities. Additionally, DOD’s instruction currently states that the military departments are to develop procedures for certain joint DOD-DOE activities. However, the Procedural Guideline and the instruction are unclear about the services’ aligning their programs and resources with each other for supporting joint-service nuclear weapons concept and feasibility studies.\nBoth DOD and DOE have requirements to review and, as needed, update their respective guidance regularly. For example under the DOD Directives Program, DOD issuances—including directives, instructions, and other key publications—must be reviewed to determine whether they are necessary, current, and consistent with DOD policy, existing law, and statutory authority prior to the 5th year anniversary of their publication date. The Procedural Guideline for the Phase 6.X Process was issued in 2000, and is now being updated, but the completion date of this task is uncertain. If the Procedural Guideline for the Phase 6.X Process and the corresponding DOD instruction are not updated to reflect the need for the services to align their programs and identify resources to support joint- service nuclear weapons concept and feasibility studies, or unless other guidance is issued to this effect, then the individual services may not be prepared to fund future studies examining the feasibility of interoperable warheads.", "DOD and NNSA are embarking on a long-term modernization of strategic delivery systems and the nuclear stockpile, which increasingly requires accurate information and close collaboration. The Nuclear Weapons Council has special roles and responsibilities related to synchronizing DOD and DOE efforts to modernize the nuclear weapons enterprise, and has adopted a long-term baseline plan for doing so. To this end, the council needs current and up-to-date cost estimates and other information from the Air Force and NNSA about a centerpiece of the 2010 Nuclear Posture Review Report—the long-term sustainment of the ICBM, together with interoperable warheads. Moreover, without considering which department will bear responsibility for the full cost of both the Minuteman III follow-on and the W78/88-1 warhead, both the Air Force and the council may be significantly underestimating the funds needed from DOD for the system’s modernization. The conduct of the Minuteman III follow- on study may have implications for other nuclear weapon systems developments as the council revises its baseline plan. Therefore without Nuclear Weapons Council stakeholder involvement, the council’s ability to synchronize its long-term plan will be limited.\nAt this time, the Navy has higher nuclear weapons modernization priorities and, coupled with long-standing concerns about introducing design changes to nuclear weapons, the Navy has been reluctant to fund its participation in the W78/88-1 feasibility study, contributing to the study’s delay. However, unless the Navy identifies the long-term resources needed for the W78/88-1 life-extension program, it may be poorly positioned to undertake the more-detailed analyses needed to validate the interoperable warhead on Navy systems, resulting in further program delays and potentially costly modifications. Moreover, the Nuclear Weapons Council will lack the information that it needs to determine whether the interoperable warhead concept is an effective approach, both for the W78/88-1 life-extension program, and over the long term as a cornerstone for stockpile modernization. Further, unless the Procedural Guideline for the Phase 6.X Process and DOD Instruction 5030.55 are revised to ensure that the services align their programs and resources to jointly support future warhead concept and feasibility studies, or other such guidance is issued, the Nuclear Weapons Council’s long-term vision for stockpile management, including the introduction of interoperable warheads, may be unattainable. Finally, unless the Navy identifies the long-term resource requirements for the warhead life- extension program, should the Nuclear Weapons Council approve an interoperable warhead design, then the Navy may be unable to fund the effort needed to test and certify the new design.", "To assist DOD and DOE in synchronizing plans for modernizing the nuclear weapons enterprise and for assessing the feasibility of the interoperable warhead concept, we recommend the Secretary of Defense take the seven actions listed below, including three recommendations that are jointly addressed to the Secretary of Energy.\nTo enhance the Nuclear Weapons Council’s ability to consider the development of the Minuteman III follow-on system and the W78/88-1 warhead as it synchronizes DOD and DOE modernization programs, we recommend the following four actions:\nThe Secretaries of Defense and Energy direct the Secretary of the Air Force and NNSA Administrator to prepare cost estimates that include the total system costs for Minuteman III follow-on system alternatives and the costs associated with the W78/88-1 warhead, and provide periodic updates on the estimated total system cost to the Nuclear Weapons Council in conjunction with the Project Officers Group’s semiannual program review.\nThe Secretary of Defense direct the Secretary of the Air Force to update the draft study plan for the Minuteman III follow-on study by including the Nuclear Weapons Council as a stakeholder to synchronize the Minuteman III follow-on study with the W78/88-1 life-extension program, and providing periodic updates and a final report on the Minuteman III follow-on study to the Nuclear Weapons Council in conjunction with the Minuteman III follow-on study’s periodic updates to its study advisory group.\nTo ensure that DOD and NNSA are able to consider the possibilities of potentially designing and developing an interoperable warhead as directed by the Nuclear Weapons Council during the W78/88-1 life- extension program, we recommend that the Secretary of Defense direct the Secretary of the Navy to identify the long-term resources needed to implement the W78/88-1 life-extension program once the warhead feasibility study is completed, should the Nuclear Weapons Council approve of an interoperable warhead design.\nTo ensure that the services are able to support the consideration of interoperable warhead concepts during future life-extension programs, we recommend the following two actions: the Secretaries of Defense and Energy direct the Nuclear Weapons Council to revise the Procedural Guideline for the Phase 6.X Process to require the services to align their programs and resources before beginning concept or feasibility studies jointly with another service; and the Secretary of Defense issue or revise existing guidance to require the services to align their programs and resources before beginning concept or feasibility studies jointly with another service.", "We provided DOD and DOE with copies of our draft classified report for their review and comment. In response, we received written comments from both departments, which are reprinted in appendixes II and III, respectively. DOD concurred with all seven recommendations, and DOE concurred with the three recommendations requiring joint action between the departments. DOD and DOE also provided technical comments, which we have incorporated as appropriate.\nDOD and DOE concurred with our two recommendations that the Secretaries of Defense and Energy direct the Secretary of the Air Force and NNSA Administrator to (1) prepare cost estimates that include the total system costs for the Minuteman III follow-on system alternatives and the costs associated with the W78/88-1 warhead, and (2) provide periodic updates on the estimated total system cost to the Nuclear Weapons Council in conjunction with the W78/88-1 Project Officers Group’s semiannual program review. In its response, DOD stated that the Air Force will outline the total life-cycle costs for the Minuteman III follow-on system as part of the Minuteman III follow-on study. DOD further stated that decisions about the Minuteman III follow-on and the W78/88-1 warhead will be informed by estimates of costs, schedule, and performance for the complete system, adding that total ownership costs would be agreed upon by DOD and NNSA. DOD also stated that it and NNSA would track progress via the Nuclear Weapons Council with semiannual updates from the Project Officers Group and through other acquisition reviews. In its response, DOE indicated that NNSA will prepare cost estimates that are suitable for discriminating among the options under consideration during the course of the warhead feasibility study, adding that a more-detailed cost estimate would be developed following the warhead feasibility study. DOE further indicated that although it could not speak for DOD, NNSA would work within the Nuclear Weapons Council and Project Officers Group structure—which includes the Air Force—to make parallel presentations of cost estimates for the Minuteman III follow-on system and the W78/88-1 warhead, as we recommended. Additionally, DOE indicated that NNSA and DOD could brief the council on estimated warhead costs and Minuteman III follow-on system costs, in conjunction with the Project Officers Group’s semiannual program reviews. Our recommendations intend that the Nuclear Weapons Council receive total cost estimates periodically throughout the course of the Minuteman III follow-on study and the warhead feasibility study. If DOD’s and DOE’s proposed actions provide such periodic updates to the Nuclear Weapons Council and the presentations present a total system cost estimate in sufficient detail to affect the council’s decision-making, then the intent of our recommendations will have been met.\nDOD also concurred with our two recommendations that the Secretary of Defense direct the Secretary of the Air Force to update the draft study plan for the Minuteman III follow-on study by (1) including the Nuclear Weapons Council as a stakeholder to synchronize the Minuteman III follow-on study with the W78/88-1 life-extension program, and (2) providing periodic updates and a final report on the Minuteman III follow- on study to the Nuclear Weapons Council. In its response, DOD stated that the draft study plan includes the members of the Nuclear Weapons Council as stakeholders, adding that the council members are part of the study’s senior advisory group, which would receive periodic updates from the Air Force study group. DOD stated further that it would provide additional briefings during the Minuteman III follow-on study to the council as requested. Our recommendation seeks to involve the Nuclear Weapons Council as a body in the Minuteman III follow-on study, so that the council is better informed about the course of the study, and can take actions to synchronize the development of a follow-on ICBM with other long-term nuclear weapons recapitalization plans. If DOD’s actions provide the council with the information it needs for this purpose, then the intent of our recommendation will have been met.\nDOD concurred with our recommendation that the Secretary of Defense direct the Secretary of the Navy to identify the long-term resources needed to implement the W78/88-1 life-extension program once the warhead feasibility study is completed, should the Nuclear Weapons Council approve of an interoperable warhead design. In its response, DOD stated that it supports Navy direction to identify the long-term resources needed to implement the W78/88-1 life-extension program once the warhead feasibility study is completed and the council approves a design. However, DOD did not provide information in its comments as to how it would implement this recommendation.\nDOD and DOE concurred with our recommendation that the Secretaries of Defense and Energy direct the Nuclear Weapons Council to revise the Procedural Guideline for the Phase 6.X Process to require the services to align their programs and resources before beginning concept or feasibility studies jointly with another service. DOD stated that a revision to the Phase 6.X process is currently underway and will serve to align service programs and resources to support future warhead interoperability. In its response, DOE stated that NNSA will coordinate with DOD on the appropriate revisions. DOD also concurred with our recommendation that the Secretary of Defense issue or revise existing guidance to require the services to align their programs and resources before beginning concept or feasibility studies jointly with another service. In concurring with these recommendations, DOD stated further that the revision to the Phase 6.X process will acknowledge the requirement in existing departmental guidance that programs be fully resourced before major acquisition decisions. DOD added that the Nuclear Weapons Council and DOD’s annual program review process will also provide forums to ensure technical, schedule, and resource alignment between the services and subsequently with NNSA.\nWe are sending copies of this report to the appropriate congressional committees and to the Secretary of Defense; Secretary of the Air Force; Secretary of the Navy; Chairman, Joint Chiefs of Staff; Commander, U.S. Strategic Command; Secretary of Energy; and Administrator, National Nuclear Security Administration (NNSA). This report is also available at no charge on the GAO website at http://www.gao.gov.\nShould you or your staffs have any questions about this report, please contact John Pendleton at (202) 512-3489 or pendletonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix IV.", "For this review, we addressed the extent to which (1) the Department of Defense (DOD) has assessed the capability requirements, potential basing options, and costs for the follow-on to the Minuteman III intercontinental ballistic missile (ICBM); and (2) DOD and the National Nuclear Security Administration (NNSA) have explored the feasibility of incorporating an interoperable warhead concept into the long-term nuclear weapons stockpile plan. For our review of these two objectives, we obtained and analyzed DOD, NNSA, and Nuclear Weapons Council policies and guidance on the requirements development process and the planning and implementation of nuclear weapons delivery system modernization and stockpile life-extension programs. This documentation included: Chairman, Joint Chiefs of Staff Instruction 3170.01H, Joint Capabilities Integration and Development System, dated January 10, 2012; DOD Instruction 5030.55, DOD Procedures for Joint DOD-DOE Nuclear Weapons Life-Cycle Activities, dated June 25, 2001; and the Nuclear Weapons Council’s Procedural Guideline for the Phase 6.X Process, dated April 2000. For criteria used in both objectives, we reviewed the April 2010 Nuclear Posture Review Report, particularly its analysis and recommendations for modernizing the Minuteman III ICBM and for studying the feasibility of developing interoperable warheads to be used on ICBMs and Navy submarine-launched ballistic missiles (SLBM).\nTo help us understand ICBM operational requirements, we traveled to Air Force Global Strike Command, Barksdale Air Force Base, Louisiana, and to U.S. Strategic Command, Offutt Air Force Base, Nebraska, to obtain briefings on ICBM operational requirements, readiness, maintenance, sustainment, and modernization, and to discuss these subjects with officials from each organization. We also reviewed Air Force instructions on ICBM readiness, operations, and maintenance. We obtained and reviewed key reports to Congress, including the May 2010, February 2011, and April 2012 reports to Congress from the Office of the Secretary of Defense that describe the administration’s 10-year plan and cost estimates for modernizing nuclear weapons and their associated delivery systems. We also obtained and reviewed key Air Force documentation that provided additional details of the Air Force’s plan to sustain the Minuteman III to 2030, and discussed this plan with Air Force Global Strike Command officials. We obtained and reviewed the 2011 Requirements and Planning Document, and a November 2012 update to that document that details DOD’s requirements for deployed and nondeployed ICBM and SLBM warheads. We also obtained and reviewed the Nuclear Weapons Council’s Report on Stockpile Assessments for Fiscal Year 2011 in order to obtain a complete perspective on the safety, security, and effectiveness of the W78 and W88 warheads. We also obtained and reviewed NNSA’s Fiscal Year 2011 Stockpile Stewardship and Management Plan and the Technical Basis for Stockpile Transformation Planning–FY 2010 in order to put the proposal for developing interoperable warheads into context. We also interviewed DOD and NNSA officials responsible for developing and coordinating requirements for the follow-on to the Minuteman III ICBM and for the W78/88-1 life-extension program, and other officials from the Office of the Secretary of Defense, including from the office of the Deputy Assistant Secretary of Defense for Nuclear Matters and the Cost Assessment and Program Evaluation office; the Air Force, including Global Strike Command and Nuclear Weapons Center; the Navy, including Strategic Systems Programs; U.S. Strategic Command; and NNSA, including the NNSA manager for the W78/88-1 life-extension program and NNSA managers for the ICBM and SLBM weapons systems.\nTo determine the extent to which DOD has assessed the capability requirements and potential basing options for the follow-on to the Minuteman III ICBM, we analyzed the Air Force’s initial capabilities document for the Minuteman III follow-on system, which identified minimum capability requirements for the future system and gaps in the current operating system. For an operational perspective, we met with officials from the Air Force Global Strike Command, Air Force Nuclear Weapons Center, Air Force A10, and U.S. Strategic Command to discuss such requirements and the Air Force’s ability to maintain requirements at high levels of operational alert. To identify alternative basing options for the Minuteman III follow-on system, we reviewed previous basing reports such as the Land Based Strategic Deterrent analysis of alternatives, and Air Force documentation highlighting proposed alternative basing options prepared by the Air Force Nuclear Weapons Center and the Air Force Global Strike Command, which is leading the Minuteman III follow-on study. We discussed this documentation with officials from the Joint Staff, Air Force A10, Office of the Deputy Assistant Secretary of Defense for Nuclear Matters, Air Force Nuclear Weapons Center, and Air Force Global Strike Command.\nAfter identifying capability requirements and alternative basing options, we reviewed the Air Force’s draft plan for studying Minuteman III follow- on options, which was prepared by Air Force Global Strike Command. After reviewing the Air Force’s draft study plan, we met with Air Force Global Strike Command and Air Force Nuclear Weapons Center officials to discuss, among other elements, how they planned to establish cost estimates for each of the alternative basing options, and the Air Force’s plan for oversight for the planned study. Using our prior work for developing sound cost estimates found in GAO Cost Estimating and Assessment Guide as criteria, we identified potential challenges to building comprehensive and credible cost estimates. Additionally, we reviewed statues and guidance related to the Nuclear Weapons Council, DOD, and Air Force processes for analyzing weapon system requirements, and used these documents as criteria to analyze the Nuclear Weapons Council’s role in the Minuteman III follow-on study. We discussed and confirmed our approach with officials from the Office of the Secretary of Defense’s Cost Assessment and Program Evaluation office, Office of the Deputy Assistant Secretary of Defense for Nuclear Matters, Office of the Deputy Assistant Secretary of Defense for Strategic and Tactical Systems, Air Force Global Strike Command, Air Force Nuclear Weapons Center, and Air Force A10.\nTo determine the extent to which DOD and NNSA have explored the feasibility of incorporating an interoperable warhead concept into the long-term nuclear weapons stockpile plan, we examined both the long- term plan and effort to date to implement the W78/88-1 life-extension program. We analyzed the Nuclear Weapons Council’s preliminary baseline plan for the nuclear weapons stockpile for the next 25 years, including options that the council considered in adopting the baseline plan. We obtained and reviewed key briefings from U.S. Strategic Command, and interviewed officials from the Office of the Secretary of Defense, U.S. Strategic Command, NNSA, Air Force Nuclear Weapons Center, and Navy Strategic Systems Programs. We discussed possible uncertainties and risks about the baseline plan with officials from the Office of the Deputy Assistant Secretary of Defense for Nuclear Matters; U.S. Strategic Command; Air Force; and Navy. Turning to our analysis of the W78/88-1 life-extension program, we used criteria drawn from the 2010 Nuclear Posture Review Report and from the U.S. Strategic Command’s 2010 Joint Requirements Study for a Common Life Extension Program for the Mk12A/W78-1 and Mk5/W88-1, and the Procedural Guideline for the Phase 6.X Process, to evaluate the extent to which the Air Force and Navy have aligned their programs and resources to support this effort. To perform this analysis, we reviewed documentation for the W78/88-1 life-extension program, including memorandums from the Air Force, Navy, NNSA, and Nuclear Weapons Council; identified and reviewed key Air Force and NNSA briefings that identified potential design options for the W78/88-1 life-extension program; reviewed DOD, NNSA, and W78/88-1 Project Officer Group and subgroup charters, as well as Air Force, Navy, and NNSA budget documents; reviewed the Navy’s perspective on stockpile modernization by interviewing senior officials from Navy Strategic Systems Programs, Navy N514, and NNSA’s federal program manager for Navy warheads; interviewed the Air Force lead project officer and NNSA federal program manager for the W78/88-1 life-extension program, at Kirtland Air Force Base, New Mexico; interviewed NNSA officials involved in the management of the W78 and W88 warheads; and met with DOD officials, including officials from the Office of the Deputy Assistant Secretary of Defense for Nuclear Matters; Joint Staff J8; and U.S. Strategic Command.\nWe conducted this performance audit from June 2012 to June 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "", "In addition to the contact named above, key contributors to this report included Penney Harwell Caramia, Assistant Director; David M. Adams; Colin Chambers; Grace Coleman; Julie Corwin; Robert Scott Fletcher; Jason Lee; Kevin L. O’Neill; Michael Shaughnessy; and Amie Steele." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full", "h0_full h2_title", "h2_full", "h0_full", "h0_full", "h2_full h1_full", "", "", "h1_full", "h1_full", "", "", "", "h2_full", "", "", "", "", "" ] }	{ "question": [ "To what extent has the financial cost of refurbishment been considered?", "How important is a cost analysis to the program?", "How has the Nuclear Weapons Council attempted to create a cost estimate?", "Why is neither department developing total cost estimates?", "To what extent has the Council been involved in the study?", "How may this lack of coordination negatively affect the study?", "To what extent has the possibility of interoperable warheads been examined?", "To what extent does the 2010 Nuclear Posture Review recommend expanding this examination?", "Why has the Navy been inactive in this review?", "To what extent is the Navy likely to participate in future rounds of the review?", "What will the Navy be poorly positioned to do as a result of not identifying necessary resources needed to continue the program?", "What imperative (if any) does the Navy have to join the reviews?", "Why might the lack of joint-service cooperation cause issues in the future?", "To what extent are US nuclear weapons still within their intended service lives?", "How did the 2010 Nuclear Posture Review plan on mitigating the aging issue?", "What will happen in order to begin the process of replacing the Minuteman III missile?", "To what extent did GAO analyze plans and policies in regards to the life-extension program?" ], "summary": [ "The Department of Defense (DOD) has identified capability requirements and potential basing options for the Minuteman III follow-on intercontinental ballistic missile (ICBM), and the Department of Energy (DOE) has begun a parallel study of options to extend the life of its warhead, but neither department plans to estimate the total system costs for the new missile and its warhead.", "GAO's work on cost estimating has found that a reliable cost estimate is critical to any program by providing the basis for informed decision making.", "The Nuclear Weapons Council--the joint activity of DOD and DOE for nuclear weapons programs--is responsible for coordinating budget matters related to nuclear weapons programs between the departments, and is engaging in an effort to broadly synchronize nuclear weapons life-extension programs with delivery-system modernization efforts, but has not asked either department to provide estimates of the total system cost.", "In the absence of such a request, neither department is developing total cost estimates.", "Further, DOD's plan to study ICBM follow-on options does not include the council as a stakeholder to synchronize the missile and warhead efforts to help ensure that the study considers an enterprise-wide perspective.", "Without timely cost estimates and updates on the status of the ICBM follow-on study, the council may be unable to provide guidance and direction on the study, or consider its implications and potential effects on other nuclear weapons modernization efforts.", "DOD and DOE have prepared a long-term plan that incorporates interoperable warheads into the stockpile, and although they have begun studying the feasibility of designing such a warhead, the Navy has had limited participation thus far.", "The 2010 Nuclear Posture Review recommended the Nuclear Weapons Council study the development of an interoperable warhead that could be deployed on both Air Force and Navy ballistic missiles, and the council has requested the Air Force, Navy, and the National Nuclear Security Administration (NNSA) to commit resources to the study.", "Although the Air Force and NNSA have been examining warhead concepts, the Navy has not fully engaged in the effort because (1) other, ongoing modernization programs are higher Navy priorities, and (2) it has concerns about changing the design of the warhead.", "The Navy's further participation is uncertain because it has not identified the resources needed to continue with the program once the study is completed, if the interoperable warhead is adopted.", "Consequently, the Navy will be poorly positioned to perform the more-detailed analyses needed to validate the approved design, potentially resulting in program delays.", "The Nuclear Weapons Council guidelines governing nuclear weapons refurbishments, and the corresponding DOD instruction, do not require the Air Force and Navy to align their programs and resources before beginning joint-service warhead studies. For example, DOD's instruction states that the military departments are to develop procedures for certain joint DOD-DOE activities, but it is unclear about aligning their programs and resources with each other.", "If the guidance and DOD instruction are not updated, the services may not be prepared to participate in future joint-service studies.", "U.S. nuclear weapons--both the bombs and warheads and their delivery systems--are aging beyond their intended service lives.", "The 2010 Nuclear Posture Review recommended that the Nuclear Weapons Council study options for extending the life of ICBM warheads, including the potential for developing a warhead that is interoperable on both Air Force and Navy missiles.", "In 2013 DOD will initiate a study to identify a replacement for the Minuteman III missile.", "GAO analyzed DOD and NNSA policies, plans, guidance, and other documents; and interviewed officials responsible for planning the Minuteman III follow-on and the warhead life-extension program." ], "parent_pair_index": [ -1, 0, -1, 2, -1, 4, -1, 0, -1, 2, 3, -1, 5, -1, 0, -1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0 ] }
GAO_GAO-18-414	{ "title": [ "Background", "The Listers Generally Followed Procedures, but the Bureau Experienced Some Issues Reassigning Work, Estimating Workload and Lister Productivity, and Managing to Staffing Goals", "Some Listers Duplicated Each Other’s Work Due to a Lack of Operational Procedures for Reassigning Work", "The Bureau Has Not Evaluated Workload, Productivity Rates, and Staffing Assumptions for Address Canvassing", "Workload", "Lister Productivity", "Hiring", "Resolving Challenges from the Address Canvassing Test Will Better Position the Bureau for the 2020 Census", "The Bureau Does Not Have Procedures to Ensure All Collected Address Canvassing Data Are Retained", "More Useful and Accurate Monitoring Data for Field Supervisors Would Strengthen Management of Operations", "System Alerts Were Not Consistently Used by Supervisors", "The Bureau’s Management Dashboard Did Not Always Display Accurate Information", "The Bureau Does Not Have Documented Procedures to Address Broadband Internet Service Coverage Gaps", "The Bureau Has Not Identified Alternative Sites for Listers to Take Online Training When Access to the Internet is Unavailable", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Department of Commerce", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The Bureau’s address canvassing operation updates its address list and maps, which are the foundation of the decennial census. An accurate address list both identifies all households that are to receive a notice by mail requesting participation in the census (by Internet, phone, or mailed- in questionnaire) and serves as the control mechanism for following up with households that fail to respond to the initial request. Precise maps are critical for counting the population in the proper locations—the basis of congressional apportionment and redistricting.\nOur prior work has shown that developing an accurate address list is challenging—in part because people can reside in unconventional dwellings, such as converted garages, basements, and other forms of hidden housing. For example, as shown in figure 1, what appears to be a single-family house could contain an apartment, as suggested by its two doorbells.\nDuring address canvassing, the Bureau verifies that its master address list and maps are accurate to ensure the tabulation for all housing units and group quarters is correct. For the 2010 Census, the address canvassing operation mobilized almost 150,000 field workers to canvass almost every street in the United States and Puerto Rico to update the Bureau’s address list and map data—and in 2012 reported the cost at nearly $450 million. The cost of going door-to-door in 2010, along with the emerging availability of imagery data, led the Bureau to explore an approach for 2020 address canvassing that would allow for fewer boots on the ground.\nTraditionally, the Bureau went door-to-door to homes across the country to verify addresses. This “in-field address canvassing” is a labor-intensive and expensive operation. To achieve cost savings, in September 2014 the Bureau decided to use a reengineered approach for building its address list for the 2020 Census and not go door-to-door (or “in-field”) across the country, as it has in prior decennial censuses. Rather, some areas (known as “blocks”) would only need a review of their address and map information using computer imagery and third-party data sources— what the Bureau calls “in-office” address canvassing procedures.\nAccording to the Bureau’s address canvassing operational plan, in-office canvassing had two phases:\nDuring the first phase, known as “Interactive Review,” Bureau employees use current aerial imagery to determine if areas have housing changes, such as new residential developments or repurposed structures, or if the areas match what is in the Bureau’s master address file. The Bureau assesses the extent to which the number of housing units in the master address file is consistent with the number of units visible in the current imagery. If the housing shown in the imagery matches what is listed in the master address file, then those areas are considered to be resolved or stable and would not be canvassed in-field.\nDuring the second phase, known as “Active Block Resolution,” employees would try to resolve coverage concerns identified during the first phase and verify every housing unit by virtually canvassing the entire area. As part of this virtual canvass, the Bureau would compare what is found in imagery to the master address file data and other data sources in an attempt to resolve any discrepancies. If Bureau employees still could not reconcile the discrepancies, such as housing unit count or street locations with what is on the address list, then they would refer these blocks to in-field address canvassing.\nHowever, in March 2017, citing budget uncertainty the Bureau decided to discontinue the second phase of in-office review for the 2020 Census. According to the Bureau, in order to ensure that the operations implemented in the 2018 End-to-End Test were consistent with operations planned for the 2020 Census, the Bureau added the blocks originally resolved during the second phase of in-office review back into the in-field workload for the test. The cancellation of Active Block Resolution is expected to increase the national workload of the in-field canvassing workload by 5 percentage points (25 percent to 30 percent).\nDuring in-field address canvassing, listers use laptop computers to compare what they see on the ground to what is on the address list and map. Listers confirm, add, delete, or move addresses to their correct map positions. At each housing unit, listers are trained to speak with a knowledgeable resident to confirm or update address data, ask about hidden housing units, confirm the housing unit location on the map, (known as the map spot) and collect a map spot using global positioning systems (GPS). If no one is available, listers are to use house numbers and street signs to verify the address data. The data are transmitted electronically to the Bureau.\nThe Census Bureau expects that the End-to-End Test for address canvassing will identify areas for improvement and changes that need to be made for the 2020 Census. Our prior work has shown the importance of robust testing. Rigorous testing is a critical risk mitigation strategy because it provides information on the feasibility and performance of individual census-taking activities, their potential for achieving desired results, and the extent to which they are able to function together under full operational conditions.\nIn February 2017, we added the 2020 Census to GAO’s High-Risk List because operational and other issues are threatening the Bureau’s ability to deliver a cost-effective enumeration. We reported on concerns about the Bureau’s capacity to implement innovative census-taking methods, uncertainties surrounding critical information technology systems, and the quality of the Bureau’s cost-estimates. Underlying these issues are challenges in such essential management functions as the Bureau’s ability to: collect and use real-time indicators of cost, performance, and schedule; follow leading practices for cost estimation; scheduling; risk management; IT acquisition, development, testing, and security; and cost-effectively deal with contingencies including, for example, fiscal constraints, potential changes in design, and natural disasters.", "The Bureau completed in-field address canvassing as scheduled by September 29, 2017, canvassing approximately 340,400 addresses. Most of the listers we observed generally followed procedures. For example, 15 of 18 listers knocked on doors, and 16 of 18 looked for hidden housing units, which is important for establishing that address lists and maps are accurate and for identifying hard-to-count populations. Those procedures include taking such steps as: comparing the housing units they see on the “ground” to the housing units on the address list, knocking on all doors so they could speak with a resident to confirm the address (even if the address is visible on the mailbox or house) and to confirm that there are no other living quarters such as a basement apartment, looking for “hidden housing units”, looking for group quarters such as group homes or dormitories, and confirming the location of the housing unit on a map with GPS coordinates collected on the doorstep.\nTo the extent procedures were not followed, it generally occurred when listers did not go up to the door and speak with a resident or take a map spot on the doorstep. Failure to follow procedures could adversely affect a complete count, as addresses could be missed or a group quarter could be misclassified as a residential address. After we alerted the Bureau to our observations, the Bureau agreed moving forward, to emphasize the importance of following procedures during training for in-field address canvassing.", "Address canvassing has tight time frames, so work needs to be assigned efficiently. Sometimes this means the Bureau needs to reassign work from one lister to another. During address canvassing, the Bureau discovered that reassigned census blocks sometimes would appear in both the new and the original listers’ work assignments. In some cases, this led to blocks being worked more than once, which decreased efficiency, increased costs, and could create confusion and credibility issues when two different listers visit a house.\nAccording to Bureau procedures, listers were instructed to connect to the Bureau’s Mobile Case Management (MCM) system to download work assignments (address blocks) and to transmit their completed work at the beginning and end of the work day but not during the work day. Thus during the work day, they were unaware when unworked blocks had been reassigned to another lister. Bureau officials also told us that the Listing and Mapping Application (LiMA) software used to update the address file and maps was supposed to have the functionality to prevent blocks from being worked more than once, but this functionality was not developed because of budget cuts.\nFor 2020, Bureau officials told us they plan to create operational procedures for reassigning work. According to Bureau officials, they plan to require supervisors to contact the original lister when work is reassigned. We have requested a copy of those procedures; however, the Bureau has not finalized them. Standards for Internal Control in the Federal Government (Standards for Internal Control) call for management to design control activities, such as policies and procedures to achieve objectives. Finalizing these procedures should help prevent blocks from being canvassed more than once.", "The Bureau conducts tests under census-like conditions, in part, to verify 2020 Census planning assumptions, such as workload, how many houses per hour a lister can verify (also known as a lister’s productivity rate), and how many people the Bureau needs to hire for an operation. Moreover, one of the objectives of the test is to validate that the operations being tested are ready at the scale needed for the 2020 Census. For the 2018 End-to-End Test, the Bureau completed in-field address canvassing on time at two sites and early at one site; despite workload increases at all three test sites and hiring shortfalls at two sites. The Bureau credits this success to better than expected productivity. As the Bureau reviews the results of address canvassing, evaluating the factors that affected workload, productivity rates, and staffing and making adjustments to its estimates, if necessary, before the 2020 Census would help the Bureau ensure that address canvassing has the appropriate number of staff and equipment to complete the work in the required time frame.", "For the 2020 Census, the Bureau estimates it will have to send 30 percent of addresses to the field for listers to verify. However, at the three test sites, the workload was higher than this estimate (see table 1). At one test site, the percent of addresses verified through in-field address canvassing was 76 percent or 46 percentage points more than the Bureau’s expected 2020 Census in-field address canvassing workload estimate of 30 percent.\nBureau officials told us that the 30 percent in-field workload estimate is a national average and is not specific to any of the three test sites. Prior to the test, officials said that the Bureau also knew that the West Virginia site was assigning new addresses to some of the test site’s housing units due to local government emergency 911 address conversion and that the in-field workload would be greater in West Virginia when compared to the other test sites.\nWe requested documentation for the Bureau’s original estimate that 30 percent of the 133.8 million expected addresses would be canvassed in- field for the 2020 Census. However, the Bureau was unable to provide us with documentation to support how they arrived at the 30 percent estimate. Instead, the Bureau provided us with a November 2017 methodology document that showed three in-field address canvassing workload scenarios, whereby, between 41.9 and 45.1 percent of housing units would need to go to the field for address canvassing. The three scenarios consider a range of stability in the address file as well as different workload estimates for in-field follow-up. At 30 percent the Bureau would need to canvass about 40.2 million addresses; however, at 41.9 and 45.1 percent the Bureau would need to canvass between 56 million and 60.4 million addresses, respectively. According to Bureau officials, they are continuing to assess whether changes to its in-office address canvassing procedures would be able to reduce the in-field address canvassing workload to 30 percent, while at the same time maintaining address quality. However, Bureau officials did not provide us with documentation to show how the in-field address canvassing workload would be reduced because the proposed changes were still being reviewed internally.\nWorkload for address canvassing directly affects cost – the greater the workload the more people as well as laptop computers needed to carry out the operation. We found that the 30 percent workload threshold is what is reflected in the December 2017 updated 2020 Census cost estimate that was used to support the fiscal year 2019 budget request. Thus, if the 30 percent threshold is not achieved then the in-field canvassing workload will likely increase for the 2020 Census and the Bureau would be at risk of exceeding its proposed budget for the address canvassing operation.\nStandards for Internal Control call for organizations to use quality information to achieve their objectives. Thus, continuing to evaluate and finalize workload estimates for in-field address canvassing with the most current information will help ensure the Bureau is well-positioned to conduct addressing canvassing for the 2020 Census. For example, according to Bureau officials, preliminary workload estimates will need to be delivered by January 2019 for hiring purposes and the final in-field workload numbers for address canvassing will need to be determined by June 2019 for the start of address canvassing, which is set to begin in August 2019. Moreover, by February 2019 the Bureau’s schedule calls for it to determine how many laptops will be needed to conduct 2020 Census address canvassing.", "At the test sites, listers were substantially more productive than the Bureau expected. The expected production rate is defined as the number of addresses expected to be completed per hour, and it affects the cost of the address canvassing operation. This rate includes time for actions other than actually updating addresses, such as travel time. In the 2010 Census the rates reflected different geographic areas, and the country was subdivided into three areas: urban/suburban, rural, and very rural. According to Bureau officials, for the 2020 Census the Bureau will have variable production rates based on geography, similar to the design used in the 2010 Census. The Bureau told us they have not finalized the 2020 Census address canvassing production rates.\nTable 2 shows the expected and actual productivity rates (addresses per hour) for the in-field address canvassing operation at all three test sites.\nTo ensure address canvassing for the test was consistent with the 2020 Census, Bureau officials told us they included the blocks resolved during the now discontinued second phase of in-office review, into the in-field workload for the test. The Bureau attributed the greater productivity to this discontinued second phase. Bureau officials told us that they believe that listers spent less time updating those blocks because they had already been resolved, and any necessary changes were already incorporated. Moreover, while benefitting from the second phase of in-office address canvassing may be one explanation for why listers were more productive. Bureau officials told us that they are unable to evaluate the differences in expected versus actual productivity for blocks added to the workload as a result of the discontinued second phase because of limitations with the data. However, there could be other reasons as well such as travel time and geography. Standards for Internal Control require that organizations use quality information to achieve their objectives. Therefore, continuing to evaluate other factors from the 2018 End-to-End Test that may have increased or could potentially decrease productivity will be important for informing lister productivity rates for 2020, as productivity affects the number of listers needed to carry out the operation, the number of staff hours charged to the operation, and the number of laptops to be procured.", "For the 2018 End-to-End Test address canvassing operation, the Bureau hired fewer listers than it assumed it needed at two sites and hired more at the other site. In West Virginia, 60 percent of the required field staff was hired and in Washington, 74.5 percent of the required field staff was hired. Nevertheless, the operation finished on schedule at both these sites. In contrast in Rhode Island the Bureau hired 112 percent of the required field staff and finished early.\nAccording to Bureau officials, both the West Virginia and Washington state test sites started hiring field staff later than expected because of uncertainty surrounding whether the Bureau would have sufficient funding to open all three test sites for the 2018 End-to-End Test. When a decision was made to open all three sites for the address canvassing operation only, that decision came late, and Bureau officials told us that once they were behind in hiring and were never able to catch up because of low unemployment rates and the short duration of the operation. According to Bureau officials, their approach to hiring for the 2018 End-to-End Test was similar to that used for the 2010 and 2000 Censuses. In both censuses the Bureau’s goal was to recruit and hire more workers than it needed because of immutable deadlines and attrition.\nAfter the 2010 Census we reported that the Bureau had over recruited; conversely, for the 2000 Census the Bureau had recruited in the midst of one of the tightest labor markets in three decades. Thus we recommended, and the Bureau agreed to evaluate current economic factors that are associated with and predictive of employee interest in census work, such as national and regional unemployment levels, and use these available data to determine the potential temporary workforce pool and adjust its recruiting approach. The Bureau implemented this recommendation, and used unemployment and 2010 Census data to determine a base recruiting goal at both the Los Angeles, California and Houston, Texas 2016 census test sites. Specifically, the recruiting goal for Los Angeles was reduced by 30 percent.\nBureau officials told us that it continues to gather staffing data from the 2018 End-to-End Test that will be important to consider looking forward to 2020. Although address canvassing generally finished on schedule even while short staffed, Bureau officials told us they are carefully monitoring recruiting and hiring data to ensure they have sufficient staff for the test’s next census field operation non-response follow-up, when census workers go door-to-door to follow up with housing units that have not responded. Non-response follow-up is set to begin in May 2018. According to test data as of March 2018, the Bureau is short of its recruiting goal for this operation which is being conducted in Providence County, Rhode Island. The Bureau’s goal is to recruit 5,300 census workers and as of March 2018, the Bureau had only recruited 2,732 qualified applicants to fill 1,166 spots for training and deploy 1,049 census workers to conduct non-response follow-up. Bureau officials told us they believe that low unemployment is making it difficult to meet its recruiting goals in Providence County, Rhode Island, but they are confident they will be able to hire sufficient staff without having to increase pay rates.\nRecruiting and retaining sufficient staff to carry out operations as labor- intensive as address canvassing and nonresponse follow-up for the 2020 Census is a huge undertaking with implications for cost and accuracy. Therefore, striking the right staffing balance for the 2020 Census is important for ensuring deadlines are met and costs are controlled.", "", "Bureau officials told us that during the test 11 out of 330 laptop computers did not properly transmit address and map data collected for 25 blocks. The lister-collected address file and map data are supposed to be electronically transmitted from the listers’ laptops to the Bureau’s data processing center in Jeffersonville, Indiana. The data are encrypted and remain on the laptop until the laptops are returned to the Bureau where the encrypted data are deleted. Prior to learning that not all data had properly transmitted off the laptops, data on seven of the laptops was deleted. Data on the remaining four laptops were still available. In Providence, Rhode Island, where the full test will take place, the Bureau recanvassed blocks where data were lost to ensure that the address and map information for nonresponse follow-up was correct. Recanvassing blocks increases costs and can lead to credibility problems for the Bureau when listers visit a home twice.\nGoing into address canvassing for the End-to-End Test, Bureau officials said they knew there was a problem with the LiMA software used to update the Bureau’s address lists and maps. Specifically, address and map updates would not always transfer when a lister transmitted their completed work assignments from the laptop to headquarters. Other census surveys using LiMA had also encountered the same software problem. Moreover, listers were not aware that data had not transmitted because there was no system-generated warning. Bureau officials are working to fix the LiMA software problem, but told us that the software problem has been persistent across other census surveys that use LiMA and they are not certain it will be fixed.\nBureau officials told us that prior to the start of address canvassing they created an alert report to notify Bureau staff managing the operation at headquarters if data were not properly transmitted. When transmission problems were reported, staff was supposed to remotely retrieve the data that were not transmitted. This workaround was designed to safeguard the data but according to officials was not used. Bureau officials told us that they do not know whether this was because the alert reports were not viewed by responsible staff or whether the alert report to notify the Bureau staff managing the operation was not triggered. Bureau officials told us they recognize the importance of following procedures to monitor alert reports, and acknowledge that the loss of data on seven of the laptops may have been avoided had the procedures that alert reports get triggered and monitored been followed; however, officials did not know why the procedures were not followed.\nFor 2020, if the software problem is not resolved, then officials said the Bureau plans to create two new alert reports to monitor the transmission of data. One report would be triggered when the problem occurs and a second report would capture a one-to-one match between data on the laptop and data transmitted to the data center so that discrepancies would be immediately obvious. While these new reports should help ensure that Bureau staff are alerted when data has not properly transmitted, the Bureau has not determined and addressed why the procedures that required an alert report get triggered and then reviewed by Bureau staff did not work as intended. Standards for Internal Control require that organizations safeguard data and follow policies and procedures to achieve their objectives. Thus, either fixing the LiMA software problem, or if the software problem cannot be fixed, then determining and addressing why procedures that alert reports get triggered and monitored were not followed would position the Bureau to help prevent future data losses.", "To effectively manage address canvassing, the Bureau needs to be able to monitor the operation’s progress in near real time. Operational issues such as listers not working assigned hours or falling behind schedule need to be resolved quickly because of the tight time frames of the address canvassing and subsequent operations. During the address canvassing test, the Bureau encountered several challenges that hindered its efforts to efficiently monitor lister activities as well as the progress of the address canvassing operation.", "The Bureau provides data-driven tools for the census field supervisors to manage listers, including system alerts that identify issues that require the supervisor to follow-up with a lister. For the address canvassing operation, the system could generate 14 action codes that covered a variety of operational issues such as unusually high or low productivity (which may be a sign of fraud or failure to follow procedures) and administrative issues such as compliance with overtime and completion of expense reports and time cards.\nDuring the operation, over 8,250 alerts were sent to CFSs or about 13 alerts were sent per day per CFS. Each alert requires the CFS to take action and then record how the alert was resolved. CFSs told us and the Bureau during debriefing sessions that they believed many of the administrative alerts were erroneous and they dismissed them. For example, during our site visit one CFS showed us an alert that incorrectly identified that a timecard had not been completed. The CFS then showed us that the lister’s timecard had indeed been properly completed and submitted. CFSs we spoke to said that they often dismissed alerts related to expense reports and timecards and did not pay attention to them or manage them. Bureau officials reported that one CFS was fired for not using the alerts to properly manage the operation.\nTo assist supervisors, these alerts need to be reliable and properly used. Bureau officials said that they examined alerts for errors after we told them about our observation. They reported that they did not find any errors in the alerts. They believe that CFSs may not fully understand that the alerts stay active until they are marked as resolved by the CFS. For example, if a CFS gets an alert that a lister has not completed a timecard the alert will remain active until the CFS resolves the alert by stating the time card was completed. The Bureau’s current CFS manual does not address that by the time a CFS sees the alert a lister may have already taken action to resolve it. Because this was a reoccurring situation, CFSs told us they had a difficult time managing the alerts.\nStandards for Internal Control call for an agency to use quality information to achieve objectives. Bureau officials acknowledge that it is a problem that some CFSs view the alerts as erroneous and told us they plan to address the importance of alerts in training. We spoke to Bureau officials about making the alerts more useful to CFSs, such as by differentiating between critical and noncritical alerts and streamlining alerts by perhaps combining some of them. Bureau officials told us they would monitor the alerts during the 2018 End-to-End Test’s nonresponse follow-up operation and make adjustments if appropriate. However, while the Bureau told us it will monitor alerts for the non-response follow-up operation, the Bureau does not have a plan for how it will examine and make alerts more useful.\nEnsuring alerts are properly followed up on is critical to the oversight and management of an operation. If the CFSs view the alerts as unreliable, they could be likely to miss key indicators of fraud such as unusually high or low productivity or an unusually high or low number of miles driven. Moreover, monitoring overtime alerts and the submission of daily time cards and expense reports is also important to ensure that overtime is appropriately approved before worked and that listers get paid on time.", "Another tool the Bureau uses to monitor operations is its Unified Tracking System (UTS), a management dashboard that combines data from a variety of Census systems, bringing the data to one place where the users can run or create reports. It was designed to track metrics such as the number and percentage of blocks assigned and blocks completed as well as the actual expenditures of an operation compared to the budgeted expenditures. However, information in UTS was not always accurate during address canvassing. For example UTS did not always report the correct number of addresses assigned and completed by site. As a result, Bureau managers reported they did not rely on UTS and instead used data from the source systems that fed into it. Bureau officials agreed that inaccurate data is a problem and that this workaround was inefficient as users had to take extra time to go to multiple systems to get the correct data.\nBureau officials reported problems importing information from the feeder systems into UTS because of data mismatches. They said that address canvassing event codes were not processed sequentially, as they should have been, which led to inaccurate reporting. Bureau officials told us that they did not specify that the codes needed to be processed in chronological order as part of the requirements for UTS. Bureau officials said UTS passed the requisite readiness reviews and tests. However, Bureau officials also acknowledged that some of these problems could have been caught by exception testing which was not done prior to production.\nTo resolve this issue for 2020, Bureau officials stated they are developing new requirements for UTS to automatically consider the chronological order of event codes. The Bureau told us they are working on these UTS requirements and will provide us with documentation when they are complete. They also said the Bureau plans to implement a process which compares field management reports with UTS reports to help ensure that the reports have the same definitions and are reporting accurate information. Standards for Internal Control call for an organization’s data be complete and accurate and processed into quality information to achieve their objectives. Thus, finalizing UTS requirements for the address canvassing reporting should help increase efficiency for the 2020 Census by avoiding time consuming workarounds.", "The Bureau has taken significant steps to use technology to reduce census costs. These steps include using electronic systems to transmit listers’ assignments and address and map data. However, during the address canvassing test, several listers and CFSs at the three test sites experienced problems with Internet connections primarily during training. The West Virginia site, which was more rural than the other sites, experienced the most problems with Internet connectivity. All six West Virginia CFSs reported Internet connectivity problems during the operation. As a work around, CFSs told us that a couple of their listers transmitted their work assignments from libraries where they could access the Internet.\nBureau officials stated that the laptops in the 2018 End-to-End Test only used two broadband Internet service providers, which may have contributed to some of the Internet access issues. Bureau officials added that despite the reported Internet connectivity issues, the 2018 End-to- End Test for address canvassing finished on schedule and without any major problems. While this might be true for the test, we have previously reported that minor problems can become big challenges when the census scales up to the entire nation. Therefore, it is important that these issues get resolved before August 2019 when in-field address canvassing for the 2020 Census is set to begin.\nThe Bureau is analyzing the cellular network coverage across all 2020 Census areas using coverage maps and other methods to determine which carrier is appropriate (including a backup carrier) for geographic areas where network coverage is limited. According to Bureau officials, they anticipate identifying the cellular carriers for each of its 248 area census offices by the summer of 2018. The officials said they are considering both national and regional carriers to provide service in some geographic areas because the best service provider in a certain geographic area may not be one of the national providers, but a regional provider. In those cases, listers and other staff in those areas will receive devices with the regional carrier. According to Bureau officials, for the 2020 Census, the ability to access multiple carriers should provide field staff with better connectivity around the country.\nWe also found that there was no guidance for listers and CFSs on what to do if they experienced Internet connectivity problems and were unable to access the Internet. Bureau officials told us that staff in the field can use different methods to access the Internet, such as using home wireless networks or mobile hotspots located at libraries, or coffee shops to transmit data. However, the Bureau did not provide such instructions to listers. In addition, the Bureau also does not define what constitutes a secure Internet public connection. Ensuring data are safeguarded is important because census data are confidential. Bureau officials told us that the Bureau plans to provide instructions to field staff on what to do if they are unable to access census systems and what constitutes a secure Internet connection for the next 2018 End-to-End Test field operation, non-response follow-up. However, the Bureau has not finalized or documented these instructions. Standards for Internal Control call for management to design control activities, such as providing instructions to employees to achieve objectives. Finalizing these instructions to field staff will help ensure listers have complete information on how to handle problems with Internet connectivity and that data are securely transmitted.", "Some listers had difficulty accessing the Internet to take online training for address canvassing. This is the first decennial census that the Bureau is using online training, in previous decennials training was instructor-led in a class room. According to the Bureau, in addition to the Bureau provided laptop, listers also needed a personal home computer or laptop and Internet access at their home in order to complete the training. However, while the Bureau reported that listers had access to a personal computer to complete the training, we found some listers did not have access to the Internet at their home and were forced to find workarounds to access the training.\nAccording to American Community Survey data from 2015, among all households, 77 percent had a broadband Internet subscription. Bureau officials told us they are aware that not all households have access to the Internet and that the Bureau’s field division is working on back-up plans for accessing online training. Specifically, Bureau officials told us for 2020 they plan to identify areas of the country that could potentially have connectivity issues and plan to identify alternative locations such as libraries or community centers where Internet connections are available to ensure all staff has access to training. However, they have not finalized those plans to identify locations for training sites. Standards for Internal Control call for management to design control activities, such as having plans in place to achieve objectives. Finalizing these plans to identify alternative training locations will help ensure listers have a place to access training.", "The Bureau’s re-engineered approach for address canvassing shows promise for controlling costs and maintaining accuracy. However, the address canvassing operation in the 2018 End-to-End test identified the need to reexamine assumptions and make some procedural and technological improvements. For example, at a time when plans for in- field address canvassing should be almost finalized, the Bureau is in the process of evaluating workload and productivity assumptions to ensure sufficient staff are hired and that enough laptop computers are procured. Moreover, Bureau officials have not finalized (1) procedures for reassigning work from one lister to another to prevent the unnecessary duplication of work assignments, (2) instructions for using the Internet when connectivity is a problem to ensure listers have access to training and the secure transmission of data to and from the laptops, and (3) plans for alternate training locations. To ensure address and map data are not lost during transmission, Bureau officials will also need to either (1) fix the problem with the LiMA software used to update the address and map files or (2) determine and address why procedures that alert reports be triggered and monitored were not followed.\nFinally, the Bureau has made progress in using data driven technology to manage address canvassing operations. However, ensuring data used by supervisors to oversee and monitor operations are both useful and accurate will help field supervisors take appropriate action to address supervisor alerts and will help managers monitor the real-time progress of the address canvassing operation. With little time remaining it will be important to resolve these issues. Making these improvements will better ensure address canvassing for the actual enumeration, beginning in August 2019, fully functions as planned and achieves desired results.", "We are making the following seven recommendations to the Department of Commerce and the Census Bureau:\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau continues to evaluate and finalize workload estimates for in-field address canvassing as well as evaluates the factors that impacted productivity rates during the 2018 End-to-End Test and, if necessary, make changes to workload and productivity assumptions before the 2020 Census in-field address canvassing operation to help ensure that assumptions that impact staffing and the number of laptops to be procured are accurate. (Recommendation 1)\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau finalizes procedures for reassigning blocks to prevent the duplication of work. (Recommendation 2)\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau finalizes backup instructions for the secure transmission of data when the Bureau’s contracted mobile carriers are unavailable. (Recommendation 3)\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau finalizes plans for alternate training locations in areas where Internet access is a barrier to completing training. (Recommendation 4)\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau takes action to either fix the software problem that prevented the successful transmission of data, or if that cannot be fixed, then determine and address why procedures that alert reports be triggered and monitored were not followed. (Recommendation 5)\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau develops a plan to examine how to make CFS alerts more useful so that CFSs take appropriate action, including alerts a CFS determines are no longer valid because of timing differences. (Recommendation 6)\nSecretary of Commerce should ensure the Director of the U.S.\nCensus Bureau finalizes UTS requirements for address canvassing reporting to ensure that the data used by census managers who are responsible for monitoring real-time progress of address canvassing are accurate before the 2020 Census. (Recommendation 7)", "We provided a draft of this report to the Department of Commerce. In its written comments, reproduced in appendix I the Department of Commerce agreed with our recommendations. The Census Bureau also provided technical comments that we incorporated, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we are sending copies of this report to the Secretary of Commerce, the Under Secretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and interested congressional committees. The report also will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you have any questions about this report please contact me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix II.", "", "", "", "In addition to the contact named above, Lisa Pearson, Assistant Director; Kate Wulff, Analyst-in-Charge; Mark Abraham; Devin Braun; Karen Cassidy; Robert Gebhart; Richard Hung; Kirsten Lauber; Krista Loose; Ty Mitchell; Kayla Robinson; Kate Sharkey; Stewart Small; Jon Ticehurst; and Timothy Wexler made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 3, 3, 3, 1, 2, 2, 3, 3, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h5_full h4_full", "h5_title h0_title h2_title h4_title h1_title", "h0_full h2_full", "h5_full h1_title h4_title", "h1_full", "", "h4_full", "h2_title h3_title", "h3_full h2_full", "h3_title", "", "h3_full", "", "", "h3_full", "h0_full h3_full h5_full", "", "", "", "", "" ] }	{ "question": [ "How long ago did the Census Bureau last complete in-field address canvassing?", "How was the canvassing process made redundant in some cases?", "How does the Bureau plan to mitigate this redundancy?", "How does the redundancy affect the Bureau's work?", "How many addresses does the Bureau expect to have to verify?", "To what extent is this estimate accurate?", "How was the Bureau estimate so far off from the actual workload?", "How were address files updated?", "To what extent did this system preserve and properly transmit the required data?", "How did the Bureau respond to the software issues?", "To what extent did staff regard these alerts?", "How is the Bureau attempting to respond to the software and/or user issues?", "To what extent did the Bureau's data management system provide accurate information?", "How was the system intended to be used?", "How did the system's shortcomings affect how Bureau staff used it?", "How does the Bureau react to user workarounds?", "How is the Bureau responding to the data issues?", "How is the decennial census so successful and accurate?", "How does the Bureau keep track of these addresses?", "How is the address information collection process tested?", "How is the in-field address canvassing reviewed?", "How does this report assess the in-field canvassing?", "How did GAO use external data to help further their assessment?", "To what extent did GAO observe these documents in action (ie. the testing of the procedures)?" ], "summary": [ "The Census Bureau (Bureau) recently completed in-field address canvassing for the 2018 End-to-End Test.", "GAO found that field staff known as listers generally followed procedures when identifying and updating the address file; however, some address blocks were worked twice by different listers because the Bureau did not have procedures for reassigning work from one lister to another while listers work offline.", "Bureau officials told GAO that they plan to develop procedures to avoid duplication but these procedures have not been finalized.", "Duplicating work decreases efficiency and increases costs.", "For the 2020 Census, the Bureau estimates it will have to verify 30 percent of addresses in the field.", "However, at the test sites, the actual workload ranged from 37 to 76 percent of addresses.", "Bureau officials told GAO the 30 percent was a nationwide average and not site specific; however, the Bureau could not provide documentation to support the 30 percent workload estimate.", "Listers used laptops to connect to the Internet and download assignments. They worked offline and went door-to-door to update the address file, then reconnected to the Internet to transmit their completed assignments.", "Bureau officials told GAO that during the test 11 out of 330 laptops did not properly transmit address and map data collected for 25 blocks. Data were deleted on 7 laptops.", "Because the Bureau had known there was a problem with software used to transmit address data, it created an alert report to notify the Bureau staff if data were not properly transmitted.", "However, Bureau officials said that either responsible staff did not follow procedures to look at the alert reports or the reports were not triggered.", "The Bureau is working to fix the software problem and develop new alert reports, but has not yet determined and addressed why these procedures were not followed.", "The Bureau's data management reporting system did not always provide accurate information because of a software issue.", "The system was supposed to pull data from several systems to create a set of real-time cost and progress reports for managers to use.", "Because the data were not accurate, Bureau staff had to rely on multiple systems to manage address canvassing.", "The Bureau agreed that not only is inaccurate data problematic, but that creating workarounds is inefficient.", "The Bureau is developing new requirements to ensure data are accurate but these requirements have not been finalized.", "The success of the decennial census depends in large part on the Bureau's ability to locate every household in the United States.", "To accomplish this monumental task, the Bureau must maintain accurate address and map information for every location where a person could reside.", "For the 2018 End-to-End Test, census workers known as listers went door-to-door to verify and update address lists and associated maps in selected areas of three test sites—Bluefield-Beckley-Oak Hill, West Virginia; Pierce County, Washington; and Providence County, Rhode Island.", "GAO was asked to review in-field address canvassing during the End-to-End Test.", "This report determines whether key address listing activities functioned as planned during the End-to-End Test and identifies any lessons learned that could inform pending decisions for the 2020 Census.", "To address these objectives, GAO reviewed key documents including test plans and training manuals, as well as workload, productivity and hiring data.", "At the three test sites, GAO observed listers conducting address canvassing." ], "parent_pair_index": [ -1, -1, 1, 1, -1, 0, -1, -1, 0, -1, 2, -1, -1, -1, 1, 1, -1, -1, 0, -1, -1, -1, -1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 4, 4, 4, 8, 8, 8, 8, 8, 9, 9, 9, 9, 9, 0, 0, 0, 1, 1, 1, 1 ] }
CRS_R45688	{ "title": [ "", "Introduction", "The National Forest System", "Statutory Authorities for Harvesting Timber", "Planning, Sale Process, and Revenues", "Timber Harvests from the NFS", "Geographic Distribution of Timber Harvests from NFS Lands", "Bureau of Land Management Lands", "Statutory Authorities for Harvesting Timber", "Planning, Sale Process, and Receipts", "Timber Harvests from BLM Lands", "Geographic Distribution of Timber Harvests on BLM Lands", "Issues for Congress", "Appendix. Timber Receipt Funds" ], "paragraphs": [ "", "Timber harvesting on federal lands is a long-standing activity which sometimes generates controversy. Most timber harvesting on federal lands occurs on lands directed to provide a regular output of multiple uses under current law. Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies. Often at issue is the appropriate use of federal lands for timber harvesting under these policies, including what amount of timber harvesting should occur and what constitutes proper balance among timber harvesting and other uses.\nCongress has authorized timber harvesting on certain federal lands under specified circumstances. Most timber harvesting on federal lands occurs on two land systems. The majority of harvests occur on the National Forest System (NFS), which is managed by the Forest Service (FS) within the Department of Agriculture (USDA). Harvests also occur on the public lands managed by the Bureau of Land Management (BLM) within the Department of the Interior (DOI). The FS manages 144.9 million acres of forest, while the BLM manages 37.6 million acres of forest (see Figure 1 ). Together, FS and BLM forest comprises 76% of federal forest area and 23% of all forest in the United States. Within their respective forest, the FS has 96.1 million acres of timberlands, and the BLM has 6.1 million acres of timberlands. The United States has 765.5 million acres of forest, of which 514.4 million acres is timberland and 57% is private. The United States has 57.0 million acres of woodland.\nTimber harvesting is the physical cutting and removal of trees or parts of trees from a given forested site. Harvested timber , or cut and removed trees, is the raw material for items made of wood, such as lumber, plywood, paper, and other products. Timber harvesting may occur on private, federal, or non-federal publicly owned lands, and may be conducted by the landowner or by another entity they allow to do so. Most timber harvesting in the United States is conducted on private lands: in 2011, 88% of timber harvests were conducted on private lands, and in 2012, 90% of wood and paper products in the United States originated on private lands.\nFS and BLM conduct timber sales as the most general way to allow timber harvesting on their respective lands, although they may allow harvesting in other ways. A timber sale is a formal process whereby an entity may purchase a contract to cut and remove specified timber. FS and BLM receive revenue from the sale of the contract. Information on timber harvesting in this report, such as harvested volume, harvested value, and other statistics, derives from FS and BLM data and may include timber harvested through timber sales or other means.\nBoth FS and BLM timber sale planning and implementation proceed under similar principles of achieving multiple use and sustained yield. Both agencies conduct timber harvesting for various purposes. Both plan long-term timber management by designating areas that can support sustainable timber harvest and calculating yields that can be taken without permanent impairment. In the short term, both agencies create plans for timber sales, determine the value of offered timber and specify what timber may be cut, and conduct sales in a competitive manner open to the public.\nTimber harvesting may also occur on two other federal land systems, the National Park System, managed by the National Park Service, and the National Wildlife Refuge System (NWRS), managed by the Fish and Wildlife Service (both agencies are within DOI). In the case of the National Park System, the Secretary may dispose of timber to control insects and diseases or to conserve natural or historic resources. In the case of the NWRS, the Secretary of the Interior may permit timber harvesting to achieve desired fish and wildlife habitat conditions. On both systems, timber harvesting is rare, and harvested volumes are small.\nThis report provides an overview of timber harvesting on FS and BLM lands. The report describes general statutory authorities and regulations, planning activities, timber sales, and trends in the volume and value of timber harvested, first from FS lands, and then for BLM lands. It concludes with a discussion of issues Congress has debated concerning timber harvesting and federal lands.", "The National Forest System comprises nearly 193 million acres. It is made up of 154 national forests, national grasslands, and other units such as research and experimental areas. Approximately 75% of national forest acreage is located in 15 states. As discussed, the NFS contains 144.9 million acres of forest and woodland, of which 66% are considered timberland.", "Most of the lands contained in the modern Forest Service were reserved from the public lands in the late 19 th and early 20 th centuries, in what were first called \"forest reserves\". The forest reserves were initially managed by the DOI and later moved to the USDA and the Forest Service. Through the Organic Administration Act, Congress specified that the purpose of these forests was to \"improve and protect the forest within the reservation … and to furnish a continuous supply of timber for the use and necessities of the citizens of the United States,\" in addition to protecting water flows. The act authorized timber sales of \"dead, matured or large growth of trees\" and set out procedures for conducting them.\nCongress expanded the purposes for the national forests, and developed management goals to achieve those purposes, through the Multiple Use-Sustained Yield Act of 1960 (MUSYA). Congress added the provision of fish and wildlife habitat, recreation, energy and mineral development, and livestock grazing as official purposes of the national forests, in addition to timber harvesting and watershed protection. To supply these activities, management of the forests' resources is to be organized for multiple uses in a \"harmonious and coordinated\" manner that considers the combination of uses that best meets the needs of the American people, not that necessarily yields the largest dollar return or output. The act also directs a sustained yield of products and services, meaning high-level regular output in perpetuity without impairing the lands' productivity.", "Congress has directed FS to engage in long-term land use and resource management. Plans set the framework for land management, uses, and protection. They are developed through an interdisciplinary process with opportunities for public participation. FS uses these plans to guide implementation of site-specific activities. In the case of timber, plans describe where timber harvesting may occur and include measures of sustainable timber harvest levels, and are used to guide implementation of individual sales. These sales generate revenues. Congress has specified various uses for these revenues.\nCongress directed the Forest Service to conduct long-term planning and management through the passage of the National Forest Management Act of 1976 (NFMA). NFMA requires the FS to prepare a land and resource management plan—often called a \"forest plan\"—for each NFS unit. These plans are to be revised at least every 15 years. The FS has issued regulations to implement the planning requirement—often called \"planning rules\"—and to establish the procedures for developing, amending, and revising forest plans. The first planning rule was issued in 1979 and later revised; the current rule dates from 2012. Forest planning and implementation generally proceed as described below. Forest Service timber planning and administration proceed under general FS planning procedures.\nForest plans guide management of the plan area by specifying objectives, standards, and guidelines for resources and activities. They contain certain components required by statute, such as components addressing provision of outdoor recreation, range, wildlife, fish, and timber. Among the most general required components addressing timber are requirements to identify areas and quantities for timber harvesting. The FS must identify lands that may be not suited for timber production . All other lands in the NFS unit are considered suitable for timber production. The plan must contain the allowable sale quantity, the measure of timber that can be removed annually without impairing future yield, although FS also considers other measures of sustainable yield in planning over various time horizons. The allowable sale quantity informs the amount of timber that can be removed annually over a ten-year plan period. Plans are required to be developed with public participation and in accordance with various other administrative and environmental statutes, such as the National Environmental Policy Act (NEPA).\nForest plans may consider harvesting for various purposes—for example, to produce timber or to achieve and maintain desired resource conditions, such as habitat improvement, fire risk reduction, and sanitation. If the forest plan identifies lands as suitable for timber production, the plan must address timber harvesting on those lands. If the forest plan considers timber harvesting for purposes other than producing timber, it must delineate areas where such activities may occur. These areas may be identified by forest type, geographic area, or other criteria.\nFS conducts timber sales to achieve the objectives in the forest plan. FS establishes a sale schedule and timber sale project plan, which may include more than one timber sale. The plan estimates volume offered, acreage, and harvest methods for the relevant sales. Site-specific timber harvests must also comport with NEPA and relevant statutes, including any requirement for site-specific environmental analysis and review.\nPrior to an individual sale, FS marks and appraises the timber to be offered. FS may designate timber in one of three ways: physical marking, a written description of specific trees for harvest (called description ) , or a written description of desired post-harvest stand characteristics (called prescription ). FS creates a sale package, including a prospectus, sample contract, and other required documentation; some requirements are site-specific. FS advertises the package at an appraised starting price. Interested parties may bid on the package. A contract is awarded to the highest bidder provided legal conditions are met. The winning bidder conducts the timber harvest according to the terms—such as timeline, harvest method, and road construction conditions—specified in the contract. Timber harvests must generally be completed in 3 years, with a maximum term of 10 years.\nTimber sales generate revenue, and disposition of this revenue depends on several factors. Congress has established several funds for FS to retain and use timber sale receipts. Depending on the type of sale, among other factors, FS may be required to make certain deposits to these funds. If any portion of receipts are not required to be deposited, FS may distribute receipts among funds at their discretion, including depositing all revenue in a single fund. The money in these funds may be used by the FS for a variety of purposes, sometimes without further appropriation (i.e., as mandatory appropriations). See Table A-1 for a list of these funds. A more detailed discussion of revenue levels, expenditures, and issues related to FS timber revenue funds is outside the scope of this report.", "Timber harvesting is one of many authorized uses of the NFS. The amount of timber harvested from the NFS, and its relative proportion of total U.S. timber supply, has fluctuated over time. This section provides an overview of timber volume harvested from the NFS, and value of those harvests, along with some economic and historical factors which may have contributed to observed changes.\nThe volume of timber harvested from the national forests (and their precursors, the forest reserves) increased slowly from 1898 until the 1940s. Most demand for wood was met by private timberlands; by 1940, for example, FS lands supplied 2% of U.S. timber supply.\nIn the post-World War II era, timber harvest volume from the NFS grew (see Figure 2 ). The timber supply from private forestry was unable to keep pace with the increased demand, due in part to high harvest levels during WWII. In the 1950s, the FS began to raise harvest limits. Harvests rose from 1-3 billion board feet (abbreviated BBF) annually in the early 1940s to more than 10 BBF in some years of the 1960s and 1970s. According to historical data from one source, harvest from the NFS rose from 9% of total U.S. harvest in 1952 to 16% in 1962 and 1970, and 15% in 1976.\nHarvest volume declined from the mid-1970s to the early 1980s. Harvest on FS lands shifted to more marginal timberlands; in part, clear-cutting in the previous decades had reduced tree volume available for harvest in productive areas. This period also coincided with recessions in 1980 and 1982, which may have reduced demand.\nTimber harvests rose from the early 1980s to the early 1990s, sometimes reaching levels of over 12 BBF per year. These timber harvests coincided with the 1986 U.S. peak in per capita consumption of wood products, driven in part by an increase in housing starts following the 1982 recession. In 1986, timber harvests from the NFS were 13% of total U.S. timber harvests.\nIn the early 1990s, harvested timber volume began a sustained decrease. In 1991, the NFS supplied 11% of total U.S. harvested timber, and in 1997, the NFS supplied 5% of total U.S. harvested timber. In 2011, NFS supplied 2% of U.S. wood and paper products. Numerous interrelated factors, including statutory, administrative, biological, and market influences, may have contributed to this decline. The effect of each individual factor is not settled, as is the effect of each factor over time. These factors occurred at varying points in time and may not coincide directly with observed harvest level changes. Some sources have noted that statutory changes added complexity to forest management and increasing litigation frequency, while also increasing transparency and public participation. Other sources have noted changing management priorities. Others have noted decreasing domestic demand, volatile prices, and the prevalence of less valuable timber due to high harvest levels in previous decades. The listing of the northern spotted owl ( Strix occidentalis caurina) under the Endangered Species Act in 1990 is often discussed in regard to declining timber harvest levels.\nHarvested volumes have consistently been between 2 BBF and 3 BBF annually from FY2004 onward. In FY2018, approximately 2.8 BBF were harvested from FS lands. Although the national timber market in the United States was affected by the 2008 housing market collapse and the subsequent decline in demand, timber volumes harvested from FS experienced relatively little change in volume, for unclear reasons.\nIn FY2018 dollars, harvest values from approximately FY2000 onward are similar to harvest values in the early 1940s. Harvest values generally increased from the early 1940s to a peak of approximately $3.4 billion (FY2018 dollars) in FY1979, before a decline through FY1982. They rose again thereafter, reaching another peak of approximately $2.6 billion (FY2018 dollars) in FY1989, before again declining. Values from FY2001 onward have generally been between approximately $100 million and $300 million in FY2018 dollars. In FY2018, cut value was approximately $188.8 million. FS harvest value declined during the recession and housing collapse of 2008. Harvest value may vary due to quality, species, and age class of offered timber and timber market conditions, and is correlated with volume harvested.", "FS harvest volume differs by region; these differences mirror the major production regions in private forestry (see Figure 3 ). FS Region 6 (the Pacific Northwest), Region 8 (the Southeast), and Region 9 (the North), are the three largest producing regions in both private and public forestry. In general, harvest volume and value by region is a function of many complex factors, including the dominant timber type, age class, and condition; the suitability of FS sites for harvest operations; the legal limitations on land uses; and the status of the local forest products industry.", "The Bureau of Land Management (BLM) administers about 246 million surface acres of federal lands, almost entirely located in twelve western states. As noted, about 37.6 million acres of BLM lands are forest; of that, 16% is considered timberland. The Oregon and California (O&C) lands, which comprise approximately 2.6 million acres, contain 2.4 million acres of forest (see \" Statutory Authorities for Harvesting Timber ,\" below, for a description of the O&C lands). The transfer of the forest reserves to FS administration in the early 1900s reduced the amount of forest land and timberland under BLM management today.", "The modern BLM was formed in 1946 to manage the public domain lands. At its formation, BLM had no general authority to harvest timber on those lands. Congress authorized BLM to dispose of forest materials through the Materials Act of 1947. Congress later elaborated BLM's management responsibilities with the passage of the Federal Land Policy and Management Act of 1976 (FLPMA). Like the MUSYA's mandate for the FS, FLPMA requires BLM to manage the public lands for multiple use and sustained yield in a \"harmonious and coordinated\" manner that considers the combination of uses that best meets the needs of the American people, not necessarily yields the largest dollar return or output. The act directs a sustained yield of renewable resources, meaning high-level regular output in perpetuity without impairing the lands' productivity.\nThe O&C lands are lands in western Oregon managed according to their own establishing statutes, mostly by BLM. FS manages 492 thousand acres of the O&C lands, or 18% of this total area. The lands consist of several areas, the Oregon and California lands and the Coos Bay Wagon Road (CBWR) lands, which were revested to the federal government following violation of grant terms. They are usually referred to collectively as \"O&C lands\" and often grouped for legislative purposes. BLM or FS's mandate to sell timber on the O&C lands derives directly from the O&C lands' establishing statute. The O&C Act directs that O&C lands be managed for sustained yield of permanent forest production, watershed protection, recreation, and contributing to the economic stability of local communities and industries.", "Congress has directed BLM to engage in long-term land use and resource management planning . Plans set the framework for land management, uses, and protection. They are developed through an interdisciplinary process with opportunit ies for public participation. BLM uses these plans to guide implementation of site-specific activities. In the case of timber, plans describe where timber harvesting may occur and include measures of sustainable timber harvest levels . They are used to guide execution of individual sales , which generate revenues. Congress has specified various uses for these revenues.\nBLM timber planning and administration follow general BLM land use planning procedures. Through FLPMA, Congress directs BLM to develop, maintain, and revise plans for managing public lands. BLM issued the first regulations to implement the planning requirement in 1979, and subsequently revised them; the current BLM planning rule dates from 2005. Plans must be developed with public participation and in accordance with various other administrative and environmental statutes (e.g., NEPA).\nUnder BLM's planning rule, resource management plans remain in effect indefinitely. They are to include monitoring and evaluation standards, and are to be amended or revised when circumstances warrant. The planning rule directs BLM to identify indicators that describe the desired forest outcomes in the plan area. BLM is to identify a suite of management actions to achieve those outcomes, including identifying sustained yield areas, areas that could support long-term timber harvest. BLM personnel determine a harvest level for these areas that can be maintained without permanent impairment; this harvest level is known as the allowable sale quantity . Allowable sale quantity is measured for a ten-year period.\nIn addition, BLM generally makes annual forest product sale plans. These plans contain estimates of sale volume, acreage, and permitted harvest methods for any sales proposed for the year. Site-specific timber harvests must comport with NEPA and relevant statutes, including any additional requirement for site-specific analysis and review.\nTo conduct an individual sale within the plan, BLM designates the timber for sale and appraises the value of the timber. BLM timber may be designated by physical marking or by enclosing timber in a sale boundary. BLM prepares a sale contract, along with a prospectus describing the sale. The sale is advertised at an appraised starting price. Interested parties may bid on the contract. A contract is awarded to the highest bidder provided legal conditions are met. The winning bidder conducts the timber harvest according to the terms specified in the contract, such as timeline and harvest method. Timber harvests must generally be completed in three years, but may be extended under certain circumstances.\nTimber sales generate revenues, and disposition of these revenues depends on a number of factors. Congress has established several funds for timber sale revenues. Depending on the type of sale and the originating lands, BLM may be required to make certain deposits to these funds. If any portion of revenues are not required to be deposited, BLM may allocate those revenues among funds at its discretion, including depositing all revenues in a single account. Some funds are permanently appropriated to BLM and may be used without further congressional action (i.e. as mandatory appropriations). See Table A-2 for a list of these funds. A more detailed discussion of funding levels, expenditures, and issues related to BLM timber revenue funds is outside the scope of this report.", "Timber harvesting is one of many authorized uses of BLM lands. Long-term historical data regarding BLM timber harvesting is unavailable. Other data on past timber program activity show that BLM timber harvesting may have changed over time. This section provides data on timber offered for sale, timber sold, and timber harvested from BLM lands at various points in time, along with some economic and historical factors which may have contributed to observed changes.\nData on cut timber volume from BLM lands is available from FY1994 onward (see Figure 4 ). While complete historical cut data is unavailable prior to FY1994, some data exists about past sales (see Table 1 ). The intermittent nature of this data challenges drawing conclusions about larger trends in these periods, especially in the missing decades. In addition, these data refer to either timber sold or timber offered for sale, which differs from volume of timber cut. However, as an approximate comparison, the data show that the volumes sold prior to FY1990 are large compared to recent volumes offered for sale. Observers confirmed a decline in public domain timber offered for sale beginning in 1991, though the investigation did not consider the O&C lands.\nVolumes harvested from BLM lands were between 100 and 260 MMBF from FY1995 to FY2000 and from FY2004 to FY2018 (see Figure 4 ). Harvests were lower in FY1994 and between FY2001 and FY2003. Harvested volumes have shown a generally increasing trend since FY2001, with the largest recently recorded harvest in FY2015 (about 258 MMBF). Like the NFS, harvests from BLM lands during the recession and housing market collapse of 2008 experienced relatively little change in volume, for unclear reasons. In FY2018, BLM harvested about 178 MMBF.\nData on cut timber value from BLM lands is available from FY1996 onward (see Figure 4 ). Total value of harvests has declined since FY1996. Harvest values have generally increased since the low value of approximately $15.4 million in FY2001, and have been between $20 million and $50 million since FY2011 (FY2018 dollars). In FY2018, cut value was $41.3 million. Like the FS, BLM harvest value during the recession and housing market collapse of 2008 declined, but the relative change was small compared to the decreases of the late 1990s. Harvest value may vary due to the quality, species, and age class of offered timber as well as timber market conditions, and is correlated with harvested volume. BLM harvest values per unit of timber are higher than FS values per unit, due to the dominant timber type harvested from BLM lands, among other factors.", "Most timber harvests on BLM lands are conducted on the O&C lands. From FY2014 to FY2018, the average harvested volume from O&C lands was 93% of the average total volume. The large proportion of volume harvested from O&C lands reflects the forest cover and type, dominant use for forest production, and the size of the forest industry in the Pacific Northwest. As with the NFS, in general, BLM harvest volume and value is a function of many complex factors, including the dominant timber type, age class, and condition; the suitability of sites for harvest operations; legal limitations on land uses; and the status of the local forest products industry.", "Management of federal lands for multiple uses and sustained yield is challenging, including balancing timber harvesting with other uses. Timber production from federal lands is driven by a complex interaction of environmental factors, market forces, and land management policies. Under current law, efforts to change harvest levels must comport with the provision of a sustained yield of multiple uses. Congress has sometimes considered legislation to prioritize or exclude some uses in a limited manner—in certain geographic regions, for example—but has not changed these fundamental management concepts since their enactment in the 1960s and 1970s.\nThe public often expresses preferences for uses of federal forests, including with respect to timber harvesting. Some may support timber harvesting generally, and believe the current levels of production are sufficient. Others may wish to see the levels of production increased or decreased, depending on their perspective. Those who support timber harvesting on federal lands may cite benefits to the local timber industry, a belief that harvesting is part of the core mission of federal forests, or a belief that timber harvesting is a tool for improving forest health conditions, among other reasons. Proponents of timber harvesting on federal lands may also emphasize the role of timber harvesting in some forest-adjacent rural economies. Others may oppose timber harvesting due to concerns about ecological or human impacts: for example, they may cite beliefs that timber sales have detrimental impacts on environmental quality, fish and wildlife habitat, forest character, recreation and tourism, or cultural and aesthetic values. Opponents may also contend that conducting timber sales favors the timber industry over other interests.\nIn addition to the themes identified above, Congress may also debate other issues related to federal timber harvests that are not discussed in detail in this report. For example, these include issues related to the disposition and use of timber sale revenues; the relationship between timber harvest planning and statutes such as NEPA and the Endangered Species Act (ESA); and special harvest authorities, among others.", "The following tables list and describe the funds that receive timber sale revenues; the funds' statutory authority is also shown. A detailed discussion of funding levels, expenditures, and issues related to these funds is outside the scope of this report." ], "depth": [ 0, 1, 1, 2, 2, 2, 3, 1, 2, 2, 2, 3, 1, 2 ], "alignment": [ "h7_title h10_title h5_title h0_title h2_title h4_title h3_title h9_title h1_title h6_title h8_title", "h5_full h10_full h4_full", "h7_title h0_title h2_title h1_title h6_title h8_title", "h0_full h6_full", "h0_full h8_full h2_full h6_full", "h7_full h1_full", "", "h2_title h9_title h3_title h8_title", "h8_full h2_full", "h8_full h2_full", "h3_full h9_full", "h3_full h9_full", "h10_full h4_full", "" ] }	{ "question": [ "How are the lands under FS managed?", "Why is the MUSYA used by the FS?", "How has Congress directed the FS?", "What plans have been set due to the NFMA?", "How do these plans specifically pertain to timber and the FS?", "What are the plans for revenue?", "How has timber harvest behaved over time?", "What was timber harvest like in the 1940s?", "How did harvest volumes change from the 1950s to the 1980s?", "How have harvest volumes behaved since the 1990s?", "How did the value of timber harvests behave from the 1940s to 1979?", "Since 2001, how has harvest value been?", "What is notable about the harvest volume from 2014 to 2018?", "How are BLM lands managed?", "How has Congress influenced BLM?", "Under FLPMA and Congress, what is being planned?", "How do these plans apply to timber?", "How is revenue going to be handled?", "How is data on timber trends for BLM being interpreted?", "What was observed about harvest volume for BLM?", "What was observed about the greatest average harvest volume from BLM?", "What was observed about the harvest values for BLM?", "What did Congress debate about timber use?", "What is challenging about determining appropriateness?", "What balances need to be considered when determining appropriateness?", "How has timber been debated in relation to forests?", "What has Congress granted to some federal land management agencies?", "What agencies have taken advantage of this authority?", "How is forest management handled by these two agencies?", "How are other agencies involved in timber sales?", "How are FS lands managed?", "How does the MUSYA direct FS in their land use?", "How has Congress influenced FS?", "What plans have been set to enact the movements of FS?", "How do these plans concern timber?", "What is being done with revenue?", "How has timber harvest behaved?", "How did harvest volumes behave in the 1940s?", "How did harvest volumes behave from the 1950s to the 1980s?", "How did harvest volumes behave from the 1990s onwards?", "What was notable about the harvest volume from 2014 to 2018?", "How did harvest value change from the 1940s until 1979?", "How did this value then change after 2001?", "How are BLM lands managed?", "How does the FLPMA direct BLM in their land use?", "How has Congress influenced BLM?", "What plans have been set to enact the movements of BLM?", "How do these plans concern timber?", "What is being done with revenue?", "How is data on timber trends for BLM being interpreted?", "What was observed about harvest volume for BML?", "What was observed about the greatest average harvest volume from BLM?", "What was observed about the harvest values for BLM?", "What has Congress debated regarding timber?", "Why is this balance challenging for land management agencies?", "What influences the balance of timber harvesting and other uses?", "What are some concerns relating to timber harvest and the forest environment?" ], "summary": [ "Lands managed by the FS, the National Forest System (NFS), are managed under a multiple use-sustained yield model pursuant to the Multiple Use-Sustained Yield Act of 1960 (MUSYA).", "This statute directs FS to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity.", "Congress, through the National Forest Management Act (NFMA), has directed FS to engage in long-term land use and resource management planning.", "Plans set the framework for land management, uses, and protection; they are developed through an interdisciplinary process with opportunities for public participation.", "In the case of timber, they describe where timber harvesting may occur and include measures of sustainable timber harvest levels.", "FS uses these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue.", "Timber harvest on FS lands has varied over time.", "FS harvest volumes in the 1940s were around 1-3 billion board feet per year.", "Annual harvest volumes rose from the 1950s through the 1980s, sometimes exceeding 10 billion board feet.", "Annual harvested volumes decreased in the early 1990s and have remained between 1.8 and 2.8 billion board feet since FY2003.", "The total dollar value of FS timber harvests generally rose from the early 1940s to over $3 billion in FY1979.", "Total value has been between $100 million and $300 million since FY2001.", "From FY2014 to FY2018, the greatest average annual harvest volume on FS lands was from Oregon and Washington.", "BLM lands are managed under a multiple use-sustained yield model pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA). This statute directs BLM to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity.", "Congress has directed BLM to engage in long-term land use and resource management planning through FLPMA.", "Plans set the framework for land management, uses, and protection; they are developed made through an interdisciplinary process with opportunities for public participation.", "In the case of timber, they describe where timber harvesting may occur and contain measures of sustainable timber harvest levels.", "The FS and the BLM use these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue.", "Although trends in timber activities on BLM lands are challenging to infer from the available data, volumes sold in the past appear to be larger than recent volumes offered for sale.", "Harvested volumes for the BLM have been between 100 and 260 million board feet annually from FY1995 onward, except in FY1994 and between FY2001-FY2003.", "From FY2014 to FY2018, the greatest average annual harvest volume from BLM lands was from Oregon and Washington.", "Total harvest values have declined since the mid-1990s, and have generally been between $20 million and $50 million annually since FY2011.", "Congress has debated the appropriate balance of timber harvesting and other uses on federal lands.", "Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies.", "Preferences for certain balances of these uses often stem from values about federal forests' purposes, such as consideration of economic, environmental, or recreational values.", "Debate has also centered on the relationship of timber harvesting levels to forest health, including whether changing harvest levels is a desirable forest management tool.", "Congress has granted some federal land management agencies the authority to sell timber from federal lands.", "Two agencies, the Forest Service (FS) and the Bureau of Land Management (BLM), conduct timber sales as an authorized use.", "Together, the FS and the BLM manage 76% of federal forest area. FS manages 144.9 million acres, while BLM manages 37.6 million acres.", "The other major federal land management agencies, the National Park Service (NPS) and the Fish and Wildlife Service (FWS), rarely conduct timber sales.", "Lands managed by the FS, the National Forest System (NFS), are managed under a multiple use-sustained yield model pursuant to the Multiple Use-Sustained Yield Act of 1960 (MUSYA).", "This statute directs FS to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity.", "Congress, through the National Forest Management Act (NFMA), has directed FS to engage in long-term land use and resource management planning.", "Plans set the framework for land management, uses, and protection; they are developed through an interdisciplinary process with opportunities for public participation.", "In the case of timber, they describe where timber harvesting may occur and include measures of sustainable timber harvest levels.", "FS uses these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue.", "Timber harvest on FS lands has varied over time.", "FS harvest volumes in the 1940s were around 1-3 billion board feet per year.", "Annual harvest volumes rose from the 1950s through the 1980s, sometimes exceeding 10 billion board feet.", "Annual harvested volumes decreased in the early 1990s and have remained between 1.8 and 2.8 billion board feet since FY2003.", "From FY2014 to FY2018, the greatest average annual harvest volume on FS lands was from Oregon and Washington.", "The total dollar value of FS timber harvests generally rose from the early 1940s to over $3 billion in FY1979.", "Total value has been between $100 million and $300 million since FY2001.", "BLM lands are managed under a multiple use-sustained yield model pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA).", "This statute directs BLM to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity.", "Congress has directed BLM to engage in long-term land use and resource management planning through FLPMA.", "Plans set the framework for land management, uses, and protection; they are developed made through an interdisciplinary process with opportunities for public participation.", "In the case of timber, they describe where timber harvesting may occur and contain measures of sustainable timber harvest levels.", "The FS and the BLM use these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue.", "Although trends in timber activities on BLM lands are challenging to infer from the available data, volumes sold in the past appear to be larger than recent volumes offered for sale.", "Harvested volumes for the BLM have been between 100 and 260 million board feet annually from FY1995 onward, except in FY1994 and between FY2001-FY2003.", "From FY2014 to FY2018, the greatest average annual harvest volume from BLM lands was from Oregon and Washington.", "Total harvest values have declined since the mid-1990s, and have generally been between $20 million and $50 million annually since FY2011.", "Congress has debated the appropriate balance of timber harvesting and other uses on federal lands.", "Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies.", "Preferences for certain balances of these uses often stem from values about federal forests' purposes, such as consideration of economic, environmental, or recreational values.", "Debate has also centered on the relationship of timber harvesting levels to forest health, including whether changing harvest levels is a desirable forest management tool." ], "parent_pair_index": [ -1, 0, -1, 2, 3, 2, -1, 0, 0, 0, -1, 4, -1, -1, -1, 1, 2, 1, -1, -1, 1, -1, -1, 0, 0, -1, -1, 0, -1, -1, -1, 0, -1, 2, 3, -1, -1, 0, 0, 0, 3, -1, 5, -1, 0, -1, 2, 3, -1, -1, -1, 1, -1, -1, 0, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5, 0, 0, 0, 0, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5 ] }
CRS_R41965	{ "title": [ "", "Introduction", "Brief Overview of Essential Features", "Debt Ceiling Increase and Disapproval Process", "Statutory Discretionary Spending Limits", "Joint Select Committee on Deficit Reduction", "Budget Goal Enforcement: Spending Reduction Trigger", "Vote on Constitutional Amendment to Balance the Budget", "Federal Student Aid Programs", "Expedited Procedures: General Observations", "Debt Ceiling Increase and Disapproval Process", "Increases in the Debt Limit in Three Installments", "Expedited Procedures for Consideration of Disapproval Resolution", "Introduction of a Qualifying Joint Resolution", "Senate Consideration", "House Consideration", "Procedures Following a Presidential Veto and the Enactment Deadline", "Statutory Limits on Discretionary Spending", "Adjustments", "Enforcement", "Reports", "Rules Related to Provisions Designated as Emergency in the House", "Senate Budget Enforcement for FY2012 and FY2013", "Joint Select Committee on Deficit Reduction", "Establishment of the Joint Committee", "Membership", "Staffing and Funding58", "Development of the Joint Committee Recommendations", "Procedures for the Operation of Joint Committee Meetings", "Expedited Procedures for Consideration of the Joint Committee Bill", "Introduction and Referral of Joint Committee Bill in Both Chambers", "Senate Floor Action", "Privileged for Consideration", "Privileged for Disposition", "House Floor Action", "Under the Terms of the Budget Control Act", "Option to Consider the Bill under the Terms of a Special Rule", "Passage Vote and Subsequent Action", "Budget Goal Enforcement: Spending Reduction Trigger", "Revising Statutory Limits on Discretionary Spending", "Calculating the Spending Reductions", "Implementing the Required Spending Reductions", "Vote on Balanced Budget Amendment to the Constitution", "Requirement for Vote", "Expedited Procedure for Consideration of Constitutional Amendment Approved by Other Chamber", "Federal Student Aid Programs", "Federal Direct Loan Program (Student Loans)", "Federal Pell Grant Program" ], "paragraphs": [ "", "The President signed the Budget Control Act of 2011 (BCA; P.L. 112-25 ) on August 2, 2011. The new law contains multiple interrelated components, several of which establish procedures that will affect the consideration of subsequent legislation.\nThis report begins with a brief overview of the essential features of the Budget Control Act, taking a broad view of the connections between its different components and introducing readers to some fundamental concepts and terminology. The subsequent sections of this report provide more detailed information on each component of the BCA, with the goal of providing information to assist Members and staff as they apply these new procedures. (The appendices contain tools for those quickly seeking specific information: a list of short answers to \"frequently asked questions\" and tables identifying the various dates for action in relation to the bill to be proposed by the Joint Select Committee on Deficit Reduction and the resolutions disapproving the debt limit increase.)\nThe explanations of the procedures established in the BCA are based on a reading of the new law and an understanding of how similar procedures operated in the past. Some elements of the Budget Control Act of 2011, like all laws, will be subject to interpretation. Ultimately it is the House and Senate that will decide on the specific operation of the legislative procedures. For advice on the implementation of these procedures, congressional Members and staff will be best advised to consult with the Parliamentarian of their chamber. If an automatic spending reduction process is triggered, its actual execution will depend in large part on the interpretations and actions of the Office of Management and Budget (OMB), which might also need to be consulted regarding specific elements of that process.", "", "The Budget Control Act is the result of negotiations between the President and Congress held in response to the federal government having nearly reached its borrowing capacity.\nThe BCA authorized debt limit increases up to at least $2.1 trillion dollars (and up to $2.4 trillion under certain conditions) in three installments. The first installment of $400 billion already occurred when the President submitted a certification, pursuant to the act, that the debt was within $100 billion of its limit. Congress can prevent each of the next two installments if it passes a joint resolution disapproving the increase to the debt limit and overrides an expected presidential veto, although this full sequence of actions is widely considered to be unlikely.\nThe initial passage of a resolution disapproving a debt limit increase requires majority support in each chamber; BCA procedures prevent a Senate filibuster that otherwise could delay or prevent its coming to a vote. Presumably, however, the President will veto the disapproval resolution because the Treasury will have advised him that further borrowing is required to meet existing commitments. To override a Presidential veto requires the support of two-thirds of both chambers. Ultimately, therefore, the support of two-thirds of each chamber might be necessary to prevent a debt limit increase.\nThe House and Senate might consider a resolution disapproving the next increase of $500 billion to the debt limit sometime in September, which is when the deadline set by the BCA for enacting such a resolution occurs. The debt is next predicted to be within $100 billion of its limit in early 2012, when the President would submit another certification and Congress might consider another disapproval resolution.", "Reaching agreement on the debt ceiling increase contained in the BCA depended in part on enacting procedures designed to reduce future federal spending. The BCA therefore also established caps on the amount of money that could be spent through the annual appropriations process for the next 10 years, which the Congressional Budget Office estimates will reduce federal spending by $917 billion. The caps established by the BCA may also be adjusted for certain purposes, including, for example, for the costs of the \"Global War on Terrorism.\"\nThe adjustable caps are not placed on specific accounts or even on each of the appropriations bills; instead they are broad caps on the total amount of discretionary spending. For the first two fiscal years, the caps are on two categories of spending: security and nonsecurity. For the other years, one limit on all discretionary spending is created. Decisions about how these caps will affect specific agencies or programs will be made by Congress and the President through the regular appropriations process.\nDiscretionary spending limits are not unique; in current practice, the appropriators generally operate under caps set by Congress in a budget resolution or in another form. But those caps are enforced in the House and Senate, and the House and Senate can each waive them unilaterally. The caps established by the BCA, in contrast, cannot be waived by a single chamber. If the caps are exceeded, the BCA provides for a sequestration process: an automatic, largely across-the-board cancellation of budgetary resources.", "Another part of the BCA agreement to increase the debt ceiling was the creation of a Joint Select Committee on Deficit Reduction, instructed to develop legislation to reduce the federal deficit by at least another $1.5 trillion over the 10-year period ending in FY2021. The legislation resulting from the joint committee recommendations can be considered under special procedures that prevent amendment and limit debate in both chambers. These procedures could have a significant impact in the Senate because they allow a simple majority to approve a bill without indefinite delay. Under regular Senate procedures, the support of 60 Senators is often necessary to advance the consideration of legislation.\nThe joint committee, made up of an equal number of Democrats and Republicans from each chamber, has wide authority to develop a proposal to reduce the federal deficit. No specific policy restrictions or requirements are placed on the joint committee. Under the terms of the BCA it could recommend changes to revenue, spending, or both; it might even propose new budget enforcement mechanisms. For the proposal to be considered under the special, expedited procedures, however, it must be approved by the joint committee by November 23, 2011, and passed by both chambers by December 23, 2011. Given this timeline, perhaps the greatest indirect restriction on the content of the joint committee bill is that it must pass a House controlled by one party and a Senate controlled by another.", "Furthermore, if Congress and the President do not enact a joint committee bill reducing the deficit by at least $1.2 trillion over the period of FY2012 to FY2021, there are potentially undesirable consequences. The failure to enact such a bill into law by January 15, 2012, will trigger an automatic spending reduction process. This process, sometimes referred to as \"the trigger,\" includes sequestration, or the cancellation of budgetary resources. What it could mean is that if a qualifying joint committee bill is not enacted by January 15, 2012, then on January 2, 2013, the spending authority of many federal departments and agencies will be reduced.\nThe automatic process for deficit reduction involves several steps and calculations, and for details the reader is referred to the \"Budget Goal Enforcement\" section of the report below. Very generally, the spending reductions are to be made equally from defense spending and from all other spending (referred to as \"nondefense spending\"). The reductions required in each of these categories are then divided proportionally between discretionary spending and mandatory spending.\nThe spending reductions are achieved for direct spending through sequestration each year (FY2013 to FY2021). For discretionary spending, the reductions are achieved through sequestration the first year (FY2013). For the other fiscal years (FY2014-FY2021), the discretionary spending reductions are achieved through a downward adjustment of statutory limits on discretionary spending divided into two new categories that reflect defense and nondefense spending. Importantly, some programs, including both Social Security and Medicaid, are exempt from sequestration, and any sequestration of Medicare spending is capped at 2%.\nThe precise implications of the automatic spending reduction process cannot be assessed at this time. The amounts of spending reductions required each year cannot yet be known, as they depend in part on the extent, if any, by which the reductions in the joint committee bill fall short of the $1.2 trillion goal and in part on spending estimates to be calculated in the future by the Office of Management and Budget (OMB). Furthermore, beginning in FY2014, part of the spending reductions will be achieved through a downward adjustment of the statutory limits on discretionary spending, not by automatic across-the-board spending cuts. For discretionary spending, it will therefore be Congress and the President who later determine the manner in which reductions are made to each account through the annual appropriations process each year.\nThis process presumably is intended to encourage agreement among policy makers on deficit reduction. During the negotiations over the BCA, it was widely reported that part of the reason to include both defense and domestic spending in the automatic spending reduction process was to encourage lawmakers to work to an agreement on deficit reduction based on an explicit determination of government budget priorities. Presumably, such an agreement would be preferred by lawmakers to a largely across-the-board cut, proportional to each category, as described here. Thus, many lawmakers presumably have an incentive to prevent the automatic spending reduction process by enacting a joint committee bill reducing the deficit by $1.2 trillion or more over FY2012-FY2021. Congress and the President could also modify or terminate the process by passing a law altering the BCA, perhaps as part of the deal reached by the joint committee or perhaps in another law enacted sometime in 2012—because sequestration and other automatic spending reduction actions will not take place until 2013.", "The BCA also states that the House and Senate must each vote on a balanced budget amendment to the Constitution between September 30 and December 31, 2011. In the Senate, to get to a direct passage vote on a constitutional amendment, it might be necessary to secure support from 60 Senators to begin consideration of such a proposal. Many factors, including expectations created by approval of the BCA, could potentially influence whether or not the Senate votes on a balanced budget amendment. The only procedural consequence of not voting as specified in the BCA is that, if Congress does not approve a constitutional amendment, one of two avenues for increasing the debt ceiling by $1.5 trillion, instead of $1.2 trillion, will not be available.\nIf a joint resolution proposing a balanced budget amendment to the Constitution is approved by either chamber, then the BCA provides an expedited procedure for that joint resolution to be considered, without amendment, in the other chamber. The BCA does not affect procedures for bringing a measure up before the Senate, however. To summarize, if the House passes a balanced budget amendment by the required two-thirds vote, and if the Senate agrees to take up the House-passed proposal using its regular procedures, then the BCA procedures ensure the Senate will vote on passage of the House proposal.", "The BCA also makes changes to the William D. Ford Federal Direct Loan (DL) program and the Federal Pell Grant program, two of the largest federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329). The BCA amends the HEA by eliminating the availability of Subsidized Stafford Loans to graduate and professional students for periods of instruction beginning on or after July 1, 2012. The BCA also eliminates the authority of the Secretary of Education to offer one of the two types of repayment incentives on DL program loans first disbursed on or after July 1, 2012. CBO estimates these changes in the DL program would reduce direct spending by $9.6 billion over the FY2012-FY2016 period and $21.6 billion over the FY2012-FY2021 period.\nApproximately $17 billion of the $21.6 billion in estimated savings from the changes in the DL program would be directed to the Pell Grant program for future general use. The BCA provides $10 billion in mandatory funding for FY2012, and $7 billion in mandatory funding for FY2013 for the program. These additional funds would reduce the amount of discretionary appropriations required in FY2012 and FY2013, although additional funding above the FY2011 discretionary level of approximately $23 billion may still be required in order to maintain the current eligibility parameters of the program in FY2012.", "The BCA establishes legislative procedures for the expedited consideration of three legislative proposals: a resolution disapproving a debt increase, the joint committee bill, and a balanced budget constitutional amendment passed by the other chamber. The specifics of each of these procedures are contained in the relevant sections of this report, but the procedures are similar enough that it is possible to generalize about them.\nFirst and foremost, as is the case with all provisions of law that establish internal congressional procedures, either chamber can unilaterally decide to modify or otherwise disregard the procedures established by the BCA. Under the Constitution, each chamber may \"determine the Rules of its Proceedings,\" and the BCA even explicitly acknowledges in two cases that the expedited procedures are being created with full acknowledgement of the right of either chamber to modify them. To be clear, this is not to say that individual members or party leaders can deviate from the procedures established by the law without consequence; it is to say that the House or the Senate, acting under its regular rules, could modify the process without the permission of the other chamber. In the House, for example, this might be done by the approval of a special rule reported by the Committee on Rules. In the Senate, unanimous consent agreements might alter the specifics of the BCA's application.\nSecond, a motivation for the creation of expedited procedures is that they alter a fundamental feature of regular Senate procedure: the right of each Senator to engage in unlimited debate on a question. Under Senate rules, getting to a vote on most questions essentially requires either unanimous consent or the support of three-fifths of the Senate (normally 60 Senators). Even with the support of 60 Senators, considering legislation can be time consuming, since the cloture process used to limit consideration of any question takes several days and might have to be used in connection with more than one question. The procedures established for the consideration of the joint committee bill and for the consideration of the resolution disapproving a debt limit increase both allow the Senate to take up the legislation without debate, and therefore without the need for a multi-day, supermajority-vote cloture process. All of the expedited procedures created in the BCA place a time limit on floor consideration of the legislation, which means if the Senate has agreed to consider a measure, the Senate will have an opportunity to vote on it. All of the expedited procedures also prevent amendments.\nIn contrast to the Senate, in the House the same numerical majority that can pass a bill can set the terms for its consideration. For this reason, in part, the House majority might bring up the legislation as it normally does for other bills through adoption of a special rule, although this method is likely to preserve key elements of the expedited procedures including a prohibition on amendments, time restrictions on debate equally divided between a proponent and an opponent, and a prohibition on the motion to recommit.\nAnother motivation, however, for the creation of expedited procedures in both chambers is to establish a means of ensuring that the measure in question can be brought to the floor even if the leadership (and the committees of jurisdiction) do not seek its consideration. The statutory procedures established in the BCA provide a means by which a numerical majority, and not necessarily the partisan majority, can take up legislation in the House and Senate.", "", "The Budget Control Act authorizes increases to the debt limit by at least $2.1 trillion (and up to $2.4 trillion), in three installments. First, upon the certification by the President that the debt subject to limit is within $100 billion of the debt limit, the debt limit is increased by $400 billion immediately. Second, if Congress does not enact into law a joint resolution of disapproval within 50 calendar days of receipt of the certification, the debt limit is increased by an additional $500 billion. If Congress enacts a joint resolution of disapproval (presumably over a presidential veto), the debt limit will not be increased and the Office of Management and Budget is required to sequester budgetary resources on a \"pro rata\" basis, subject to sequestration procedures and exemptions provided in Sections 253, 255, and 256 of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended.\nThird, if the debt limit has been increased by the first $900 billion and upon another certification that the debt subject to limit is within $100 billion of the debt limit, Congress will have 15 calendar days of receipt of the certification to enact into law a joint resolution of disapproval to prevent another increase in the debt limit (again over a presumed presidential veto). If Congress does not enact such resolution, the debt limit is increased by one of three amounts: (1) $1.2 trillion; (2) an amount between $1.2 trillion and $1.5 trillion, if Congress passes and the President signs into law legislation introduced by the Joint Select Committee on Deficit Reduction; or (3) $1.5 trillion, if a Constitutional amendment requiring a balanced budget is submitted to the states for ratification.\nIn summary, while an initial increase in the debt limit of $400 billion is effective immediately and not subject to congressional disapproval, subsequent additional increases of $500 billion and an amount between $1.2 trillion and $1.5 trillion are subject to congressional disapproval. That is, for either of the two subsequent additional increases in the debt limit, if Congress enacts a joint resolution of disapproval, the debt limit would not be increased by such amounts.", "", "A joint resolution disapproving either debt limit increase can be considered in both chambers under expedited procedures that limit debate and prevent amendment. A disapproval resolution would qualify for consideration under the expedited procedures of the BCA only if it meets specific content and timing criteria. The BCA mandates the exact language of a disapproval resolution: \"That Congress disapproves of the President's exercise of authority to increase the debt limit, as exercised pursuant to the certification under section 3101A(a) of title 31, United States Code.\" The BCA also provides the title for the joint resolution and states that it may not contain a preamble.\nTo qualify for expedited consideration, the joint resolution of disapproval also must be introduced by specific times. For the first opportunity to disapprove the increase in the debt limit, the resolution must be introduced on September 6, 7, 8, or 9, 2011. For the opportunity to disapprove the second increase, the resolution must be introduced either the day the certification (that the debt subject to limit is within $100 billion of the debt limit) is received from the President or on any of the next three calendar days.\nThe BCA procedures apparently aim to ensure an opportunity for timely consideration of a disapproval resolution. In both chambers, any Member can introduce the joint resolution. Furthermore, if a chamber would otherwise not be in session when the President submits the second certification, the BCA requires the House Speaker and Senate majority leader (in consultation with the Senate minority leader) to reconvene their respective chambers within two calendar days after receiving the certification from the President.\nThe BCA anticipates introduction of a joint resolution of disapproval in both chambers. Each chamber could initially consider its own joint resolution, although either eventually the House would need to pass the Senate joint resolution, or the Senate would need to pass the House joint resolution, in order to meet the constitutional requirement that the chambers pass precisely the same text in the same measure. The act also anticipates that each chamber will act on its own proposal by providing that if a chamber receives a joint resolution of disapproval from the other house before it has concluded consideration of its own resolution, it can consider or continue to consider its own legislation, but the final passage vote will be held on the resolution received from the other chamber.", "After a Senator introduces the joint resolution, it will be placed directly on the Senate calendar instead of being referred to committee. A motion to proceed to the consideration of the joint resolution will not be subject to debate if it is offered within a specified brief period after the certification is received from the President. A non-debatable motion to proceed to a House-passed joint resolution of disapproval could also be made instead, as long as the Senate has not already considered a Senate resolution of disapproval. This non-debatable motion to proceed expedites the process of bringing a matter before the Senate. Under the regular rules of the Senate, motions to proceed are usually subject to debate, so it therefore is sometimes necessary to gain the support of three-fifths of the Senate (60 Senators if no more than one vacancy) in order to end debate on the question of taking up a matter. In addition, if any motion to proceed to the disapproval resolution is disagreed to, another may be offered, although presumably only in the time frame provided. In addition, the BCA waives all points of order that could be raised against consideration of the joint resolution, and it also precludes several motions that could be used to delay its consideration.\nIf a majority of Senators voting agree to the motion to proceed, the joint resolution \"shall remain the unfinished business until disposed of,\" meaning that it would require unanimous consent to turn to any other business and even the maturation of a cloture motion on another matter would not interrupt its consideration. The total time for consideration of the resolution is limited to 10 hours, equally divided between the majority and minority leader (or their designees). Because the time is controlled, Senators who wish to speak will need to be yielded time from one of the Leaders or another Senator acting as the floor manager. Because total consideration time is limited, time spent making requests or motions and time spent conducting quorum calls and votes, in addition to time spent in debate, will all count toward the 10 hour limit. The Senate could consider the measure for less than 10 hours by unanimous consent, if Senators controlling time yield back time, or if a majority agree to a non-debatable motion to further limit debate. Several motions, most significantly any motion to amend the joint resolution, are precluded by the BCA, and appeals from decisions of the Chair are not debatable. A House-passed joint resolution of disapproval would be subject to the same procedures if no joint resolution is introduced or considered in the Senate.\nUnder the BCA, the Senate is to vote on passage of the joint resolution immediately after the expiration of the 10 hours of consideration, except that any Senator could request a live quorum call just prior to the vote. If, at the time of the vote, the Senate has received the House version of the disapproval resolution, the final passage vote would occur on the House resolution instead of the Senate resolution.", "In the House, after a joint resolution of disapproval is introduced, it is to be referred to committee as under the regular rules of the House. The BCA provides that if a committee fails to report within five calendar days after introduction, it will be automatically discharged and the joint resolution will be placed on the House calendar.\nThe BCA creates a special procedure for the House to take up the joint resolution, debate it for two hours, and take an up-or-down vote thereon without allowing Members to offer an amendment or a motion to recommit. The House could use these statutory procedures, or it might instead choose to take up the joint resolution through a special rule reported by the Rules Committee or by another method available under regular House rules.\nUnder the BCA procedures, once the committee has reported the measure (or been discharged), and no later than the sixth day after its introduction, any Member can move that the House take up the joint resolution. All points of order against the motion to proceed to the joint resolution are waived by the BCA, and the motion is not debatable; consequently the House would vote on the taking up the resolution immediately after the motion was made.\nIf the House agrees to consider the joint resolution, it will be debated for up to two hours, equally divided and controlled by a proponent and an opponent. All points of order against the joint resolution are waived, and no amendments can be offered. Under ordinary House procedures the minority party is generally guaranteed a chance to offer a motion to recommit a bill prior to final passage, a motion that is effectively an opportunity to amend the bill. No such opportunity is available under the statutory provisions.\nIf the House has received a joint resolution of disapproval from the Senate prior to voting on its own version of the joint resolution, the final passage vote in the House will occur on the Senate vehicle.", "Although only a majority of each chamber is necessary to agree to a resolution of disapproval, preventing an increase in the debt limit might ultimately require supermajority support. This is because if the Treasury has advised the President that further borrowing is required to meet existing commitments, the President might normally be expected to veto the congressional resolution of disapproval. Congress can override a presidential veto, but to do so would require the support of two-thirds of each chamber. The joint resolution of disapproval would be returned to the chamber that originated it, which under the statutory procedures will be the chamber that passes it first. Only if that chamber agreed to override the veto with a two-thirds vote would the second chamber also have an opportunity to vote on the question of overriding the veto.\nThe BCA limits debate on any veto message received in the Senate to one hour, equally divided between the majority and minority leaders or their designees. Under regular Senate rules, the question of overriding the veto, and some other available motions that could displace consideration of the veto message, are subject to extended debate. The statutory debate limitation could allow a numerical majority of the Senate to get to a vote on the question of overriding the veto more quickly than might be possible under its regular rules. In the House, the veto message would be considered under its regular procedures which would normally limit debate to one hour.\nThe BCA limits the time by which each potential disapproval resolution must be enacted into law. The disapproval resolution responding to the President's first certification has 50 calendar days from the time the Congress received the certification to be enacted into law. Similarly, a disapproval resolution in response to the President's second certification must be enacted into law within 15 calendar days from the time Congress receives the certification. As a result, successful enactment of a disapproval resolution might require not just passage by both chambers and presentment to the President but also, if the President returns the measure, a timely veto override vote in each chamber.\nUnder the Constitution, the President has up to 10 days, excluding Sundays, to either sign or veto a measure sent by the Congress. If these days count toward the deadline for enactment, the length of time the President holds the measure could influence how much time, if any, Congress would have to act on a possible veto before the expiration of time allowed by the statute for enactment. Under the act, accordingly, if Congress passes a joint resolution of disapproval, the time that the President is in possession of the enrolled joint resolution is apparently not to be counted toward the 50 (or 15) days.", "Section 101 of the Budget Control Act of 2011 (BCA) amends Section 251 of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; Title II of P.L. 99-177 , 2 U.S.C. 900-922) to establish 10-year adjustable statutory limits (or caps) on discretionary spending, enforced primarily through a sequestration process. Discretionary spending is provided and controlled through the annual appropriations process. Statutory limits on discretionary spending were previously created by the Budget Enforcement Act of 1990 (Title XIII of P.L. 101-508 ), which also amended the BBEDCA, and twice were extended, in 1993 and 1997, but expired at the end of FY2002. Section 104 of the BCA repeals the expiration date in the BBEDCA, and thereby restores many features of the previous statutory discretionary limits, including the sequestration enforcement process.\nThe new statutory limits cap the amount of new budget authority for each fiscal year covering FY2012-FY2021 (see Table 1 ). For FY2012 and FY2013, the spending limits are divided into two separate categories: security and nonsecurity. The security category includes discretionary spending for the Departments of Defense, Homeland Security, and Veterans Affairs, the National Nuclear Security Administration, the intelligence community management account, and all accounts in the international affairs budget function (budget function 150). The nonsecurity category includes discretionary spending in all other budget accounts. For FY2014-FY2021, the limits cap spending in a single category (specified as the discretionary category), which includes all discretionary spending in all budget accounts.", "The BCA allows for the adjustment of the discretionary limits for six different purposes. Five of the six adjustments effectively exempt certain discretionary spending from the statutory caps. The limits could be adjusted to accommodate: (1) changes in concepts and definitions; (2) appropriations designated as emergency requirements; (3) appropriations designated for Overseas Contingency Operations/Global War on Terrorism (such as for military activities in Iraq and Afghanistan); (4) appropriations for continuing disability reviews and redeterminations; (5) appropriations for controlling health care fraud and abuse; and (6) appropriations designated as being for disaster relief.\nThe first three adjustments are not capped, and therefore the statutory limits would be adjusted by the amounts meeting the conditions for the adjustment. Once a year, the Office of Management and Budget (OMB) can adjust the limits to reflect changes in concepts and definitions, in consultation with the Committees on Appropriations and Budget in each house. In addition, the limits must be adjusted by the amounts of appropriations designated as emergency requirements and those designated for Overseas Contingency Operations/Global War on Terrorism (OCO/GWOT) in statute and subsequently by the President. The emergency and OCO/GWOT designations must be made on an account-by-account basis; this requirement presumably would preclude a blanket designation, for example, covering all appropriations provided in an appropriations act.\nThe three other adjustments are capped at certain amounts of appropriations for the specified purposes for each year. Two of the three adjustments allow for additional appropriations for program integrity initiatives—activities that are intended to produce a net reduction in federal spending; the remaining adjustment allows for additional appropriations for relief activities associated with unexpected natural disasters. First, the adjustment for appropriations for \"continuing disability reviews\" under Disability Insurance and Supplemental Security Income (SSI) and \"redeterminations\" of eligibility under SSI beneficiaries would be the amount provided for such activities in excess of $273 million each year, with a maximum adjustment ranging from $623 million for FY2012 to $1,309 million for each of fiscal years 2017 through 2021, allowing for a total adjustment of $11,132 million over the entire period of FY2012-FY2021. Second, the adjustment for appropriations for the \"health care fraud abuse program at the Department of Health and Human Services\" would be the amount provided for such activities in excess of $311 million each year, with a maximum adjustment ranging from $270 million for FY2012 to $496 million for FY2021, allowing for a total adjustment of $3,927 million over the entire period of FY2012-FY2021. Finally, the adjustment for appropriations that Congress designates as being for disaster relief in statute may not exceed, in any year, \"the average funding provided for disaster relief over the previous 10 years, excluding the highest and lowest years\" plus the amount by which the appropriations so designated in the preceding fiscal year was less than the applicable average funding level. For example, if in a fiscal year Congress designates $10 million less than the average level, then in the next fiscal year, the maximum adjustment could equal the applicable average level for that year plus the $10 million from the previous year.", "The discretionary spending limits are primarily enforced through a sequestration process. Sequestration is the largely across-the-board cancellation of budgetary resources (i.e., spending cuts) in nonexempt accounts. If the final sequestration report (explained below), issued within 15 calendar days after the end of a session of Congress, indicates that discretionary appropriations within a category exceed the spending limit for that category, sequestration is triggered automatically. The President is required to issue a sequestration order canceling budgetary resources in nonexempt accounts, within the category in which the breach occurred, by an amount necessary to eliminate the breach. For instance, if for FY2012 or FY2013 discretionary appropriations within the security category are enacted that results in a breach of the security category limit for either year, a sequestration of only security spending would occur to eliminate that breach. As noted above, for FY2014-FY2021, only one category exists for total discretionary appropriations; therefore, a sequestration, if necessary, would occur in that total discretionary appropriations category. Under the sequestration process, each nonexempt account is reduced by a uniform percentage, except that certain health and medical care accounts are limited to a 2% reduction, under Section 256(e) of the BBEDCA (as restored by Section 104 of the BCA).\nAlong with the end-of-the-session sequester, a within-session sequester is required if an appropriation, such as a supplemental appropriation, causes a spending limit to be breached during a fiscal year. In this case, sequestration would occur 15 days after the enactment of the appropriation. If such a breach occurs in the last quarter of the fiscal year (i.e., July 1 through September 30), the applicable spending limit for the following fiscal year must be reduced by the amount of the breach.\nThe BCA also provides for the enforcement of the discretionary spending limits by points of order during the consideration of appropriations legislation in each house (new Section 314(e) of the Budget Act). Because the caps limit the total amount of budget authority for the budget year, the order in which an individual appropriations bill is considered will affect whether or not it is subject to the point of order. The point of order most likely would apply to, and during the consideration of, the last appropriations act considered by each House, and any supplemental appropriations acts considered after the regular appropriations acts have been enacted. In the Senate, a motion to waive the point of order requires an affirmative vote of three-fifths of Senators, duly chosen and sworn (i.e., 60 Senators if there is no more than one vacancy); in the House, a special rule waiving the point of order would require an affirmative majority vote.", "OMB and CBO are required to issue several reports throughout each year to assist Congress in complying with the spending limits and, in the case of OMB's final sequestration report, to trigger the sequestration of budgetary resources, if any limit is exceeded. First, for each appropriations act signed into law, OMB is required to issue a cost estimate of the legislation within seven days of its enactment; CBO is required to provide to OMB its cost estimate of such legislation as soon as practicable after Congress completes action on such legislation. Second, three separate sequestration reports are required, at certain times during the year, to provide the status of the discretionary spending limits, including any appropriate adjustments to the limits: (1) a sequestration preview report, (2) a sequestration update report, and (3) a final sequestration report. OMB is required to issue such reports with the President's budget submission, by August 20, and 15 days after the end of a session, respectively; CBO is required to issue its own sequestration update and final sequestration reports five days prior to OMB's reports. Most importantly, OMB's final sequestration report generally is the only report triggering a sequester. Therefore, if a breach has occurred, the final report must include the percentage reduction and amount of budgetary resources to be sequestered, for each affected budget account.", "Section 105(a)(3) of the BCA amends the Congressional Budget Act to establish certain procedural rules relating to the treatment of, and consideration of legislation containing, provisions designated as an emergency requirement. In general, the rules allow the House to exempt from congressional budget constraints provisions designated as emergency requirements pursuant to the BBEDCA, as amended by the BCA. They also provide opportunities for Members to strike such designations and offer proposals to offset the budgetary effects of a designated provision.\nFirst, any new discretionary appropriations designated as an emergency requirement pursuant to Section 251(b)(2)(A) of the BBEDCA will not be counted for purposes of Titles III and IV of the Budget Act. As explained above (see \" Adjustments \" section), under Section 251(b)(2)(A) of the BBEDCA, the statutory discretionary spending limits may be adjusted to accommodate appropriations designated, on an account-by-account basis, as emergency requirements. The rules change effectively allows the House to exempt such spending from certain spending constraints, such as the appropriations subcommittee allocations under Section 302(b) of the Budget Act.\nSecond, new Section 314(d)(2)(B) of the Budget Act provides that the budgetary effects of a motion to strike a designation (presumably an emergency designation) shall not be counted for purposes of Titles III and IV of the Budget Act and the House Standing Rules. The rule would allow a Member to offer an amendment to strike the designation without being subject to a point of order. Without this rule, a motion to strike an emergency designation contained in an appropriations act, for example, would likely be subject to a point of order under Section 302(f) of the Budget Act because striking the designation would cause the applicable new budget authority to be counted and therefore likely cause the appropriations bill to exceed its Section 302(b) allocation.\nFinally, new Section 314(d)(2)(C) of the Budget Act provides that an amendment proposing to strike an emergency designation and also to reduce \"each amount appropriated or otherwise made available\" shall be in order at any time during the reading of a bill for amendment. The purpose of such an amendment would presumably be to make across-the-board reductions in spending already subject to the applicable spending cap sufficient to accommodate the appropriation newly being subjected to the spending constraint. Without this rule, such an amendment, making across-the-board reductions throughout the bill, generally would not be in order for at least three reasons: (1) it proposes to amend a paragraph or section in a bill not yet read for amendment; (2) it proposes to amend a paragraph or section already read for amendment; and (3) it proposes to amend the bill in more than one place. Under the rule, nevertheless, such an amendment presumably would be subject to a demand for a division of the question (thereby forcing separate votes on striking the designation and reducing the appropriated amounts).", "Section 106 of the Budget Control Act establishes certain procedural provisions for the purpose of budget enforcement for FY2012 and FY2013 that apply in the Senate only, which expire, with respect to each of these fiscal years, if Congress adopts a budget resolution for that year. The provisions would establish budget levels enforceable in the Senate, including constraints on spending provided in appropriations acts for FY2012 and FY2013, if the House and Senate are not able to agree on a budget resolution for the respective fiscal year.\nSpecifically, these procedural provisions of the BCA require the chair of the Senate Budget Committee (SBC) to file a statement of levels of various budgetary amounts that would ordinarily be established by the budget resolution for FY2012, including committee spending allocations, aggregate spending and revenue levels, and Social Security revenue and outlay levels, covering the period FY2011-FY2021. The budget levels filed must be consistent with the statutory discretionary spending limits, established by Section 101 of the BCA, and with CBO's March 2011 baseline levels (adjusted to account for the budgetary effects of the BCA, as well as of any other legislation enacted prior to the BCA). Under the provisions of Section 106 of the BCA, these levels are to have the same force and effect as if they were included and associated with a budget resolution for FY2012 adopted by Congress.\nThe SBC chair would also be required to file such budget levels covering the period FY2012-FY2022, by April 15, 2012, consistent with the same baseline parameters, and such levels would have the same force and effect as if they were included and associated with a budget resolution for FY2013 adopted by Congress.\nFinally, the SBC chair is required to reduce the balances on the Senate Pay-As-You-Go (PAYGO) ledger to zero. The Senate PAYGO rule generally requires that any legislation projected to increase direct spending or reduce revenues must also include equivalent amounts of direct spending cuts, revenue increases, or a combination of the two, so that the legislation does not increase the on-budget deficit over a six-year period and an 11-year period. The PAYGO ledger records any projected deficit reduction resulting from legislation (except reconciliation legislation) enacted since the beginning of the calendar year and not accounted for in the baseline, as defined by the rule. Therefore, reducing the balance to zero would prevent such balances (in particular, those resulting from the deficit reduction included in the BCA) from being used to offset increases in the deficit resulting from legislation subsequently considered in the Senate.", "Title IV of the Budget Control Act establishes a Joint Select Committee on Deficit Reduction, composed of an equal number of Senators and Members of the House, and instructs it to develop a proposal that would reduce the deficit by at least $1.5 trillion over FY2012 to FY2021. The BCA provides no other guidelines regarding the policy content of the proposal. The proposal, if reported by a majority of the joint committee by November 23, 2011, could be considered by each chamber under special procedures that prevent amendment and limit debate. The expedited procedures represent a significant divergence from regular Senate procedures, under which it can generally become necessary to obtain agreement among at least three-fifths of the Senate (normally 60 Senators) in order to bring debate to a close and the chamber to a vote on a matter. The expedited procedures in each chamber will only apply to a joint committee bill passed on or before December 23, 2011. If a joint committee bill reducing the deficit by at least $1.2 trillion is not signed into law by January 15, 2012, then the process of automatic spending reduction created by the BCA will begin to occur in January of 2013.\nThe BCA identifies several other specific actions the joint committee and Congress are expected to take by certain dates ( Appendix B , Table B -1 ). In some cases, the BCA establishes direct, procedural consequences if an action is not completed by a stated time. In other cases, there is no immediate procedural result if an action is not taken, or if it is not taken by a stated deadline. Ultimately, if the joint committee bill does not become law, then the consequence is the automatic spending reduction process explained in the following section of this report.", "", "Party leaders appointed the 12 members of the Joint Select Committee on Deficit Reduction by the target date established in the BCA of August 16, 2011. The Speaker of the House, the House minority leader, the Senate majority leader, and the Senate minority leader each appointed three members. From among these 12 joint committee members, the Senate majority leader appointed a co-chair and the House Speaker appointed the other co-chair. If any seat on the joint committee becomes vacant, due to resignation or otherwise, the leader who appointed the member vacating the seat would appoint a replacement within 14 days. Members of the joint committee will serve until its termination on January 31, 2012. Committee members must comply with the ethics rules of the their respective chambers (Section 401(c)(2)).", "The co-chairs jointly are to hire a staff director as well as other staff for the committee. The co-chairs are also empowered to fix the compensation of staff \"within guidelines for employees of the Senate and following all applicable rules and employment requirements of the Senate.\" Staff of the committee must comply with ethics rules of the Senate. The BCA directs federal agencies to \"provide technical assistance\" if requested in writing by the co-chairs.\nFunding for the committee is provided equally from House and Senate appropriations accounts. The committee is \"authorized to incur expenses in the same manner and under the same conditions as the Joint Economic Committee.\"", "The Budget Control Act requires the joint committee to hold its first meeting no later than September 16, 2011. The committees of the House and Senate may submit recommendations regarding deficit reduction to the joint committee, for which the BCA establishes a deadline of October 14, 2011. The act neither requires committees to submit recommendations nor requires the joint committee to consider the recommendations. Generally, however, both chambers rely on the expertise of committees with jurisdiction over policy matters, and ultimately, of course, the joint committee proposal can succeed only with the support of a numerical majority in both chambers.\nThe joint committee is expected to develop a report of its findings and recommendations as well as legislative language to carry out the recommendations. The report is required to contain a cost estimate prepared by CBO, and the legislation is required to include a \"statement of the deficit reduction achieved by the legislation over the period of fiscal years 2012 to 2021.\" The report may contain supplemental, additional or minority views, provided that a joint committee member gave notice of the intent to submit such views at the time of the vote on the report and submitted the views in writing to the committee staff director within 3 calendar days of the vote. The BCA places no other requirements on the content of the report or on the legislative language. It could recommend changes to revenue, spending, or both; it might even propose new budget enforcement mechanisms.\nThe joint committee must vote on proposed legislative language as well as an accompanying report by November 23, 2011. If the committee does not vote by that date, no legislation will be eligible for consideration under the expedited procedures of the BCA. Support from a majority of the joint committee, or seven members if no vacancies, is necessary to approve the report and the legislative language. If the language and report are approved, both must be transmitted to the President, Vice President, Speaker of the House, and majority and minority leaders of both chambers by December 2, 2011.", "Title IV of the Budget Control Act also establishes several rules concerning the operation of joint committee meetings and hearings. Some of these rules resemble the existing standing rules of each chamber; others are unique to the joint committee.\nThe BCA states that a quorum of the joint committee, or the number of members required to be present for the conduct of business, is seven. This is the minimum number of members who must be present at any vote or any meeting of the committee, including hearings. If seven members are not present, then presumably any member of the committee could make a point of order, under the BCA, that a quorum is not present. If the member presiding determined that a quorum was not present, and the joint committee could not establish a quorum, the committee presumably would adjourn. Most committees of the House and Senate have lower quorum requirements, often just two members, for the receipt of testimony, and often one-third for business meetings other than the vote to report. The BCA also precludes \"proxy voting,\" or the practice, common in the Senate but forbidden by House rules, of allowing another member of a committee (usually the chair or ranking member) to cast a vote for a member who is not present. Furthermore, the agenda for any meeting must be made available to all members of the joint committee at least 48 hours ahead of time.\nThe BCA grants the joint committee the authority to conduct hearings, including the power to require witness attendance and submission of documentation. The authority is similar to that granted to House committees in House Rule XI clause 2(m)(1) and to Senate committees in Senate Rule XXVI, paragraph 1. The statements of any witnesses appearing before the joint committee must be submitted in writing two calendar days prior to the hearing, unless the co-chairs waive the requirement. Many standing committees rules in both chambers require witness testimony to be submitted two days in advance, longer than the one day required by the Senate (Rule XXVI, paragraph 4(b)) and more specific than the House rule (House Rule XI, clause 2(g)(4) which states that committees shall require written statements in advance). Finally, the co-chairs must publicly announce any hearings seven days in advance, unless they determine there is good cause to provide less notice. The hearing notice requirement is similar to the week required under House and Senate rules (House Rule XI, clause 2 (g)(3) and Senate Rule XXVI, paragraph 4).\nThe joint committee cannot vote on the question of approving the report or legislative language unless CBO cost estimates mentioned above have been available to its members for at least 48 hours. After any such vote, the report, legislative language, and record of the vote must \"promptly\" be made available to the public.\nAll other regulations concerning the internal operations of the committee will be established by the joint committee itself. Under House rules, the joint committee is required to adopt written rules of procedure. It is not clear what effect a House-only rule could have on a bicameral entity, but, if the House rule is followed, the joint committee will meet in public to consider its rules (unless a majority agree by recorded vote to close the meeting).", "", "If the joint committee transmits its report and proposed legislative language, the Budget Control Act requires the House majority leader (or his designee) and the Senate majority leader (or his designee) to each introduce the proposed language, without change, as a bill. The leaders (or designees) will introduce the legislation \"by request,\" which signals that the act of introduction is not necessarily a personal endorsement of the bill. Two bills will therefore be introduced in Congress, with identical text, but with different numbers (one will be an S. numbered bill and the other an H.R. numbered bill). The House and Senate can then each initially consider its own bill. To meet the Constitutional requirement that both chambers agree to the same legislative measure with the same text, the act provides a means (described in more detail below) for one chamber to vote on final passage of the bill received from the other chamber instead of its own bill. The Constitution also requires that bills affecting revenues originate in the House, and for that reason Section 402(e)(2) ensures that if the joint committee bill contains revenue provisions, it will be the House bill that is eventually presented to the President.\nIn the Senate, the majority leader or his designee is to introduce the legislative language as the joint committee bill on the first calendar day that the Senate is in session after the joint committee proposal is submitted. The BCA provides for joint referral of the legislation to all committees of jurisdiction. This procedure contrasts with regular Senate practice, under which legislation is, with few exceptions, referred to just one committee, the one with jurisdiction over the subject matter predominant in the bill (Senate Rule XVII, paragraph 1), or, if the bill contains any revenue provisions, typically just to the Committee on Finance. Any committee to which the bill is referred is required to report it without amendment by December 9, 2011; any committee that fails to report by that time will be automatically discharged and the bill will be placed on the Senate legislative calendar, where it is available to be taken up by the full chamber. In this way, the BCA appears to mandate referral while also preventing any committee from blocking floor consideration.\nIn the House, the majority leader or his designee is to introduce the proposed language as the joint committee bill on the first legislative day after the joint committee proposal is transmitted. The bill will be referred under regular House rules by the Speaker to every committee having jurisdiction over a provision of the bill. Each such committee can report the legislation—favorably, unfavorably, or without recommendation—but cannot report it with amendment and are required to report by December 9, 2011. The BCA creates a privileged motion by which the House could discharge any committee that does not report by the deadline, although general rules also provide the House majority with other means to bring the bill to the floor.", "The Senate could consider a bill introduced pursuant to the Budget Control Act under special procedures that differ considerably from general Senate rules. Decision-making in the Senate is shaped by the ability of individual Senators to \"filibuster,\" or to take actions to prevent (or delay) a matter from coming to a vote. To get to a vote on a question in the Senate can require either the consent of every single Senator, or the cloture process, which itself can be time-consuming. A cloture motion is not voted on until two days of session after it is filed. If cloture is successfully invoked by a vote of three-fifths of Senators duly chosen and sworn (60 Senators if there is no more than one vacancy), then consideration of the question can continue for up to 30 additional hours. The time required for the cloture process can be compounded since getting to a final passage vote on a bill might require a successful cloture process on several questions: for example, on the question of taking up the bill, on a major amendment to the bill, and on the bill itself.\nThe special procedures established in the Budget Control Act are discussed in detail below, but in general they can be understood to expedite the Senate floor process by providing that the bill be taken up without debate and by imposing a time limit on consideration of the bill, thereby avoiding the need to invoke cloture on any question.", "Under the Budget Control Act, a joint committee bill could be promptly brought before the Senate. Once a qualifying bill is on the Senate calendar, the majority leader (or his designee) can move to proceed to the bill. After the bill has been on the calendar for two days of session, any Senator can move that the Senate proceed to the bill. In either case, the motion to proceed to the bill is not debatable and a simple majority vote is all that is needed to take up the bill. If past practice on taking up other measures privileged for consideration is any guide, the Senate might reach a consensus to begin consideration of the bill and not conduct a roll call vote on the motion to proceed. The BCA further allows multiple opportunities for proponents to propose that the bill be taken up; even if the Senate disagrees to one motion to proceed to the joint committee bill, additional such motions could be offered and would not be subject to debate.\nThis BCA procedure differs from regular Senate rules, under which most motions to proceed are debatable. The ability to take up a matter without debate is potentially significant in the Senate. If there is opposition to calling up a bill, the Senate might need to go through the cloture process, as described above, even to reach a vote on the motion to proceed to the bill.\nThe Budget Control Act addresses additional motions and actions to help ensure that the Senate decide on the question of taking up the bill without delay. It precludes motions to postpone as well as motions to reconsider the vote, motions that if allowed could potentially lead to additional time-consuming roll call votes. It also prevents any Senator from making a point of order against consideration of the joint committee bill. In addition, the bill is apparently given special standing in relation to pending matters on which cloture has already been invoked. Under the BCA, the motion to proceed is in order \"Notwithstanding Rule XXII\" (the cloture rule), suggesting that perhaps even if the Senate is considering a matter on which cloture has been invoked, which would ordinarily require consideration until disposed of, the motion to proceed to the joint committee bill would be in order.", "If the motion to proceed to the joint committee bill is agreed to, then under the BCA it \"shall remain the unfinished business until disposed of.\" This means that, absent unanimous consent, the Senate cannot turn to other legislative or executive business. A motion to proceed to another bill or to enter executive session to consider a nomination, for example, would not be in order. Nor would consideration of the joint committee bill be interrupted by the maturation of a cloture motion filed on a different pending matter two days of session before the joint committee bill was taken up. The bill itself is also protected from any points of order.\nUnder the BCA, no amendments can be proposed to the joint committee bill. Senators can debate the bill, but they cannot propose changes to it. This is a departure from regular Senate procedure, under which Senators can offer amendments and, in fact, can offer them on any topic under most circumstances. Consideration of the bill under the BCA is limited to a maximum of 30 hours. All the time spent on consideration of the bill, including time spent debating related motions, voting, and in quorum calls, would count against the 30 hours. In this respect, the expedited procedure would operate similarly to the 30-hour time cap on consideration after cloture is invoked on a bill.\nThe Budget Control Act, however, also provides that the 30 hours be controlled by the party leaders, which is different from proceedings under cloture. Under controlled time, Senators are yielded blocks of time for debate from party leaders or bill managers (or their designees). Thus, for consideration of the joint committee bill, each party leader would be granted 15 hours, and the party leader would then decide who could speak, for how long, and in what order. Similar terms apply, under the Congressional Budget Act of 1974, during consideration of a budget resolution or a reconciliation bill in the Senate. Frequently, time is also controlled in the Senate by unanimous consent agreements. Under the regular rules of the Senate, however, time is not controlled, there is no limit placed on how long a Senator can speak, and Senators speak in the order they seek recognition from the presiding officer.\nIn an apparent effort to streamline Senate procedures, the BCA includes several other provisions restricting the motions that can normally be made or the length they could otherwise be debated. Under the BCA, in addition to the prohibition on amendments, it is not in order to offer a motion to postpone or a motion to recommit the bill. Appeals from decisions of the chair relating to Senate rules are not debatable under the act. Any other motions that might be offered or appeals that might be made are debatable for just one hour each (included under the total cap of 30 hours) equally divided between those favoring and opposing the motion.\nWhen the time for consideration of the joint committee bill has expired, then under the BCA the Senate is to vote on passage of the bill. Just as under regular Senate rules, passing the bill would require support from a simple majority of Senators voting, or 51 if all Senators vote and there are no vacancies. At the request of any Senator, there could be a live quorum call prior to the final passage vote. The purpose of allowing a quorum call presumably is to provide an opportunity to bring Senators to the floor for the vote, if necessary. The vote on passage is to occur no later than December 23, 2011; after that time, the special procedures for consideration of the bill will not longer apply.", "", "The BCA creates special procedures that ensure that the House could bring the Joint committee bill to the floor even if the committees of jurisdiction and party leadership do not seek its consideration. If a committee does not report by December 9, 2011, a Member could make a privileged motion to discharge the committee from consideration. The motion is debatable for 20 minutes, and if it is agreed to the measure would be immediately pending before the House. Furthermore, if the committee or committees do report, any Member could make a non-debatable motion that the House proceed to consider the joint committee bill.\nOnce the House has agreed to bring the bill to the floor, the BCA procedures provide that the House is to consider the legislation for two hours without an opportunity for amendment and then vote on final passage. All points of order against the bill and against its consideration are considered waived. Under ordinary House procedures the minority party is generally guaranteed a chance to offer a motion to recommit the bill before final passage, but no such opportunity is available under the statutory procedures. One motion is in order to limit debate time further.\nThe BCA provides a procedure for any numerical majority to take up and pass a bill without delay, but it also precludes individual members or minority factions from slowing down the business of the House by offering repetitive motions. For example, once one motion to discharge a committee is disposed of (perhaps by a motion to table—or kill—the discharge proposal) another such motion is not in order. Similarly, if the House disposes of a motion to proceed to the joint committee bill, perhaps because a numerical majority decline to take it up, further motions to proceed to the joint committee bill are not in order. No motions to reconsider votes are permitted.\nThe House, like the Senate, is required under the BCA to pass the bill by December 23, 2011. If the bill is not passed by both chambers at the end of that day, then it cannot be considered under the expedited procedures of the BCA.", "The House has the option, however, of considering the joint committee bill under a special rule reported by the Rules Committee in the same way that other major legislation is brought before the House for consideration. When the House considers measures eligible for expedited procedures under other statutes, such as the Congressional Budget Act of 1974 and the Trade Act of 1974, it typically does so not under the statutory expedited procedures but under a special rule.\nThe House might choose this form of consideration in order to customize the terms of consideration (debate time could differ, for example, from the two hours provided under the BCA). It also might choose to bring the measure up by special rule in order to avoid procedural steps created by the BCA that are uncommon in current House practice. In fact, one reason to use a special rule might be because it is a manner of proceeding with which all Members of the House are familiar.\nEven if the House does bring up the joint committee bill by rule, it is unlikely that amendments to the bill will be made in order unless there is reason to expect the Senate could expeditiously consider the measure under its regular rules. If the House were to amend the bill, the bill would be ineligible for expedited consideration in the Senate. The House-amended text would be different from that recommended by the Joint committee, and thus it would no longer meet the definition of a joint committee bill under the BCA. If prior practice under statutory expedited procedures is a guide, it is also unlikely that a motion to recommit would be made in order if the bill were brought up by special rule. Since the motion to recommit with instructions is effectively an opportunity to amend a bill, a successful motion to recommit with instructions would make the bill ineligible for expedited consideration in the Senate.", "Because the joint committee bills introduced in each chamber are both required to consist of the legislative text proposed by the joint committee, and because no amendments are in order in either chamber, if each chamber passes its bill, both measures will be identical. No conference committee or other means of resolving policy differences between the chambers will be necessary. Under the Constitution, however, it is necessary for both chambers to pass the same measure. In other words, even if each chamber passes its own numbered bill (for example, the House passes H.R. 2345 and the Senate passes S. 6789 ), and the texts of those two bills are identical, either the House must pass the Senate bill or the Senate must pass the House bill. Under the Budget Control Act, Congress will meet this requirement by providing that the joint committee bill that passes a chamber first will be the bill that is sent to the President.\nMore specifically, it provides that if the Senate receives the House joint committee bill before it has passed its own joint committee bill, the Senate will consider its own bill up until the point of final passage. When it is time to vote on final passage, the vote will occur on the identical House bill. If the Senate passes its bill before it receives the House companion measure, then it will send its bill to the House, and the House will vote on the Senate bill. If the joint committee bill has any provisions affecting revenue, however, then the Senate will vote on the identical House bill when received, regardless of which chamber has passed its bill first.\nIf the President vetoes the joint committee bill, each chamber could override the President's veto with a two-thirds vote. The BCA limits debate on any veto message received in the Senate to one hour, equally divided between the majority and\nminority leaders or their designees. Under regular Senate rules, the question of overriding the veto, and some other available motions that could displace consideration of the veto message, are subject to extended debate. The statutory debate limitation could allow the Senate to more quickly get to a vote on the question of overriding the veto than might be possible under the regular rules. In the House, the veto message would be considered under its regular procedures normally permitting one hour of debate. The deadline for enactment—passage by both chambers and signature by the President—to prevent an automatic spending reduction process is January 15, 2012.", "Section 302 of the Budget Control Act of 2011 establishes an automatic process to reduce spending, beginning in 2013, unless a joint committee bill reducing the deficit by at least $1.2 trillion over the period covering FY2012-FY2021 is enacted by January 15, 2012. The process presumably is intended to encourage agreement on such deficit reduction, either by enacting the joint committee proposal by the deadline at the end of 2011, or possibly by enacting other legislation (through existing congressional procedures) by the beginning of 2013, when the automatic process would begin to make reductions. In effect, if Congress and the President do not act to reduce the deficit by $1.2 billion through the enactment of legislation, then spending reductions are automatically made, unless Congress and the President agree by statute to repeal or modify the automatic process.\nThe spending reduction process is triggered automatically if legislation introduced by the joint committee is not enacted, or if it is enacted, but it does not reduce the deficit by at least $1.2 trillion over the period covering FY2012-FY2021. Therefore, if a joint committee bill is enacted, but it reduces the deficit by only $900 billion, for example, the automatic process would still be triggered to make up the remainder.\nIf triggered, the automatic spending reduction process entails four key steps:\nthe statutory discretionary spending limits for FY2013-FY2021 are revised, by redefining the security and nonsecurity categories and by extending such categories through FY2021; the amount of spending reduction required for each year is calculated and divided equally between two categories—defense and nondefense; the annual amount of spending reductions required each year in each of these categories is further divided proportionally between discretionary appropriations and direct spending programs (excluding certain programs and activities) within each category; and the spending reductions required in each year (FY2013-FY2021) are achieved through a combination of sequestration and the downward adjustment of the revised discretionary spending limits.\nEach of these steps is described in detail below, to explain how the spending reductions would be achieved in the event the automatic process is triggered.", "First, the statutory discretionary spending limits for FY2013-FY2021, established under Section 101 of the BCA, are revised: (1) to redefine the security and nonsecurity categories; and (2) to set annual limits for each of these categories through FY2021. The revised categories basically divide the original discretionary spending limits between defense and nondefense accounts; at this point, the total amount of discretionary spending allowed under the limits is not yet reduced (see Table 2 ). In contrast to the original discretionary limits under Section 251 of the BBEDCA, as amended by the BCA, the security category is revised to include discretionary appropriations classified as budget function 050 (national defense) only. The nonsecurity category is revised to include all other discretionary appropriations; the other discretionary appropriations not in budget function 050 (\"National Defense\") included in the original security category are essentially transferred to the revised nonsecurity category. By setting annual limits for the revised categories through FY2021, the revised limits extend the \"firewall\" between different spending categories beyond the original two-year firewalls (for FY2012 and FY2013). Both changes to the discretionary spending limits presumably facilitate the equal split of the required spending reduction between defense and nondefense accounts over the nine years through FY2021, as required in the next steps.", "Second, OMB is required to calculate the amount of deficit reduction required to be achieved in the defense and nondefense budget functions each year through this automatic process. The calculation involves five steps: (1) begin with $1.2 trillion (the budget goal); (2) subtract the amount of deficit reduction in the joint committee bill, if enacted; (3) subtract 18% of the difference, attributable to debt service; (4) divide by nine, to allocate the spending reductions equally across the nine FY2013-FY2021; and (5) divide by two, to allocate the spending reductions between defense and nondefense functions. Again, this calculation provides the amount of spending reductions required from each of the two categories of defense and nondefense for each fiscal year covering FY2013-FY2021.\nTable 3 provides two hypothetical illustrations of the calculations to be required, if the automatic process is triggered. In the first illustration, for example, $900 billion of deficit reduction is achieved through the enactment of a joint committee bill. In this case, the automatic process would require $13.7 billion each in spending reductions within the defense function and within the total of all other budget functions (nondefense functions) each year.\nThe third step is that the annual amount of spending reductions required in each of these categories is further divided proportionally between discretionary and nonexempt direct spending within each category. These calculations, as set forth in the Budget Control Act, yield four amounts of required spending reductions, respectively in (1) defense discretionary appropriations, (2) defense direct spending, (3) nondefense discretionary appropriations, and (4) nondefense direct spending.", "Finally, the required spending reductions are achieved each year (FY2013-FY2021) through a combination of a sequestration process and the downward adjustment of the revised discretionary spending limits . Specifically, the reductions required are implemented in three parts: (1) for discretionary spending for FY2013, a sequestration of budgetary resources in that year; (2) for discretionary spending for FY2014-FY2021, a downward adjustment of the revised discretionary spending limits ; and (3) for direct spending, a sequestration of budgetary resources in each year from FY2013 through FY2021.\nIn general, the sequestration process involves the cancellation of budgetary resources (i.e., spending cuts) in nonexempt programs and accounts. Certain programs and activities are exempt from any sequestration. Such programs include Social Security, Medicaid, and federal retirement and disability programs, among many others, as provided by Section 255 of the BBEDCA (as restored by Section 104 of the BCA). In addition, the sequestration process is governed by general and special rules, as provided in the BCA, Section 6 of the Statutory Pay-As-You-Go Act of 2010 (Title I of P.L. 111-139 ), and Section 256 of the BBEDCA, including a 2% limit on any reductions in spending for Medicare and for certain health care programs.\nThe BCA requires OMB to calculate, in the manner specified above, and the President to order a sequestration of nonexempt discretionary appropriations for FY2013, and of nonexempt direct spending for FY2013 and for each year through FY2021. The sequestration for FY2013 is to occur on January 2, 2013, and the sequestrations for subsequent years are to occur on the date the sequestration preview report is issued (i.e., with the President's budget submission). Generally, under the sequestration process, each nonexempt account is reduced by a uniform percentage necessary to achieve the reductions required. For example, if for FY2013 hypothetically $54.2 billion in spending reductions are required in defense discretionary appropriations, and assuming the total amount of nonexempt defense discretionary appropriations is $546 billion, then each nonexempt account within the defense function would be reduced by 9.9%. Within the nondefense category, the BCA requires that OMB increase the reductions required in discretionary appropriations and nonexempt non-Medicare spending by a uniform percentage to in effect offset the reductions not achieved in Medicare spending as a result of the 2% limit.\nFinally, on the date the sequestration preview report is issued (i.e., with the President's budget submission), for each year covering FY2014-FY2021, OMB is required to adjust downward the revised statutory limits on discretionary spending for each category by the amount of spending reduction required within each category for that year, calculated in the manner described above. As a result, the spending reductions in discretionary appropriations for FY2014-FY2021 are achieved by further limiting the maximum amount that may be appropriated in each category for each year. In contrast to the spending reductions achieved through sequestration for FY2013, the lower limits for subsequent fiscal years will provide Congress and the President the opportunity to determine the manner in which the reductions are made to each account through the annual appropriations process each year. It is important to note, however, that these newly revised spending limits for each category would be enforced through a sequestration process, as explained in the \" Statutory Limits on Discretionary Spending \" section, above.", "", "Section 201 of the Budget Control Act states that the chambers \"shall vote on passage of\" a balanced budget amendment to the Constitution between September 30 and December 31, 2011. No requirements are placed on the specific content of the proposal to amend the Constitution. The BCA does not specify that the Senate must vote on a House-passed constitutional amendment, nor does it require that both chambers vote on the same constitutional amendment.\nThe BCA does not impose any procedural consequence if a chamber fails to vote on a balanced budget amendment. Factors besides procedure, however, might be expected to influence the decision to hold a vote. Furthermore, without successful final passage votes on the same measure in both chambers, the BCA precludes one avenue by which the debt limit may be increased by $1.5 trillion (instead of by $1.2 trillion). Specifically, if both chambers approve a Constitutional amendment by the required two-thirds vote, then the debt limit could be increased by $1.5 trillion; if one or both chambers do not approve a Constitutional amendment, then it can be increased only by $1.2 trillion. (Enactment of the joint committee bill is another avenue through which the debt limit could be increased by up to $1.5 trillion. See the section \"Debt Ceiling Increase\" above.)\nThe BCA does not establish any expedited procedures for initial consideration of a Constitutional amendment. If the House were to consider a House-originated Constitutional amendment, it would do so under its regular rules of procedure, possibly under the terms of a special rule or by a motion to suspend the rules. If the special rule permitted amendments they could be adopted by majority vote, but final adoption would require support from two-thirds of Members present and voting. If the Senate were to consider a Senate-originated Constitutional amendment, it also would do so under its regular rules. That would mean it would be brought to the floor by unanimous consent or a motion to proceed. The motion to proceed would be debatable, so bringing it to a vote might require a vote of three-fifths of the Senate to limit debate. The Constitutional amendment itself would also be debatable, which could again require cloture, and amendments could be offered and adopted by a majority of Senators present and voting, but the joint resolution could be agreed to only by two thirds of Senators present and voting.", "Section 202 of the BCA establishes legislative procedures to expedite the consideration by one chamber of a joint resolution approved by the other. To be clear, these procedures will only be used if one chamber approves a Constitutional amendment with the required two-thirds vote. If that happens, then one chamber could use these procedures to consider a measure sent to it by the other.\nThe BCA provides that if the Senate receives a House-passed joint resolution, it will be referred to the committee of jurisdiction, which is required to report by the fifth session day after the Senate received the joint resolution from the House. If the committee does not report, it will be automatically discharged and the joint resolution will be placed on the calendar, making it eligible to be called up in the full Senate.\nThe Senate, however, must agree to take up the joint resolution under its regular rules, because the BCA does not affect the procedures for bringing the measure to the floor. The Senate could take up a House joint resolution by unanimous consent or by agreeing to a motion to proceed. While a simple majority could agree to a motion to proceed, the motion is debatable, and therefore the Senate might have to invoke cloture in order to get to a vote on the question of taking up the balanced budget amendment. Cloture requires the support of three-fifths of the Senate (normally 60 Senators) and several days to invoke. As a result, Senators might not have the opportunity, however, of voting directly on the question of approving a House-passed balanced budget amendment. On the other hand, given that passage of the constitutional amendment has a higher threshold (two-thirds of those present and voting, normally 67 Senators) than cloture, any balanced budget amendment likely to be approved by the Senate could also likely clear this procedural hurdle.\nIf the Senate chooses to take up a House joint resolution proposing a balanced budget amendment then the BCA establishes special expedited procedures for the consideration of that joint resolution. The measure is to be considered for a total of 20 hours, including time spent in quorum calls and voting. The time would be equally divided between the majority and minority leaders or their designees. No Senator could offer an amendment to the joint resolution, and several other motions that would take the Senate off of consideration of the joint resolution are also precluded. If the Senate has voted to proceed to a House joint resolution, then the final passage vote is to occur immediately after the 20 hours is used or yielded back (except for one quorum call if requested) or no later than the seventh session day after the joint resolution was placed on the calendar.\nThe BCA also provides a special procedure the House could use to consider a Senate joint resolution proposing a balanced budget amendment, although the House might choose instead to consider the measure under the terms of a special rule or under suspension of the rules. To briefly summarize the special procedures, the BCA provides a method for a majority to take up a Senate-passed joint resolution on the floor and debate it for two hours, equally divided between those opposed and those in favor. No amendments and no motion to recommit would be in order under the procedures for House consideration outlined in the BCA.", "The Budget Control Act of 2011 (BCA; P.L. 112-25 ) also makes changes to two of the federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329):\nThe William D. Ford Federal Direct Loan (DL) program and The Federal Pell Grant program.", "The William D. Ford Federal Direct Loan (DL) program is the primary federal student loan program administered by the U.S. Department of Education (ED). The program makes available loans to undergraduate and graduate students and the parents of dependent undergraduate students to help them finance their postsecondary education costs. Several types of loans are offered through the DL program: Subsidized Stafford Loans and Unsubsidized Stafford Loans for undergraduate, graduate, and professional students; PLUS Loans for graduate students and the parents of dependent undergraduate students; and Consolidation Loans through which borrowers may combine their loans into a single loan. The primary difference between Subsidized and Unsubsidized Stafford Loans is that with Unsubsidized Stafford Loans borrowers are responsible for paying the interest that accrues while they are in school, and during grace and deferment periods, whereas with Subsidized Stafford Loans the interest that accrues during these periods is paid by the government. DL program subsidy costs are mostly funded with mandatory appropriations, and administrative costs are mostly funded with discretionary appropriations.\nThe BCA eliminates the availability of Subsidized Stafford Loans to graduate and professional students for periods of instruction beginning on or after July 1, 2012, which corresponds to the beginning of award year 2012-13. After that date, graduate and professional students will be able to substitute amounts they previously would have been able to borrow using Subsidized Stafford Loans with Unsubsidized Stafford Loans. According to ED, during award year 2010-11, 1.47 million graduate and professional students borrowed $10.8 billion in Subsidized Stafford Loans; 1.34 million graduate and professional students borrowed $15.1 billion in Unsubsidized Stafford Loans; and 0.34 million graduate and professional students borrowed $6.4 billion in PLUS Loans.\nAlso, effective for DL program loans first disbursed on or after July 1, 2012, the BCA eliminates the authority of the Secretary of Education to offer one of two repayment incentives to borrowers of DL program loans. At present, two types of repayment incentives are offered:\nBorrowers of Stafford Loans currently receive a 0.5% up-front interest rebate that partially offsets a 1% origination fee; and borrowers of PLUS Loans receive an up-front interest rebate of 1.5% that partially offsets a 4% origination fee. If a borrower who receives an up-front interest rebate fails to make the first 12 monthly loan payments on time, the rebated amount is added back to the borrower's loan principal, increasing the loan amount that must be repaid. The BCA eliminates authority for the Secretary to offer this benefit. Borrowers who repay DL program loans using automatic electronic debit currently receive a 0.25 percentage point reduction in their interest rate. The BCA retains authority for the Secretary to offer this benefit.\nCBO estimates the changes in the DL program would reduce direct spending by $9.6 billion over the FY2012-FY2016 period and by $21.6 billion over the FY2012-FY2021 period. Approximately $17 billion of these savings would be directed to the Pell Grant program for future use, while $4.6 billion would go towards deficit reduction.", "The Federal Pell Grant program is the single largest source of federal grant aid supporting postsecondary education students. The program provided over $34.7 billion to approximately 9.5 million undergraduate students in FY2010.\nThe Pell Grant program is currently funded with three types of spending:\nAnnual discretionary appropriations bills that provide most of the funding for the program and typically specify the base discretionary maximum grant level for the program in a given award year; Mandatory appropriations provided in \"such sums as necessary\" for the purposes of funding annual increases to the base discretionary maximum grant level each year, as specified in the HEA, under existing statutory parameters; and Additional specific amounts in mandatory appropriations provided in previous legislation that are available for general use for a specific time period and may be used to pay for obligations associated with provisions that primarily affect discretionary spending in the program.\nThe BCA provides additional mandatory funding for the Pell Grant program for general use in FY2012 and FY2013, as depicted in the last category above. The BCA provides an additional $10 billion in mandatory funding for FY2012, and an additional $7 billion in mandatory funding for FY2013, for a total of an additional $17 billion.\nThese additional appropriations would reduce the amount of discretionary appropriations required in FY2012 and FY2013. Despite the availability of the additional funds provided in the BCA, Congress would need to provide an additional $1.3 billion over the FY2011 discretionary funding amount to maintain the current award levels and eligibility parameters in FY2012. Congress could also consider revising the program's award rules, eligibility parameters, and aid levels in order to reduce costs in the program, and therefore, reduce the amount of additional appropriations needed in FY2012. Other than providing additional mandatory funding, the BCA does not make any other changes to the Pell Grant program.\nAppendix A. Frequently Asked Questions About the Budget Control Act\nHow will the spending caps affect a specific program (or department or agency)?\nThe effect of the limits placed on discretionary spending by the BCA on specific government programs, departments or agencies will be determined later through the regular appropriations process. The spending limits of the BCA are established for two broad categories for FY2012 and FY2013 (\"security\" and \"nonsecurity\") and for one overall discretionary category for FY2014 through FY2021. Congress and the President will decide how to allocate spending within these constraints.\nThe BCA authorized an immediate increase of the federal debt ceiling. Are subsequent increases contingent upon Congress taking any other action?\nNo. The BCA authorized an increase of the debt ceiling up to at least $2.1 trillion. If Congress does not take any other action, the increase up to $2.1 trillion will occur. Raising the debt ceiling to a higher level, up to a maximum of $2.4 trillion, is contingent on other action, namely the enactment of a joint committee bill that reduces the deficit by more than $1.2 trillion or the passage in both chambers of a balanced budget constitutional amendment. Furthermore, Congress can prevent subsequent stages of debt limit increases authorized by the BCA by enacting a \"joint resolution of disapproval,\" a process expected to require support of two-thirds of each chamber to override a likely veto by the President.\nAre there any content requirements for the Joint Committee bill to be considered under the expedited procedures?\nTo qualify as a joint committee bill under the definition in the BCA, the legislative language recommended by the Committee must include a statement of the deficit reduction achieved over the period of FY2012 to FY2021. Otherwise, the only other requirements the text must meet to be considered under the special procedures are (1) be recommended by a majority of joint committee members through a vote conducted on or before November 23, 2011; (2) be introduced by the House Speaker (or designee) the first legislative day after it is transmitted from the joint committee or be introduced by the Senate majority leader (or designee) the first day of session after it is transmitted from the joint committee; and (3) be passed by both chambers by December 23, 2011.\nCan the Joint Committee bill contain provisions affecting revenue?\nYes. The BCA does not contain any specific restrictions on the policy content of the joint committee bill. In order to comply with the Constitutional requirement that all bills affecting revenue originate in the House of Representatives, Section 402(e)(2) of the BCA ensures that the bill sent to the President for his signature will be the \"H.R.\" version of the joint committee Bill, not the \"S.\" version.\nWhat happens if the Joint Committee bill does not become law?\nIf a joint committee bill reducing the deficit by at least $1.2 trillion over the period covering FY2012-FY2021 is not enacted by January 15, 2012, an automatic process to reduce spending will begin January 2, 2013. The spending reductions are achieved for direct spending through sequestration each year (FY2013 to FY2021). For discretionary spending, the reductions are achieved through sequestration the first year (FY2013). For the other fiscal years (FY2014-FY2021), the discretionary spending reductions are achieved through a downward adjustment of statutory limits on discretionary spending divided into two new categories that reflect defense and nondefense spending. Importantly, some programs, including both Social Security and Medicaid, are exempt from sequestration, and any sequestration of Medicare spending is capped at 2%.\nIf the automatic spending reduction process occurs because a Joint Committee bill does not become law, how much will spending be cut?\nThe amounts of spending reductions required each year cannot yet be known. It depends in part on the extent, if any, by which the reductions in the joint committee bill fall short of the $1.2 trillion goal and in part on spending estimates to be calculated in the future by the Office of Management and Budget (OMB). Furthermore, beginning in FY2014, part of the spending reductions will be achieved through a downward adjustment of the statutory limits on discretionary spending, not by automatic across-the-board spending cuts. For discretionary spending, it will therefore be Congress and the President who later determine the manner in which reductions are made to each account through the annual appropriations process each year.\nWhat programs and activities are exempt from the sequestration process that will occur if a Joint Committee bill does not become law?\nThe list of exempt programs and activities can be found in Section 255 of the Balanced Budget and Emergency Deficit Control Act, as amended (2 U.S.C. 905). The exempt programs include Social Security, Medicaid, and federal retirement and disability programs, among many others.\nWhat happens if a balanced budget constitutional amendment is not sent to the states?\nThe BCA does not establish a procedural consequence if the House and Senate do not both pass a balanced budget constitutional amendment by the required two-thirds in each chamber. If the chambers do approve such a constitutional amendment, however, the BCA provides that the debt ceiling could be increased by $1.5 trillion, instead of by $1.2 trillion.\nDo both chambers have to vote on a balanced budget amendment?\nSection 201 of the Budget Control Act states that the chambers \"shall vote on passage of\" a balanced budget amendment to the Constitution between September 30 and December 31, 2011. In the Senate, to get to a direct passage vote on a constitutional amendment, it might be necessary to secure support from 60 Senators to begin consideration of such a proposal. The BCA does not impose any procedural consequence if a chamber fails to vote on a balanced budget amendment. Factors besides procedure, however, might be expected to influence the decision to hold a vote. Without successful final passage votes on the same measure in both chambers, the BCA does preclude one avenue by which the debt limit may be increased by $1.5 trillion (instead of by $1.2 trillion).\nMy question is not on this list. Do I have to read this whole report to get answers?\nNo. You can ask your specific questions to the authors of this report or one of several other CRS analysts whose contact information is provided below:\nKey Policy Staff\nAppendix B. Timelines for Actions in Expedited Procedures" ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 3, 3, 1, 2, 2, 2, 1, 1, 1, 2, 3, 3, 2, 2, 2, 3, 3, 4, 4, 3, 4, 4, 4, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "", "h0_title h2_title h1_title h3_title", "h0_full", "h0_full", "h0_full", "h1_full", "h2_full", "h3_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_full", "", "", "", "h2_title", "h2_full", "", "h2_full h1_title h3_title", "h3_full", "h2_full h1_full" ] }	{ "question": [ "What has the BCA authorized in regard to debt limit?", "What are the goals of this action regarding federal spending?", "What else has the BCA done to try and reduce federal spending?", "What did the BCA create in case a cutting of the deficit was not reached by January 15, 2012?", "What is the goal of this automatic spending reduction process?", "What happens if the deficit cut, by January 15, 2012, exceeds $1.2 trillion?", "What else does the BCA control?", "How does the BCA control the Senate?", "How does this control alter the working of Senate voting?", "What consequences can come from the Senate not being able to vote?", "What changes does the BCA have the power to make?", "What specific changes does the BCA enact on July 1, 2012 pertaining to these programs?", "How does the CBO estimate these changes would affect federal spending?", "What would the savings from these changes likely be directed towards?" ], "summary": [ "The BCA authorized increases in the debt limit of at least $2.1 trillion dollars (and up to $2.4 trillion under certain conditions), subject to a disapproval process that would likely require securing the support of two-thirds of each chamber to prevent a debt limit increase.", "It established caps on the amount of money that could be spent through the annual appropriations process for the next 10 years, which the Congressional Budget Office (CBO) estimates will reduce federal spending by $917 billion.", "The BCA also created a Joint Select Committee on Deficit Reduction that is instructed to develop a bill to reduce the federal deficit by at least another $1.5 trillion over the 10 year period ending in FY2021.", "If a joint committee proposal cutting the deficit by at least $1.2 trillion is not enacted by January 15, 2012, then the BCA established an automatic spending reduction process that includes sequestration (the cancellation of budgetary resources).", "The process presumably is intended to encourage agreement on deficit reduction, either by enacting the joint committee legislation by early 2012, or possibly by enacting other legislation (presumably through existing congressional procedures) by the beginning of 2013, when the automatic process would make reductions.", "If the enacted bill cuts the deficit by more than $1.2 trillion, an additional increase in the debt limit becomes available in the amount of the excess, up to $0.3 trillion.", "The Budget Control Act has two additional elements.", "First, it directs that the House and Senate must each vote on a proposal to amend the Constitution to require that the budget of the federal government be balanced.", "The BCA does not alter the procedures for taking up such a measure in the Senate, and therefore the Senate might not be able to vote on passage of a constitutional amendment unless the support of 60 Senators can be secured to begin consideration.", "The only procedural consequence of not voting specified in the BCA is that, if Congress does not approve a constitutional amendment, the second of two conditions under which the act would permit an additional increase of $0.3 trillion in the debt ceiling, will not be available.", "Second, the BCA also makes changes to the William D. Ford Federal Direct Loan (DL) program and the Federal Pell Grant program, two federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329).", "Effective July 1, 2012, the BCA eliminates the availability of Subsidized Stafford Loans to graduate and professional students and eliminates all but one type of repayment incentives on future DL program loans.", "CBO estimates these changes would reduce direct spending by $21.6 billion over the FY2012-FY2021 period.", "Approximately $17 billion of the $21.6 billion in estimated savings from the changes in the DL program would be directed to the Pell Grant program for future general use in FY2012 and FY2013." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, -1, -1, 1, 2, -1, 0, 1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5 ] }
CRS_R43049	{ "title": [ "", "Introduction", "Background", "United States' Military Strategy Shift: Do the Bombers' Capabilities Meet Strategic Requirements?", "Potential Strategic Influence of Bombers on the Administration's Strategy Shift", "Bomber Expectations: Employment in DOD's Strategic Guidance", "Bomber Contribution to Critical Missions", "Forward Deployed Diplomacy: Continuous Bomber Presence and Worldwide Power Projection", "Meeting the Anti-Access/Area Denial (A2/AD) Challenge", "Bomber Employment in an A2/AD Environment", "Nuclear Deterrent Operations", "New Strategic Arms Reduction Treaty: Impact on Bombers", "Existing U.S. Bomber Force", "B-52H Stratofortress42", "Current B-52 Sustainment and Modernization Efforts43", "B-1B Lancer44", "Current B-1 Sustainment and Modernization Efforts45", "B-2A Spirit46", "Current B-2 Sustainment and Modernization Efforts48", "Issues for Congress", "Potential for Inducing a Shortfall in Long-Range Strike Capabilities", "Will Current Air Force Bomber Sustainment and Modernization Plans Get Us to the LRS-B?", "To Fund or Not to Fund: What Are DOD and Air Force Priorities?", "As Legacy Bombers Phase Out, Are 80-100 LRS-Bs Sufficient?", "If Legacy Bombers are Modernized, Can the Air Force Further Delay Development of the LRS-B?", "Modernization of Bomber-Launched Weapons", "Potential Implications of Bomber Modernization on Air Force Basing and any Future Base Realignment and Closures (BRAC)", "Industrial Base Concerns Associated with Bomber Sustainment", "Historical Appropriations for Bomber Sustainment and Modernization, FY2002-2012", "Legislative Activity FY2011-FY2013", "FY2011 National Defense Authorization Act (P.L. 111-383)", "FY2012 Department of Defense Appropriations (H.Rept. 112-331)", "FY2012 National Defense Authorization Act (P.L. 112-81)", "FY2013 Department of Defense Appropriations (S.Rept. 112-196: To accompany H.R. 5856)", "FY2013 Department of Defense Authorizations (P.L. 112-239)", "Conclusion" ], "paragraphs": [ "", "The central issue addressed by this report is how much Congress should consider appropriating for the continued sustainment and modernization of the B-52, B-1, and B-2 bombers over the remainder of their service lives. Many military experts note the advanced age of the United States' long-range bomber fleet. The B-52H Stratofortress, B-1B Lancer, and B-2A Spirit are now about 50, 28, and 20 years old respectively. In fact, Air Force Global Strike Command declared 2012 the \"Year of the B-52\" in honor of the 50 th anniversary of the last delivery of a B-52 and the 60 th anniversary of the first test flight of the YB-52. The B-1B celebrated its 25 th anniversary in 2010. The last B-2 delivery was in 1997. Although the Department of Defense and the Air Force are committed to the development and fielding of a new Long-Range Strike-Bomber (LRS-B), flight-testing of the new bomber will likely not start until the mid-2020s. Initial development of the B-2 began in the early 1980s and the first aircraft was delivered on December 17, 1993. If the B-2 experience is the norm, potential delivery of the first operational LRS-B may be expected sometime in the 2030 timeframe. With this in mind, can the U.S. Air Force's B-52Hs, B-1Bs, and B-2As physically last and continue to be credible weapon systems until the LRS-B is fielded? More importantly, does the nation's \"legacy\" bomber force possess the capabilities required to meet national security strategy objectives, especially in the face of potential adversaries possessing advanced, 21 st century anti-access/area-denial (A2/AD) weapon systems? The U.S. Air Force and aerospace industry's answer is \"yes,\" provided sufficient sustainment and modernization funding is available over the remaining lifespan of these weapon systems.\nWithout sufficient sustainment and modernization funding, many analysts argue the U.S. bomber fleet will quickly become a decrepit force ill-suited to the potential challenges posed by 21 st century adversaries. The average age of the bomber force is 33. Because of the physical wear-and-tear placed on these aircraft from the demands of military flight—compounded by 11 years of continuous combat—aging airframe structures need reinforcement, engines need to be replaced, and computer and electronic components need upgrading. Even if corrosion, metal fatigue, and parts obsolescence do not take their toll on the fleet, military analysts point out that potential adversaries are acquiring advanced, A2/AD weapon systems that would make it harder for the bombers to reach their targets, thus relegating them to a \"standoff\" weapons employment role. But even \"standoff\" weapons have their limits, especially against deeply buried and/or hardened targets found in places like North Korea and Iran. Consequently, most experts agree all three bombers are in need of upgrades to their systems in order to counter A2/AD-equipped adversaries and require constant operational research and testing to evaluate and incorporate new and modern weapons into their arsenal.\nThis report addresses potential congressional oversight and appropriations concerns for the sustainment and modernization of the U.S. Air Force's bomber force. It does not address Air Force efforts to develop and acquire the proposed LRS-B. Congressional interest in this subject stems from Congress's authority to approve, reject, or modify Air Force funding requests for bomber sustainment and modernization, as well as their oversight of the nation's long-range strike requirements and capabilities. In addition, sustainment, modernization, and size of the bomber force have been perennial legislative topics since the early 1990s. As the Air Force progresses through development and acquisition of the LRS-B and begins the gradual phase-out of 50-year-old bombers, it is anticipated that Congress will continue dealing with bomber sustainment and modernization legislation. Congress's decisions on appropriations for the bomber force could impact the nation's long-range strike capabilities and have additional consequences for the U.S. aerospace industry.\nA key issue for Congress is whether to continue providing sustainment and modernization funding for the Air Force's B-52H, B-1B, and B-2A bombers, and if so, at what levels. Pertinent to the discussion is the potential for a shortfall in the nation's long-range strike capabilities if Congress or the Air Force chooses to minimize funding for sustainment and upgrades that would keep these weapon systems viable against A2/AD-equipped adversaries. Also, given Air Force plans to keep the B-52 and B-1 flying well beyond 2030, Congress may consider whether current bomber sustainment and modernization plans will meet the nation's long-range strike requirements until the LRS-B is operational. Additionally, Congress may also consider whether the planned 80-100 LRS-Bs will adequately replace the capabilities lost as the legacy bombers start retiring from service in the 2030s. Congress's oversight and decisions on these issues could also have implications for any potential future base realignment and closure (BRAC) decisions as well as impact the U.S. aircraft manufacturing industrial base. Ultimately, the priority the Air Force places on bomber sustainment and modernization, and any decisions considered by Congress, could have potential consequences for future national defense strategies and on U.S. long-range strike capabilities.", "", "The Obama Administration's 2012 shift in national security and defense strategy towards the Asia-Pacific region has significant implications for America's legacy bomber force. Stemming from the growing economic importance of the Asia-Pacific region, China's growing military capabilities and its increasing assertiveness of claims to disputed maritime territories, U.S. concerns with freedom of navigation and the ability to project power in the region, and the end of U.S. military operations in Iraq and Afghanistan, President Obama directed the Department of Defense (DOD) to raise the Asia-Pacific region's priority in U.S. military planning. Many analysts agree this rebalance has placed renewed emphasis on U.S. naval forces due to the maritime character of the Pacific theater of operations. However, budgetary pressures and potential defense cuts may reduce long-term naval procurement plans and planned naval force levels in the Pacific region. Consequently, just as B-17 and B-29 bombers demonstrated the value of long-range airpower projection in the Pacific Theater during World War II, the U.S. Air Force may be planning on the current fleet of B-52s, B-1s, and B-2s to provide an essential complement to U.S. naval forces in the vast geographical expanses of the Asia-Pacific.\nIn addition to the Asia-Pacific, the Administration's new defense strategy also calls for retaining emphasis on the Middle East while ensuring U.S. defense commitments to European allies. This aspect of the new strategy may prove the most challenging from a resource perspective as the DOD is forced to implement automatic spending cuts laid out in the Budget Control Act (BCA) of 2011 ( P.L. 112-25 / S. 365 of August 2, 2011). The BCA necessitates $55 billion a year in defense cuts over the nine years from FY2013 to FY2021. Specifically for the bomber force, Air Force leaders have said that such cuts would result in an 18% reduction in both bomber flying hours and in bomber sustainment and modernization efforts, resulting in aircraft availability and mission capable rates falling below standards. Some military analysts, consequently, are skeptical as to whether U.S. force levels will be sufficient to meet multiple, competing priorities in both the Asia-Pacific and the Middle East, all the while reassuring U.S. commitments in Europe. However, some historical examples suggest the current bomber force is capable of balancing national security priorities among competing geographical regions.\nSince 2003, B-52s, B-1s, and B-2s have maintained a continuous bomber presence in the Pacific with regularly scheduled rotations to Andersen Air Force Base, Guam, while simultaneously participating in continuous combat operations in the Middle East and Afghanistan. An example of this is the March 2003 deployment of B-52s and B-1s to Guam (in response to North Korean nuclear weapons activities) while additional B-52s, B-1s, and B-2s participated in the opening phases of Operation Iraqi Freedom and flew combat sorties in Afghanistan. Essentially, this dual deployment of bombers to two geographical regions demonstrated the United States and the bomber force's ability to fight wars in the Middle East and Afghanistan while retaining the capability to respond to potential crises in the Asia-Pacific.", "The Administration's strategic guidance identifies three priorities for which the USAF bomber force could have significant strategic influence. These include reaffirming U.S. commitment to the security and prosperity of allies in the Asia-Pacific region; ensuring access to the global commons which facilitate world-wide economic opportunities and guarantee U.S. power projection capabilities; and ensuring a quick, military response capability to any hostilities from potential adversaries in the region.\nAccording to former Secretary of State Hillary Clinton, the U.S. commitment to what she termed \"forward-deployed\" diplomacy would include the strengthening of bilateral security alliances with U.S. allies in the Asia-Pacific and necessitate the forging of a broad-based military presence. Forward based bombers, whether deployed on a continuous basis or periodically as part of training exercises, could play a significant role in reaffirming U.S. commitments to allies in the Asia-Pacific region. Primarily through regular rotational deployments (such as the continuous bomber presence rotation at Andersen AFB, Guam) and participation in bilateral and multilateral training exercises, the visible presence of U.S. bombers abroad could potentially reinforce the U.S. commitment to deterrence (conventional and nuclear) against any potential adversary in the region and could provide an economical and effective way to increase U.S. influence there.\nFreedom of navigation and access to the South China Sea is considered by many analysts vital to the economy of every nation in North America and East Asia. More than half of the world's shipping passes through the South China Sea every year (approximately 70,000 ships carrying $5.3 trillion worth of goods). Of that, $1.2 trillion worth is trade that directly affects the United States. In addition, over 80% of crude oil supplies to Japan, South Korea, and Taiwan flow through the South China Sea—making these countries especially dependent on South China Sea shipping routes. Any attempt to restrict universal access to this maritime common could impact the security, political stability, and economic prosperity of the United States and its allies in the region and potentially inhibit U.S. power projection capabilities by restricting the U.S. Navy's ability to patrol and operate in the South China Sea and the Malacca Straits. Long-range bombers, conducting maritime reconnaissance and capable of anti-shipping operations, could actively and passively maintain situational awareness of the vast Asia-Pacific maritime region and possibly keep in check any potential adversary looking to threaten the United States and its allies' access to the Asia-Pacific's commons.\nFinally, the legacy bomber force is one option than can produce a quick, military response to hostile actions taken by potential adversaries in the region. Unconstrained by the need for a forward operating location within theater, the capability of bombers to reach anywhere in the Asia-Pacific, in a relatively short period of time and with a wide array of weapons, could provide national leaders a viable option for responding to encroachments on U.S. interests in the region and for honoring defense and security commitments to U.S. allies.", "", "The Administration's new strategic guidance emphasizes the military's need to recalibrate its capabilities and make selective investments to succeed in a number of missions critical to achieving national security objectives. Any argument for or against any level of funding for bomber modernization could include an assessment and cost/benefit analysis of those upgrades and their contribution to accomplishing the expected missions of U.S. forces as defined in the DOD's strategic guidance, Sustaining U.S. Global Leadership: Priorities for 21 st Century Defense . These missions include the following:\nCounter terrorism and irregular warfare; deter and defeat aggression; project power despite anti-access/area denial challenges; counter weapons of mass destruction; operate effectively in cyberspace and space; maintain a safe, secure, and effective nuclear deterrent; provide a stabilizing presence; and, conduct stability and counterinsurgency operations.\nAll three of the nation's bombers have made, and are expected to continue making, significant contributions to all of the critical missions set forth in DOD's strategic guidance. Looking as far back as 1962 (coinciding with the last B-52 delivery), numerous examples describe one or more of the current bombers accomplishing these missions (see Table 1 ). However, with the rising prevalence of 21 st century A2/AD capabilities in several potential adversary countries, even the U.S. Air Force assesses that modern threat capabilities are outpacing the 20 th century capabilities and abilities of the B-52, B-1 and, in some circumstances, even the B-2, to accomplish these missions. Without funding for critical modernization and sustainment efforts, all three bombers run the risk of becoming ineffective in the face of A2/AD equipped adversaries.", "With the conclusion of U.S. military involvement in Iraq and U.S. forces drawing down in Afghanistan, DOD has announced it intends to shift military capacity from the Middle East to the Asia-Pacific region as part of the Obama Administration's rebalancing strategy. On multiple occasions, Deputy Secretary of Defense Ashton Carter has stated DOD's intent to begin rotating B-1 bombers (which have been the only bomber participating in Operation Enduring Freedom since May 2006) into the Asia-Pacific region to augment B-52s already on continuous rotation there. This continuous rotation—referred to by the DOD as the Continuous Bomber Presence (CBP)—is based at Andersen Air Force Base, Guam, and represents a major investment in ensuring U.S. security commitments in the Pacific.\nCapable of reaching anywhere in the U.S. Pacific Command's (USPACOM's) area of responsibility with weapons ranging from conventional to nuclear-tipped cruise missiles, the CBP is one way of reassuring allies of the U.S. commitment to their defense and deterring potential adversaries in the region, including possibly China. The CBP can potentially send the signal that no naval vessel can patrol the South China Sea and Pacific without coming under the reach of land-based bombers. According to former Pacific Air Forces commander General Gary L. North, \"Chinese military writings talk a lot about how to extend their power to the second island chain … the 1,800 mile [factor], which would enable them to prevent other nations' ability to have freedom of movement at that great range.\" Invoking the lessons learned from the Pacific Theater of World War II, the CBP, and long-range airpower projection in general, could be seen as an essential complement in dealing with potential adversary naval forces.\nAir Force Global Strike Command recently announced B-2s will begin regular worldwide training deployments to each of the regional U.S. combatant commands' areas of responsibility starting in 2013. According to 8 th Air Force Commander Major General Stephen Wilson, B-2s will rotate to forward operating locations all over the world in small numbers for a few weeks at a time, a set number of times a year beginning with a short Pacific deployment in 2013. The plan calls for B-2 deployments to all the geographic combatant commands including those in Central and South America, Southwest Asia, and Europe in addition to the Asia-Pacific. These worldwide training deployments are an exercise in power projection and meant to demonstrate U.S. commitments to allies in multiple regions of the world while providing a visible deterrent to any potential U.S. adversary.\nMilitary analysts point out that engaging in this type of \"forward deployed diplomacy\" with the bomber force has the potential to influence the Asia-Pacific region beyond the near-term concern of a rising China. Give the efforts by numerous Asian-Pacific states seeking to increase their diplomatic, economic, and strategic influence in the region, the potential exists for a number of regional players to acquire advanced military capabilities that could influence long-term U.S. interests and/or threaten U.S. access to the region in the future. For example, North Korea's continuing efforts to develop an intercontinental ballistic missile capability, along with its nuclear weapons program, represent a potential direct threat to the United States and threaten to undermine regional security. South Korea, in an effort to offset its strategic vulnerabilities, has undergone a vigorous procurement and acquisition of state-of-the-art weaponry and has invested over $25 billion a year since 2006 on indigenous research and development programs for its local defense industries. Japan, after years of watching its international influence eroded by a slow-motion economic decline, is attempting to raise its relevance in the region by offering military aid to regional neighbors and by stepping up training and engagement activities by its own armed forces in an effort to build regional alliances and shore up other countries' defenses. India, who until the recent global economic downturn possessed the second-fastest-growing economy in the world, became the largest weapons importer in the world in March 2011. It is anticipated that India will spend up to $80 billion on military modernization by 2015, and it is considered by many analysts to be on the verge of attaining military superpower status. Indonesia, supported by its military leadership and a $16.7 billion budget, is moving forward with a three-year plan to strengthen and modernize its military arsenal to include $2.5 billion for 10 light frigates, $2 billion for four submarines, and $6 billion for the addition of Russian Sukhoi and U.S. F-16 fighters. Taiwan, who is falling rapidly behind the unprecedented Chinese military buildup over the past decade, conducted tests of a new \"carrier killer\" anti-ship missile in late 2012. Thought to be an advanced version of the Hsiung Feng III anti-ship missile, such a weapon could pose a significant challenge to any naval vessel operating in the Taiwan Straits if developed in sufficient numbers. The point being, there is no doubt that with the enormous amount of economic, military, and political power concentrated in the Asia-Pacific region, the proliferation of A2/AD weapon systems could impact the future of U.S. influence and capacity in the region, regardless of who possesses such capabilities.\nCBP rotations and regular B-2 deployments stand to play a long-term role in the United States' ability to influence and project military power in the Asia-Pacific, provided bomber sustainment and modernization efforts keep pace with current and evolving A2/AD military capabilities that are becoming prevalent in the region. However, with such emphasis being placed on military modernization by many of the major states in the region, it is hard to predict what the strategic and military landscape of the Asia-Pacific will look like in 20 or 30 years. Such a time frame could potentially see the B-52, B-1, and B-2 still in service; if so, they will be expected to be effective weapon systems if employed.", "A major challenge in meeting the goals of the Administration's new strategy is the rising prevalence of 21 st century anti-access/area denial (A2/AD) threats. Anti-access refers to those adversary actions and capabilities, usually employed from long ranges, designed to prevent an opposing force entry to an operational area by restricting its access to the global commons (sea, air, space, and cyberspace). Area denial refers to those adversary actions and capabilities, usually of shorter range, designed not to keep an opposing force out, but to limit its freedom of action within an operational area. Although not a new concept, A2/AD is a rising concern due to the proliferation of technology that places precise, long-range weapons in the hands of potential foes. Such weapons include ballistic and cruise missiles, integrated air defense systems, anti-ship missiles, submarines, guided rockets, missiles and artillery, 4 th - and 5 th -generation combat aircraft, and space and cyber warfare capabilities. Many of these A2/AD threats are specifically designed to challenge the U.S. military's power projection capabilities and potentially threaten U.S. access to key areas of strategic interest both in the Asia-Pacific and the Middle East.\nThe U.S. military addresses the A2/AD challenge in its Joint Operational Access Concept (JOAC). Although not enemy- or region-specific, JOAC describes how joint forces will operate in response to the emerging A2/AD threat. Its central idea hinges on the joint forces' ability to leverage cross-domain synergy—the complementary employment of military capabilities across the sea, air, land, space, and cyberspace domains that enhances the effectiveness of military operations and compensates for any known weaknesses in U.S. capabilities. The Air Force and Navy have embraced cross-domain synergy and have codified their approach to the A2/AD challenge in their Air-Sea Battle Concept (ASBC). ASBC seeks to achieve interoperability between air and naval forces that can execute networked, integrated attacks, in-depth, to disrupt, destroy, and defeat an adversary's A2/AD capabilities. ASBC and the idea of cross-domain synergy as an answer to the A2/AD challenge have very real implications for the modernization and operational employment of the bomber force; primarily, modernization and sustainment efforts should equip the bomber force with the capabilities necessary to operate in the extreme-, high-, and low-risk denied regions of the 21 st century A2/AD environment.", "One of the objectives of an A2/AD adversary is to establish what the military terms extreme-risk geographic zones in order to deny any advantage to U.S. forces operating in them. In extreme-risk zones, only the most capable, low-signature (stealthy) forces maintain the ability to survive and operate effectively using self-defense systems, maneuver and, in some cases, additional support to do so. Due to its stealth and self-defense capabilities, the B-2 is the most capable bomber able to operate in the extreme-risk zone.\nIn high-risk zones, the majority of U.S. high-signature (non-stealthy) forces require significant defense support. For the bombers, this means their defensive countermeasures and maneuvers will be effective if assisted by mutually supporting forces, but on their own, they may be operationally ineffective and limited. The U.S. bombers most capable of operating in the high-risk zone are the B-2 (because of its stealth and self-defense capabilities) and the B-1 given its speed, maneuverability, low-altitude flying capability, and electronic self-defense capabilities.\nIn the low-risk zone—usually found at extended ranges from the adversary's borders—all U.S. forces can generally operate freely, although the adversary can potentially still pose a threat. The B-1 and B-52 are quite capable of operating in low-risk zones and would most likely employ their arsenal of long-range, standoff cruise missiles (the B-2 does not carry long-range stand-off cruise missiles). In the overall Air-Sea Battle Concept, higher-signature forces—such as the B-1 and B-52—would be teamed with low-signature forces as required—such as the stealthy F-22 fighter—in order to enhance the effectiveness and compensate for the vulnerabilities of each platform. Nevertheless, the challenge is that the Air Force's legacy bombers could have increasing difficulty operating in A2/AD environments without more modern systems and weapons capabilities.", "Under DOD's strategic guidance, maintaining a safe, secure, and effective nuclear deterrent remains a primary mission for U.S. Armed Forces. Its guidance is coherent with and builds on the 2010 Quadrennial Defense Review (QDR) which states, \"Until such time as the Administration's goal of a world free of nuclear weapons is achieved, nuclear capabilities will be maintained as a core mission of the Department of Defense.\" Relevant to the bomber force, the 2010 Nuclear Posture Review (NPR) reaffirmed the enduring contributions and viability of the nuclear strike capabilities of the B-52 and the B-2 in accomplishing the nuclear deterrent mission (the B-1 is no longer nuclear capable).\nProponents argue three principal reasons for retaining and modernizing nuclear-capable, or, more accurately, dual-capable B-52 and B-2 bombers. First, an air-delivered nuclear capability provides a rapid and direct hedge against technical challenges with the other legs of the nuclear triad as well as geopolitical uncertainties.\nSecond, nuclear-capable bombers are important to extended deterrence of potential attacks on U.S. allies and partners. Unlike intercontinental ballistic missiles (ICBMs) and submarine launched ballistic missiles (SLBMs), heavy bombers can be visibly forward deployed, thereby signaling U.S. resolve and commitment in a crisis.\nFinally, not only is the LRS-B not anticipated to start flight testing until the mid-2020s, it is also yet to be determined if it will initially be nuclear capable once it does. Former Chief of Staff of the Air Force General Norton Schwartz testified before Congress in November 2011 that the new LRS-B will be built with nuclear capability but will operate as a conventional strike aircraft initially. He stressed that although the aircraft will be designed and built with all the hardware for both nuclear and conventional missions from the outset, \"Deferring the new aircraft's nuclear certification until the B-52 and B-2 start to retire would help the service manage costs.\" However, in response to General Schwartz's testimony, language in the 2013 Defense Authorization Act ( P.L. 112-239 ) stipulates the next-generation LRS-B will be \"capable of carrying strategic nuclear weapons as of the date on which such aircraft achieves initial operating capability\" and will be \"certified to use such weapons by not later than two years after such date.\" If the nation wishes to maintain an air-delivered nuclear capability, as stated in the 2010 QDR and NPR, it is unclear whether the B-52 and B-2 will be the only air-delivery option in the U.S. nuclear arsenal until the 2030s or whether the LRS-B can be expected to start filling that role in the late 2020s.", "In accordance with the New Strategic Arms Reduction Treaty (NST) signed in April 2010, the United States and Russia plan on reducing and limiting ICBMs and ICBM launchers, SLBMs and SLBM launchers, heavy bombers, ICBM warheads, SLBM warheads, and heavy bomber nuclear armaments. Seven years after entry into force of the treaty and thereafter, the aggregate numbers, as counted in accordance with Article II section one of the treaty, will not exceed 700 for deployed ICBMs, deployed SLBMs, and deployed heavy bombers. Also, the total numbers will not exceed 800 for deployed and non-deployed ICBM launchers, deployed and non-deployed SLBM launchers, and deployed and non-deployed heavy bombers. The United States retains the right to determine for itself the composition and structure of its strategic offensive arms.\nConsequently, the February 2011 entry-into-force of the New START drives the United States to convert a number of nuclear-capable B-52 bombers to a conventional-only role. Although a final force structure decision has not been made to reflect the requirements of New START, Air Force Global Strike Command (AFGSC) recommended a preferred course of action in the FY13 Program Objective Memorandum (POM) and funded through the future years defense program (FYDP). The New START drives no change to the configuration of B-2 force numbers.\nIn her statement before the Senate Foreign Relations Committee, Ms. Madelyn Creedon, Assistant Secretary of Defense for Global Strategic Affairs, provided testimony on the need for bomber sustainment and modernization in the context of implementing the New Start Treaty:\nThe United States will maintain two nuclear capable B-52H strategic bomber wings and one B-2A wing. Both bombers, however, are aging and sustainment and modernization funding will have to be provided to ensure they remain operationally effective through the remainder of their service lives. Funding has been allocated to upgrade these platforms; for example, to provide the B-2A with survivable communications, a more modern flight control system, and a new radar. The B-52 will also need various upgrades including for its bomb bay and survivable communications. These modernization and sustainment programs are needed to maintain the effectiveness of the current bomber force until the introduction of a new long-range bomber.", "The Air Force's existing bomber fleet includes 76 B-52H bombers, 63 supersonic B-1B bombers, and 20 B-2 stealth bombers. Table 2 summarizes the three types of aircraft. Additional information on the existing bomber force is presented in Appendix A .", "The B-52 is currently the USAF's only nuclear bomber capable of employing long-range standoff weapons. It serves both as a nuclear and conventional bomber. It first entered operational service on June 29, 1955. The B-52's original service life expectancy was approximately 5,000 hours or approximately 20 years depending on severity of the flying environment. Of the 744 various model B-52s built, 76 B-52H models remain in service today. The B-52H first entered service on May 9, 1961, with operational aircraft currently stationed at Barksdale AFB, Louisiana, and Minot AFB, North Dakota. The B-52's life expectancy has been extended beyond original expectations through numerous modernization efforts. It is now projected to be sustainable into 2040 based on projected average flying hours and severity of the flying environment.\nThe B-52H program's challenge is to continue sustainment activities and maintain combat effectiveness against the nation's adversaries until the platform is retired, and to approach modernization efforts effectively by recognizing capability gaps, prioritizing valid requirements, and investing in material solutions that meet platform and war fighter needs. As plans for sustainment, modernization, and recapitalization move forward, some argue the B-52 enterprise should be prepared to make required programmatic and operational adjustments in step with changes in platform mission taskings and operational plans. The B-52's strengths lie in its diverse capabilities, precision, large payload, and long range; however, if these capabilities remain static, mission effectiveness is likely to erode in the face of 21 st century A2/AD threats.", "The following is a list of B-52 sustainment and modernization initiatives in the program of record (POR) that are either just being completed or are currently in progress. Additional information on each effort, as well as information on short-term and long-term sustainment and modernization efforts, can be found in the B-52's Master Plan summarized in Appendix B .\nCombat network communications technology (CONECT) Military-standard-1760 modernization B-52 trainer upgrades Arms control activities under the New START Mode S/5 identification friend or foe (IFF) Low cost modifications B-52 anti-skid replacement B-52 modernization research development test and evaluation efforts 1760 internal weapons bay upgrade (IWBU)\nTable 3 is the FY2013 budget submission for B-52 procurement and B-52 research, development, test, and evaluation programs derived from Air Force budget justification books. It summarizes prior-year and estimated future-year expenditures for B-52 sustainment and modernization programs.", "The B-1B Lancer was developed by Rockwell International, now Boeing Defense and Space Group, and became operational in 1986. The B-1B was originally designed to serve as a low-altitude Cold War supersonic bomber. Its low radar cross-section, variable-geometry wings, avionics, and afterburning engines made it less vulnerable than the B-52 to enemy surface-to-air missiles and fighter aircraft. However, following the end of the Cold War, the Air Force ended the B-1's nuclear mission in 1992 and began the aircraft's transition to conventional-only weapons capability. The Conventional Mission Upgrade Program (CMUP) transformed the B-1B into a conventional-only bomber capable of employing the latest in conventional weapons to include Global Positioning System (GPS)-guided Joint Directed Attack Munitions (JDAM) and long-range standoff Joint Air-to-Surface Stand-off Missiles (JASSM). The B-1B has the largest internal payload of any current bomber. However, many of the systems on the B-1 are original equipment and suffer from diminishing manufacturing sources and material shortfalls that impact reliability, availability, and maintainability.\nOne hundred B-1Bs were initially built, of which 63 remain in service. The fleet operates from Dyess AFB, Texas (35 aircraft), and Ellsworth AFB, South Dakota (28 aircraft). It possesses diverse capabilities: large precision payload, range, speed, and endurance; however, if these capabilities remain static, mission effectiveness may erode in the face of 21 st century A2/AD threats. The B-1B is expected to be in service until 2040.", "The following is a list of B-1 sustainment and modernization initiatives currently in the program of record (POR) that are either just completing or are currently in progress. Additional information on each effort, as well as information on short-term and long-term sustainment and modernization efforts, can be found in the B-1's Strategic Action and Investment Plan (SAIP) summarized in Appendix C .\nFully integrated data link Simulator digital control loading Central integrated test system Inertial navigation system replacement Radar improvement upgrade Visual situation display upgrade Self-contained attitude indicator Gyro stabilization system replacement (GSSR) B-1 training support Digital communications B-1 Link 16 cryptographic materials Laptop controlled targeting pod Low cost mods Miscellaneous B-1 modernization research, development, test, and evaluation efforts\nTable 4 is the FY2013 budget submission for B-1 procurement and B-1 research, development, test ,and evaluation programs derived from Air Force budget justification books. It summarizes prior-year and estimated future-year expenditures for B-1 sustainment and modernization programs.", "The B-2A is the only long-range, penetrating low observable (LO) bomber operated by the U.S. Air Force. It serves as both a conventional and nuclear bomber. The aircraft entered service in December 1993 and is based solely at Whiteman AFB, Missouri. It achieved initial operational capability (IOC) in April 1997 and achieved full operational capability (FOC) on December 17, 2003. A total procurement of 132 B-2s was envisioned. However, following the Cold War, the number was reduced to 75, and then to 20. Congress added one more by providing funding to convert one of the test vehicles into a combat aircraft, for a total of 21, but a B-2 was lost in a crash during takeoff at Andersen AFB, Guam, in February 2008, reducing the total number to 20. Its payload weight is more limited than those of the B-1 or B-52. Originally fielded in Block 10 configuration, the current fleet is Block 30. Each block upgrade improved stealth characteristics, expanded weapons employment options, and improved offensive and defensive avionics. Its preeminent capabilities are precision, range, and stealth.\nThe B-2 currently experiences parts obsolescence and diminishing manufacturing sources. The B-2 is also impacted by aging support and test equipment. For the first time since the B-2 aircraft became fully operational capable, the weapon system's survivability is in question in the face of advancing 21 st century A2/AD threats. The B-2A's projected service-life goal is 2058.", "The following is a list of B-2 sustainment and modernization initiatives currently in the program of record (POR) that are either just completing or are currently in progress. Additional information on each effort, as well as information on short-term and long-term sustainment and modernization efforts, can be found in the B-2's Master Plan summarized in Appendix D .\nExtremely high frequency satellite communications (EHF SATCOM) and computer upgrade program Massive ordnance penetrator integration Low observable signature and supportability modifications (LOSSM) diagnostics B-2 trainer system upgrade Link-16/center instrument display/in-flight re-planner (CID/IFR) Radar modernization program (RMP) Low observable signature and supportability modifications (LOSSM) program structures/materials Defensive management system modernization (DMS-M) Stores management operational flight program (SMOFP) re-host and mixed carriage modification Common very-low frequency receiver (CVR Increment 1) Low-cost engine modifications Low-cost modifications B-2 modernization research, development, test, and evaluation efforts Baseline B-2 support\nTable 5 is the FY2013 budget submission for B-2 procurement and B-2 research, development, test, and evaluation programs derived from Air Force budget justification books. It summarizes prior-year and estimated future-year expenditures for B-2 sustainment and modernization programs.", "", "As the bomber force continues to age and shrink, and development of the LRS-B continues, a potential oversight issue for Congress is whether failure to sustain and modernize the Air Force's legacy bomber fleet will induce a shortfall in the nation's long-range strike capabilities. Consistent with prior administrations, the Obama Administration's strategic guidance requires a long-range, deep strike capability that is effective in the face of A2/AD threats and is not constrained by the lack of overseas basing. In addition, under the New START treaty, nuclear-capable heavy bombers could continue to make up one-third of the U.S. nuclear triad along with ICBMs and SLBMs. With only 20 B-2s, the recent retirement of three B-1s, and the conversion of a yet-to-be-determined number of B-52s to conventional-only roles, the potential exists for the total number of bombers to fall below the level necessary to fulfill long-range strike requirements. Currently, the DOD and the Air Force plan on a bomber force of approximately 156 aircraft out to at least 2022 (see Table 6 , below). However, with $487 billion of defense cuts over the next 10 years as a result of the Budget Control Act of 2011, the potential for additional budget constraints, and changing defense strategies, these numbers are subject to change. Furthermore, the potential for shortfall in long-range strike capabilities does not simply lie in the sheer number of legacy bombers in service.\nThe more pressing oversight issue is the \"capability\" of the legacy bomber force. That is, can the legacy bomber force meet the national security challenges posed by the growing number of potential A2/AD-equipped adversaries? The ability of the current bomber force to bridge a potential long-range strike capabilities gap may depend upon the feasibility and cost effectiveness of sustainment and modernization programs that will make these weapon systems viable in the 21 st century A2/AD environment while extending their service lives until the LRS-B becomes operational in the late 2020s.\nMany analysts argue that the Navy's nuclear-powered aircraft carrier is another, highly flexible alternative to the bomber and is capable of filling the nation's long-range strike needs. Indeed, the aircraft carrier's ability to dominate the seas and launch its aircraft without the need for a forward airbase is without question a valuable strategic asset. However, the relatively limited amount of fuel carried by naval fighters limits their ability to penetrate deeply into enemy territory without assistance from Air Force tankers. Without tanker support, the strategic reach of naval fighters is limited to the coastal areas of any potential adversary. Furthermore, compared to a bomber, the weapons load out capability of carrier-based aircraft is limited thus potentially requiring multiple aircraft in order to service a single target. Finally, there is also a potential concern over the carrier's survivability and ability to operate in an A2/AD environment. The primary goal of an adversary employing an anti-access strategy is to deny an outside country the ability to project power into a region. One way of doing this is with anti-ship weapons. Weapons systems such as submarines, China's version of the SS-N-22, SS-N-27, and DF-21D, and Iranian small-boat swarm tactics are all potential threats that could push a carrier task force even further out to sea, thus potentially increasing the range at which naval aviation must travel. Although most analysts will agree the aircraft carrier is an essential element in U.S. long-range strike capabilities, carrier aviation may be seen as complementary to and not taking the place of the much more powerful and flexible long-range bomber. While both capabilities are long-range, they are not necessarily fungible in their military utility.", "Another possible oversight issue for Congress will be the feasibility and affordability of Air Force bomber sustainment and modernization programs and whether those programs bridge any potential capabilities gap until the LRS-B becomes operational. Congress requested such oversight information in the FY2011 National Defense Authorization Act ( P.L. 111-383 ), specifically requesting a report discussing \"the cost, schedule, and performance of all planned efforts to modernize and keep viable the existing B-1, B-2, and B-52 bomber fleets and a discussion of the forecasted service-life and all sustainment challenges that the Secretary of the Air Force may confront in keeping those platforms viable until the anticipated retirement of such aircraft.\" This report was submitted to Congress in September 2011. The information in this report is also contained in Air Force Global Strike Command's (AFGSC's) and Air Combat Command's (ACC's) master plan documents for the B-52 and B-2 (AFGSC) and the B-1 (ACC). Updated on an annual basis, these master plans outline each command's plans, programs, requirements, and strategic vision for each platform to meet national security objectives. The plans also identify timeframes, outline capability needs, and describe the force and technologies needed for continued system effectiveness and viability while providing guidance on long-range sustainment, modernization, and recapitalization needs.\nThe 2012 updates to these plans take into consideration President Obama's Asia-Pacific rebalance and DOD strategic direction. Primarily, the plans state that without sufficient sustainment and modernization funding, each weapon system's survivability is at risk in the face of 21 st century A2/AD threats. Appendices B thru D provide summaries of each bomber's sustainment and modernization master plans.", "The DOD is challenged with reducing defense spending by $487 billion over the next 10 years, notwithstanding the possibility of further cuts through possible sequestration. At the same time, the DOD's priorities require continued modernization of aging capabilities to address the proliferation of modern A2/AD threats in that the DOD and Air Force plan on the B-52, B-,1 and B-2 to operate well into the 2030s, especially in the global strike and nuclear deterrent roles. According to DOD's Annual Aviation Inventory and Funding Plan for FY2013-FY2042:\nThe enduring need for long-range attack capabilities will be met by a combination of current and future aircraft and weapons systems. The current fleet of Air Force bombers continues to be modernized so that it can retain long range strike capabilities through the 2030s.\nThe FY12 PB (Presidential Budget) initiated development of the Long-Range Strike-Bomber (LRS-B), a key component of the LRS Family of Systems.... The current goal is to achieve an initial capability in the mid-2020s, and to hold down the unit cost to ensure sufficient production (80 to 100 aircraft) and a sustainable bomber inventory over the long term. Meanwhile, the Department will invest in upgrades to the B-2 bomber to enhance its effectiveness and survivability as well as modernize the B-52 fleet with new visual displays and increased weapons storage capacity. The Air Force also continues to modernize the B-1 and address sustainability issues to ensure the overall health and continued viability of the B-1 fleet.\nThe Air Force's 2012 Posture Statement presented to the House Armed Services Committee suggests funding legacy bomber modernization is a priority given the rise of A2/AD threats.\nThe Air Force's ability to conduct global strike—to hold any target on the globe at risk—will be of growing importance in the coming decade. Our conventional strike forces [bombers] compose a significant portion of the Nation's deterrent capability, providing national leaders with a range of crisis response and escalation control options. Our [U.S. Air Force] nuclear deterrent forces provide two-thirds of the Nation's nuclear triad competently forming the foundation of global stability and underwriting our national security and that of our allies. However, increasingly sophisticated air defenses and long-range missile threats require a focused modernization effort exemplified by the long-range strike family of systems.\nThe posture statement goes on to emphasize that, within the Air Force core functions of Global Precision Attack and Nuclear Deterrence Operations:\nWe [the U.S. Air Force] are modernizing conventional bombers to sustain capability while investing in the Long-Range Strike Family of systems. The bomber fleet was retained at its current size because we recognized the importance of long range strike in the current and future security environments. The Air Force is enhancing long range strike capabilities by upgrading the B-2 fleet with an improved Defensive Management System (DMS) and a new survivable communications system, and is increasing conventional precision guided weapon capacity within the B-52 fleet. We are investing $191.4 million in modernizing the B-1 to prevent obsolescence and diminishing manufacturing sources issues and to help sustain the B-1 to its approximate 2040 service life.\nAccording to the U.S. Air Force's FY2013 Budget Overview:\nThe Air Force will continue bomber modernization and sustainment efforts, to include the B-2 Defensive Management systems program, the B-2 Very Low Frequency/Low Frequency communications program, and the B-52 1760 Internal Weapons Bay Upgrades.\nWith the February 2011 entry-into-force of the New Strategic Arms Reduction Treaty ... the FY 2013 Budget Request funds compliance activity and force reduction options to meet the central limits of the treaty. These include ... the conversion of some B-52Hs from nuclear-capable to conventional-only capability.\nIn addition to the development of LRS-B (Long-Range Strike-Bomber), the Air Force will continue to modernize the B-1B to ensure the fleet remains viable until recapitalization can be accomplished. The FY2013 Budget Request includes the continuation of the B-1 Integrated Battle Station contract which concurrently procures and installs Vertical situation display Upgrade (VSDU), Central Integrated Test System (CITS), and Fully Integrated Data Link (FIDL). VSDU and CITS each address obsolescence and diminishing manufacturing sources for the B-1 fleet. FIDL provides both the electronic backbone for VSDU and CITS, as well as a capability enhancement of line-of-sight/beyond line-of-sight Link 16 communications. In addition, the FY2013 Budget Request includes upgrades to flight and maintenance training devices to ensure continued sustainability and common configuration with the aircraft fleet. These initiatives will help bridge the gap until the next generation long-range strike aircraft is operational.", "As the legacy bomber force begins phasing out of service (planned for some time in the mid-2020s thru the 2040s), Congress may want to reevaluate Air Force acquisition plans for the LRS-B to ensure a sufficient backfill of U.S. long-range strike capabilities that meet the requirements of national security objectives. The Air Force and Congress may consider how to balance modernization and sustainment efforts for all three legacy bombers with their gradual phase-out while ensuring a sufficient number of LRS-Bs are produced to minimize the effects of any potential long-range strike capability gap during the transition.\nDirectly tied to this phase-out/phase-in process will be a final determination by Congress as to the final number of LRS-Bs ultimately produced. Current Air Force plans call for 80-100 LRS-Bs. However, since the 1970s, the number of new combat aircraft actually produced in a given program has rarely come close to the number of aircraft originally planned. In the original 1969 stated requirement, the Air Force planned a production run of 250 B-1A bombers as a replacement for the \"then aging\" B-52. However, the program was canceled by President Jimmy Carter in 1977; political support for the B-1A waned due to reduced military spending following the Vietnam War and problems within the B-1A program itself. After being revived by President Reagan in 1981, the eventual 100 B-1Bs that were built were the result of an Air Force proposal that split the original 250 B-1As envisioned between 100 B-1Bs and 132 B-2 stealth bombers. Thus, the original 1981 B-2 contract proposed to acquire as many as 132 B-2s. That number was subsequently trimmed to 75 after the end of the Cold War and ultimately only 21 B-2s were built after the program was cancelled in 1991. In fighter aircraft, the Air Force originally sought to acquire 381 F-22 Advanced Tactical Fighters in 2006. However, the resulting high cost of the aircraft ($150 million in FY2009 dollars), a U.S. ban on exports, and the ongoing development of the potentially cheaper and more versatile F-35 resulted in only 195 aircraft built (8 test aircraft and 187 combat aircraft). Currently, the Air Force plans on acquiring 1,763 of the new F-35 Lightning II Joint Strike Fighter. It is yet to be determined if that number will withstand the effects of reductions in defense spending.\nAcquisition of anything less than the planned 80-100 LRS-Bs can be expected to drive corresponding modernization and sustainment decisions for the legacy bomber fleet, resulting in further life-extension programs and possibly impacting U.S. long-range strike capabilities, especially in the face of A2/AD equipped adversaries.", "Another oversight issue for Congress will be whether development of the LRS-B can be further delayed given sufficient levels of funding for legacy bomber sustainment and modernization. Assuming the Air Force makes an effort to keep the B-52 and B-1 operational through 2040 and the B-2 through 2058, it is fair to ask whether the Air Force can further delay development of the LRS-B. All three of the legacy bombers receive meticulous care, with every aspect of their existence recorded and tracked to ensure long-term health and safety of flight. Based on this meticulous care, as well as ongoing structural fatigue testing and computer modeling, the Air Force insists all three bombers will meet their extended service life goals. However, whether the Air Force can further delay development of the LRS-B is not simply a matter of the legacy bombers' air worthiness. With enough funding and continued life extension programs, all three bombers could theoretically fly beyond the Air Force's target dates. Analysts suggest that the real determinant of whether the development of the LRS-B can be further delayed is the legacy bombers' anticipated combat capability over the next 10 to 25 years of operations.\nAs potential adversaries acquire better and advanced A2/AD defenses, the legacy bombers' ability to get close enough to targets to employ weapons will likely continue to deteriorate. Already, against today's toughest air defenses, the B-52 and B-1 are largely relegated to standoff roles; only the B-2 is expected to get through. In the years to come, the Air Force anticipates the B-2's ability to penetrate will also decline, even though the Air Force plans to upgrade all three bombers with new systems and weapons. According to Air Force Lieutenant General Christopher D. Miller, deputy chief of staff for strategic plans and programs, the current fleet is \"increasingly at risk to modernizing air defenses. We need to start now to replace the aging B-52, and B-1 bomber inventories.\" When asked whether the steady advance in A2/AD capabilities around the world means the Air Force must have the LRS-B ready for service by a specific deadline, Lieutenant General Miller stated, \"I think that decision has been given to us ... Now is the time to get started.\" As declining defense budgets are anticipated for the foreseeable future, Congress will have to remain cognizant of the actual capabilities realized by funding specific legacy bomber sustainment and modernization efforts with the Air Force's stated requirement to fund and begin LRS-B development now.", "Another oversight issue for Congress is the modernization, sustainment, and development of the weapons employed by the legacy bombers—weapons that directly impact their ability to operate in the A2/AD threat environment. As the non-stealthy B-52 and B-1 are likely to operate in the permissive (low-threat) and contested (high-risk) A2/AD employment zones, both platforms will increasingly depend on long-range standoff weapons in order to survive and be effective.\nSpecifically for the B-52, Congress may consider continued appropriations for the conventional and nuclear capable AGM-86B/C Air Launched Cruise Missile (ALCM) service life extension program (SLEP) and development of a new Advanced Cruise Missile. In her statement before the Senate Foreign Relations Committee in June 2012, Madelyn Creedon, Assistant Secretary of Defense for Global Strategic Affairs, testified,\nBecause the growth of modern air defenses is putting even the bomber stand-off missions increasingly at risk, DoD is carrying out an analysis of alternatives (AOA), for a follow-on Air Launched Cruise Missile (ALCM). The final report for the AOA for the new system, the Long-Range Standoff (LRSO) missile, is due in late 2012. The existing ALCM weapon system will be sustained until the LRSO can be fielded during the 2020s.\nThe AGM-86B/C ALCM started its second SLEP in FY2012 that is intended to extend its service life to 2030. An initial SLEP will be finalized in FY2013 and includes a service life extension of the W80 nuclear warhead. A total of 129 missiles are currently funded for modification with a number being converted into conventional missiles. Congress and the Air Force have also dedicated $887.6 million from FY2011 to FY2016 to the development of a new Advanced Cruise Missile that will ultimately replace the AGM-86 family of ALCMs. In FY2012, Air Force research and development funds were transferred from the AGM-86 to \"Nuclear Modernization\" to identify viable concepts and solutions to replace the AGM-86.\nFor both the B-52 and the B-1, the acquisition, test and evaluation, and fielding of the Miniature Air Launched Decoy (MALD) and MALD-J (jammer) would enhance the ability of these aircraft to operate in contested (high-risk) and highly contested (extreme-risk) A2/AD employment zones. MALD and MALD-J are designed to present a realistic decoy representing penetrating fighter, attack, and bomber aircraft to enemy integrated air defense systems (IADS). MALD-J incorporates a jammer while retaining the decoy capabilities. The B-52 is the initial demonstration platform for this program and is currently undergoing initial operational test and evaluation with initial operational capability scheduled for early 2013. The B-1 community is exploring further integration of MALD and MALD-J on the B-1.\nFor all three legacy bombers, continued acquisition of the AGM-158A Joint Air-Surface Standoff Missile (JASSM) and the AGM-158B JASSM-ER (extended range) and the development of the Long-Range Anti-Ship Missile (LRASM) is considered by some analysts essential to their effectiveness in future A2/AD environments. The JASSM provides a long-range, conventional air-to-surface, autonomous, precision guided, standoff cruise missile able to attack a variety of fixed or re-locatable targets. The Air Force plans on procuring 4,900 missiles (2,400 baseline versions and 2,500 ER) with an estimated program cost of $6.1 billion beyond FY2017. In addition to the JASSM, the Defense Advanced Research Projects Agency (DARPA), in partnership with Lockheed Martin, is developing the LRASM. It stems from a 2008 urgent operational needs statement from the U.S. Pacific Fleet requesting weapons technology to defeat heavily defended ship targets. LRASM includes a datalink to provide updates as the missile approaches the target area and an anti-radiation homing capability to detect and identify emissions from threats to help guide the missile to the target. This long-range, anti-ship capability dovetails with the U.S. rebalance to the Asia-Pacific region and may prove invaluable in any maritime conflict as potential adversaries continue to equip their naval vessels with highly advanced weapon systems. LRASM is based on the AGM-158B JASSM and has an unclassified range of 500 nautical miles. Lockheed Martin and the Air Force are planning to test-fire three LRASM missiles in 2013 from the B-1B.", "Another potential oversight issue is the potential implications of reduced bomber sustainment and modernization, and subsequent diminishing numbers of airframes, on any future rounds of base realignment and closure (BRAC) efforts. Although the DOD included two rounds of BRAC in its 2013 budget proposal, Congress did not authorize any closures or realignments. However, as the DOD continues to look for ways to divest itself of assets in an effort to meet budgetary challenges, BRAC continues to be a subject of speculation, possibly as early as 2015.\nThe legacy bomber force is not getting bigger. The original 744 B-52s built were stationed at approximately 21 bases across the United States during the height of the Cold War. There are now 76 B-52Hs in service stationed at two bases, Barksdale AFB, Louisiana, and Minot AFB, North Dakota. The original 100 B-1s built in the 1980s were stationed at six bases from 1986 until 2001. Now, there are 63 B-1s stationed at two bases, Dyess AFB, Texas, and Ellsworth AFB, South Dakota. All four of these bases have excess capacity with the potential to accommodate the entire B-52 fleet at either Barksdale or Minot and the entire B-1 fleet at Dyess or Ellsworth. If the current trend of retiring airframes to pay for sustainment and modernization efforts continues (as was done with the B-1 when 27 aircraft in 2001-2002 and three aircraft in 2012 were retired in order to use the savings to pay for sustainment and upgrades), the total fleet size of both bombers may suggest consolidation at one base simply from a cost feasibility perspective.\nEllsworth AFB in South Dakota survived the 2005 BRAC when the federal base-closing commission voted to keep the base open, despite Pentagon recommendations to close the base and consolidate the B-1 fleet at Dyess AFB in Texas. Ellsworth employs some 4,000 people and has an estimated economic impact of $278 million on the local community. Although no BRAC actions were taken for Minot AFB and Barksdale AFB in 2005, Air Force BRAC planners initially proposed retiring Minot's 150 Minuteman III intercontinental ballistic missiles and realigning the base. Ultimately, planners decided this idea would not work and the Air Force's top BRAC committee, the Base Closure Executive Group, rejected the idea. As far as the B-2 is concerned, all 20 are stationed at Whiteman AFB, Missouri. There has been no public discussion of potential basing for the LRS-B, if and when it finally hits the flight line in the mid-to-late 2020s.", "Another oversight issue is the ability of the nation's industrial base to sustain the legacy bomber force. A potential problem with sustaining a fleet of bombers with an average age of 33 years is that the industrial base that developed and produced these aircraft may no longer possess the capability to manufacture and supply parts in necessary quantities—if at all—to affordably keep these aircraft flying. Especially in the case of the B-52 and B-1, many of the original parts designed and produced in the 1950s (for the B-52) and the 1970s (for the B-1) are simply not produced anymore. Both airframes struggle with diminishing manufacturing sources and material shortages in an effort to replace and repair aircraft parts and equipment that the original manufactures do not make anymore. As the nation's current budget deficit debate shifts from taxes towards spending cuts and the debt limit, commentators note the potential for deep defense cuts may drive the defense industry to streamline and consolidate operations, potentially exit prior production lines, and undergo internal restructuring in an effort to maintain their existing profit margins. Consequently, a question to be answered is whether the defense industrial base will even be capable of meeting the sustainment requirements of America's legacy bomber force out to 2040 and to what extent Congress should consider this issue when evaluating proposed defense cuts.", "Figure 7 depicts historical authorizations and appropriations for B-52H, B-1B, and B-2 sustainment and modernization. Dollar amounts include funds authorized/appropriated in the \"Procurement\" and \"Research, Development, Test and Evaluation\" sections as well as any funds authorized/appropriated for sustainment and modernization efforts directly tied to \"Overseas Contingency Operations\" provided for in National Defense Authorization and Appropriations acts from FY2002 to FY2013. Figure 8 is a side-by-side graphical comparison of historical appropriations for all three bombers.\nFigure 9 is an overlay of historical appropriations for all three bombers and their average yearly mission capable rate. Mission capable rate is defined as the percentage of aircraft in each of the bomber fleet components that are capable of performing its intended wartime mission.", "The follow is a brief summary of legislative actions involving U.S. Air Force bomber sustainment and modernization from fiscal years 2011 through 2013. It also highlights Congress's interest in the potential threat posed by countries seeking to implement anti-access/area denial capabilities and strategies. The complete legislative language for each of these efforts can be found in Appendix E .", "Section 1056 of P.L. 111-383 directed the Secretary of the Air Force to submit to congressional defense committees a report concerning bomber modernization, sustainment, and recapitalization efforts in support of the National Defense Strategy. In the report, the Air Force was to discuss the cost, schedule, and performance of all planned efforts to modernize and keep viable the existing B–1, B–2, and B–52 bomber fleets. Congress also requested the forecasted service-life and all sustainment challenges that the Secretary of the Air Force may confront in keeping those platforms viable until the anticipated retirement of all three aircraft. As previously discussed, this report was submitted to Congress in September 2011 and contains similar information as that found in the Air Force Global Strike Command's (AFGSC's) and Air Combat Command's (ACC's) master plan documents for the B-52 and B-2 (AFGSC) and the B-1 (ACC) presented in Appendixes B through D .\nUnder Section 1238 of P.L. 111-383 , Congress requested an additional report on United States' efforts to defend against threats posed by the Anti-Access and Area-Denial capabilities of certain nations-states. This report was requested in response to DOD's 2010 Quadrennial Defense Review that concluded ''[a]nti-access strategies seek to deny outside countries the ability to project power into a region, thereby allowing aggression or other destabilizing actions to be conducted by the anti-access powers. Without dominant capabilities to project power, the integrity of United States alliances and security partnerships could be called into question, reducing United States security and influence and increasing the possibility of conflict.\" Congress also requested an assessment by the Secretary of Defenses on the United States' efforts to defend against any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile nation-states. These reports were submitted to the House and Senate Armed Services Committees in April 2011.", "In the DOD's FY2012 budget request, the Air Force proposed the retirement of six B-1 bombers with the intent of putting the money saved by retiring these aircraft towards modernization and sustainment efforts for the remaining 60 B-1 aircraft. In response to this proposal, the House Appropriations Committee made the following recommendation in their conference report to accompany H.R. 2055 .\nThe fiscal year 2012 budget request includes a proposal to retire six B–1 bomber aircraft. The conferees understand that the B– 1 fleet continues to operate almost constantly over Afghanistan in support of troops on the ground and that the B–1 is a critical component of the Nation's long-range strike capabilities. The Air Force proposed to reinvest less than 40 percent of the savings from aircraft retirements in the B–1 modernization program across the Future Years Defense Program. The conferees are concerned that premature retirement of six B–1 aircraft could negatively impact long-range strike capabilities. Therefore, the conferees direct the Secretary of the Air Force to reinvest a larger portion of savings realized from B–1 aircraft retirements, to the extent authorized by law, in the sustainment and modernization of the B–1 fleet.", "Further responding to the Air Force's proposal to retire six B-1s, Section 132 in P.L. 112-81 sought to clarify the Air Force's plan by restricting FY2012 funds for the retirement of any B-1 aircraft until the Secretary of the Air Force submitted a plan to congressional defense committees detailing the following:\nIdentification of each B–1 bomber aircraft that will be retired and the disposition plan for such aircraft; an estimate of the savings that will result from the proposed retirement of B–1 bomber aircraft in each calendar year through calendar year 2022; an estimate of the amount of the savings that will be reinvested in the modernization of B–1 bomber aircraft still in service in each calendar year through calendar year 2022; a modernization plan for sustaining the remaining B–1 bomber aircraft through at least calendar year 2022; and, an estimate of the amount of funding required to fully fund the modernization plan for each calendar year through calendar year 2022.\nLanguage in Section 132 also went on to specify that if retirement of six B-1s was justified, after subsequently retiring those aircraft, the Secretary of the Air Force will maintain in a common capability configuration no less than 36 combat-coded B–1 aircraft out to September 30, 2013. After that date, no less than 35 combat-coded aircraft until September 30, 2014, then 34 until September 30, 2015, and finally 33 combat-coded aircraft until September 30, 2016.\nSection 134 of P.L. 112-81 made available certain FY2011 funds for research and development relating to the B-2 bomber. Specifically, $20 million was made available for FY2012 for research, development, test and evaluation of a conventional weapons mixed load capability for the B–2. In addition, Section 135 made available $15 million of FY2011 funds for research, development, test and evaluation of alternative options for the B-2's extremely high frequency terminal Increment 1 program of record.", "Note: as of this writing, this legislation has not been passed into law.\nThe FY2013 budget request did not include funds under Aircraft Procurement for the B-52 CONECT program of record due to the Air Force's decision to terminate the program. Instead, it included $34,700,000 for research, development, test and evaluation for a restructured and descoped B–52 CONECT program. The committee, however, directed that no funds may be obligated or expended for the B–52 CONECT program of record post-milestone C acquisition activities or for a restructured B–52 CONECT program until 30 days after the congressional defense committees have been briefed on the Air Force's proposed way ahead.\nThe committee also addressed the Air Force's decision to terminate the B-52 Strategic Radar Replacement [SR2] program. The B-52's existing APQ-166 radar was produced in the 1960s, has a 20 to 30 hour mean-time between failure rate, has limited in capabilities, and is costly to operate and maintain. Although the Air Force conducted a lengthy analysis of alternatives in 2011 and ultimately terminated the program, the committee encouraged the Secretary of the Air Force to reconsider this decision.", "The subject of retiring B-1 aircraft was addressed again in P.L. 112-239 . Section 142 amended Section 8062 of title 10, United States Code, by adding at the end a new subsection stating, \"Beginning October 1, 2011, the Secretary of the Air Force may not retire more than six B–1 aircraft\" and \"shall maintain in a common capability configuration not less than 36 B–1 aircraft as combat-coded aircraft.\"\nSection 211 addressed concerns over the nuclear certification requirements of the Air Force's proposed Next-Generation Bomber by directing the Secretary of the Air Force to ensure the next-generation long-range strike bomber is capable of carrying nuclear weapons as of the date on which the aircraft achieves initial operating capability (IOC) and is also certified to use such weapons no later than two years after IOC.", "In the wake of fiscal constraints levied by the Budget Control Act of 2011 ( P.L. 112-25 / S. 365 ) and the implementation of sequestration on March 1, 2013, Congress and the Air Force will be faced with difficult decisions regarding fiscal appropriations for bomber sustainment and modernization. The impacts of these fiscal measures on bomber appropriations can already be seen with implementation of the FY2013 defense budget. From FY2002 through FY2012, the sustainment and modernization appropriations for the B-52, B-1, and B-2 averaged $160.15 million, $219.77 million, and $451.2 million per year respectively. For the FY2013 budget, appropriations for the B-52 were $63 million, down 61% from the prior 11-year average and the lowest amount appropriated since FY2002. FY2013 appropriations for the B-1 were $167 million, down 24% from the prior 11-year average and also the lowest amount appropriated since FY2002. The B-2 was the only bomber not affected by the budget cuts in FY2013 with $447 million appropriated, a drop of only 1% from the prior 11-year average. Meanwhile, potential foes and long-time allies in the Asia-Pacific are undergoing major (in some cases unprecedented) expansions of their defense capabilities in order to secure or expand their diplomatic, economic, and strategic influence in the region. The result is an increase in the proliferation of advanced 21 st century weapon systems and a trend of countries adopting A2/AD strategies to secure their national interests. Nevertheless, time and time again, the United States turns to its long-range bomber force as means of flexing its deterrent muscle, as it did most recently in response to renewed threats of war by North Korean leader Kim Jong Un. In March and April of 2013, the United States sent B-52s and B-2s on short-notice deployments for exercises with South Korean forces and for shows-of-force over the Korean peninsula as a visible signal to Kim Jong Un that such threats by the North's regime will not go unchecked. However, as potential A2/AD equipped adversaries throughout the world become more prevalent and more capable, the question remains: will the Air Force's legacy bomber force keep pace with sustainment and modernization efforts in order to remain a credible response to such adversaries, or will they become increasingly irrelevant because the nation cannot afford them? In large part, decisions by Congress will determine just how much longer the B-52, B-1, and B-2 will remain relevant, and ultimately, will likely determine the future of the nation's long-range strike capabilities.\nAppendix A. Existing Bomber Force\nThis appendix presents additional information on the U.S. Air Force's existing fleet of B-52H, B-1B, and B-2 bombers.\n52H Stratofortress\nMission\nThe B-52H is a long-range, heavy bomber that can perform a variety of missions. The bomber is capable of flying at high subsonic speeds at altitudes up to 50,000 feet (15,166.6 meters). It can carry nuclear or precision guided conventional ordnance with worldwide precision navigation capability.\nFeatures\nIn a conventional conflict, the B-52H can perform strategic attack, close-air support, air interdiction, offensive counter-air, and maritime operations. During Desert Storm, B-52s delivered 40% of all the weapons dropped by coalition forces. It is also capable of ocean surveillance, and can assist the U.S. Navy in anti-ship and mine-laying operations. Two B-52Hs, in two hours, can monitor 140,000 square miles (364,000 square kilometers) of ocean surface.\nAll B-52Hs can be equipped with two electro-optical viewing sensors, a forward-looking infrared camera, and an advanced targeting pod, to augment targeting, battle assessment, and flight safety.\nPilots wear night vision goggles, or NVGs, to enhance their vision during night operations. Night vision goggles provide greater safety during night operations by increasing the pilot's ability to visually clear terrain, avoid enemy radar, and see other aircraft in a lights-out environment.\nStarting in 1989, on-going modifications incorporate the global positioning system, heavy stores adapter beams for carrying 2,000 pound munitions, and a full array of advance weapons currently under development.\nThe use of aerial refueling gives the B-52H a range limited only by crew endurance. It has an unrefueled combat range in excess of 8,800 miles (14,080 kilometers).\nBackground\nThe B-52H is capable of dropping or launching a wide array of weapons. This includes gravity bombs, cluster bombs, precision guided missiles, and joint direct attack munitions. Updated with modern technology the B-52H will be capable of delivering the full complement of joint developed weapons. Current engineering analyses show the B-52H's life span to extend beyond the year 2040.\nThe B-52A first flew in 1954, and the B model entered service in 1955. A total of 744 B-52s were built with the last, a B-52H, delivered in October 1962. The first of 102 B-52Hs was delivered to Strategic Air Command in May 1961. The H model can carry up to 20 air launched cruise missiles. In addition, it can carry the conventional cruise missile that was launched in several contingencies during the 1990s, starting with Operation Desert Storm and culminating with Operation Iraqi Freedom.\nIn Operations Desert Storm and Allied Force, B-52s struck wide-area troop concentrations, fixed installations and bunkers, and decimated the morale of Iraq's Republican Guard. On September 2 and 3, 1996, two B-52H's struck Baghdad power stations and communications facilities with 13 AGM-86C conventional air launched cruise missiles, or CALCMs, as part of Operation Desert Strike. At the time, this mission was the longest distance flown for a combat mission, involving a 34-hour, 16,000 statute mile, round trip from Barksdale Air Force Base, LA.\nIn 2001, the B-52H contributed to Operation Enduring Freedom by loitering high above the battlefield and providing close air support through the use of precision guided munitions.\nThe B-52H also played a role in Operation Iraqi Freedom. On March 21, 2003, B-52Hs launched approximately 100 CALCMs during a night mission.\nOnly the H model is still in the Air Force inventory and is assigned to the 5 th Bomb Wing at Minot AFB, ND, and the 2 nd Bomb Wing at Barksdale AFB, LA, which fall under Air Force Global Strike Command. The aircraft is also assigned to the Air Force Reserve Command's 307 th Bomb Wing at Barksdale.\nGeneral Characteristics Primary Function: Heavy bomber Contractor: Boeing Military Airplane Co. Power plant: Eight Pratt & Whitney engines TF33-P-3/103 turbofan Thrust: Each engine up to 17,000 pounds Wingspan: 185 feet (56.4 meters) Length: 159 feet, 4 inches (48.5 meters) Height: 40 feet, 8 inches (12.4 meters) Weight: Approximately 185,000 pounds (83,250 kilograms) Maximum Takeoff Weight: 488,000 pounds (219,600 kilograms) Fuel Capacity: 312,197 pounds (141,610 kilograms) Payload: 70,000 pounds (31,500 kilograms) Speed: 650 miles per hour (Mach 0.86) Range: 8,800 miles (7,652 nautical miles) Ceiling: 50,000 feet (15,151.5 meters) Armament: Approximately 70,000 pounds (31,500 kilograms) mixed ordnance—bombs, mines, and missiles. (Modified to carry air-launched cruise missiles) Crew: Five (aircraft commander, pilot, radar navigator, navigator, and electronic warfare officer) Unit Cost: $53.4 million (FY1998 constant dollars) Initial operating capability: April 1952 Inventory: Active force, 76; ANG, 0; Reserve, 9\nB-1B Lancer\nMission\nCarrying the largest payload of both guided and unguided weapons in the Air Force inventory, the multi-mission B-1 can rapidly deliver massive quantities of precision and non-precision weapons.\nFeatures\nThe B-1B's blended wing and body configuration, variable-geometry wings, and turbofan afterburning engines combine to provide long range, maneuverability, and high speed while enhancing survivability. Forward wing settings are used for takeoff, landings, air refueling, and in some high-altitude weapons employment scenarios. Aft wing sweep settings—the main combat configuration—are typically used during high subsonic and supersonic flight, enhancing the B-1B's maneuverability in the low- and high-altitude regimes. The B-1B's speed and handling characteristics, large payload, radar targeting system, long loiter time, and survivability allow it to integrate with almost any joint/composite strike force.\nThe B-1B is a multi-mission weapon system. Its synthetic aperture radar is capable of tracking, targeting, and engaging moving vehicles as well as self-targeting and terrain-following modes. In addition, an extremely accurate Global Positioning System-aided Inertial Navigation System enables aircrews to navigate without the aid of ground-based navigation aids as well as engage targets with a high level of precision. Combat Track II data link radios provide a secure, beyond-line-of-sight reach back connectivity for command and control and in-flight re-tasking/re-targeting. In a time sensitive targeting environment, the aircrew can use targeting data from the Combined Air Operations Center over Combat Track II to strike emerging targets.\nThe B-1B's onboard self-protection electronic jamming equipment, radar warning receiver, expendable countermeasures, and a towed decoy system complement its low-radar cross-section to form an integrated defense system that supports penetration of hostile airspace. The electronic countermeasures system detects and identifies adversary threat radars and then applies the appropriate jamming technique either automatically or through operator inputs.\nCurrent B-1B sustainment and modernization efforts build on this foundation. Radar sustainability and capability upgrades will provide a more reliable system and may be upgraded in the future to include an ultra-high-resolution capability and automatic target recognition. The addition of a fully integrated data link, or FIDL, will add Link-16 line-of-sight data link communications capability. FIDL combined with associated cockpit upgrades will provide the crew with a much more flexible, integrated cockpit. Several obsolete and hard to maintain electronic systems are also being replaced to improve aircraft reliability.\nBackground\nThe B-1A was initially developed in the 1970s as a replacement for the B-52. Four prototypes of this long-range, high speed (Mach 2.2) strategic bomber were developed and tested in the mid-1970s, but the program was canceled in 1977 before going into production. Flight testing continued through 1981.\nThe B-1B is an improved variant initiated by the Reagan Administration in 1981. Major changes included the addition of additional structure to increase payload by 74,000 pounds, an improved radar, and reduction of the aircraft's radar cross section (RCS) by an order of magnitude. The engine inlets were extensively modified as part of this RCS reduction, necessitating a reduction in maximum speed to Mach 1.2.\nThe first production B-1B flew in October 1984, and the first aircraft was delivered to Dyess Air Force Base, Texas, in June 1985. Initial operational capability was achieved on October 1, 1986. The final B-1B was delivered May 2, 1988.\nThe B-1B was first used in combat in support of operations against Iraq during Operation Desert Fox in December 1998. In 1999, six B-1Bs were used in Operation Allied Force, delivering more than 20% of the total ordnance while flying less than 2% of the combat sorties.\nDuring the first six months of Operation Enduring Freedom, eight B-1Bs dropped nearly 40% of the total tonnage delivered by coalition air forces. This included nearly 3,900 Joint Direct Attack Munitions (JDAMs), or 67% of the total. In Operation Iraqi Freedom, the aircraft flew less than 1% of the combat missions while delivering 43% of the JDAMs used. The B-1 continues to be deployed today, flying missions daily in support of continuing operations.\nGeneral Characteristics Primary Function: Long-range, multi-role, heavy bomber Contractor: Boeing, North America (formerly Rockwell International, North American Aircraft); Offensive avionics, Boeing Military Airplane; defensive avionics, EDO Corporation Power plant: Four General Electric F101-GE-102 turbofan engine with afterburner Thrust: 30,000-plus pounds with afterburner, per engine Wingspan: 137 feet (41.8 meters) extended forward, 79 feet (24.1 meters) swept aft Length: 146 feet (44.5 meters) Height: 34 feet (10.4 meters) Weight: approximately 190,000 pounds (86,183 kilograms) Maximum Takeoff Weight: 477,000 pounds (216,634 kilograms) Fuel Capacity: 265,274 pounds (120,326 kilograms) Payload: 75,000 pounds ( 34,019 kilograms) Speed: 900-plus mph (Mach 1.2 at sea level) Range: Intercontinental Ceiling: More than 30,000 feet (9,144 meters) Armament: 84 500-pound Mk-82 or 24 2,000-pound Mk-84 general purpose bombs; up to 84 500-pound Mk-62 or 8 2,000-pound Mk-65 Quick Strike naval mines; 30 cluster munitions (CBU-87, -89, -97) or 30 Wind-Corrected Munitions Dispensers (CBU-103, -104, -105); up to 24 2,000-pound GBU-31 or 15 500-pound GBU-38 Joint Direct Attack Munitions; up to 24 AGM-158A Joint Air-to-Surface Standoff Missiles; GBU-54 Laser Joint Direct Attack Munition Crew: Four (aircraft commander, copilot, and two weapon systems officers) Unit Cost: $283.1 million (fiscal 98 constant dollars) Initial operating capability: October 1986 Inventory: Active force, 63 (test, 2); ANG, 0; Reserve, 0\nB-2 Spirit\nMission\nThe B-2 Spirit is a multi-role bomber capable of delivering both conventional and nuclear munitions.\nFeatures\nAlong with the B-52H and the B-1B, the B-2 provides the penetrating flexibility and effectiveness inherent in manned bombers. Its low-observable, or \"stealth,\" characteristics give it the ability to penetrate an enemy's most sophisticated defenses and threaten its most valued, and heavily defended, targets.\nThe blending of low-observable technologies with high aerodynamic efficiency and large payload gives the B-2 important advantages over existing bombers. Its low observability provides it greater freedom of action at high altitudes, thus increasing its range and providing a better field of view for the aircraft's sensors. Its unrefueled range is approximately 6,000 nautical miles (9,600 kilometers).\nThe B-2's low observability is derived from a combination of reduced infrared, acoustic, electromagnetic, visual, and radar signatures. These signatures make it difficult for sophisticated defensive systems to detect, track, and engage the B-2. Many aspects of the low observability process remain classified; however, the B-2's composite materials, special coatings, and flying-wing design all contribute to its \"stealthiness.\"\nThe B-2 has a crew of two pilots: an aircraft commander in the left seat and a mission commander in the right.\nBackground\nThe first B-2 was publicly displayed on November 22, 1988, when it was rolled out of its hangar at Air Force Plant 42, Palmdale, CA. Its first flight was July 17, 1989. The B-2 Combined Test Force, Air Force Flight Test Center, Edwards Air Force Base, CA, is responsible for flight testing, engineering, manufacturing, and development of the B-2.\nWhiteman AFB, MO, is the only operational base for the B-2. The first aircraft, Spirit of Missouri, was delivered December 17, 1993. Depot maintenance responsibility for the B-2 is performed by Air Force contractor support and is managed at the Oklahoma City Air Logistics Center at Tinker AFB, OK.\nIn Operation Allied Force, the B-2 was responsible for destroying 33% of all Serbian targets in the first eight weeks, by flying nonstop to Kosovo from its home base in Missouri and back. In support of Operation Enduring Freedom, the B-2 flew one of its longest missions to date from Whiteman to Afghanistan and back. The B-2 completed its first-ever combat deployment in support of Operation Iraqi Freedom, flying 22 sorties from a forward operating location as well as 27 sorties from Whiteman AFB and releasing more than 1.5 million pounds of munitions. The aircraft received full operational capability status in December 2003. On February 1, 2009, the Air Force's newest command, Air Force Global Strike Command, assumed responsibility for the B-2 from Air Combat Command.\nThe prime contractor, responsible for overall system design and integration, is Northrop Grumman Integrated Systems Sector. Boeing Military Airplanes Co., Hughes Radar Systems Group, General Electric Aircraft Engine Group, and Vought Aircraft Industries, Inc., are key members of the aircraft contractor team.\nGeneral Characteristics Primary function: Multi-role heavy bomber Contractor: Northrop Grumman Corp. and Contractor Team: Boeing Military Airplanes Co., Hughes Radar Systems Group, General Electric Aircraft Engine Group, and Vought Aircraft Industries, Inc. Power Plant: Four General Electric F118-GE-100 engines Thrust: 17,300 pounds each engine Wingspan: 172 feet (52.12 meters) Length: 69 feet (20.9 meters) Height: 17 feet (5.1 meters Weight: 160,000 pounds (72,575 kilograms) Maximum Takeoff Weight: 336,500 pounds (152,634 kilograms) Fuel Capacity: 167,000 pounds (75750 kilograms) Payload: 40,000 pounds (18,144 kilograms) Speed: High subsonic Range: Intercontinental Ceiling: 50,000 feet (15,240 meters) Armament: Conventional or nuclear weapons Crew: Two pilots Unit cost: Approximately $1.157 billion (fiscal 98 constant dollars) Initial operating capability: April 1997 Inventory: Active force: 20 (1 test); ANG: 0; Reserve: 0\nAppendix B. Plans for B-52H Bomber Sustainment and Modernization\nB-52H Master Plan and Requirements\nThe B-5 H 2 Bomber Master Plan outlines Air Force Global Strike Command's (AFGSC's) plans, programs, requirements, and strategic vision for the B-52 platform to meet the nation's airborne strategic nuclear deterrence and global precision attack mission objectives. Near-term modernization and sustainment efforts are identified for the time period 2012 to 2018. Far-term modernization and sustainment efforts are identified as those required in the 2019 to 2032 time period. AFGSC Director of Plans, Programs and Requirements (HQ AFGSC A5/8) is responsible for producing and updating the master plan.\nAssumptions\nThe B-52H Bomber Master Plan is based on the following assumptions:\nThe B-52H will conduct its assigned nuclear mission through 2040. The B-52H will continue to conduct its assigned conventional mission through 2040. The B-52H fleet size will consist of not more than 76 airframes through 2040. Conversion of a required number of B-52Hs to a conventional-only role by 2018 for New START compliance. The current B-52H service life goal is 2040. There will be no change to current B-52H basing. Unfunded risks and issues require prioritization and validation through the resource allocation and POM (program objectives memorandum) process. The nuclear enterprise will continue to be a top priority for the Air Force and the primary mission of Air Force Global Strike Command.\nCurrent B-52H Sustainment and Modernization Efforts\nThe following is a summary of B-52H sustainment and modernization initiatives currently in the program of record (POR) that are either just being completed or are currently in progress. (Asterisks denote sustainment and modernization efforts that could be considered essential to the B-52H's ability to operate in A2/AD threat environments.)\n* Combat Network Communications Technology (CONECT): The B-52 CONECT acquisition program supports nuclear and conventional operations by upgrading the B-52 fleet with tactical datalink and voice communications capability along with improved threat and situational awareness to support participation in network centric operations.\n* Military-Standard-1760 Modernization: Improves the B-52's conventional warfare capability with additional MIL-STD-1760 smart weapons and improved weapons carriage and fully integrates advanced targeting pods with the B-52's offensive avionics system.\nB-52 Trainer Upgrades: Includes modernization upgrades to B-52 training devices to support aircrew and maintenance training with the latest B-52 capabilities. Upgrades and modernizations under this program ensure weapons system trainers (simulators) are current with ongoing B-52 modifications.\nArms Control: Arms control activities under the New START create the need to modify a number of B-52s to a conventional only role by removing the aircraft's nuclear Code Enable Switch and associated equipment. This effort requires a complete design to remove the equipment from the aircraft and install metal plates prohibiting reinstallation of removed equipment to comply with treaty protocols.\n* Mode S/5 Identification Friend or Foe (IFF): The Mode S/5 program replaces the B-52's aging APX-64 IFF transponder with a modern APX-119 transponder. Mode S/5 IFF is required for flight by the Federal Aviation Administration (FAA), International Civil Aviation Organization (ICAO), and the DOD.\nLow Cost Modifications: Miscellaneous, low-cost modernization efforts that stem from the operation and maintenance of a 50-plus-year-old aircraft, such as parts obsolescence, diminishing manufacturing resources, and emerging requirements to add or maintain the existing B-52 capabilities.\nB-52 Anti-Skid Replacement: The B-52 anti-skid system is used to maintain control of the aircraft during landing and taxi operations by preventing aircraft skidding. This modification replaces the current anti-skid system with an updated system that resolves obsolescence issues. If not upgraded, the unsupportability of the current anti-skid system is projected to affect aircraft availability starting in 2015.\n* B-52 Modernization Research Development Test and Evaluation Efforts: B-52 modernization RDT&E efforts is a comprehensive program to ensure the B-52's ability to perform current and future wartime missions. It includes upgrades to data links, navigation, sensors, weapons, and electronic warfare and training capabilities.\n* 1760 Internal Weapons Bay Upgrade (IWBU): The 1760 IWBU modification allows the B-52 to carry J-series weapons such as the Joint Direct Attack Munitions (JDAM), Joint Air-to-Surface Standoff Missile (JASSM), JASSM-ER (extended range), and Miniature Air Launched Decoy (MALD) weapons in the B-52's internal weapons bay.\nFuture B-52H Sustainment and Modernization Requirements\nWhile the current B-52H weapon system is capable of meeting today's strategic deterrence and conventional taskings, it may require continued sustainment and modernization efforts to remain airworthy and viable against 21 st century A2/AD threats. For the B-52H to continue meeting mission requirements, Air Force Global Strike Command recommends considering the following modernization and sustainment efforts for future appropriations consideration. These efforts are organized into five broad categories: airframe, avionics, communications systems, weapons interfaces, and supporting infrastructure. A detailed explanation of each category's specific recommendations can be found in the B-52H's Master Plan.\nAirframe: The airframe is comprised of structural components, engines, flight controls, and miscellaneous mechanical systems. Several B-52 airframe subsystems such as the existing B-52 analog Yaw Electronic Control Unit/Pitch Electronic Control Unit and the Anti-Skid Control Unit within the Anti-Skid System are becoming unsupportable due to parts obsolescence, lack of test equipment, specialized tools, troubleshooting guides, and experienced repair personnel. Continued full funding for these programs could mitigate these problems.\nAvionics Systems: Avionics systems are comprised of defensive systems, offensive systems, and navigation systems. Several avionics subsystems are suffering from obsolescence and supportability issues. For example, the current radar antenna was never upgraded, uses 1950s technology and is projected to become unsupportable in the near future. In addition, the Electronic Warfare (EW) suite is experiencing parts obsolescence, diminishing manufacturing sources, and ineffectiveness against the technologically advancing A2/AD threats.\nCommunications Systems: Communications systems are comprised of cryptographic, tactical, emergency, and survivable subsystems. The biggest near-term communications concern involves the family of advanced beyond line-of-sight terminals. Delays in the program are putting the Extremely High-Frequency (EHF) program at risk by not meeting U.S. Strategic Command's (USSTRATCOM) need dates based on projected Military Strategic and Tactical Relay Satellite (MILSTAR) Ultra High Frequency Satellite Communications (UHF SATCOM) end-of-life projections. Further delays will impact the B-52's ability to receive Emergency Action Messages (EAMs) and Report-Backs in support of USSTRATCOM's nuclear command and control requirements.\nLonger-term communications concerns involve the integration of an advanced tactical datalink and an advanced secure, broadband, beyond line-of-sight datalink for continuous, survivable command and control coordination, and improved reception of weapons retargeting data and mission updates.\nWeapons Interfaces: Weapons interfaces are systems designed to support, carry, communicate with and/or launch weapons from the B-52. Near-term needs include the integration of an Advanced Targeting Pod, on-going Military-Standard-1760 internal weapons bay upgrades, integrated weapons interface unit (IWIU) integration on external weapons pylons, and a GPS interface unit/programmable keyboard upgrade to the offensive avionics system.\nSupporting Infrastructure: B-52 supporting infrastructure includes trainers, simulators, test equipment, aircraft ground equipment, and weapon system testing that support the B-52 platform.\nAppendix C. Plans for B-1 Bomber Sustainment and Modernization\nB-1 Strategic Action and Investment Plan (SAIP)\nSimilar to the B-52H and B-2's Master Plans, the B-1 sustainment and modernization plan is captured in the B-1 Strategic Action and Investment Plan (SAIP) . B-1 requirements are managed by Air Combat Command's (ACC's) B-1 Aircraft Branch (ACC/A8A1) within the ACC/A8A Combat Aircraft Division. In 2011, the B-1 Aircraft Branch contracted with the consulting firm of Whitney, Bradley & Brown, Inc. to research, study, and develop a cost optimized and time phased B-1 sustainment and modernization plan. The resulting B-1 SAIP provides detailed analysis and recommendations for the period 2014 to 2025 and presents optimum B-1 portfolios of sustainment and modernization efforts for the FY14, FY16, and FY18 Programs Objective Memorandum (POM). The results of this effort produced three sustainment and modernization plans designed to maximize the benefit to be received from three, assumed funding levels dependent on Air Force requested and congressionally provided appropriations.\nAppropriation of $179 million per year (out to 2022) should complete existing sustainment and modernization programs and fund only those sustainment programs needed to maintain existing B-1 capabilities. The B-1 SAIP concludes that $179 million represents the minimum feasible B-1 modernization and sustainment funding level. The B-1 SAIP concluded that appropriations of $250 million per year (out to 2022) is the minimum recommended funding level for B-1 sustainment and modernization. At this level, several high benefit capabilities could be funded, which would reduce Air Force ownership costs and potentially increase the B-1's operational effectiveness. Appropriations of $400 million per year is the highest considered funding profile recommended by the B-1 SAIP and would be sufficient to fund most of the recommended B-1 sustainment and modernization efforts out to 2022.\nThe B-1 SAIP concludes that the Air Force should request at least $250 million per year for B-1 sustainment and modernization. Appropriations at this level and above are anticipated to provide near-term solutions to weapon system capability gaps and shortfalls while ensuring the B-1 is capable of supporting national security objectives.\nAssumptions\nThe B-1 Bomber Strategic Action and Investment Plan (SAIP) is based on the following assumptions:\nThere will be a continued requirement to strike fleeting or time sensitive targets. The overall force structure within the Air Force will continue to be reduced, emphasizing the need for availability of existing platforms such as the B-1. B-1 force structure will remain steady over the SAIP timeline. B-1s may be employed from the continental United States or applicable forward-deployed locations, as warranted by the scenario and theater requirements. Budget pressures dictate that B-1 aircraft be sustained in the most affordable manner possible. Reductions in manpower will continue to highlight the need for efficiencies. Irregular Warfare operations will continue throughout the service life of the B-1.\nCurrent B-1 Sustainment and Modernization Efforts\nThe following is a summary of the major B-1 sustainment and modernization initiatives that are currently in the program of record (POR) that are either just completing or are currently in progress. The costs of these PORs were factored into the SAIP's sustainment and modernization funding analysis and are reflected in the three assumed funding levels. (Asterisks denote sustainment and modernization efforts that could be considered essential to the B-1's ability to operate in A2/AD threat environments.)\n* Fully Integrated Data Link: FIDL will provide the B-1 with Link-16 line-of-sight (LOS) and Joint Range Extension (JRE) beyond-line-of-sight (BLOS) data link capability and supports machine-to-machine transfer of targeting data to the B-1's weapons control computers.\nSimulator Digital Control Loading: Simulator digital control loading is a modification to the B-1's Weapon System Trainer(s) (WSTs) that will replace the existing hydraulically-operated control loading system with a digital control loading system. Control loading provides force feedback for the pilot's flight control stick and pedals; the WST flight stations are unusable without a working control loading system. The existing system faces obsolescence and diminishing manufacturing sources (DMS) issues, with some critical parts having no spares.\nCentral Integrated Test System: CITS is the B-1's fault diagnostic and fault isolation system. The current CITS processor is at maximum memory/throughput, thus inhibiting fault detection and isolation for current systems and future B-1 upgrades. This modification provides a new processor, upgraded displays, and new software that will enhance diagnostic capabilities, improve aircraft turnaround time, and reduce maintenance costs. This program will also alleviate the current diminishing manufacturing source issue with this system.\n* Inertial Navigation System Replacement: Provides for the replacement of a line replaceable unit (LRU) in the B-1's inertial navigation system. The B-1 INS provides autonomous capability to navigate globally, without the aid of ground-based and global positioning system navigation aids, as well as engage ground targets with a high level of precision. The current INS system is plagued with severe diminishing manufacturing source issues.\n* Radar Improvement Upgrade: The B-1B Radar Reliability and Maintainability Improvement Program (RMIP) consists of the replacement of two high-failure-rate radar Line Replaceable Units (LRUs) and the supporting software conversion of legacy radar modes. The Radar RMIP is intended to provide B-1B combat forces with an updated offensive radar system that should improve mission capable (MC) rates and eliminate issues with diminishing manufacturing sources (DMS).\n* Visual Situation Display Upgrade: The Vertical Situation Display Upgrade (VSDU) is a safety-critical program that replaces the B-1's pilot and co-pilot primary flight displays and associated flight instruments. The current VSDs are monochrome cathode ray tube displays and \"steam gauge\" primary flight instruments which are experiencing severe diminishing manufacturing source issues with the potential to ground the aircraft. Spares are no longer procurable due to obsolescence. VSDU installs two 8\" x 6\" color displays at the pilot and co-pilot stations to provide primary flight information and backups to meet flight safety standards.\nSelf-Contained Attitude Indicator: The SCAI is a backup to the B-1's primary flight instruments and provides pilots with indications of aircraft attitude, airspeed, Mach, altitude and vertical velocity. This development effort will replace the current obsolete legacy SCAI with a more reliable and supportable off-the-shelf display.\nGyro Stabilization System Replacement (GSSR) : This program is procuring and installing line replaceable units (LRUs) in the B-1's GSS, which is part of the aircraft's navigation system. This modification provides for replacement of the high maintenance/high cost/high failure rate GSS LRUs with high reliability LRUs.\nB-1 Training Support: This effort modifies and replaces computer components in the B-1 aircraft Maintenance Training Devices (MTDs). These MTDs are currently running on computer systems from the late 1990s and are using nearly 100% of the computer resources available to them. As such, no excess computer capacity exists to support current updates, including current B-1 modification efforts. This modification will update the hardware with modern Commercial Off-The-Shelf (COTS) computer systems and will re-host the software on the new hardware, allowing these MTDs to accept new upgrades and remain concurrent with B-1 upgrades.\n* Digital Communications: The digital communications upgrade provides for replacement of a currently installed Ultra High Frequency (UHF) Satellite Communications (SATCOM) beyond line of sight datalink radio system with a Demand Assigned Multiple Access (DAMA) compliant, UHF SATCOM radio. The current system, a temporary modification, was installed in 2002 to support combat operations in Southwest Asia. The current system is not DAMA compliant, which severely limits accessibility to SATCOM channels. In addition, the current system utilizes a system unique datalink, which is not interoperable with standard, joint UHF SATCOM systems.\n* B-1 Link 16 Cryptographic Materials: Assistant Secretary of Defense for Command, Control and Communications (ASD/C3I) directed implementation of the DOD Cryptographic Modernization Initiative (CMI) on 23 February 2001. CJCS Notice 6510/NSA 3-9 directs the modernization of all cryptography in military systems in the US, NATO and Coalition nations. To prevent information compromise, the National Security Agency mandate requires Link 16 cryptographic systems to be upgraded.\n* Laptop Controlled Targeting Pod: LCTP provides advanced targeting pod control, display, and information to all B-1 crewmembers. It allows aircrew to derive precision coordinates for GPS guided weapons, guide laser-guided weapons, and allows aircrew to conduct inflight re-planning of long-range standoff weapons. This effort permanently installs three rack mounted computers and removes temporary targeting pod laptops.\nLow Cost Mods: These modifications are low cost B-1 upgrades that address safety, reliability, maintainability, and/or improved system performance issues on the aircraft, support equipment, and simulators/trainers. These funds are required for mission essential B-1 low cost modifications to ensure readiness and B-1 operational requirements.\n* Miscellaneous B-1 Modernization Research, Development, Test and Evaluation Efforts: This program provides RDT&E funding for the B-1 modernization program. The modernization program addresses potential aircraft obsolescent issues due to diminishing manufacturing sources (DMS) and provides new and improved capabilities to the B-1 weapon system that require significant hardware and software development and testing.\nFuture B-1 Sustainment and Modernization Requirements\nOptimal $250M /Year B-1 Modernization and Sustainment Funding Scenario\nFigure C-1 depicts the $250 million/year funding scenario for current programs of record (POR) and the recommended future B-1 modernization and sustainment requirements. $250 million/year is the minimum funding level recommended by the B-1 SAIP where 32, high-benefit capabilities could be funded that could reduce Air Force ownership costs and potentially increase the B-1's operational effectiveness. Authors of the B-1 SAIP believe the 32, high-benefit capabilities represent the optimal combination of future modernization and sustainment needs that could provide the highest benefit at the $250 million/year funding level and is a point of departure when considering other funding levels and future requirements. A detailed description of each of the 32 capabilities can be found in the B-1 SAIP.\nAppendix D. Plans for B-2 Sustainment and Modernization\nB-2 Master Plan and Requirements\nThe B-2 Bomber Master Plan outlines Air Force Global Strike Command's (AFGSC's) plans, programs, requirements, and strategic vision for the B-2 platform to meet the nation's airborne strategic nuclear deterrence and global precision attack mission needs. Near-term modernization and sustainment efforts are identified for the time period 2012 to 2018. Far-term modernization and sustainment efforts are identified as those required in the 2019 to 2032 time period. AFGSC Director of Plans, Programs and Requirements (HQ AFGSC A5/8) is responsible for producing and updating the master plan.\nAssumptions\nThe B-2 Bomber Master Plan is based on the following assumptions:\nThe B-2 will continue to conduct currently assigned nuclear and conventional missions well into the 2050s. The B-2 fleet size will remain at 20 aircraft through 2058. The B-2 planned end-of-life will remain 2058. There will be no change to current B-2 basing. Unfunded risks and issues require prioritization and validation through the resource allocation and program objective memorandum (POM) process. The B-2 will continue to be required to penetrate and employ weapons in highly defended anti-access/area denial environments well into 2050. The B-2 will continue to be a primary component in the USAF Long Range Strike (LRS) family of systems. The B-2 will incorporate all new, applicable air-to-ground weapons including the new cruise missile and the ability to employ weapons to defeat and destroy hardened and deeply buried targets. The B-52 will incorporate beyond-line-of-sight (BLOS) connectivity for conventional, as well as nuclear taskings [survivable, assured nuclear command and control]. Air Force Global Strike Command and Air Combat Command will continue to work cooperatively on B-2 requirements in accordance with applicable Memoranda of Agreement.\nCurrent B-2 Sustainment and Modernization Efforts\nThe following is a summary of B-2 sustainment and modernization initiatives currently in the program of record (POR) that are either just completing or are currently in progress. (Asterisks denote sustainment and modernization efforts that could be considered essential to the B-2's ability to operate in A2/AD threat environments.)\n* Extremely High Frequency Satellite Communications (EHF SATCOM) and Computer Upgrade Program: The aging Ultra High Frequency (UHF) Military Satellite Communications system is being phased out and replaced by the Advanced Extremely High Frequency (AEHF) Satellite Communications (SATCOM) system. The B-2 Extremely High Frequency (EHF) SATCOM program supports the replacement of the B-2's UHF Terminal Set with an EHF SATCOM system that will be compatible with the legacy MILSTAR I/II satellite constellation and the future AEHF satellite constellation.\n* Massive Ordnance Penetrator Integration: The B-2 is the only anti-access penetrating platform capable of delivering the Massive Ordnance Penetrator (MOP) against hardened, deeply buried targets. Integration of the 30,000 lb class MOP provides the ability to hold additional hardened, deeply buried targets at risk beyond those achievable with current munitions. The MOP integration program will design, develop, integrate, and test hardware and software required for carriage, jettison, and release of MOP from the B-2.\n* Low Observable Signature and Supportability Mod ifications (LOSSM) Diagnostics: LOSSM diagnostics equipment projects help reduce low observable (LO) maintenance, increase aircraft availability and improves the combat ready LO signature for the B-2 fleet.\nB-2 Trainer System Upgrade: Trainer system upgrades keep the B-2 family of trainers current with aircraft system updates while countering equipment obsolescence issues. Enhancements are provided to the B-2 family of trainers to include the Weapon System Trainers, Mission Trainer, Cockpit Procedures Trainers, Computerized Maintenance Training System, Weapon System Training Aids, Weapons Load Trainer, Crew Escape System Maintenance Trainer, Flight Control System Trainer, instructor-operator station, and Training System Support Center.\n* Link-16/Center Instrument Display/In-Flight Replanner (CID/IFR) : Link-16 CID/IFR allows the B-2 access to theater tactical data links, improving on-board situational awareness while greatly enhancing the ability of theater commanders to coordinate the B-2 with other assets. The Center Instrument Display Digital Video Recorder provides the ability to record video signals from the display to the existing recorders in the cockpit. This capability allows mission playback, operational assessments and de-briefs, and provides aircrew training.\nRadar Modernization Program (RMP): Completed in the third quarter FY12, this program brought all operational and flight test B-2 aircraft radars into frequency compliance.\n* Low Observable Signature and Supportability Modifications (LOSSM) Program Structures/Materials : This program implements a mix of over 20 improvements to the B-2's low observable (LO) support equipment, structures, and materials designed to slow signature degradation and to improve LO supportability. LOSSM projects decrease low observable (LO) maintenance, increase aircraft availability, and maintain and improve the combat-ready LO signature for the B-2 fleet.\n* Defensive Management System Modernization (DMS-M): The DMS-M program addresses capability gaps, obsolescence, and supportability issues associated with the B2's legacy DMS system. DMS-M will upgrade the B-2's self-defense capabilities against improved, 21 st century A2/AD enemy air defenses. DMS-M is the #1 priority modification program in the B-2 program office and will resolve the #1obsolescence issue in the B-2 fleet.\n* Stores Management Operational Flight Program (SM OF P) Re-host and Mixed Carriage Modification: This program will re-host the B-2's stores management operational flight software onto a larger, more capable processor, enabling the B-2 to carry a mixed weapons carriage with a Rotary Launcher Assembly (RLA) in one weapons bay and a Smart Bomb Rack Assembly (SBRA) in the other weapons bay.\n* Common Very Low Frequency Receiver (CVR Increment 1): This program provides the B-2 with a survivable, beyond-line-of-sight communication path for receipt of Emergency Action Messages (EAMs) to support United States Strategic Command's (USSTRATCOM) nuclear command and control requirements.\nLow Cost Engine Modifications: B-2 engine improvements include the F118 engine service life extension program, the extended mission oil tank upgrade, and stage one and three engine fan blade improvements that will reduce engine changes and increase aircraft availability.\nLow Cost Modifications: These modifications are low cost B-2 upgrades that address safety, reliability, maintainability, and/or improved system performance issues on the B-2 aircraft, support equipment, and simulators/trainers. These funds are required for mission essential B-2 low cost modifications to ensure readiness and B-2 operational requirements.\n* B-2 Modernization Research, Development, Test and Evaluation efforts: To ensure the B-2 fleet can accomplish its nuclear and conventional mission in highly defended and anti-access environments, periodic modernization efforts must be undertaken to upgrade combat capability as well as improve the viability, supportability, and survivability of the weapon system. RDT&E funding ensures recent and ongoing investments in necessary avionics, structures, communications, and weapons upgrades keep the B-2 viable in the immediate future.\nBaseline Support: Baseline Support maintains the B-2 unique flight test aircraft, as well as obtains, modifies, and operates a flying test bed, developmental hardware/software and test equipment, to support developmental systems integration and flight test.\nFuture B-2 Sustainment and Modernization Requirements\nWhile the current B-2 weapons system is capable of meeting today's strategic deterrence and conventional taskings, it may require continued sustainment and modernization efforts to remain airworthy and viable against 21 st century anti-access/areal denial (A2/AD) threats. Consequently, the B-2 will require continued system review and testing, adaptation to emerging technologies and threats, and attention to facilities and ground support equipment in order for the weapon system to remain viable out to the 2050s. The following is a brief summary of Air Force Global Strike Command's recommendations to support the B-2 from 2012 through 2032. The recommendations are designed to address sustainment challenges while ensuring future modernization and acquisition efforts remain integrated and synchronized to meet the B-2's operational requirements. The guidance is organized into three broad categories: airframe, communications systems, and supporting infrastructure. A detailed explanation of each category's specific recommendations can be found in the B-2's Master Plan.\nAirframe: The airframe category is comprised of avionics, low-observable, weapons interfaces, flight controls, engines, and miscellaneous mechanical subsystems. Many issues within these systems currently affect viability, availability, and turnaround time of the B-2 weapon system. For example, low-observable maintenance continues to be problematic due to high repair costs, labor-intensive procedures, supportability issues, and degradation of aircraft radar signature. The 1980s era Defensive Management System technology suffers from obsolescence and supportability issues and requires modernization. Mixed weapons carriage flexibility is constrained due to system limitations such as computer processing, memory and throughput. These issues should continue to be addressed as they reduce the B-2's flexibility to deliver desired effects, its ability to penetrate A2/AD threats, and ultimately, its combat survivability.\nCommunications System: The communications system category is comprised of cryptographic, tactical, emergency and survivable communications subsystems. The cryptographic system requires modernization due to obsolescence and decertification issues leading to security and sustainment concerns. Currently, the aircraft's primary beyond-line-of-sight (BLOS) communications capability is provided via the UHF Military Strategic and Tactical Relay Satellite (MILSTAR) system, which has already exceeded its design life and is nearing life expected end-of-life.\nSupporting Infrastructure: The supporting infrastructure category includes—but is not limited to—depot , trainers, simulators, test equipment, aerospace ground equipment (AGE), flight testing, and software that support the B-2 weapon system. Test and support equipment are aging and beginning to suffer from design life, supportability, and parts obsolescence issues.\nAppendix E. Legislative Activity FY2011-FY2013\nFY2011 National Defense Authorization Act ( P.L. 111-383 )\nTITLE 1 - Procurement\nSubtitle C - Joint and Multiservice Matters\nSEC. 126. INTEGRATION OF SOLID STATE LASER SYSTEMS INTO CERTAIN AIRCRAFT .\n(a) ANALYSIS OF FEASIBILITY REQUIRED.—The Secretary of Defense shall conduct an analysis of the feasibility of integrating solid state laser systems into the aircraft platforms specified in subsection (b) for purposes of permitting such aircraft to accomplish their missions, including to provide close air support.\n(b) AIRCRAFT—The aircraft platforms specified in this subsection shall include, at a minimum, the following:\n(1) The C–130 aircraft.\n(2) The B–1 bomber aircraft.\n(3) The F–35 fighter aircraft.\n(c) SCOPE OF ANALYSIS.—The analysis required by subsection (a) shall include a determination of the following:\n(1) The estimated cost per unit of each laser system analyzed.\n(2) The estimated cost of operation and maintenance of each aircraft platform specified in subsection (b) in connection with each laser system analyzed, noting that the fidelity of such analysis may not be uniform for all aircraft platforms.\nTITLE X - General Provisions\nSubtitle F - Studies and Reports\nSEC. 1056 . REQUIRED REPORTS CONCERNING BOMBER MODERNIZATION, SUSTAINMENT, AND RECAPITALIZATION EFFORTS IN SUPPORT OF THE NATIONAL DEFENSE STRATEGY.\n(a) AIR FORCE REPORT.—\n(1) REPORT REQUIRED.—Not later than 360 days after the date of the enactment of this Act, the Secretary of the Air Force shall submit to the congressional defense committees a report that includes—\n(A) a discussion of the cost, schedule, and performance of all planned efforts to modernize and keep viable the existing B–1, B–2, and B–52 bomber fleets and a discussion of the forecasted service-life and all sustainment challenges that the Secretary of the Air Force may confront in keeping those platforms viable until the anticipated retirement of such aircraft;\n(B) a discussion, presented in a comparison and contrast type format, of the scope of the 2007 Next-Generation Long Range Strike Analysis of Alternatives guidance and subsequent Analysis of Alternatives report tasked by the Under Secretary of Defense for Acquisition, Technology, and Logistics in the September 11, 2006, Acquisition Decision Memorandum, as compared to the scope and directed guidance of the year 2010 Long Range Strike Study effort currently being conducted by the Under Secretary of Defense for Policy and the Office of the Secretary of Defense's Cost Assessment and Program Evaluation Office; and\n(C) a discussion of the preliminary costs, any development, testing, fielding and operational employment challenges, capability gaps, limitations, and shortfalls of the Secretary of Defense's plan to field a long-range, penetrating, survivable, persistent and enduring ''family of systems'' as compared to the preliminary costs, any development, testing, fielding, and operational employment of a singular platform that encompasses all the required aforementioned characteristics.\n(2) PREPARATION OF REPORT.—The report under paragraph (1) shall be prepared by a federally funded research and development center selected by the Secretary of the Air Force and submitted to the Secretary for submittal by the Secretary in accordance with that paragraph.\n(b) COST ANALYSIS AND PROGRAM EVALUATION REPORT.—Not later than 180 days after the date of the enactment of this Act, the Director of the Cost Analysis and Program Evaluation of the Office of the Secretary of Defense shall submit to the congressional defense committees a report that includes—\n(1) the assumptions and estimated life-cycle costs of the Department's long-range, penetrating, survivable, persistent, and enduring ''family of systems'' platforms; and\n(2) the assumptions and estimated life-cycle costs of the Next Generation Platform program, as planned, prior to the cancellation of the program on April 6, 2009.\nTITLE XII - Matters Relating to Foreign Nations\nSubtitle C - Reports and Other Matters\nSEC. 1238 . REPORT ON UNITED STATES EFFORTS TO DEFEND AGAINST THREATS POSED BY THE ANTI-ACCESS AND AREA-DENIAL CAPABILITIES OF CERTAIN NATION-STATES.\n(a) FINDING.—Congress finds that the 2010 report on the Department of Defense Quadrennial Defense Review concludes that ''[a]nti-access strategies seek to deny outside countries the ability to project power into a region, thereby allowing aggression or other destabilizing actions to be conducted by the anti-access power. Without dominant capabilities to project power, the integrity of United States alliances and security partnerships could be called into question, reducing United States security and influence and increasing the possibility of conflict''.\n(b) SENSE OF CONGRESS.—It is the sense of Congress that, in light of the finding in subsection (a), the Secretary of Defense should ensure that the United States has the appropriate authorities, capabilities, and force structure to defend against any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries.\n(c) REPORT.—Not later than April 1, 2011, the Secretary of Defense shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report on United States efforts to defend against any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile nation-states.\n(d) ELEMENTS.—The report required under subsection (c) shall include the following:\n(1) An assessment of any potential future threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries, including an identification of the foreign countries with such capabilities, the nature of such capabilities, and the possible advances in such capabilities over the next 10 years.\n(2) A description of any efforts by the Department of Defense to address the potential future threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries.\n(3) A description of the authorities, capabilities, and force structure that the United States may require over the next 10 years to address the threats posed by the anti-access and area-denial capabilities of potentially hostile foreign countries.\n(e) FORM.—The report required under subsection (c) shall be submitted in unclassified form, but may contain a classified annex if necessary.\n(f) DEFINITIONS.—In this section—\n(1) the term ''anti-access'', with respect to capabilities, means any action that has the effect of slowing the deployment of friendly forces into a theater, preventing such forces from operating from certain locations within that theater, or causing such forces to operate from distances farther from the locus of conflict than such forces would normally prefer; and\n(2) the term ''area-denial'', with respect to capabilities, means operations aimed to prevent freedom of action of friendly forces in the more narrow confines of the area under a potentially hostile nation-state's direct control, including actions by an adversary in the air, on land, and on and under the sea to contest and prevent joint operations within a defended battlespace.\nFY2012 Department of Defense Appropriations ( H.Rept. 112-331 to Accompany H.R. 2055 )\nRetirement of B-1 Aircraft\nThe fiscal year 2012 budget request includes a proposal to retire six B–1 bomber aircraft. The conferees understand that the B– 1 fleet continues to operate almost constantly over Afghanistan in support of troops on the ground and that the B–1 is a critical component of the Nation's long-range strike capabilities. The Air Force proposed to reinvest less than 40 percent of the savings from aircraft retirements in the B–1 modernization program across the Future Years Defense Program. The conferees are concerned that premature retirement of six B–1 aircraft could negatively impact long-range strike capabilities. Therefore, the conferees direct the Secretary of the Air Force to reinvest a larger portion of savings realized from B–1 aircraft retirements, to the extent authorized by law, in the sustainment and modernization of the B–1 fleet.\nFY2012 National Defense Authorization Act ( P.L. 112-81 )\nTITLE I – Procurement\nSubtitle D – Air Force Programs\nSEC. 132 . LIMITATIONS ON USE OF FUNDS TO RETIRE B–1 BOMBER AIRCRAFT.\n(a) IN GENERAL.—None of the funds authorized to be appropriated by this Act for fiscal year 2012 for the Department of Defense may be obligated or expended to retire any B–1 bomber aircraft on or before the date on which the Secretary of the Air Force submits to the congressional defense committees the plan described in subsection (b).\n(b) PLAN DESCRIBED.—The plan described in this subsection is a plan for retiring B–1 bomber aircraft that includes the following:\n(1) An identification of each B–1 bomber aircraft that will be retired and the disposition plan for such aircraft.\n(2) An estimate of the savings that will result from the proposed retirement of B–1 bomber aircraft in each calendar year through calendar year 2022.\n(3) An estimate of the amount of the savings described in paragraph (2) that will be reinvested in the modernization of B–1 bomber aircraft still in service in each calendar year through calendar year 2022.\n(4) A modernization plan for sustaining the remaining B–1 bomber aircraft through at least calendar year 2022.\n(5) An estimate of the amount of funding required to fully fund the modernization plan described in paragraph (4) for each calendar year through calendar year 2022.\n(c) POST-PLAN B–1 RETIREMENT.—\n(1) IN GENERAL.—During the period described by paragraph (4), the Secretary of the Air Force shall maintain in a common capability configuration not less than 36 B–1 aircraft as combat coded aircraft.\n(2) FY 2014 AND THEREAFTER.—After the period described in paragraph (4), the Secretary shall maintain not less than—\n(A) 35 B–1 aircraft as combat-coded aircraft in a common capability configuration until September 30, 2014;\n(B) 34 such aircraft as combat-coded aircraft in a common capability configuration until September 30, 2015; and\n(C) 33 such aircraft as combat-coded aircraft in a common capability configuration until September 30, 2016.\n(3) TOTAL AMOUNT OF RETIRED B–1 AIRCRAFT.—The Secretary may not retire more than a total of six B–1 aircraft, including the B–1 aircraft retired in accordance with this subsection.\n(4) PERIOD DESCRIBED.—The period described in this paragraph is the period beginning on the date on which the plan described in subsection (b) is submitted to the congressional defense committees and ending on September 30, 2013.\n(5) COMBAT-CODED AIRCRAFT DEFINED.—In this subsection, the term ''combat-coded aircraft'' means aircraft assigned to meet the primary aircraft authorization to a unit for the performance of its wartime mission.\nSEC. 134 . AVAILABILITY OF FISCAL YEAR 2011 FUNDS FOR RESEARCH AND DEVELOPMENT RELATING TO THE B–2 BOMBER AIRCRAFT . Of the unobligated balance of amounts appropriated for fiscal year 2011 for the Air Force and available for procurement of B–2 bomber aircraft modifications, post-production support, and other charges, $20,000,000 may be available for fiscal year 2012 for research, development, test, and evaluation with respect to a conventional mixed load capability for the B–2 bomber aircraft.\nSEC. 135 . AVAILABILITY OF FISCAL YEAR 2011 FUNDS TO SUPPORT ALTERNATIVE OPTIONS FOR EXTREMELY HIGH FREQUENCY TERMINAL INCREMENT 1 PROGRAM OF RECORD.\n(a) IN GENERAL.—Of the unobligated balance of amounts appropriated for fiscal year 2011 for the Air Force and available for procurement of B–2 bomber aircraft modifications, post-production support, and other charges, $15,000,000 may be available to support alternative options for the extremely high frequency terminal Increment 1 program of record.\n(b) PLAN TO SECURE PROTECTED COMMUNICATIONS.—Not later than 90 days after the date of the enactment of this Act, the Secretary of the Air Force shall submit to the congressional defense committees a plan to provide an extremely high frequency terminal for secure protected communications for the B–2 bomber aircraft and other aircraft.\nTITLE II – Research, Development, Test, and Evaluation\nSubtitle B – Program Requirements, Restrictions, and Limitations\nSEC. 216. LIMITATION ON USE OF FUNDS FOR INCREMENT 2 OF B–2 BOMBER AIRCRAFT EXTREMELY HIGH FREQUENCY SATELLITE COMMUNICATIONS PROGRAM. Of the funds authorized to be appropriated by section 201 for research, development, test, and evaluation for the Air Force as specified in the funding table in section 4201 and available for Increment 2 of the B–2 bomber aircraft extremely high frequency satellite communications program, not more than 40 percent may be obligated or expended until the date that is 15 days after the date on which the Secretary of the Air Force submits to the congressional defense committees the following:\n(1) The certification of the Secretary that—\n(A) the United States Government will own the data rights to any extremely high frequency active electronically steered array antenna developed for use as part of a system to support extremely high frequency protected satellite communications for the B–2 bomber aircraft; and,\n(B) the use of an extremely high frequency active electronically steered array antenna is the most cost effective and lowest risk option available to support extremely high frequency satellite Communications for the B–2 bomber aircraft.\n(2) A detailed plan setting forth the projected cost and schedule for research, development, and testing on the extremely high frequency active electronically steered array antenna.\nFY2013 Department of Defense Appropriations ( S.Rept. 112-196 : To accompany H.R. 5856 )\nNote: as of this writing, this legislation has not been passed into law.\nCommittee Initiatives: B–52 Combat Network Communications Technology\n[CONECT]. —The fiscal year 2013 budget request includes no funds in Aircraft Procurement, Air Force for the B–52 CONECT program of record due to the Air Force's decision to terminate the program, and $34,700,000 in Research, Development, Test and Evaluation, Air Force for a restructured, descoped B–52 CONECT program. The Committee understands that the Air Force is reviewing its decision to terminate the program of record in light of potential requirements of the Global Strike Command. The Committee further understands that should the Air Force reverse its decision to terminate B–52 CONECT during the fiscal year 2014 budget process, prior year funds would be available to reinstate the program following approval by the congressional defense committees. The Committee directs that no funds for B–52 CONECT program of record post-milestone C activities or a B–52 CONECT restructured program may be obligated or expended until 30 days after the congressional defense committees have been briefed on the Air Force's proposed way ahead, to include certification of full funding of the proposed program.\nCommittee Recommended Adjustments: B–52 Strategic Radar Replacement [SR2].—The Committee is aware the Air Force conducted a lengthy analysis of alternatives in 2011 to address a Strategic Radar Replacement [SR2] for the B–52H. The existing APQ–166 radar was produced in the 1960s, has a 20 to 30 hour mean-time between failure rate, and capability limitations. The Committee understands that the current APQ–166 radar is costly to operate and maintain. Therefore, the Committee encourages the Secretary of the Air Force to reconsider the decision to terminate the SR2 program.\nFY2013 Department of Defense Authorizations ( P.L. 112-239 )\nTITLE I – Procurement\nSubtitle D – Air Force Programs\nSEC. 142. RETIREMENT OF B–1 BOMBER AIRCRAFT.\n(a) IN GENERAL.—Section 8062 of title 10, United States Code, is amended by adding at the end the following new subsection:\n(h)(1) Beginning October 1, 2011, the Secretary of the Air Force may not retire more than six B–1 aircraft.\n(2) The Secretary shall maintain in a common capability configuration not less than 36 B–1 aircraft as combat-coded aircraft.\n(3) In this subsection, the term 'combat-coded aircraft' means aircraft assigned to meet the primary aircraft authorization to a unit for the performance of its wartime mission.''.\n(b) CONFORMING AMENDMENT.—Section 132 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112–81; 125 Stat. 1320) is amended by striking subsection (c).\nIn regards to the nuclear certification requirements of the Next-Generation Bomber, SEC. 211. states;\nThe Secretary of the Air Force shall ensure that the next-generation long-range strike bomber is—\ncapable of carrying strategic nuclear weapons as of the date on which such aircraft achieves initial operating capability; and\ncertified to use such weapons by not later than two years after such date.\nTITLE II – Research, Development, Test, and Evaluation\nSubtitle B – Program Requirements, Restrictions, and Limitations\nSEC. 211. NEXT-GENERATION LONG-RANGE STRIKE BOMBER AIRCRAFT NUCLEAR CERTIFICATION REQUIREMENT. The Secretary of the Air Force shall ensure that the next generation long-range strike bomber is—\n(1) capable of carrying strategic nuclear weapons as of the date on which such aircraft achieves initial operating capability; and\n(2) certified to use such weapons by not later than two years after such date." ], "depth": [ 0, 1, 1, 2, 2, 2, 3, 3, 3, 3, 3, 3, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 2, 2, 2, 3, 3, 1 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_title h1_title", "", "", "h0_title", "", "", "h0_full", "", "", "", "", "h1_full", "", "h1_full", "", "h1_full", "", "h0_title", "", "", "", "", "h0_full", "h0_full", "", "", "", "", "", "", "", "", "", "" ] }	{ "question": [ "What is being questioned about the United State's bomber fleets?", "Why is it expected that the efficacy of these aircraft will continue to decline?", "What issues exist in using the LRS-B?", "What did the Air Force do in response to the predicted year of operation for the LRS-B?", "How do the Air Force and aerospace industry feel about the timeline?", "What could possibly alter this timeline?", "What are the B-52Hs capable of?", "When was the B-52H first in service?", "What are the B-1Bs capable of?", "When was the B-1B first in service?", "What are the B-2A capable of?", "When was the B-2A first in service?" ], "summary": [ "The United States' existing long-range bomber fleet of B-52s, B-1s, and B-2s are at a critical point in their operational life span. With the average age of each airframe being 50, 28, and 20 years old, respectively, military analysts are beginning to question just how long these aircraft can physically last and continue to be credible weapon systems.", "As potential adversaries acquire 21st century defense systems designed to prevent U.S. access to the global commons (sea, air, space, and cyberspace) and to limit U.S. forces' freedom of action within an operational area, the ability of these Cold War era bombers to get close enough to targets to be effective will continue to deteriorate.", "Although the Air Force is committed to the development and acquisition of its proposed Long-Range Strike-Bomber (LRS-B), it is anticipated that flight-testing of the new bomber will not start until the mid-2020s, with initial operational capability near 2030.", "With this timeline in mind, the Air Force has extended the operational lives of the B-52 and B-1 out to 2040 and the B-2 out to 2058.", "Air Force and aerospace industry experts insist that with sufficient funding for sustainment and modernization over their expected lifespans, all three of the existing bombers can physically last and continue to remain credible weapon systems.", "However, appropriations decisions made by Congress based on required military capabilities to meet national security objectives will ultimately determine how long the B-52, B-1, and B-2 will remain in service.", "76 B-52H Stratofortress bombers capable of both conventional and nuclear operations and capable of employing long-range standoff weapons.", "The B-52H first entered service on May 9, 1961.", "63 B-1B Lancer bombers capable of supersonic and low-level flight, conventional only operations, and employing long-range standoff weapons.", "The B-1B became operational in 1986.", "20 B-2A Spirit, low observable (stealth) bombers capable of both conventional and nuclear operations.", "The B-2A entered service in December 1993 and became fully operational capable (FOC) on December 17, 2003." ], "parent_pair_index": [ -1, 0, -1, 2, 3, 4, -1, 0, -1, 2, -1, 4 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 0, 5, 5, 5, 5, 5, 5 ] }
CRS_R40731	{ "title": [ "", "Status of Legislation", "Appropriation", "National Defense Authorization", "Title I: Department of Defense", "Military Construction", "Key Budget Issues", "Planning Future Construction", "Uncertainty in Future Years Defense Plan (FYDP)", "Quadrennial Defense Review (QDR)", "Base Realignment and Closure (BRAC)", "Cost of Implementation, 2005 BRAC Round", "Requiring the Secretary to Seek Fair Market Value in Economic Development Conveyances", "Implementing the 2005 BRAC Round, Eglin AFB Funding", "Guam Redeployment", "Overseas Installations", "Overseas Contingency Operations", "Construction at Al Musannah Air Base, Oman", "Oversight of the Development of Overseas Installations", "Transition of Camp Lemonier from Expeditionary to Enduring Status", "Military Housing", "Army Trainee Barracks", "Privatization Initiatives", "Incremental vs. Phased Construction Funding", "Navy Outlying Landing Fields", "Other Issues", "Piñon Canyon, CO, Maneuver Training Area (PCMTA)", "New Project Starts Under Continuing Resolutions", "School Construction", "Aegis Ashore Test Facility", "Palanquero Air Base, Columbia", "Title II: Department of Veterans Affairs", "Agency Overview", "", "Key Budget Issues", "Title III: Related Agencies", "American Battle Monuments Commission", "U.S. Court of Appeals for Veterans Claims", "Department of Defense: Civil (Army Cemeterial Expenses)", "Armed Forces Retirement Home (AFRH)", "", "Appropriations for FY2009", "Regular Appropriations (Consolidated Security and Continuing Appropriations)", "Economic Stimulus (American Reinvestment and Recovery Act)", "Supplemental Appropriations Act, 2009" ], "paragraphs": [ "", "", "President Barack Obama did not submit a detailed appropriations request during the first weeks of his administration. Instead, he forwarded the outline of a budget request, stating\nIn the little more than a month my Administration has had in office, we have not had the time to fully execute all the budget reforms that are needed, and to which I am fully committed. Those will come in the months ahead, and next year's budget process will look much different.\nDetailed information on the FY2010 Department of Defense (DOD) request was released on May 7, 2009.\nRepresentative Chet Edwards (TX/17), chair of the House Committee on Appropriations Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, reported an original measure, H.R. 3082 ( H.Rept. 111-188 ), to the House on June 26, 2009. The bill was placed on the Union Calendar (Calendar No. 101). The House Committee on Rules reported H.Res. 622 , for consideration of H.R. 3082 , on July 9, allowing one hour of general debate. The rule was passed on July 10, and the bill was brought to the floor for consideration ( Congressional Record pp. H7976-H7983). Following floor debate ( CR pp. H7983-H7991), the measure passed on the Yeas and Nays: 415-3 (Roll No. 529).\nSenator Tim Johnson (South Dakota), chair of the Senate Committee on Appropriations Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, introduced an original measure, S. 1407 ( S.Rept. 111-40 ), to the Senate on July 7, 2009, where it was placed on the Senate Legislative Calendar under General Orders (Calendar No. 100).\nH.R. 3082 was received in the Senate on July 13, 2009, where it was placed on the Senate Legislative Calendar under General Orders (Calendar No. 16). The bill was laid before the Senate on November 5, 2009 ( CR pp. S11187-S11191). The Senate debated the bill on November 6 ( CR pp. S11239-S11245), November 9 ( CR pp. S11265-S11273, and S11283-S11284), November 10 ( CR pp. S11313-S11334), November 16 ( CR pp. S11362-S11378), and November 17 ( CR pp. S11403-S11411), passing it on November 17 by Yea-Nay vote: 100-0 (Record Vote No. 348).\nOn December 8, 2009, H.R. 3082 , along with appropriations bills for Transportation-HUD, Commerce-Justice-Science, Financial Services, Labor-HHS, and State-Foreign Operations, was included in the conference report for H.R. 3288 , the 2010 Transportation-HUD appropriations bill retitled as the Consolidated Appropriations Act, 2010. H.R. 3082 became Div. E of that report, H.Rept. 111-366 . The House adopted the conference report on December 10 by the Yeas and Nays, 221-202-1 (Roll No. 949).\nThe Senate began consideration of the H.R. 3082 conference report the same day, along with an accompanying cloture motion. Floor action continued through December 13, including a point of order invoking Rule XXVIII (the rule was waived by Yea-Nay vote: 60-36, Record Vote No. 372), the invocation of cloture (Yea-Nay vote: 60-34, Record Vote No. 373), and final agreement to the conference report by Yea-Nay vote: 57-35 (Record Vote No. 374).\nThe passed bill was presented to the President on December 15, 2009, who it signed into law the next day as P.L. 111-117 .\nThe conference report accompanying the enacted bill specifies that\nThe language and allocations set forth in H.Rept. 111-188 and S.Rept. 111-40 should be complied with unless specifically addressed to the contrary in the conference agreement and this explanatory statement. Report language included by the House, which is not changed by the report of the Senate or this explanatory statement, and Senate report language, which is not changed by this explanatory statement is approved by the Committees on Appropriations of both Houses of Congress. This explanatory statement, while repeating some report language for emphasis, does not intend to negate the language referred to above unless expressly provided herein. In cases where the House or the Senate have directed the submission of a report, said report is to be submitted to both Houses of Congress.\nDetailed, appropriations account-level data on the appropriations bills, including enacted amounts for prior years, are displayed in Table 4 (Department of Veterans Affairs), Table 6 (Related Agencies), and Table A -1 (Military Construction and Family Housing).", "Representative Ike Skelton (MO/04) introduced H.R. 2647 , the National Defense Authorization Act for 2010, on June 2, 2009, when it was referred to the House Committee on Armed Services (HASC). The committee reported the bill ( H.Rept. 111-166 ) on June 16. The House began consideration on June 24 and passed it on June 25, 2009. The bill was received in the Senate on July 6 and placed on the Legislative Calendar (No. 96).\nThe Senate's version of the bill, S. 1390 , was introduced to that chamber by the chair of the Senate Committee on Armed Services (SASC), Senator Carl Levin (MI), as an original measure on July 2, 2009. The Senate began consideration of the bill on July 14. Senator Harry Reid (NV), the Majority Leader, introduced a cloture motion on July 22 and passed it, as amended, on July 23, 2009, by Yea-Nay vote (87-7, Record Vote No. 242).\nOn July 23, the Senate took up consideration of H.R. 2647 , struck all after its Enabling Clause, and substituted the debate-amended language of S. 1390 . The Senate then passed the amended H.R. 2647 by Unanimous Consent, insisted on its amendment, and requested a conference.\nThe House took up the amended bill on October 6, 2009, when Representative Skelton moved that the chamber disagree to the amendment and agree to a conference. The motion carried by voice vote. Representative J. Randy Forbes moved that the conferees be instructed on a provision regarding the Matthew Shephard Hate Crimes Prevention Act. After one hour of debate, the motion failed by the Yeas and Nays, 178-234 (Roll No. 754).\nConferees filed the conference report ( H.Rept. 111-288 ) in the House on October 7. Representative Skelton brought up the report for floor consideration on October 8. After one hour of debate, Representative Buck McKeon moved that report be recommitted with instructions to the conference committee. The motion was defeated by the Yeas and Nays (208-216, Roll No. 769). The House agreed to the conference report by a recorded vote of 281-146 (Roll No. 770).\nThe Senate took up the conference report on October 20. A cloture motion was filed the same day. Cloture on the conference report was invoked by the Senate on October 22 by a Yea-Nay vote of 64-35 (Record Vote No. 326). The chamber agreed to the conference report by Yea-Nay vote (68-29) on the same day (Record Vote No. 327).\nCongress cleared the bill for the White House on October 22, 2009. It was presented to the President on October 26 and signed by him on October 28, becoming P.L. 111-84 .\nTable 1 and Table 2 track the progress of the appropriations and authorization acts, respectively.", "", "Military C onstruction accounts provide funds for new construction, construction improvements, planning and design, and host nation support of active and reserve military forces and DOD agencies. The North Atlantic Treaty Organization Security Investment Program (NSIP) is the U.S. contribution to defray the costs of construction (airfields, fuel pipelines, military headquarters, etc.) needed to support major NATO commands. Family housing accounts fund new construction, construction improvements, federal government costs for family housing privatization, maintenance and repair, furnishings, management, services, utilities, and other expenses incurred in providing suitable accommodation for military personnel and their families where needed.\nThe DOD Housing Improvement Fund is the vehicle by which funds, both directly appropriated and transferred from other accounts, support military housing privatization. The Homeowners Assistance Fund aids federal personnel stationed at or near an installation scheduled for closure or realignment who are unable to sell their homes by allowing the Secretary of Defense to subsidize the sale or to purchase homes outright. The Chemical Demilitarization Construction, Defense-Wide , account provides for the design and construction of disposal facilities required for the destruction of chemical weapons stockpiles. The Base Realignment and Closure Account 1990 funds the remaining environmental remediation requirements (including the disposal of unexploded ordnance) arising from the first four base realignment and closure (BRAC) rounds (1988, 1991, 1993, and 1995). The Base Realignment and Closure Account 2005 provides funding for the military construction, relocation, and environmental requirements of the implementation of both the 2005 BRAC round and the DOD Integrated Global Presence and Basing Strategy/Global Defense Posture Realignment (military construction only).\nFunding of the various accounts included under Title I (Department of Defense) is listed in Appendix A to this report.", "", "Congressional committees with jurisdiction over military construction appropriations and appropriation authorizations require the Secretary of Defense to justify in detail the construction projects requested for the upcoming fiscal year. In addition, in order to anticipate upcoming construction requirements, Congress requires the Secretary to regularly project its future budget plans and to review its national defense strategy. These exercises are referred to as the Future Years Defense Plan (FYDP) and the Quadrennial Defense Review (QDR).", "Section 221 of Title 10 of the United States Code (10 U.S.C. 221) requires the Secretary of Defense to submit a Future Years Defense Plan in conjunction with the President's annual appropriations request. A FYDP projects the Secretary's anticipated appropriations requirements, including military construction-related accounts, over the next five or six years and is used by the defense committees to exercise oversight by tracking changes in DOD plans.\nRather than submit a complete appropriations request for FY2010 only five weeks after taking office, President Barack Obama published a budget overview, A New Era of Responsibility: Renewing America's Promise , on February 26, 2009. Detailed information on the FY2010 DOD request was released on May 7. In the accompanying documentation, Secretary of Defense Robert Gates did not project the Department's requirements into the future, citing the ongoing Quadrennial Defense Review (QDR, see next section) and the uncertainty of its potential impact on future military construction.\nAll four congressional defense committees noted the Secretary's failure to provide this information. The HAC declared its expectation for the Department \"to promptly inform the Committee when decisions on future plans are finalized.\" Their Senate counterparts (SAC) noted that the \"Department's decision to not provide [FYDP] data with the fiscal year 2010 budget has … complicated the Committee's efforts to ascertain the scope and timetable of large-scale initiatives.\"\nThe House Committee on Armed Services (HASC) observed, \"The inability of the Department to produce this critical document for consideration in this Act leads to a degradation of the quality of the military construction program. The committee encourages the Department to submit these documents … in concert with other budget documents, for consideration in the annual budget request.\" Finally, the SASC, in its discussion of the anticipated move of more than 7,000 Marines from the Japanese Prefecture of Okinawa to the U.S. Territory of Guam, also noted that the budget submission did not include a FYDP and pointed out that a \"FYDP would go a long way toward illustrating to the committee that the total U.S. investment required for the [relocation] initiative can be supported in future budget requests.\"", "Since the dissolution of the Soviet Union, Congress has required DOD to periodically reassess its strategic objectives and potential military threats to national defense. The Department is currently undertaking its fourth such exercise, the 2010 QDR. As stated above, the Secretary of Defense deferred submission of detailed budget documentation this year, explaining that his planning could not proceed while a QDR was ongoing. Section 1002 of the enacted National Defense Authorization Act for FY2010 ( H.R. 2647 , P.L. 111-84 ) amended 10 U.S.C. 118 by adding a new subsection (h), clarifying that the development of the QDR should not interfere with or delay delivery of budget materials and congressional reporting requirements tied to Section 1105(a) of Title 31, United States Code, the requirement for timely budget submission.\nThe QDR may affect a number of decisions that will impact future military construction programs. Three important initiatives whose future have become clouded awaiting the review's findings are Army modularization, the redeployment of forces from Germany to the United States, and the stationing of new troops as the Army's end strength grows.\nOn April 6, 2009, the Secretary of Defense announced that he would cap the number of Army Modular Brigade Combat Teams (BCTs) at 45, three below the 48 BCTs envisioned in his December 2007 Grow the Army plan. The three installations where new brigades will not be created include Fort Carson, CO, Fort Stewart, GA, and Fort Bliss, TX. The SAC observed that $2.10 billion had been appropriated in 2009 for the military construction and family housing intended to support these three BCTs. The SASC noted that the decision not to activate the three BCTs would logically reduce the requirement for new military construction at the three sites.\nThe redeployment of existing BCTs from German garrisons to installations in the United States and of 7 th Army Headquarters to a new Command and Battle Facility at Wiesbaden, Germany, have been delayed until completion of the QDR and a reevaluation of overseas deployment requirements.", "", "In the detailed documentation submitted by DOD to accompany the President's full FY2010 appropriations request, DOD estimated that its one-time implementation costs for BRAC 2005 will total $34.8 billion.\nThese cost estimates have changed over time as the military departments and DOD have developed plans to carry out the various required BRAC actions. In requesting military construction funds for FY2007, the first submission after the list of BRAC recommendations was created, DOD estimated the total one-time implementation cost to implement the 2005 BRAC round (the realignment and closure of a number of military installations on United States territory) and to redeploy approximately 70,000 troops and their families from overseas garrisons to bases within the United States at $17.9 billion. Between the submission of the FY2007 request in February 2006 and the FY2008 request the next year, DOD estimates had matured considerably, causing the estimate of one-time implementation cost to rise to more than $30.7 billion. The same estimate made by DOD in February 2008 for the FY2009 appropriations request rose again, to $32.0 billion. The FY2010 estimate for one-time implementation costs over the FY2006-2011 period reached $34.2 billion.\nThe Obama Administration requested $7.48 billion for FY2010 for the implementation of the 2005 BRAC round. The House and Senate separately supported the request, and the appropriations conferees agreed to appropriate $7.46 billion, ascribing the difference to cost reductions due to the realignment of funding for a hospital replacement project at Fort Bliss, Texas.\nFigure 1 displays the progression of DOD cost estimates.", "The House version of the National Defense Authorization Act ( H.R. 2647 ) contained language (Section 2711) that would have amended the Defense Base Closure and Realignment (BRAC) Act of 1990, redefining the role of the Economic Development Conveyance (EDC) and restricting the ability of the Secretary of Defense to negotiate the fair market value of surplus property being transferred to local redevelopment authorities. The provision would have loosened the definition of the EDC and tied the value of the property to post hoc market conditions, rather than ad hoc valuation by the Secretary. It would also have required the Secretary to convey the property for no consideration (no-cost) under certain conditions.\nSection 2705 of the Senate amendment expressed a sense of the Senate that the Department of Defense should comprehensively assess the needs of communities while assisting them to deal with the effects of base closures or growth.\nThe enacted version of the bill ( P.L. 111-84 ) amended Section 2905 of the BRAC Act to replace the previous requirement for the Secretary to seek fair market value in real property EDC with authority granting him discretion to account for local economic conditions and the cost of needed additional local infrastructure (transportation, utilities, schools, etc.) when assessing the amount of consideration to be requested for all BRAC-surplused property. The enacted language also grants the Secretary the authority to accept a range of considerations in lieu of cash value, including a share of the revenues generated from subsequent sale or lease of the property.", "One of the BRAC Commission recommendations establishes a joint pilot training school for the new F-35 Thunderbolt II (Joint Strike Fighter, JSF) at Eglin Air Force Base (AFB) adjacent to Valparaiso, FL. In their FY2010 request, the Air Force and Navy jointly requested six construction projects related to the new training squadron. Both the House Appropriations and Armed Services Committees recommended to DOD that the entire cost of these projects be fully funded through the Air Force account, with the Armed Services Committee noting that unitary management would \"ensure that a complete and usable facility can be constructed.\"", "The FY2010 budget includes the first request for funds to relocate approximately 8,000 Marines and an estimated 10,000 members of their families from installations in the Prefecture of Okinawa to the U.S. Territory of Guam. Relocation funding is to be shared between the governments of Japan and the United States. Associated with the Guam relocation is the construction of a replacement facility on Okinawa for the Marine aviation facility at Futenma and a redeployment of units to Camp Schwab, Okinawa. In its Statement of Administration Policy (SAP) on H.R. 2647 (the House-passed version of the National Defense Authorization Act for FY2010), the Office of Management and Budget (OMB) objected to a provision (Section 2836) that would prevent the Secretary of Defense from accepting a Japanese-built Futenma Replacement Facility (FRF) until he certifies that it meets Naval Aviation Safety standards. OMB stated that the planned FRF configuration has already been formally agreed between the governments of the United States and Japan.\nMore than $10.2 billion in joint construction funding for the relocation, which includes new operations-related structures and housing and infrastructure and utility upgrades on Guam, has yet to be coordinated between Japan and the United States, and the recent election of a new government in Japan may have slowed the conclusion of these negotiations. Nevertheless, the relocation is expected to be complete by 2014. Several provisions in the House-passed version of H.R. 2647 related to construction supporting the relocation. Among them, Section 2833 would have required construction workers to be paid not less than the lowest wage rates for comparable work performed in Hawaii, rather than the prevailing local wage rate set by the Secretary of Labor. In his written response to advance policy questions submitted to the SASC pursuant to his July 9, 2009, hearing on his nomination to become Commander, U.S. Pacific Command, Admiral Robert F. Willard, USN, stated\nAccording to Department of Labor data, Hawaii construction wage rates are approximately 300% higher than those on Guam. The $10.27B estimated cost for construction to relocate the Marines to Guam was based on historical wages experienced on Guam. In accordance with international agreement, the amount of funding that Japan will provide is fixed. Therefore, any additional cost will require more U.S funding. The Joint Guam Program Office estimates application of Hawaii Davis-Bacon wage rates with fringes to Guam could increase the labor cost for the realignment by $4.7B.\nSection 2833 would also have limited the number of construction work hours each month performed by persons holding H2B visas to no more 30% of the total.\nThe SASC noted that an Environmental Impact Statement, required before construction can begin on Guam, is underway. For several years, the committee has been vocal in requesting a DOD master plan that would detail the extent of military construction and associated infrastructure upgrades that the relocation would require. To date, no such comprehensive plan has been submitted, and the initiation of a QDR and deferral of a FYDP appears to indicate that a Guam Master Plan will be further delayed. The committee recommended that some construction projects requested for Guam be deferred pending the submission of a master plan and FYDP and reduced the requested Navy construction authorization by $211.0 million. In its SAP on S. 1390 , OMB objected, stating that the government of Japan had appropriated $366.0 million for its current fiscal year as part of a $6.0 billion commitment to help develop Guam.\nThe enacted version of the bill ( P.L. 111-84 ) requires that local wage rates apply to military construction contracts associated with the realignment of military installations and relocation of personnel to Guam and requires the Secretary of Labor to issue an annual wage rate determination until 90% of the funds for the project are expended. It also imposes no limitation on the number of visa holders who may work on construction projects, but requires that the needed visas be issued subsequent to the issuance of a temporary labor certification by the Governor of Guam. The bill also conditions acceptance of the Futenma Replacement Facility on a report by the Secretary of Defense to the congressional defense committees that it and its associated operating procedures are consistent with naval aviation safety requirements, but does not deny the Secretary the authority to exercise his existing waiver authorities.", "", "The FY2010 appropriations request includes $1.41 billion in overseas contingency construction for projects at various locations in Afghanistan. In previous years, construction projects in an active military area of operations would have been requested in one or more requests for emergency supplemental appropriations. This marks the first year that all such construction is included in the regular annual appropriation request.", "The U.S. Air Force operates a facility at Seeb International Airport (also known as Muscat International Airport), Oman, a joint civil-Royal Omani Air Force site, that includes prepositioned war reserve materiel. The Omani government has requested that U.S. military activity at the airport be relocated to a new site, Al Musannah, so that commercial development may proceed at Seeb International. DOD subsequently requested funding for construction at the Al Musannah site. The SASC recommended that funding requested in FY2010 ($69.0 million for airlift ramp and fuel facilities and $47.0 million for a war reserve materiel compound) be denied, noting the lack of a base master plan to guide construction, the incomplete state of the needed long-term agreement with the Omani government for its use, and the absence of contributions from the Omanis to its construction and operation. The committee calculated that the future cost to complete construction and bring the new installation into operation would likely reach $350 million, observing that a FYDP would assist in confirming the magnitude of the necessary future investment. The final version of the authorization act ( H.R. 2647 , P.L. 111-84 ) did not authorize the appropriation of the funds requested for construction. The conferees recommended that DOD confirm the existence of an updated host nation agreement before resubmitting the project in a future Presidential budget request.", "The SASC noted in its report on S. 1390 that then-President George W. Bush released an Integrated Global Posture and Basing Strategy (IGPBS) in 2004. Later renamed the Global Defense Posture Realignment Strategy (GDPRS), it formed the basis for plans to redeploy as many as 70,000 military personnel and their families from garrisons overseas to installations within the United States over the subsequent decade.\nSection 2704 of S. 1390 would have required the Secretary of Defense to submit an annual report on the status of overseas base closures and realignments that result from the implementation of changes in DOD's basing strategy. Because the QDR was created to be a comprehensive examination of national defense strategy, infrastructure, and other elements of defense policy, Section 2704 would also have amended its governing law, 10 U.S.C. 118, to require an additional report from the Secretary on the impact each QDR would have on the global posture of U.S. military forces. The enrolled version of the National Defense Authorization Act ( H.R. 2647 , P.L. 111-84 ) retained that provision as an amendment to Title 10, inserting a new Section 2687a, \"Overseas Base Closures and Realignments and Basing Master Plans.\"\nThe final bill also included in Section 1063 a requirement that the Secretary of Defense submit, concurrent with delivery of the 2009 QDR, a report on the plan for basing forces outside of the United States. In particular, the report is to address how such a plan would support international and bilateral security agreements, describe the current security environment in each geographic combatant command's Area of Responsibility, and assess the impact of any permanent change in unit basing would have on those agreements and on the status of overseas base closure and realignment actions already underway. The report is to also include the Secretary's recommendations, if any, for additional overseas base closures or realignments. The statute requires the Secretary to notify Congress at least 30 days before the permanent relocation of a unit stationed outside of the United States.", "Construction at Camp Lemonier, a former French Foreign Legion facility in Djibouti that is now the location of Combined Joint Task Force–Horn of Africa (CJTF-HOA), has been supported by emergency supplemental appropriations for expeditionary operations. Nevertheless, CJTF-HOA has recently been described by the Africa Command (AFRICOM) staff as an \"enduring forward operating site,\" implying that it has assumed a more permanent status. New construction projects requested for the Camp in 2010 have been included in the regular appropriation.\nIn its report on S. 1407 , the SAC observed that AFRICOM headquarters is located in Stuttgart, Germany. With Camp Lemonier, still an expeditionary outpost, its sole installation within the AFRICOM area of responsibility, the committee was unwilling to support any enduring construction prior to the release of the 2010 QDR. The SAC instructed DOD to submit a strategic infrastructure plan for AFRICOM not later than April 30, 2010.\nThe SASC expressed concern in its report on S. 1390 that the future mission of CJTF-HOA, its relationship with other U.S. governmental organizations in the region, and the ability of AFRICOM to sustain the task force's current level of operations remain unclear and directed the Secretary of Defense to submit an explanatory report. This language was not included in the final authorization act's conference report.", "", "The Department of the Army has reported that housing for an anticipated 65,000 new troops at its various initial training facilities will not be brought up to its current habitability standards before 2015. The House recommended $450 million in additional funding to accelerate trainee troop barracks modernization. The conference agreement reduced this to $350 million.", "The Military Housing Privatization Initiative (MHPI), initiated more than a decade ago by then-Secretary of Defense William J. Cohen, has thus far resulted in the transfer of responsibility, and cost, to private enterprise for the construction, maintenance, and operation of military family housing at approximately 100 military installations across the nation. This privatization has reduced the amount of appropriated funds needed for the construction and operation of military family housing. Therefore, the total military family housing appropriation request for FY2010, $1.96 billion, comprises only 62% of the FY2009 enacted level of funding.", "Major construction projects often require several years to complete. In their planning and execution, military departments and defense agencies have developed the practice of requesting authorization and appropriations in discrete phases, each of which is considered to be independent of another.\nA \"military construction project\" is defined in statute to include \"all … work … necessary to produce a complete and usable facility or a complete and usable improvement to an existing facility.\" Thus, each construction phase must result in a facility that can be placed in service.\nAll four military construction committees have expressed their willingness to authorize these large and complex construction projects in their entirety and appropriate funding incrementally (i.e., in annual portions). As assessed by the SASC, when used on some large-scale projects, the use of phased construction \"can lead to inefficient designs, complex construction difficulties …, repeated contractor mobilizations, and inefficient ordering of construction materials. This phasing strategy often leads to higher overall costs … and longer construction times….\" The HASC supported full authorization for a number of major projects, but authorized the appropriation of only part of the total amount. The HASC calculated this reduction based on its assessment of the relevant military department's ability to execute an annual increment of the needed construction. In its Statements of Administration Policy on H.R. 2647 and S. 1390 , the House and Senate versions of the National Defense Authorization Act for FY2010, and H.R. 3082 , the House-passed version of the military construction appropriations bill, OMB objected to incremental funding, stressing its desire to continue the use of so-called \"full funding.\"\nThe HAC stated, \"that while projects should be fully funded or separated into standalone phases where practicable, incremental funding should remain an option when it makes fiscal and programmatic sense.\" The Senate committee observed, \"it continues to be the practice of the Committee to provided incremental funding for certain large projects, despite administration policy to the contrary, to enable the services to more efficiently allocate military construction dollars….\" The explanatory statement accompanying the final version of the bill contained the following language:\nThe conferees continue to believe that military construction projects should be fully funded or separated into stand-alone phases when practical. In some cases, however, incremental funding makes fiscal and programmatic sense.\nThe conference agreement then identified six construction projects that the bill would fund incrementally.\nThe final version of the National Defense Authorization Act for FY2010 ( H.R. 2647 , P.L. 111-84 ) authorized full funding and incremental appropriations for hospital replacement projects on Guam and at Ft. Bliss, TX.", "Navy and Marine crews of fixed-wing aircraft are required to periodically practice shipboard landing techniques under daylight and nighttime conditions at specially equipped airfields before deploying to their assigned aircraft carriers. In order to mimic conditions at sea as closely as possible, the Department of the Navy maintains a number of these Outlying Landing Fields (OLF) at sites selected in part for their proximity to major Naval and Marine Corps Air Stations and at sufficient distance from encroaching city and suburban sprawl to eliminate distracting lights.\nOLF Fentress, an auxiliary airstrip located eight miles southwest of Naval Air Station (NAS) Oceana in Virginia Beach, VA, has served this purpose for several decades. Residential encroachment prompted the Department of the Navy to remove the training function to a new site available to F/A-18 squadrons based at both NAS Oceana and Marine Corps Air Station (MCAS) Cherry Point, NC. The initial effort focused on a rural inland location midway between Plymouth, VA, and Pantego, NC, approximately 85 miles from the NAS and 57 miles from the MCAS, but the new airfield was resisted by local governments, culminating in Congress repealing the Navy's authorization to acquire the land. The Department is now examining alternative OLF locations.\nIn its report on S. 1390 , the SASC directed the Secretary of the Navy to consult with the State of North Carolina and the Commonwealth of Virginia, local governments and other interested parties prior to issuing a final environmental impact statement and record of decision on its choice of location of a new field and to report on this to the defense committees.\nThe HASC also addressed Navy OLFs, but went farther by incorporating several specific measures into their recommended statutory language. Section 2818 of the House-drafted version of H.R. 2647 would prevent the Secretary of the Navy from establishing an OLF at a location where the Secretary finds the local political jurisdiction formally opposed. Section 2819 would prohibit the establishment of an OLF at either Sand Banks or Hale's Lake, NC, two more recently studied sites.\nThe enacted version of H.R. 2647 contained neither of these provisions.", "", "During the 1980s, the Department of the Army acquired approximately 250,000 acres near Ft. Carson, CO, for use as a troop maneuvering area. Half of the land was purchased via open sale, with the remainder bought through the use of condemnation proceedings.\nWhen the Department announced that the number of soldiers stationed at Ft. Carson would increase substantially, it initiated an effort to add an additional 450,000 acres to the PCMTA. Local land owners expressed concern that public condemnation might again be invoked to acquire the new land.\nAn amendment to the bill appropriating military construction funds for FY2008 ( P.L. 110-161 ) forbade the use of such funds for Piñon Canyon expansion. Identical language appeared in the military construction appropriations act for FY2009. This restriction is continued in Section 127 of the Administrative Provisions in Title I of the enacted appropriations bill.", "Federal agency operations are normally funded through the enactment of one of the 13 annual appropriations bills requested by the President and passed by Congress. Absent an annual appropriation, agency operations are funded under one or more continuing resolutions. Statute forbids the initiation of new programs using continuing resolution funding.\nDOD requested statutory relief from this restriction for new military construction projects. The HAC did not include such a provision in its version of the appropriations act ( H.R. 3082 ).", "A number of military installations will gain a significant number of military and civilian personnel during the next several years due to force shifts associated with base realignments, military end strength increases, and the redeployment of military units from overseas to domestic garrisons. Most school-age children of military personnel attend public schools operated by local school agencies.\nFederal property is exempt from the local taxation that normally supports school systems, and an important federal support for school attendance takes the form of Impact Aid Program payments to local school districts. Nevertheless, impact aid is retroactive, depending on an annual census of military family school children. This has presented a challenge for jurisdictions to prepare for a large influx of students as military units move to nearby installations.\nThe HAC directed DOD to report on options available to proactively assist local agencies with school construction and renovation and on conditions that could trigger the need for new DOD school construction.", "The Obama Administration in September announced a significant restructuring of the existing plan for the defense of Europe against potential missile attack from Iran. The Bush Administration had planned and budgeted for the installation of two fixed missile defense sites, one in Poland and another in the Czech Republic. The revamped plan called instead for a less robust configuration based on the Navy's ballistic missile defense version of its Aegis weapon control system and SM-3 missile interceptor.\nDuring floor debate of the military construction appropriations bill, Senator Daniel Inouye introduced an amendment that would rescind those funds set aside for construction required for the now-abandoned missile defense plan and add $68.5 million for a new Aegis Ashore Test Facility needed to support the new plan. The Senate accepted the amendment and the subsequent conference agreement retained both the rescission and appropriation.", "The Obama Administration requested $46.0 million for the development of a Cooperative Security Location (CSL) at Palanquero Air Base, Columbia, for the conduct of various operations, including counter narcotics and air mobility missions, throughout South America. The project includes construction of operations and billeting facilities, a taxiway and parking apron, aircraft refueling infrastructure, and improvements to utility services and communications support. Although CSLs are by definition not host to a permanent U.S. military contingent and are intended to be maintained by host nation or contractor personnel, the appropriations conferees provided $43.0 million for the project and specified that \"this funding is not intended to establish a U.S. military presence in Colombia ... in accordance with the Defense Cooperation Agreement of October 30, 2009.\"", "", "The Department of Veterans Affairs (VA) administers directly, or in conjunction with other federal agencies, programs that provide benefits and other services to veterans and their spouses, dependents and beneficiaries. The VA has three primary organizations to provide these benefits: the Veterans Benefits Administration (VBA), the Veterans Health Administration (VHA), and the National Cemetery Administration (NCA). Benefits available to veterans include service-connected disability compensation; a pension for low-income veterans who are elderly or have a nonservice-connected disability; vocational rehabilitation for disabled veterans; medical care; life insurance; home loan guarantees; burial benefits; and educational and training benefits to help in the transition of active servicemembers to civilian life. As shown in Table 3 , VA appropriations for benefits and services has increased from $58.10 billion in FY2003 to $95.95 billion in FY2009.", "", "The FY2010 budget submitted by the Administration in May 2009 called for funding the VA at a level of $108.9 billion for FY2010 (see Table 4 ). This would have been an increase of $12.9 billion, or 13.5%, over the FY2009 appropriation (including the economic stimulus funding provided by the American Recovery and Reinvestment Act [ARRA, P.L. 111-5 ]).\nThe largest increases in funding for the VA between FY2009 and FY2010 in the Administration request, H.R. 3082 , S. 1407 , and P.L. 111-117 were for compensation and pension benefits, and readjustment benefits, where the largest component was for education benefits. As shown in Table 4 , H.R. 3082 would have provided $108.86 billion in FY2010 funding for the VA, and $48.18 billion in advance FY2011 funding for VA medical care. While H.R. 3082 provided total funding for the VA equal to the Administration request, H.R. 3082 would have provided lower funding for general operating expenses and greater funding for minor construction and the National Cemetery Administration than in the Administration request.\nS. 1407 would have provided, as shown in Table 4 , $109.06 billion in FY2010 funding for the VA, and $48.18 billion in advance FY2011 funding for VA medical care. S. 1407 would have provided higher funding for medical facilities and grants for state extended care facilities than in the Administration request.\nAs shown in Table 4 , P.L. 111-117 provided increases in funding, above the Administration request, for compensation and pensions, and readjustment benefits (including education benefits). Consolidated Appropriations Act ( P.L. 111-117 ) provides a total of approximately $45.1 billion for the Veterans Health Administration (VHA) of the Department of Veterans Affairs (VA). This is a 7.4% increase over the FY2009 enacted amount and the same as the Administration's budget request for VHA. This amount includes funding for the medical services ($34.7 billion), medical support and compliance ($4.9 billion), medical facilities ($4.9 billion) and medical and prosthetic research ($581 million) accounts. The Consolidated Appropriations Act ( P.L. 111-117 ) also provides approximately $48.2 billion in advance appropriations for the medical services, medical support and compliance, and medical facilities accounts to be available in FY2011.\nAs shown in Table 5 , there is an almost equal split between mandatory and discretionary funding for the VA. In the FY2009 appropriation, mandatory funding was only slightly less than discretionary funding. The Administration request, H.R. 3082 , S. 1407 , and P.L. 111-117 for FY2010 provide discretionary funding that is slightly less than mandatory funding. For FY2011, all of the advance funding provided by H.R. 3082 , S. 1407 , and P.L. 111-117 is discretionary funding.", "", "The American Battle Monuments Commission (ABMC) is responsible for the maintenance and construction of U.S. monuments and memorials commemorating the achievements in battle of U.S. armed forces since the nation's entry into World War I; the erection of monuments and markers by U.S. citizens and organizations in foreign countries; and the design, construction, and maintenance of permanent cemeteries and memorials in foreign countries. The Commission maintains 24 cemeteries and 25 memorials in either foreign countries or on U.S. soil.", "The U.S. Court of Appeals for Veterans Claims was established by the Veterans' Administration Adjudication Procedure and Judicial Review Act of 1988 ( P.L. 100-687 ). The Court is an independent judicial tribunal with exclusive jurisdiction to review decisions of the Board of Veterans' Appeals. It has the authority to decide all relevant questions of law; interpret constitutional, statutory, and regulatory provisions; and determine the meaning or applicability of the terms of an action by the VA. It is authorized to compel action by the VA. It is authorized to hold unconstitutional or otherwise unlawful and set aside decisions, findings, conclusions, rules and regulations issued or adopted by the VA or the Board of Veterans' Appeals.\nThe Court currently occupies leased facilities near Judiciary Square in the District of Columbia and is searching for a permanent location as the current lease expires in September 2010.", "The Secretary of the Army is responsible for the administration, operation and maintenance of Arlington National Cemetery and the Soldiers' and Airmen's Home National Cemetery. In addition to its principal function as a national cemetery, Arlington is the site of approximately 3,100 non-funeral ceremonies each year and has approximately 4,000,000 visitors annually.", "The Armed Forces Retirement Home Trust Fund provides funds to operate and maintain the Armed Forces Retirement Home in Washington, DC (also known as the United States Soldiers' and Airmen's Home) and the Armed Forces Retirement Home in Gulfport, Mississippi (originally located in Philadelphia, PA, and known as the United States Naval Home). These two facilities provide long-term housing and medical care for approximately 1,600 needy veterans. The Gulfport campus, encompassing a 19-story living accommodation and medical facility tower, was severely damaged by Hurricane Katrina at the end of August, 2005, and is not currently in use. Residents of the facility were transferred to the Washington, DC, location immediately after the storm. A Memorandum of Understanding (MOU) was signed between the AFRH and the General Services Administration (GSA) for the rebuilding of the Gulfport facility, with a targeted completion date in 2010.\nThe appropriation for the AFRH facilities is from the Armed Forces Retirement Home Trust Fund. The trust fund is maintained through gifts, bequests, and a $0.50 per month assessment on the pay of active duty enlisted military personnel and warrant officers.\nTable 6 shows the FY2009 enacted appropriations, the FY2010 request, and the funding provided for FY2010 for each of the related agencies.", "", "", "President George W. Bush submitted his FY2009 appropriations request to Congress on February 4, 2008. The House Committee on Appropriations (HAC) Subcommittee on Military Construction, Veterans Affairs, and Related Agencies marked its bill on June 12, 2008, and the full committee markup took place on June 24. Representative Chet Edwards, the subcommittee chair, introduced the bill ( H.R. 6599 , H.Rept. 110-775 ) on July 24. After extensive debate and the raising of two points of order on the floor, the House passed H.R. 6599 on August 1, 2008.\nThe Senate Committee on Appropriations (SAC) Subcommittee on Military Construction, Veterans Affairs, and Related Agencies polled out its version of the appropriations bill, and the full committee reported it out without amendment by a unanimous vote on July 17, 2008. Senator Tim Johnson, subcommittee chair, introduced the measure ( S. 3301 , S.Rept. 110-428 ) on July 22, 2008.\nIn the course of legislative business, several analysts suggested that this and other appropriations bills might not be adopted until the convening of the 111 th Congress. The text of the military construction appropriations bill was incorporated into Division E of an amendment to H.R. 2638 , the Department of Homeland Security Appropriations Act, 2008, a bill subsequently retitled the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009. Passed by both chambers in late September, the President signed the bill into law ( P.L. 110-329 ) on September 30, 2008.", "Representative David R. Obey, chair of the HAC, introduced the American Recovery and Reinvestment Act of 2009 ( H.R. 1 ), or ARRA, to the 111 th Congress on January 26, 2009. Title X of the bill added funding to several military construction and veterans affairs appropriations accounts. After debate and amendment, H.R. 1 was passed by the House on January 27. The Senate subsequently substituted its own version of the bill, S. 336 , and after floor debate and amendment, passed H.R. 1 on February 10, 2009.\nThe conference committee filed its report ( H.Rept. 111-16 ) on February 12, and President Barack Obama signed the bill into law ( P.L. 111-5 ) on February 16, 2009.\nThe ARRA added $4.28 billion to already-enacted military construction, family housing, and veterans affairs appropriations, increasing DOD accounts by $2.88 billion and Department of Veterans Affairs accounts by $1.40 billion. A detailed discussion of ARRA provisions related to military construction appropriations may be found in CRS Report RL34558, Military Construction, Veterans Affairs, and Related Agencies: FY2009 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].", "Representative Obey introduced a supplemental appropriations bill ( H.R. 2346 ) on May 12, 2009, that consolidated funds, with some adjustments, that the Administration had requested in four supplemental appropriations proposals, including an April 9 request for $83.4 billion in supplemental funding for defense, international affairs, domestic fire fighting, and other purposes; an April 30 request for $1.5 billion for influenza preparedness and response; and a May 12 request for $5 billion to support International Monetary Fund (IMF) borrowing authority.\nThe House passed the bill on May 14. The Senate passed its version of the bill on May 21.\nOn June 2, the Administration submitted an additional request for $2.0 billion more for influenza response, for expanded authority to transfer funds from other appropriations for influenza measures, and for $200 million in additional humanitarian assistance to Pakistan. The conference committee filed its report ( H.Rept. 111-151 ) on June 12, 2009. After agreement by both chambers, the President signed the bill into law ( P.L. 111-32 ) on June 24.\nThe Act added $2.11 billion to military construction accounts, including $1.23 billion for Army, $239.0 million for Navy and Marine Corps, and $281.0 million for Air Force construction, $263.3 million for the Base Realignment and Closure 2005, and $100.0 million for the NATO Security Investment Program accounts.\nAppendix A. DOD Military Construction Accounts\nAppendix B. Additional Resources\nBudget\nCRS Report RL30002, A Defense Budget Primer , by [author name scrubbed] and [author name scrubbed] (pdf).\nCRS Report 98-720, Manual on the Federal Budget Process , by [author name scrubbed] and Allen Schick (pdf).\nVeterans Affairs\nCRS Report RL33991, Disability Evaluation of Military Servicemembers , by [author name scrubbed] and [author name scrubbed].\nCRS Report RS22483, Health Care for Dependents and Survivors of Veterans , by [author name scrubbed].\nCRS Report RS20533, VA-Home Loan Guaranty Program: An Overview , by [author name scrubbed].\nCRS Report RL33704, Veterans Affairs: The Appeal Process for Veterans' Claims , by [author name scrubbed].\nCRS Report RL33113, Veterans Affairs: Basic Eligibility for Disability Benefit Programs , by [author name scrubbed].\nCRS Report RL33323, Veterans Affairs: Benefits for Service-Connected Disabilities , by [author name scrubbed].\nCRS Report RL34370, Veterans Affairs: Health Care and Benefits for Veterans Exposed to Agent Orange , by [author name scrubbed] and [author name scrubbed].\nCRS Report RS22897, Veterans Affairs: Historical Budget Authority, Fiscal Years 1940 Through 2008 , by [author name scrubbed].\nCRS Report RS22561, Veterans Affairs: The U.S. Court of Appeals for Veterans Claims—Judicial Review of VA Decision Making , by [author name scrubbed].\nCRS Report RS22666, Veterans Benefits: Federal Employment Assistance , by [author name scrubbed].\nCRS Report RL33985, Veterans' Benefits: Issues in the 110 th Congress , coordinated by [author name scrubbed].\nCRS Report RL33992, Veterans Benefits: Merchant Seamen , by [author name scrubbed] and [author name scrubbed].\nCRS Report RS22902, Veterans Benefits: An Overview , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].\nCRS Report RL34626, Veterans' Benefits: Benefits Available for Disabled Veterans , by [author name scrubbed] and [author name scrubbed].\nCRS Report RS22804, Veterans' Benefits: Pension Benefit Programs , by [author name scrubbed] and [author name scrubbed].\nCRS Report RL34627, Veterans' Benefits: The Vocational Rehabilitation and Employment Program , by [author name scrubbed] and [author name scrubbed].\nCRS Report RL33993, Veterans' Health Care Issues , by [author name scrubbed].\nCRS Report RL34598, Veterans Medical Care: FY2009 Appropriations , by [author name scrubbed].\nSelected Websites\nHouse Committee on Appropriations http://appropriations.house.gov/\nSenate Committee on Appropriations http://appropriations.senate.gov/\nHouse Committee on Armed Services http://www.house.gov/hasc/\nSenate Committee on Armed Services http://armed-services.senate.gov/\nHouse Committee on Veterans Affairs http://veterans.house.gov/\nSenate Committee on Veterans Affairs http://veterans.senate.gov/\nCRS Appropriations Products Guide http://www.crs.gov/Pages/appover.aspx\nCongressional Budget Office http://www.cbo.gov/\nDefense Base Closure and Realignment Commission (BRAC Commission) http://www.brac.gov\nGovernment Accountability Office http://www.gao.gov/" ], "depth": [ 0, 1, 2, 2, 1, 2, 2, 3, 4, 4, 3, 4, 4, 4, 3, 3, 4, 4, 4, 4, 3, 4, 4, 3, 3, 3, 4, 4, 4, 4, 4, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h2_title", "h2_full", "h2_full", "h0_title h1_title", "h0_full", "h0_title h1_title", "", "", "", "", "", "", "", "", "h0_title", "h0_full", "", "", "", "", "", "", "", "", "h1_title", "", "h1_full", "", "", "", "h0_title h1_title", "h0_full h1_full", "", "h1_full", "", "", "", "", "", "", "h0_title", "", "h0_full", "" ] }	{ "question": [ "What does the Military Construction, Veterans Affairs, and Related Agencies appropriations bill provide?", "What does the bill capitalize?", "What does the bill underwrite?", "What does the bill fund?", "Why is mandatory spending increasing in relation to veterans?", "What issues has this increase caused?", "What is being done to try to reduce these delays?", "How did the House handle the Military Construction, Veterans Affairs, and Related Agencies Act?", "After the House passed it, how did the Senate handle the bill?" ], "summary": [ "The Military Construction, Veterans Affairs, and Related Agencies appropriations bill provides funding for the planning, design, construction, alteration, and improvement of facilities used by active and reserve military components worldwide.", "It capitalizes military family housing and the U.S. share of the NATO Security Investment Program, and finances the implementation of installation closures and realignments.", "It underwrites veterans benefit and health care programs administered by the Department of Veterans Affairs, provides for the creation and maintenance of U.S. cemeteries and battlefield monuments within the United States and abroad, and supports the U.S. Court of Appeals for Veterans Claims and Armed Forces Retirement Homes.", "The bill also funds construction supporting Overseas Military Operations, a function previously carried out through emergency supplemental appropriations, and advance appropriations for veterans medical services.", "In the area of veterans' non-medical benefits, mandatory spending is increasing as claims for disability compensation, pension, and readjustment benefits increase due to a combination of several factors including the aging of the veterans' population and the current conflicts in Iraq and Afghanistan.", "As a result, the average number of days for completing a pension or compensation claim in FY2008 was 179 days.", "To reduce the pending claims workload and improve processing time, funds have been provided in previous appropriation bills for hiring and training additional claims processing staff.", "The House version of the Military Construction, Veterans Affairs, and Related Agencies Act for 2010 (H.R. 3082) was passed by the House on July 10, 2009, and sent to the Senate.", "The Senate passed an amended version of the bill on November 17, 2009. H.R. 3082 was subsequently incorporated as Div. E of the Consolidated Appropriations Act, 2010 (H.R. 3288)." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 1, -1, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 3, 3, 3, 4, 4 ] }
GAO_GAO-17-637	{ "title": [ "Background", "Median Prices Charged Approximately Doubled from 2010 to 2014, and Extent of Balance Billing Is Unknown", "Median Prices Charged by Air Ambulance Providers Increased 76 to 113 Percent from 2010 to 2014", "Air Ambulance Providers Told Us Payments for Transports Are Often Lower than Prices Charged", "Extent to Which Air Ambulance Providers Balance Bill Patients Is Unknown Due to Lack of Data", "Various Factors May Play a Role in Air Ambulance Prices, but Data Are Limited", "According to Selected Providers, Transport Costs and Volume, Payer Mix, and Competition May Play a Role in Increased Prices Charged", "Transport Costs and Volume", "Payer Mix", "Competition", "Lack of Data Limits Assessment of Factors Affecting Prices", "Selected Stakeholders Proposed Actions Regarding Air Ambulance Pricing, Including Improved Data Collection and Transparency", "Stakeholders Expressed Mixed Views on Proposed Solutions of Modifying the ADA or Medicare Payment Rates", "Some Stakeholders Suggest Data Collection and Price Transparency Could Better Inform DOT and Stakeholder Actions", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Transportation", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgements" ], "paragraphs": [ "Air ambulance providers inhabit a unique position at the intersection of aviation and medical services. Providing air ambulance service is capital intensive and requires both aviation and medical investments (see fig. 1). Air ambulances must be ready to deploy at a moment’s notice in response to emergencies. Air ambulances are of two main types—rotor wing (helicopter) and fixed-wing aircraft. These two types of aircraft are generally used on different types of missions, with helicopters providing on-scene responses and shorter distance hospital-to-hospital transports and fixed-wing aircraft providing longer transports between airports. Because helicopter air ambulances make up approximately 74 percent of all air ambulances, this report focuses on helicopter air ambulance service. This report also focuses on air ambulance providers that are direct air carriers. Although most people may associate helicopter air ambulance with on-scene response to an accident such as a car accident, the majority of transports are interfacility, or from hospital to hospital. For example, Air Methods, the largest air ambulance provider, reported in June 2016 that of its total flights in the first quarter of 2016, approximately 70 percent were interfacility and 30 percent were on-scene response.\nUnlike other aviation services that are scheduled ahead of time, air ambulance transports are initiated only in response to time-sensitive medical-related events. In the case of on-scene response transports, first responders decide when air ambulance service is needed, while hospital staff make decisions regarding when to initiate interfacility transports. Because air ambulance providers transport critically sick or injured patients facing time-sensitive emergencies, patients typically have little to no ability to make cost-saving decisions, such as selecting a provider that participates in the patient’s insurance or electing to be transported by ground ambulance. On the other hand, air ambulance providers respond to emergencies without regard for a patient’s ability to pay and provide the same service regardless of the amount the provider will ultimately be compensated for the transport.\nAir ambulance providers fall under three main types of business models, which vary on which entity makes business decisions, including setting prices and determining in-network agreements with private insurance. These business models are:\nHospital-affiliated—may be a department of a hospital or owned by a consortium of hospitals, is typically non-profit, makes business decisions, and provides the medical crew. These providers may operate their own aviation services or contract for the services, often from companies that operate their own air ambulance service as independent providers.\nIndependent—a company, typically for-profit, that handles both medical and aviation aspects and makes business decisions.\nHybrid—joint venture between a hospital and an independent provider where the hospital typically provides the medical crew but (unlike the hospital-affiliated model) does not make business decisions, although the hospital name may be branded on the helicopter. Instead, the independent provider makes business decisions such as setting prices.\nIn 2007, we reported that a few large providers dominated the air ambulance industry, and in 2010, we reported that the industry had shifted since 1999 from mostly hospital-affiliated providers toward independent providers. These trends appear to have continued. For example, in 2015 three for-profit, independent providers together reported operating 692 helicopters, or about 66 percent of the total 1,045 helicopters in the industry that year. These three providers operate helicopters that span all three business model types across multiple states. As a result, some of these 692 helicopters may be under contract for aviation services to hospital-affiliated providers, in which case the hospital pays the independent provider a fixed rate and sets the prices charged for the service rather than the independent provider.\nAir ambulance providers, like other medical service providers, charge standard rates for all transports but receive payments from many sources, often at varying rates. Air ambulance providers charge patients based on a pre-established lift-off fee and per mile fee, regardless of medical services provided in route. Providers then receive payments from a mix of sources, depending on the transported patient’s insurance coverage. The amount paid by private health insurance also depends on whether the provider has a contract in place with the insurer. Key payers of air ambulance service charges include:\nMedicare—a federal program for people who are 65 or older and certain younger people with disabilities, regardless of income level.\nMedicaid—a joint federal and state program for some people with limited income and resources.\nPrivate health insurance companies—may have a contractual in- network agreement with an air ambulance provider for a payment rate negotiated ahead of time. Without such a contract, air ambulance providers are considered out of network, and the insurance company’s policies set its payment rates.\nSelf-pay—patients not covered by insurance.\nWhether or not an air ambulance provider may bill a patient for amounts in excess of the amount covered by insurance, as well as any deductibles, coinsurance, or copayment—called balance billing—varies based on the patient’s insurance coverage. Under Medicare rules, for example, air ambulance providers are not permitted to balance bill Medicare patients for ambulance services beyond deductibles and coinsurance requirements. With respect to Medicaid, providers participating in a state’s Medicaid program are required to accept Medicaid payment as payment in full and are prohibited from collecting any additional amounts from Medicaid patients, other than authorized cost sharing amounts. Patients with private health insurance might only be balance billed when the insurer and provider lack an in-network agreement, while uninsured patients might be held responsible by the provider for the entire price charged (see table 1).\nCMS sets rates and pays claims for Medicare. Medicare payments, including beneficiary co-payments, for helicopter air ambulance service totaled approximately $460 million in 2014. Although CMS typically sets Medicare payment rates by considering whether payments are adequate for a relatively efficient provider, Medicare rates for air ambulance service were last updated in 2002 as part of a negotiated rulemaking that involved public and industry stakeholders. Beginning with the negotiated rulemaking in 2002 through 2006, CMS phased in an air ambulance fee schedule as part of a series of Medicare reforms that were enacted into law in 1997. The fee schedule redistributed payments among various types of ambulance services and effectively raised the payment amounts for air ambulance service. Medicare air ambulance payments include three components: a base payment, a separate payment for mileage to the nearest appropriate facility, and a geographic adjustment factor. In addition, there is a permanent add-on payment that includes a 50 percent increase to both the base and mileage rate for rural air ambulance transports. Since 2006, CMS has adjusted rates annually, primarily based on inflation.\nAlthough the prices, routes, and services of the air ambulance industry are largely deregulated, DOT oversees certain aspects of the industry. As air carriers, air ambulance providers fall under the ADA, which was designed to promote “maximum reliance on competitive market forces” as the means to best further “efficiency, innovation, and low prices” as well as “variety quality… of air transportation.” The ADA also contains a provision that explicitly precludes state-level regulation of matters related to air carrier rates, routes, and services. Beyond aviation safety, which DOT’s Federal Aviation Administration (FAA) oversees in a variety of ways, DOT oversees certain aspects of the industry. DOT’s involvement with the air ambulance industry falls within the Office of the Secretary of Transportation (OST). For example, as an air carrier, an air ambulance provider must obtain economic authority from DOT before offering service. In addition, OST’s Office of the General Counsel issues guidance and opinion letters regarding the ADA provision that precludes state level regulation of air ambulance prices, routes, and services. Furthermore, the Office of the Assistant General Counsel for Aviation Enforcement and Proceedings (Enforcement Office), within OST’s Office of the General Counsel, has discretionary authority to investigate whether an air carrier, including an air ambulance provider, has been or is engaged in an unfair method of competition or an unfair or deceptive practice in air transportation or the sale of air transportation.\nStates are involved with air ambulances in several ways and some have taken action to bring awareness to air ambulance pricing. State emergency medical services offices are responsible for licensing medical services such as emergency medical technicians and ground and air ambulances. In addition, states have the authority to regulate the business of insurance and, as a part of this function, may review insurers’ health insurance plans and premium rates. Furthermore, each state administers and operates its Medicaid program, including setting payment rates, within broad federal requirements. States across the country have attempted to gather information or raise awareness regarding air ambulance pricing. For example, state governments have held hearings, including Maryland (2015) and Pennsylvania (2017); New Mexico recently completed a study, and Florida has convened a working group to examine air ambulance pricing issues. Meanwhile Montana developed a public website that features “frequently asked questions” about air ambulance service and provides information on pricing and the extent of contracting with insurance by provider.", "", "Between 2010 and 2014, the median prices charged for helicopter air ambulance service by providers approximately doubled. Specifically, according to Medicare data we analyzed, the median price providers charged for helicopter air ambulance transports increased 113 percent between 2010 and 2014. According to private health insurance data we analyzed, the median price charged increased 76 percent between 2010 and 2014 (see fig. 2). For comparison, the consumer price index increased by about 8.5 percent between 2010 and 2014. In 2010, a transport priced at approximately $30,000 was at the 95th percentile— meaning 95 percent of all prices charged were below that amount— according to both Medicare and private health insurance data. In 2014, a transport priced at the same amount—about $30,000—was the median, or 50th percentile, of all prices charged according to these data, while a transport of approximately $50,000 was at the 95th percentile. The increase in median prices charged from 2010 to 2014 may be part of a longer-term trend. For example, representatives from Air Methods, the largest air ambulance provider, reported that they have increased the average price charged per transport from $13,000 in 2007 to $49,800 in 2016—an increase of 283 percent over the past decade.", "Air ambulance transports, like many medical services, are generally paid at rates lower than the prices charged. Representatives from the eight providers we spoke to reported that transports of Medicare, Medicaid, and self-pay patients made up approximately 46 to 71 percent of their transports and were paid at particularly low rates. For example, according to Medicare data, median payments per transport increased only slightly between 2010 and 2014—from $6,267 in 2010 to $6,502 in 2014. According to provider representatives, Medicaid and self-pay payments are often lower than Medicare payments. See figure 3 for information on the proportion of provider transports and range of average payment amounts by key payer as reported to us by the eight selected providers in 2016. In contrast to the payment received, these selected providers reported average prices charged ranging from $13,200 to $49,800 per transport in 2016.\nRepresentatives of the providers we spoke to said that privately insured patients account for the highest percentage of their revenue. For example, seven of the eight providers indicated that the majority of their transport revenue comes from privately insured patients, which accounted for a minority (22 to 41 percent) of their overall transports in 2016. According to an HCCI report, which includes data from three large, national private health insurers, the median payment these insurers paid per transport increased by 70 percent from 2010 to 2014, from about $15,600 to $26,600. As with prices charged, payment amounts increased in range between these years, with the upper end payment increasing more substantially than the lower end payment. Although HCCI data includes approximately 40 million individuals with employer-sponsored insurance, according to an HCCI representative, patients in rural areas may be underrepresented in the data. Even though the HCCI data show private insurance payments increasing largely in parallel to price increases from 2010 to 2014, representatives from five of the eight providers we spoke to noted that payment rates from private insurance have been declining. Representatives from one provider noted that low payments from insurers occur in certain geographical areas, particularly rural areas, where one insurer covers a large proportion of the population and has a large share of the insurance market.", "National data on balance billing and on the extent to which providers are contracted with insurers are unavailable. Due to a lack of such information, it is unclear to what extent patients with private health insurance are billed by providers for the difference between the air ambulance price charged and the insurer’s payment (balance billing). Some states have attempted to collect balance billing information from patients. For example, Montana collected information on 39 instances of balance billing in 2015 and 2016. Likewise, Michigan reviewed 19 air ambulance balance billing cases between 2013 and 2016 which had an average balance bill of about $31,000.", "", "Selected providers reported that factors such as transport costs and volume, payer mix, and competition play a role in prices charged.", "Costs to provide air ambulance transports are high and relatively fixed. For example, according to Air Methods representatives, to operate one air ambulance helicopter requires a staff of 13—4 pilots, 4 nurses, 4 paramedics, and a mechanic—in order to maintain around-the-clock readiness and be ready to deploy at any time. In contrast, helicopter tour operators would generally only need to employ a pilot for times when flights are arranged. Air ambulance providers’ costs for air ambulance service are relatively fixed—meaning they do not increase significantly when they complete more transports. For example, personnel and the costs of helicopter ownership are the same regardless of how often the helicopter is used. Providers we spoke to noted that a small portion of their costs—such as fuel—are variable, meaning they increase with the number of transports completed. To be profitable, and thus be in business and provide service, providers must earn sufficient revenues to cover their costs, including their fixed costs. To increase revenue, a provider must increase its number of transports and/or its prices charged. When a provider has a lower transport volume, then that provider must earn higher prices on average across transports in order to be profitable. Representatives from the eight selected providers we spoke to reported average costs per transport, given current transport volumes, of $6,000 to $13,000 in 2016.\nRepresentatives from the providers we spoke to agreed that average transport volume per helicopter has decreased but offered different perspectives on this change. According to the Atlas & Database of Air Medical Services, from 2010 to 2014, the number of air medical helicopters nationwide increased by more than 10 percent, from 900 to 1,020. Meanwhile, over the same time period, Medicare and HCCI data do not show a proportionate increase in the number of transports per Medicare or private health insurance beneficiary. Specifically, from 2010 to 2014, the number of air ambulance transports per 1,000 patients was flat for Medicare and decreased slightly among privately insured patients represented in the HCCI data. Representatives from three providers stated that there is an issue with overcapacity or oversaturation in the industry and that the helicopters being added to the industry are in areas with existing coverage and not serving additional demand, thereby reducing the average number of transports per helicopter rather than increasing access to patients previously not covered by the service. On the other hand, representatives from four other providers told us that the decrease in transports per helicopter is due to helicopters increasingly being located in rural areas where there is greater need, but less population density, leading to fewer transports per helicopter. As noted earlier, air ambulance providers are dispatched only in response to time- sensitive medical events so have limited control over transport volume once providing service to an area.", "Providers we spoke to said their mix of payers also affects prices charged. As noted earlier, providers reported that the majority of their revenue comes from private insurance. In order to increase this revenue from private insurance, providers must increase their prices charged. Representatives from six of the eight providers we spoke to said that they adjust prices charged to receive sufficient revenue from private health insurance to account for lower-reimbursed transports. Providers have limited ability to control the payer mix—the proportion of transports reimbursed by, for example, Medicare or private health insurance—as they do not turn away patients based on insurance coverage. Representatives from three providers report that the payer mix has shifted over time from private insurance to Medicare as the population ages. For example, one large independent provider reported a 13 percent shift in transport mix from private insurance to Medicare over a 10 year period, while a hospital-affiliated provider reported that since 2013, the percentage of its transports covered by Medicare has increased from 30 to 35 percent, while the percentage of privately insured patients has decreased from 39 to 33 percent. Price increases do not proportionately result in higher revenues when the majority of transports are paid at lower fixed reimbursement levels. For example, representatives from one provider explained that to increase revenue 3 percent, they have to increase prices charged by 15 percent.", "The overall competitive environment of the air ambulance industry may also play a role in air ambulance prices. As noted previously, patients do not have control over decisions allocating the use of emergency air ambulance service, such as the choice of air versus ground service or between providers. As a result, patients cannot avoid out-of-network air ambulance providers. In such an environment, providers may not lose transport volume as a result of raising prices or being out-of-network with private health insurance. Consequently, air ambulance providers are not subject to the price competition that typically occurs in competitive markets, where if prices are too high, consumers will find alternatives such as a lower-priced service or provider. Furthermore, the ADA preempts state-level regulation of prices, routes, and services of air carriers, including air ambulance providers. DOT’s guidance notes that once DOT has granted economic authority to an air ambulance provider, “the competitive marketplace, rather than state regulations” controls the provider’s prices, routes, and services.\nBased on the eight selected providers we spoke to, the large independent providers may have higher prices and be less likely to contract with insurers than hospital-affiliated providers. Representatives from the three large independent providers we spoke to reported average prices charged per transport of over $40,000 in 2016, while representatives from the five hospital-affiliated providers reported average prices that ranged from about $13,000 to about $31,000. In addition, representatives from the three large independent providers we spoke to noted they generally do not have contracts with insurers, which, as noted earlier, leaves patients vulnerable to balance billing. For example, representatives from one large independent provider noted that they have contracts in place with fewer than 10 of the approximately 1,000 private insurance payers they work with per year—in other words, around one percent. A representative from a large independent provider noted that being out of network with insurance is advantageous to the provider because a patient receiving a balance bill will ask for a higher payment from the insurance company, which often results in higher payment to the air ambulance provider than having a pre-negotiated payment rate with the insurer. On the other hand, a representative from a small hospital-affiliated provider told us that as a non-profit, they feel obligated to contract with the largest insurer in their service area, in part because one of the hospitals the provider is affiliated with contracts with the insurer.\nThe nature of competition in the air ambulance industry may also be affected by the proportion of air ambulance helicopters operated by the three large independent providers, which is growing and may indicate increasing market concentration. Specifically, the three large independent providers reported operating 692 air ambulance helicopters in 2015 and 763 in 2016—an increase from about 66 to 73 percent of all helicopters in the industry. This growth may be due to mergers and acquisitions. For example, in January 2016, Air Methods acquired Tri-State Care Flight, which had a fleet of 22 helicopters. In April 2017, the second largest air ambulance provider, Air Medical Group Holdings (AMGH) announced that it had agreed to acquire Air Medical Resource Group, adding 62 bases across 15 states to its business. In addition, the three large independent air ambulance providers are for-profit and increasingly owned by private equity firms. For example, the largest provider in the industry, Air Methods, a publicly traded company, announced in March 2017 that it had entered into an agreement to be acquired by a private equity firm for a total transaction value of approximately $2.5 billion. Meanwhile AMGH is also held by a private equity firm and was purchased in 2015 for a reported $2 billion. The presence of private equity in the air ambulance industry indicates that investors see profit opportunities in the industry.", "Despite the above indications of factors that affect prices, an in-depth analysis of these factors is not possible due to lack of the following types of data.\nCosts to provide service: Data on providers’ costs to provide service is not readily available. The Department of Health & Human Services has reported there is no national comprehensive database of ambulance service costs available. Additionally, although the Centers for Medicare & Medicaid Services (CMS) has cost data for a portion of ambulance providers—those owned by hospitals—CMS found that these data had limitations, such as not distinguishing between air and ground ambulance transports. Recently, a study on the costs to provide air ambulance service was prepared by Xcenda, a health care consulting firm, on behalf of the Association of Air Medical Services, an association of air ambulance providers, but this study has limitations. The study notes its findings represent 51 percent of all air ambulance bases nationwide and therefore may not be generalizable to the whole industry. Representatives from four hospital-affiliated providers we spoke to noted they had declined to participate due to concerns over the study’s independence and data security. Furthermore, according to Xcenda representatives, the study was designed to assess the adequacy of Medicare’s air ambulance payment rates, which may give respondents an incentive to report high costs to justify higher Medicare payments.\nNumber of transports: As noted above, transport volume is a key factor in determining the total revenues earned and costs incurred to provide service. The FAA Modernization and Reform Act of 2012 required that that the FAA collect certain specified operations data for the air ambulance industry, including the number of annual transports, and report this information to Congress by 2014 and annually thereafter. In May 2017, FAA provided its first submission under the act to Congress. The submission contains a summary of data collected from helicopter air ambulance operators from April 1, 2015, to December 31, 2015.\nProvider information, including business model type and established prices charged: As noted above, the air ambulance industry may be increasingly concentrated, which could indicate a lack of competition in the industry such as relatively few providers setting prices for a large portion of the total market. However, industry-wide data are not available, such as prices charged by provider or providers’ business model types (hospital-affiliated, independent, or hybrid). Industry information may become more difficult to obtain as private equity firms increasingly own air ambulance providers. For example, upon completion of the acquisition noted above, Air Methods—the largest provider in the industry—will no longer be required to submit periodic reports to the U.S. Securities and Exchange Commission as is required of publicly held corporations, thereby eliminating a key source of publicly available information on the industry. As a result of the lack of industry wide data, it is unknown how the approximately 73 percent of helicopters operated by the three large providers translates into market share. Likewise, it is difficult to assess the nature of competition in the industry or even determine relationships between providers, such as what entity sets pricing for a particular provider. As noted earlier, the helicopters operated by the large independent providers include those contracted to hospital-affiliated providers that set their own prices, as well as hybrid programs where the helicopter is branded as part of the hospital system, but where the independent provider sets the prices. For example, representatives from AMGH note that one of their subsidiaries—Air Evac Lifeteam—is not generally contracted with hospitals, but another AMGH subsidiary— Med-Trans—operates mostly hospital-affiliated bases. However, according to these representatives, AMGH handles its own pricing, billing, and collections across 97 percent of all of its bases.", "The 26 stakeholders we interviewed identified three types of potential actions to address air ambulance pricing, as shown in table 2. Stakeholders expressed mixed views on two of these actions—modifying the ADA and raising Medicare rates. None disagreed with the third action of increased data collection for the purposes of investigations—such as unfair or deceptive practices—or increased transparency regarding prices.", "Half of the 26 stakeholders we interviewed supported modifying or reevaluating the ADA as it pertains to the air ambulance industry in order to allow states to have more of an oversight role. Some stakeholders said that when the ADA was enacted in 1978, the air ambulance industry was in its infancy, and so the ADA was not formulated with the unique aspects of the air ambulance industry in mind. In addition, some stakeholders told us states are best suited to regulate air ambulance service, noting that states have an incentive to protect patients from large balance bills while also ensuring access to the service. Some states, such as North Dakota, have passed legislation designed to address air ambulance billing, legislation that has subsequently been struck down in court. In particular, in 2015, the North Dakota legislature passed a statute intended to protect patients from large balance bills. It required, among other things, that air ambulance providers submit documentation indicating that they are participating providers with health insurers in the state that cover a certain proportion of the state’s population in order to be listed on a “primary call list” for dispatching. The state statute also required that air ambulance providers make their fee schedules available to certain requesters, including potential patients, upon request. However, the state statute was challenged in federal district court and in March 2016, the U.S. District Court for the District of North Dakota struck it down as being preempted, ruling that the call list requirement was “precisely the type of state regulation Congress sought to prevent…in the ADA.” North Dakota officials said they would like to see the ADA modified so they could implement such legislation. Subsequent to the ruling, North Dakota enacted a new statute in 2017 which is designed to increase transparency regarding an air ambulance provider’s health insurance network status in non-emergency situations. North Dakota officials we spoke to noted that the most recent legislation, which was signed by the governor in April 2017, will likely be challenged in court.\nEight stakeholders opposed modifying the ADA and seven instead suggested raising Medicare rates as an approach to addressing high air ambulance prices. An air ambulance provider association noted that modifying the ADA could create a “patchwork” of regulations nationwide, disrupting the regulatory certainty the industry has been built upon. This association also noted that since air ambulance providers do not turn away patients based on their ability to pay, providers have limited options to cover their costs. Two stakeholders noted that increased Medicare rates would reduce the need for air ambulance providers to increase prices, thereby alleviating pressure on patients with private health insurance.\nAlthough raising Medicare rates across the board for air ambulance service is being promoted by some stakeholders, particularly the large independent providers, 10 other stakeholders we spoke with disagreed with this approach as a solution to addressing air ambulance pricing issues. Raising air ambulance Medicare rates is being promoted through a national campaign sponsored by several providers and a key industry association which supports legislation to raise air ambulance Medicare rates. Meanwhile, 10 stakeholders we spoke with—2 providers, 1 association representing providers, 4 groups familiar with air ambulance business and billing, 1 selected state, 1 association of state officials, and 1 insurance association—disagreed with raising Medicare rates as a way to address balance billing. Some of these stakeholders noted that increasing Medicare rates could incentivize further growth in the industry, which could reduce the average number of transports per helicopter, putting pressure on providers to increase prices charged—thereby exacerbating the problem. Further, industry growth may be an indication that Medicare rates are not too low. We have previously reported that when rates are set too low, access to appropriate care for patients covered by Medicare may be adversely affected. However, the growth in the number of air ambulance helicopters indicates that providers are still deciding to provide service under existing Medicare rates.", "Five of the 26 stakeholders we spoke to—including three groups familiar with air ambulance business and billing and two providers—told us that DOT should collect information to better understand the air ambulance industry. In addition, the federal standards for internal control state that management should identify information needed to achieve objectives and address risks. Such risks in the air ambulance industry could include:\nMatters related to industry concentration: The ADA provides that in carrying out its economic regulation authorities, DOT should consider, among other things “avoiding unreasonable industry concentration,” when determining what is in the public interest and consistent with public convenience and necessity. As noted earlier, three large air ambulance providers operate 73 percent of the total helicopters in the industry in 2016, although the extent to which this translates into market share is unknown.\nUnfair or deceptive practices: DOT could potentially use such information to investigate concerns or complaints of unfair or deceptive practices, which, as noted previously, DOT through its Enforcement Office has discretionary authority to investigate.\nAn official from DOT’s Enforcement Office noted that DOT has not exercised its discretionary authority to investigate air ambulance providers. DOT officials noted that DOT needs additional information about the overall industry and that there is a dearth of information about the industry generally. For example, the officials told us DOT has received very few air ambulance complaints. In particular, the officials said they searched their database and found a small number of complaints since 2006. DOT officials noted they believe the small number of complaints may be due to consumers not thinking of DOT when encountering issues with air ambulance pricing, and instead filing complaints with other entities such as their health insurance or state department of insurance. As noted earlier, some states have collected such information—for example together Michigan and Montana collected 58 instances of balance billing since 2013. For the commercial airline industry, which is also subject to the ADA, DOT’s Enforcement Office gives consumers multiple options for filing airline service complaints, including through an online form that allows users to select from an extensive drop-down menu of U.S. and foreign air carriers. In May 2017, DOT added “air ambulance (all)” as an option on the online complaint form, with a field to manually enter an air ambulance provider’s name. However, the DOT website does not have online instructions on how to file air ambulance complaints. DOT’s Enforcement Office has a website with information such as how to file a complaint (by phone, mail, or online), what types of complaints to file (those about service other than safety or security issues), and how DOT uses the submitted information. It is unclear how, if at all, such information applies to air ambulance complaints. For example, DOT officials noted they would like consumers to know the boundaries of DOT’s jurisdiction regarding air ambulance service. Without communicating this and other aspects such as how to file an air ambulance complaint, DOT has limited ability to understand the industry including the nature of competition that could affect its decisions on whether to pursue investigations into potential unfair or deceptive practices.\nSome selected stakeholders suggested increased price transparency as a solution to address air ambulance pricing issues. In particular, nine stakeholders we spoke to—two providers, two groups familiar with air ambulance business and billing, two insurance associations, two selected states, and one group involved with consumer policy or research—noted that price transparency could provide benefits to providers and the industry, patients, insurance companies and other payers, hospitals, and first responders. Furthermore, the federal standards for internal control state that management should externally communicate information needed to achieve objectives and address risks. According to a DOT official, DOT enforces disclosure requirements due to the ADA’s focus on competitive market forces, which relies on consumers having accurate and timely information on which they can make decisions. For example, for commercial airlines, DOT’s Enforcement Office compiles a monthly Air Travel Consumer Report that includes consumer complaints submitted to DOT and is made available to the general public so consumers and others can compare the complaint records of individual airlines. Such consumer disclosure requirements are intended to enable consumers to make informed decisions on tradeoffs when selecting flights, considering such factors as provider, service quality, and price. DOT officials noted that air ambulance providers have not yet been included in the Air Travel Consumer Report but may be included if a provider reaches a certain threshold such as five complaints received in a month. However, as mentioned above, air ambulance patients may be unaware that they can file complaints with DOT. Furthermore, DOT lacks industry information to group complaints together and to identify patterns, particularly for large nation-wide providers which, as mentioned previously, operate across many states and may set prices for hybrid programs where the helicopter may be branded with a hospital’s name rather than the large provider’s name. Without more industry information, DOT is unable to put any such complaints into the context of the overall industry, both for the purposes of potentially investigating unfair and deceptive practices and for accurately compiling complaints for public reporting.\nAlthough DOT has required consumer disclosures for the commercial airline industry, it has not done so for the air ambulance industry, such as disclosing to patients the prices charged for services. For example, DOT has recently issued a final rule that, among other things, requires air carriers to disclose when flights involve any code-sharing arrangements and a supplemental notice of proposed rulemaking regarding the disclosure of baggage fees wherever fare and schedule information is provided to consumers. DOT officials note they have not made such requirements for the air ambulance industry due in part to the emergency nature of air ambulance transports. In particular, DOT officials questioned the value of consumer disclosure requirements for the air ambulance industry given that patients have little to no choice or ability to “shop.” However, a representative from a group involved with consumer policy or research noted that it is important that the public understands the price variation that exists among air ambulance providers, along with any potential limits of their insurance coverage. Furthermore, patients are not the only “consumers” of air ambulance service. Other stakeholders make decisions regarding air ambulance service such as insurance companies that pay for transports or hospitals and first responders that initiate transports. According to a representative from an association of insurers, transparency is the first step toward a rational approach to air ambulance costs—all stakeholders need to know such fundamental aspects as average prices charged, transport frequency, and the amount insurance and patients may pay. Without such information, stakeholders may not be able to make decisions that serve the patients’ best interest. For example, if hospital staff had information on the extent to which providers in the area were contracted with insurance, such staff may make more informed decisions in selecting providers that best serve the financial interests of the patient while still maintaining the same level of care.", "The ADA largely deregulated the domestic air carrier industry, including the air ambulance industry, and was intended to promote reliance on competitive market forces in order to best further quality service at low prices, among other things. Despite growth in the number of helicopters offering air ambulance service in recent years, lower air ambulance prices have not materialized. In fact, air ambulance prices have increased— approximately doubling between 2010 and 2014—and large providers report average prices charged of over $40,000 per transport in 2016. These increases pose risks to privately insured patients who may be held responsible by the provider for a portion of these charges (balance billing). Despite media reports of balance billing, DOT officials note they have received very few air ambulance complaints since 2006, possibly because consumers do not think of DOT as a place to file such complaints. DOT recently modified its online form to include air ambulance complaints, but the website does not have instructions on how to file such a complaint. Without taking such steps, DOT is missing potential information both for its understanding of the industry and for public disclosure to enable informed decision making. Furthermore, DOT lacks data needed to assess several key aspects of the industry, ranging from basic aspects—such as the composition of the industry by provider type, prices charged by provider, or number of overall air ambulance transports—to the more complex, such as the extent of contracting between providers and insurers or extent of balance billing to patients. However, information from the eight selected providers we interviewed indicate concerning trends about the nature of competition in the industry, such as increasing prices and growing concentration of the market among three large providers. Further, the increasing role of private equity in the industry could further exacerbate these trends while also reducing transparency. Without better information, DOT has limited ability to understand the industry including the nature of competition that could affect its decisions on whether to take investigative or enforcement actions. Likewise, without information on the industry and pricing, stakeholders such as hospital staff have limited ability to make air ambulance decisions, such as selecting a provider that best serves the patient’s financial interests without compromising the medical benefits air ambulance transports provide.", "To increase transparency and obtain information to better inform decisions on whether to investigate potentially unfair or deceptive practices in the air ambulance industry, we recommend the Secretary of Transportation take the following four actions:\nCommunicate a method to receive air ambulance-related complaints, including those regarding balance billing, such as through a dedicated web page that contains instructions on how to submit air ambulance complaints and includes information on how DOT uses the complaints.\nTake steps, once complaints are collected, to make pertinent aggregated complaint information publicly available for stakeholders, such as the number of complaints received by provider, on a monthly basis.\nAssess available federal and industry data and determine what further information could assist in the evaluation of future complaints or concerns regarding unfair or deceptive practices.\nConsider consumer disclosure requirements for air ambulance providers, which could include information such as established prices charged, business model and entity that establishes prices, and extent of contracting with insurance.", "We provided a draft of this report to DOT and CMS for review and comment. CMS and DOT provided technical comments which we incorporated as appropriate. In written comments provided by DOT (see app. II), DOT agreed with three of our recommendations but did not concur with our recommendation that DOT assess available federal and industry data and determine what information could assist in the evaluation of future complaints or concerns regarding unfair or deceptive practices. DOT noted that its analysis of a given complaint is based on the unique facts of each individual case, rather than on aggregate data. Therefore, DOT noted it does not believe an assessment of federal or industry data would yield information relevant to its determinations in future cases. We appreciate DOT’s comments; however, we believe that this recommendation is justified. As we note in the report, the federal standards for internal control state that management should identify information needed to achieve objectives and address risks. DOT has discretionary authority to investigate air ambulance providers but to date has not done so. Although collecting consumer complaints will help DOT identify areas for further investigation, further information will help put complaints into the context of the larger industry. DOT is currently limited in its ability to conduct such an analysis for the air ambulance industry due to data limitations noted in our report, involving such basic elements as relationships between providers including what entity sets prices or the given market share or number of transports per provider. As we noted in the report there has been some efforts to collect data, such as FAA’s efforts regarding the number of transports. These and other data are potential sources for DOT to better understand the helicopter air ambulance industry and evaluate whether consumer complaints indicate larger patterns of unfair and deceptive practices.\nWe are sending copies of this report to the Secretary of the Department of Transportation, the CMS Administrator, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or dillinghamg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.", "For this work we examined: (1) what is known about the prices charged for air ambulance service, (2) what is known about the factors that affect the prices charged for air ambulance service, and (3) what actions, if any, selected stakeholders believe the federal government should take regarding air ambulance pricing.\nTo describe what is known about air ambulance prices charged, we analyzed and assessed the reliability of information on prices charged and amount paid for 2010 and 2014 from Medicare claims data from the Centers for Medicare & Medicaid Services (CMS) and private health insurance data published by the Health Care Cost Institute (HCCI). Although HCCI data include data from three large national insurers and includes approximately 40 million individuals with employer-sponsored insurance, the data may not be generalizable to all privately insured patients. The years 2010 and 2014 were selected as they were the furthest back year and the most recently available year from HCCI, could be compared across both data sets, and allowed us to analyze changes over time. The price charged is the amount providers claim for two components: (1) the transport and (2) each mile that the patient is transported. The amount paid is the total amount allowed by the payer (i.e., the private insurer or Medicare); the patient may be responsible for a portion of that total amount through copays or deductibles. For Medicare, we excluded claims without both the transport and mileage components and excluded claims with mileage amounts over the 99th percentile.\nTo address possible issues with payments by secondary payers, we excluded claims where the payment amount was less than 10 percent of the price charged and claims that otherwise may have indicated a secondary payer. We also excluded any claims for transports with multiple patients or where an ambulance was dispatched but the patient died before being transported; these types of transports are paid at reduced rates. We also excluded outliers based on the price charged— excluding claims that were above the 99th percentile or below the 1st percentile for that year. We assessed the reliability of the data published by HCCI by reviewing related documentation, discussing the methods used with knowledgeable officials, performing data reliability checks, and comparing the findings to published information, and we determined the data were sufficiently reliable for the purposes of this report. Medicare claims data, which are used by the Medicare programs as a record of payments made to health care providers, are closely monitored by both CMS and contractors that process, review, and pay claims for Medicare- covered services. The data are subject to various internal controls, including checks and edits performed by the contractors before claims are submitted to CMS for payment approval. Although we did not review these internal controls, we assessed the reliability of Medicare claims and enrollment data by reviewing related CMS documentation and comparing our results to published sources. We determined that the Medicare claims and enrollment data were sufficiently reliable for the purposes of our reporting objectives.\nTo describe what is known about the factors affecting prices of air ambulance service, we also reviewed previous reports on costs to provide air ambulance service from the Department of Health and Human Services and by the contractor Xcenda as commissioned by the Association of Air Medical Services. We also interviewed eight selected providers and other stakeholders (as described below) regarding the prices and costs associated with their service and factors affecting prices and costs. To gauge the scope of the air ambulance industry, we also analyzed available information from the Atlas & Database of Air Medical Services, 2010—2016. Lastly, we interviewed representatives from associations regarding the costs to operate air ambulance and other on- demand air services, including the Helicopter Association International, Air and Surface Transport Nurses Association, National EMS Pilots Association, and International Association of Flight & Critical Care Paramedics. These associations were selected because they represent major cost categories of providing air ambulance service, including the aircraft and personnel.\nTo describe potential federal government actions to address the issue of air ambulance pricing, we reviewed documentation and interviewed officials from U.S. Department of Transportation (DOT) and the Department of Health & Human Services’ Centers for Medicare & Medicaid Services (CMS). In particular, we reviewed CMS documents regarding Medicare payments for air ambulance transports. We reviewed pertinent laws and regulations and DOT guidance, enforcement actions, and legal opinions, such as the Airline Deregulation Act of 1978, the federal statute (49 U.S.C. § 41712(a)) providing DOT the authority to investigate unfair and deceptive practices, and whether there were any actions by the DOT Enforcement Office regarding air ambulances. We also reviewed DOT Enforcement Office activities regarding commercial airlines, such as the consumer complaint online web form. We compared DOT’s practices and procedures for aspects of its air ambulance oversight to federal internal control standards related to information collection and external communication.\nTo describe stakeholder views on potential federal actions, we selected and interviewed 26 stakeholders, including representatives from: 8 air ambulance providers (3 large independent providers and 5 hospital- affiliated providers); 2 associations representing air ambulance providers; 6 groups familiar with air ambulance business and billing such as analysts and consultants; 4 states active in assessing air ambulance costs and prices charged; 2 associations of state officials; 2 associations representing health insurers; and 2 groups involved with consumer policy or research. Although these selected stakeholders are not generalizable to all air ambulance stakeholders, they were selected to represent a range of perspectives. For example, we selected air ambulance providers that represented a range in business model types (hospital-affiliated and independent), a range of sizes (large and small), a range of known perspectives in the industry, and geographical dispersion. There are no available data on all providers that indicates industry-wide characteristics, such as a breakdown of providers by business model type or size. In addition, we selected stakeholders familiar with air ambulance business billing to capture expertise on business aspects and also a range of views; and selected states active in assessing air ambulance prices and costs and, to the extent possible, geographically dispersed.", "", "", "", "In addition to the contact named above, Heather MacLeod (Assistant Director), Melissa Bodeau, Stephen Brown, Christine Brudevold, James Cosgrove, Danielle Ellingston, Geoff Hamilton, Corissa Kiyan-Fukumoto, Emily Larson, Malika Rice, Oliver Richard, Daniel Ries, Daniela Rudstein, and Monica Savoy made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 3, 3, 3, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full h3_full h2_full", "h0_title", "h0_full", "h0_full", "h0_full", "h1_title h3_title", "h1_title h3_title", "", "h1_full", "h3_full h1_full", "h1_full", "h2_full", "", "h2_full", "h2_full", "", "h4_full h2_full", "h3_full h4_full", "", "", "", "" ] }	{ "question": [ "How did the price for helicopter air ambulance services act from 2010 to 2014?", "How do air ambulance providers handle patients who cannot pay?", "How much was the lower Medicare payment?", "When would patients still be charged?", "Why does the extent of balance billing remain unclear?", "What factors may affect what air ambulance prices would be charged?", "Why would prices differ with private health insurance?", "Why would prices differ for the factor of market concentration?", "Why can't we analyze all the factors regarding air ambulance prices charged?", "What issues did stakeholders raise with air ambulance pricing?", "How did the stakeholders’ views on the different proposals differ from each other?", "What do federal internal control standards state surrounding information communication?", "What action has DOT taken regarding air ambulances?", "Why has DOT stated they have not taken action?", "Why has DOT not received much information from consumers?", "What does DOT’s lack of information mean for making decisions regarding air ambulance decisions?", "What is the role of helicopter air ambulances?", "What potential issues arise surrounding the fact that the choice to use air ambulances is usually due to life-or-death situations?", "What was GAO asked to do regarding air ambulance pricing?", "What did GAO do to create their report?", "What are the responsibilities of the Secretary of Transport?", "What did DOT agree with regarding these recommendations?", "What was GAO's response to DOT's disagreement?", "What did DOT and CMS provide through the report?" ], "summary": [ "Between 2010 and 2014, the median prices providers charged for helicopter air ambulance service approximately doubled, from around $15,000 to about $30,000 per transport, according to Medicare data from the Centers for Medicare & Medicaid Services (CMS) and private health insurance data.", "Air ambulance providers do not turn away patients based on their ability to pay and receive payments from many sources depending on the patient's coverage, often at rates lower than the price charged.", "For example, the Medicare median payment was $6,502 per transport in 2014.", "Air ambulance providers might bill a privately-insured patient for the difference between the price charged and the insurance payment—a practice called balance billing—when the provider lacks an in-network contract with the insurer.", "However, due to a lack of information it is unclear to what extent patients are balance billed.", "Factors such as a provider's proportion of transports provided by payer and competition may play a role in air ambulance prices charged, but data to assess these factors are not available.", "For example, selected providers reported that they adjust prices to receive sufficient revenue from private health insurance to account for certain lower-paid transports, such as those covered by Medicare.", "Price increases may also be tied to the industry's characteristics such as apparent market concentration—the three large independent providers reported operating 73 percent of the industry's total helicopters in 2016.", "An analysis of these factors is not possible due to a lack of currently available data such as the number of transports or the industry's composition by provider.", "Selected stakeholders we spoke to proposed actions to address air ambulance pricing issues, including (1) raising Medicare rates, (2) allowing state-level regulation of air ambulance prices, and (3) improving data collection for the purposes of investigations and transparency regarding prices.", "Stakeholders expressed mixed views on the first two proposals but none disagreed with the third.", "Federal internal control standards state that management should identify and communicate information needed to achieve objectives and address risks.", "The Department of Transportation (DOT) has discretionary authority to investigate potentially unfair practices in air transportation or the sale of air transportation, but has not exercised this authority in regards to helicopter air ambulances.", "DOT officials said they need additional information about the air ambulance industry.", "For example, DOT officials note that they have received few air ambulance complaints since 2006 and report that consumers may not think of DOT as the place to complain. Although DOT recently modified its online form to include air ambulance complaints, it has not communicated how to file complaints.", "Without doing so and obtaining more industry data, DOT is missing important information needed to put complaints into the context of the overall industry that could affect its assessment on whether to pursue investigations. Further, stakeholders such as hospital staff could benefit from greater transparency as they currently have limited ability to make air ambulance decisions that serve both the financial interests and medical needs of the patient.", "Helicopter air ambulances reduce transport times for critically ill patients during life-threatening emergencies.", "Although patients typically have little to no choice over the service or provider given the often emergency nature of the transports, they might be billed for charges that have potentially devastating financial impacts.", "GAO was asked to review air ambulance pricing. This report examines: (1) the prices charged for air ambulance service, (2) the factors that affect prices, and (3) stakeholders' views on any actions the federal government could take to address air ambulance pricing.", "To answer these questions GAO analyzed 2 years of data (2010 and 2014—the latest available) on prices from CMS and a private health insurance database; interviewed 26 stakeholders, such as 8 air ambulance providers chosen to represent a range of types (hospital-affiliated and independent) and sizes; and interviewed DOT and CMS officials.", "The Secretary of Transportation should: (1) communicate a method to receive air ambulance, including balance billing, complaints; (2) take steps to make complaint information publicly available; (3) assess available data and determine what information could assist in the evaluation of future complaints; and (4) consider air ambulance consumer disclosure requirements.", "DOT concurred with all but the third recommendation, stating additional information is not needed for such purposes.", "GAO stands by the recommendation, as discussed in this report.", "DOT and CMS also provided technical comments which were incorporated as appropriate." ], "parent_pair_index": [ -1, -1, 1, 1, 3, -1, 0, 0, 0, -1, 0, 0, -1, 3, 4, 4, -1, 0, -1, 2, -1, 0, 1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 4, 4, 4, 4 ] }
CRS_R44671	{ "title": [ "", "Introduction", "Corporate Tax Differentials Under Current Law", "The Corporate \"Double\" Tax", "Tax Preferences and Effective Tax Rates", "Treatment of Debt Finance", "Treatment of Foreign Source Income", "Estimates of Differential Effective Tax Rates", "Methods of Addressing Corporate Tax Distortions", "Full Integration", "Taxing at the Shareholder Level: Modified Partnership", "Taxing at the Shareholder Level: Mark to Market", "Taxing Corporate Income at the Corporate Level", "Taxing Dividends at the Shareholder Level and Retained Earnings at the Corporate Level", "Partial Integration: Dividend Relief", "Taxing at the Shareholder Level: Dividend Deductions", "Taxing at the Firm Level: Dividend Exclusion", "Approaches Also Addressing Debt", "Issues" ], "paragraphs": [ "", "In January 2016, Senator Orrin Hatch, chairman of the Senate Finance Committee, announced plans for a tax reform that would explore corporate integration. Corporate integration involves the elimination or reduction of additional taxes on corporate equity investment that arise because corporate income is taxed twice. The corporation pays corporate tax (at 35% for large corporations) on its taxable income. Individuals pay individual income taxes on dividends and capital gains (which arise from corporate retained earnings) when realized. This system produces differential tax burdens, potentially discouraging the realization of gains on the sale of corporate stock and favoring noncorporate equity investment over corporate investment, debt finance over equity finance, and retained earnings over dividends. One goal of corporate integration is to reduce or eliminate these distortions. The focus on corporate tax integration differs from the approach in some recent tax reform plans that have proposed broadening the base of the corporate tax, reducing the corporate tax rate, and revising the tax treatment of foreign source income.\nThis report provides an overview of CRS Report R44638, Corporate Tax Integration and Tax Reform , by [author name scrubbed], which contains a detailed analysis of corporate tax integration issues, data sources, and documentation.\nCorporate tax integration was the focus of a 1992 Treasury study, which recommended approaches to integration that reduced or eliminated taxes at the shareholder level while retaining taxes at the corporate level, including an exclusion of dividends for shareholders. Over the years, taxes on shareholders have been reduced. Dividends and capital gains are typically taxed at rates of 15% or 20% (whereas the top ordinary income tax rate is 39.6%), plus, for some high-income taxpayers, an additional 3.8% tax that applies to passive investment income in general.\nSeveral important factors in considering proposals have changed since 1992, aside from the lower shareholder taxes. One is the increased importance of a global economy and multinational firms with investments and activities in many countries. These firms' choices about the location of investment and profits are affected by firm-level rather than shareholder-level taxes. A second is that the fraction of shareholders who are not subject to U.S. shareholder taxes has increased. Currently only about a quarter of the corporate stock of U.S. firms is estimated to be owned by shareholders subject to U.S. individual tax (compared with about half in 1992). Inflation has declined, affecting tax rates. Tax-favored intangible assets, which are more important in the corporate sector, have also grown in importance.", "", "The United States has a \"classical\" corporate tax system, modified by lower taxes on dividends and capital gains. Corporate taxable profits are subject to a 35% rate for large corporations. Firms distribute after-tax profits as dividends or retain earnings for investment; the latter increases the firm's value, creating capital gains.\nIf all profits were taxed at the statutory rate, distributed as a dividend, and then taxed at ordinary rates to a shareholder in the 35% bracket, the total tax on a corporate investment would be 58% (a 35% corporate tax and an additional 35% on the remaining 65% of profit) compared with a tax rate of 35% on noncorporate investment, for a 23 percentage point difference. Those effects, however, are smaller because of favorable treatment of dividends and capital gains (the top rate is 23.8%); options to invest stock through tax-exempt accounts, such as retirement plans, that pay no shareholder-level tax; and tax preferences that lower the effective corporate tax rate more than the effective noncorporate rate.\nTax treatment at the shareholder level depends on the type of shareholder. As noted above, most stock is held in forms not subject to U.S. individual income tax. Shareholders are treated differently if they are (1) U.S. individuals (a 25% share), paying an estimated tax rate of 13.7%; (2) U.S. tax-exempt entities and tax deferred entities (a 50% share) paying no tax, or (3) foreign shareholders (a 25% share) paying a 3.2% estimated U.S. tax rate. The tax rates at the shareholder level are paid on income net of the corporate effective tax rate (estimated to be about 20% overall for new investment).\nThe data on shareholder distribution do not include U.S. subsidiaries of foreign firms, whose holdings are estimated at 79% of the holdings of foreign shareholders in U.S. parented firms.\nIncome of pass-through (referred to as noncorporate) businesses is subject only to the individual tax, with income allocated to each owner. These firms include sole proprietorships, partnerships (including limited liability corporations), and Subchapter S firms that are corporations but elect to be taxed as pass-throughs. The overall statutory tax rate is estimated to be 28% (although the effective rate is lower).", "In determining the effect of the business tax system and in designing integration proposals, an important issue is that of tax preferences: provisions that cause the effective tax rate to be less than the statutory rate. The most important tax preference that affects burdens on domestic investment is accelerated depreciation, which allows deductions for costs to be recovered faster than is justified by the economic decline in the value of the asset (including an immediate deduction for investment in intangibles). Other preferences are the production activities deduction, which allows a deduction for domestic production in certain industries, and the tax credit for intangible investment in research. Foreign source income is also taxed at a lower rate.", "If firms borrow to finance investments, the interest is deducted. The deduction of interest goes beyond eliminating the corporate tax on profits attributable to debt finance, because the rate at which profit is effectively taxed is lower than the rate at which interest is deducted due to tax preferences and inflation. Interest income, including the inflation portion of the nominal interest rate, is subject to tax by creditors, but the tax rates are lower than the corporate rate (estimated at 24%). In addition, only a small fraction of that interest, 19%, is estimated to be subject to tax. Interest paid to foreign persons is subject to a negligible withholding tax.", "The growth in the importance of foreign source income has changed the way corporate integration is viewed, compared with the focus in 1992. The U.S. corporate level tax is largely imposed on a source basis, reflecting the taxes in the jurisdiction where the activity takes place. Thus, a lower corporate tax generally encourages more equity (although not necessarily debt-financed) investment in the United States as compared with foreign countries. The shareholder and creditor taxes are imposed on a residence basis and apply regardless of investment location.\nThe corporate tax is technically imposed on worldwide income, but tax is not paid on the earnings of foreign subsidiaries in most cases until and if income is repatriated (or paid as a dividend to the U.S. parent). Because a fraction of profits is reinvested permanently (as plant and equipment), some share of this income is never taxed. In addition, foreign source income is eligible for credits against U.S. tax liability for taxes paid to foreign governments. Because excess credits from higher-tax countries can be used to offset U.S. tax liability from low-tax countries, the U.S. effective tax rate is small. Overall, the average tax rate paid on foreign source income is estimated at 17.4%, 14.1% paid in foreign taxes and a residual tax of 3.3% paid to the United States.", "One objective of corporate tax integration is to reduce the distortions caused by the current tax treatment. The estimated magnitude of the distortions arising from the corporate tax and other elements of the tax system can be shown through effective tax rates on the returns to new investment at the margin. Estimates presented are the effective corporate tax alone (the firm-level tax), an effective total corporate tax including shareholder or creditor taxes, and an effective tax rate on unincorporated businesses including all taxes. Table 1 shows the effective tax rates using the basic assumptions about shareholder and noncorporate average statutory tax rates and the Congressional Budget Office's (CBO's) alternative set of assumptions of these statutory tax rates.\nFor domestic equity investments, the overall effective tax rate at the firm level is estimated at 19.7%, or only 56% of the statutory rate of 35%. Across groups of assets, tax rates range from -63.3% for intangible investments in research to 30.8% for nonresidential structures. These rates compare to estimated marginal rates on foreign investment of 13%. Additional shareholder taxes add less than three percentage points. The total corporate tax rate is estimated at 22.4%, only slightly above the rate on unincorporated business of 21.1%.\nReturns on debt-financed investment in the corporate sector are subject to firm level negative effective tax rates of -53.5%; shareholder tax rates lower the negative tax (or subsidy) to -44%. The return on investment by unincorporated business is estimated to have a negative tax rate of -20.6%.\nA weighted average of debt and equity has a firm-level tax of 5.7%, an overall corporate tax rate of 7.8% and a rate on unincorporated business of 11.8%.\nThese estimated rates show a small difference in tax burden overall between equity invested in the corporate versus the noncorporate sector, but show large differences across assets and large differences between debt and equity.\nUnder current law, the incentive to retain earnings because part of capital gains (estimated at half) generated by those earnings escapes tax is small, both because of the low rates and the significant share of stock held by nontaxable entities. For individuals subject to the income tax, the estimated tax rate is 17% and half of that rate is 8.5%. For foreign shareholders, dividends are taxed at 5.9% on average and capital gains are not taxed, so the differential is 5.9%. Weighted for all taxpayers the difference between the tax on dividends and capital gains is 3.6%. Similarly, the incentive not to realize gain on stocks is likely small because of the low rate of 17% is paid by only a quarter of shareholders, for a weighted average of 4.25%.", "A number of approaches to integration are possible. These approaches can be divided into three basic types: (1) full integration; (2) partial integration, which addresses only dividends; and (3) proposals that also address the treatment of interest. They also depend on many other features, including the pass-through of preferences, which are addressed in more detail in CRS Report R44638, Corporate Tax Integration and Tax Reform .", "Full integration would eliminate one of the levels of taxation and apply both to dividends and retained earnings. Some approaches include taxing only at the shareholder level, some include taxing only at the corporate level, and some include a combination of both.", "A modified partnership treatment would impute corporate taxable income to shareholders based on who receives dividends. The income would be taxed at ordinary rates. Tax preferences would be passed through to shareholders. The corporation would collect a withholding tax that could then be credited to shareholders. The tax could be made refundable, so that tax-exempt investors would pay no tax, or it would be nonrefundable, so that foreigners and tax-exempt shareholders would pay the corporate level tax, and taxable individuals would pay tax at the individual rate. For administrative reasons, and because shareholders may face taxes larger than their distributions, a standard partnership treatment is not generally believed to be feasible.", "Mark to Market would repeal the corporate tax for publicly traded firms, tax dividends and capital gains at ordinary rates, and mark the value of stock to market—that is, tax capital gains on the stock regardless of whether it was sold. This approach would eliminate preferences. Privately traded firms would receive pass-through treatment. Mark-to-market would impose a tax on tax-exempt shareholders at any level (although a tax could be imposed on them directly). One issue with this approach is that shareholders would be taxed on income not received.", "An alternative to taxing shareholders and eliminating the corporate level tax is to impose the corporate level tax and eliminate taxes on dividends and on capital gains from corporate stock. This approach would lose some revenue, but would simplify the tax system. Probably the major objection to this approach is that the firm level tax determines the allocation of investment for multinational firms, and this approach would not reduce that tax. The current reduced rates on dividends and capital gains have taken a step in this direction.", "The final full integration proposal would tax dividends to shareholders by allowing a corporate dividend deduction, while eliminating capital gains tax on corporate stock. This treatment is identical to the partial integration dividend deduction proposals, with the added effect of eliminating capital gains taxes.", "The second major category of proposals removes the double tax on corporate income only for dividends. As with full integration, the alternative is to tax at the firm level or individual level.", "One approach would allow a dividend deduction with a withholding tax. Shareholders would pay tax on dividends plus the withholding tax and receive credits for the withholding tax (which could be refundable or nonrefundable). Dividend relief proposals often limit the relief to dividends paid out of taxable income. There are indications that Chairman Hatch is considering this approach.", "This approach would allow dividends to be excluded from shareholders' income and thus only the corporate tax would apply. As with the dividend deduction, preferences could be dealt with by allowing excluded dividends paid out of taxable income. This approach was proposed in 1992 although currently it may be less attractive because of global concerns.", "Some integration proposals have also encompassed debt. In 1992, one Treasury proposal was to disallow interest deductions for both corporate firms and unincorporated businesses. Disallowing interest deductions could be combined with integration approaches, except for mark-to-market.", "Three basic issues that relate to corporate integration policy are the revenue impacts, the administrative concerns, and the economic efficiency effects.\nRevenue impacts are an important consideration in any tax reform proposal. Table 2 provides estimates for the proposals (in the form of effective average tax rates), which show the cost as a percentage of current corporate tax revenues.\nThese estimates suggest that allowing refundable credits or mark to market do not appear feasible if revenue neutrality is an objective. Although the other proposals lose revenues, offsetting them with restrictions on debt or other base-broadening provisions would be possible. Mark to market could also be feasible if taxes are imposed directly on exempt or largely exempt firms.\nSome proposals face considerable administrative barriers, especially mark to market, which would require tax payment when income is not realized. Most proposals would add complications for shareholders, but mark to market would simplify at the corporate level. Providing tax credits to creditors if interest is subject to a withholding tax might be difficult because of the tracing of interest payments.\nEfficiency gains reflecting the traditional goals of integration are limited, with the exception of reducing the debt-equity distortion and potentially eliminating distortion across assets within the corporate sector under mark to market.\nSimilarly, most proposals would not have significant effects on the international allocation of capital, repatriation, profit-shifting and inversions. Disallowing deductions for interest would eliminate some methods of profit shifting and make inversions less attractive. Mark to market would create a residence-based tax, which would provide efficiency gains in all areas: allocation of capital, repatriation, profit-shifting, and inversions." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 1, 2, 3, 3, 3, 3, 2, 3, 3, 2, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h0_title h1_title", "h1_full", "", "", "h0_full", "", "h2_title h1_full", "h2_title h1_full", "h1_full", "h2_full", "", "h1_full", "h1_full", "", "", "h1_full", "h2_full" ] }	{ "question": [ "What plans did Senator Orrin Hatch announce for a tax reform?", "What is corporate integration in regard to this tax reform?", "Why was this system often considered inefficient?", "What concerns have become issues in almost all tax reforms?", "What was considered to approach the integration?", "What would full integration entail?", "How would tax and credit be treated in regard to shareholders?", "What is a second way to treat shareholder taxes?", "What is a third way to treat shareholder taxes?", "What would partial integration entail?", "What is another component that could be integrated?", "How does the report compare the integration proposals?", "What affects revenue losses?", "How can these losses be reduced?", "What is the general consensus on the gains and losses of efficiency of different proposals?", "What is the feasibility of a mark-to-market proposal?", "What would likely lead to efficiency gains?" ], "summary": [ "In January 2016, Senator Orrin Hatch, chairman of the Senate Finance Committee, announced plans for a tax reform that would explore corporate integration.", "Corporate integration involves the elimination or reduction of additional taxes on corporate equity investment that arise because corporate income is taxed twice, once at the corporate level and once at the individual level.", "Traditional concerns are that this system of taxation is inefficient because it (1) favors noncorporate equity investment over corporate investment, (2) favors debt finance over equity finance, (3) favors retained earnings over dividends, and (4) discourages the realization of gains on the sale of corporate stock.", "Increasingly, international concerns such as allocation of investment across countries, repatriation of profits earned abroad, shifting profits out of the United States and into tax havens, and inversions (U.S. firms using mergers to shift headquarters to a foreign country) have become issues in any tax reform, corporate integration included.", "The report outlines several approaches to integration.", "Full integration would address both dividends and retained earnings.", "Tax could be imposed at the shareholder level with allocation of income and withholding (a modified partnership treatment). Credits for withheld taxes would be provided to shareholders, and credits could be made nonrefundable for tax-exempt and foreign shareholders.", "A different full integration approach would eliminate shareholder taxes and tax only at the firm level.", "A third would tax at the shareholder level and not the firm by imposing ordinary rates and taxing not only dividends and realized capital gains but also unrealized gains by marking shares to market prices (i.e., mark-to-market).", "Partial integration focuses on dividends and could provide either a dividend deduction by the firm (with a withholding tax and credits) or a dividend exclusion to the shareholder.", "Disallowing interest deductions in full or in part could be combined with most proposals.", "The report compares these proposals with respect to impact on revenue, administrative feasibility, and effects on both traditional and international tax choices.", "Shareholder allocation or dividend deductions with refundable credits produce relatively large revenue losses, as does mark-to-market.", "Nonrefundability and making modifications in mark-to-market can substantially reduce these revenue losses.", "Most proposals would have modest efficiency gains or losses.", "Mark-to-market would tax economic income and potentially produce a number of efficiency gains but may not be feasible on administrative grounds.", "Disallowing or restricting deductions for interest would lead to efficiency gains on a number of margins and provide revenue to help achieve revenue-neutral reforms." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, 1, 1, 1, 0, 0, -1, 0, 1, 0, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4 ] }
GAO_GAO-17-631T	{ "title": [ "Actions Needed to Address Growth in Improper Payments", "Multiple Factors Hinder Efforts to Determine the Full Extent of and Reduce Improper Payments", "Programs That Do Not Report Improper Payment Estimates", "Potentially Unreliable or Understated Estimates", "IGs Report Greater Agency Noncompliance", "Improper Payments Involving Fraud", "Potentially Inaccurate Risk Assessments", "Strategies for Reducing Improper Payments", "Root Cause Analysis", "Detective Controls", "Collaborating with Other Entities", "Opportunities Exist to Improve the Acquisition and Operation of IT and to Address Cybersecurity Challenges", "Cybersecurity Presents an Ongoing Challenge", "Challenges Remain in Reducing Unneeded Federal Facilities and Managing the Federal Fleet of Vehicles", "Challenges to Managing the Federal Vehicle Fleet", "GAO Contacts", "Related GAO Products", "Improper Payments", "Information Technology", "Federal Real Property and Vehicles", "Long-Term Fiscal Outlook" ], "paragraphs": [ "Improper payments remain a significant and pervasive government-wide issue. For several years, we have reported improper payments as a material weakness in our audit reports on the consolidated financial statements of the U.S. government. Since fiscal year 2003—when certain agencies began reporting improper payments as required by the Improper Payments Information Act of 2002 (IPIA)—cumulative reported improper payment estimates have totaled over $1.2 trillion, as shown in figure 1.\nFor fiscal year 2016, agencies reported improper payment estimates totaling $144.3 billion, an increase of over $7 billion from the prior year’s estimate of $136.7 billion. The reported estimated government-wide improper payment error rate was 5.1 percent of related program outlays. These figures do not include the Department of Defense’s (DOD) Defense Finance and Accounting Service Commercial Pay program because of concerns regarding the reliability of the program’s estimate, which I will discuss later in this statement. As shown in figures 2 and 3, the reported improper payment estimates—both dollar estimates and error rates—have been increasing over the past 3 years, largely because of increases in Medicaid’s reported improper payment estimates.\nFor fiscal year 2016, overpayments accounted for approximately 93 percent of the improper payment estimate, according to www.paymentaccuracy.gov, with underpayments accounting for the remaining 7 percent.\nAlthough primarily concentrated in three areas (Medicare, Medicaid, and the Earned Income Tax Credit), the reported estimated improper payments for fiscal year 2016 were attributable to 112 programs spread among 22 agencies (see figure 4).\nAgencies reported improper payment estimates exceeding $1 billion for 14 programs, as shown in table 1, and error rates exceeding 10 percent for 11 programs (see table 2).", "In our audit report on the fiscal year 2016 consolidated financial statements of the U.S. government, we continued to report a material weakness in internal control related to improper payments because the federal government is unable to determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce them. Challenges include programs that do not report any improper payment estimates or report unreliable or understated estimates, noncompliance issues, fraud, and potentially inaccurate risk assessments.", "We found that not all agencies had developed improper payment estimates for all of the programs and activities they identified as susceptible to significant improper payments. Eight agencies did not report improper payment estimates for 18 risk-susceptible programs (see table 3).\nBecause agencies did not report improper payment estimates for these risk-susceptible programs, the government-wide improper payment estimate is understated and agencies are hindered in their efforts to reduce improper payments in these programs. For example, the Department of Health and Human Services (HHS) did not report an improper payment estimate for Temporary Assistance for Needy Families, a program with outlays of over $15 billion for fiscal year 2016. HHS cited statutory limitations prohibiting the agency from requiring states to participate in an improper payment measurement for the program.\nAnother example is the U.S. Department of Agriculture’s (USDA) Supplemental Nutrition Assistance Program (SNAP). Although USDA has reported improper payment estimates for this program in prior years, the agency did not report an estimate for fiscal year 2016. In its fiscal year 2016 agency financial report, USDA stated that it was unable to validate data provided by 42 of the 53 state agencies that administer the program. USDA stated that it could not adjust for this unreliability and calculate a national error rate.", "Improper payment estimates for certain programs may be unreliable or understated. For example, in May 2013 we reported that DOD had major deficiencies in its process for estimating fiscal year 2012 improper payments in the Defense Finance and Accounting Service (DFAS) Commercial Pay program, including deficiencies in identifying a complete and accurate population of payments. The foundation of reliable statistical sampling estimates is a complete, accurate, and valid population from which to sample. As of October 2016, DOD was still developing key quality assurance procedures to ensure the completeness and accuracy of sampled populations. Therefore, DOD’s fiscal year 2016 improper payment estimates, including its estimate for the DFAS Commercial Pay program, may not be reliable. DFAS Commercial Pay’s reported program outlays are significant—approximately $249 billion for fiscal year 2016. Consequently, a small change in the program’s estimated error rate could result in a significant change in the dollar value of its improper payment estimate.\nAlso, flexibility in how agencies are permitted to implement improper payment estimation requirements can contribute to inconsistent or understated estimates. For example, in February 2015, we reported that DOD uses a methodology for estimating TRICARE improper payments that is less comprehensive than the methodology the Centers for Medicare & Medicaid Services (CMS) used for Medicare. Though the programs are similar in that they pay providers on a fee-for-service basis and depend on contractors to process and pay claims, TRICARE’s methodology does not examine the underlying medical record documentation to discern whether each sampled payment was supported or whether the services provided were medically necessary. On the other hand, Medicare’s methodology more completely identifies improper payments beyond those resulting from claim processing errors, such as those related to provider noncompliance with coding, billing, and payment rules.\nAs a result, the estimated improper payment error rates for TRICARE and Medicare are not comparable, and TRICARE’s error rate is likely understated. In addition, corrective actions for TRICARE improper payments do not address issues related to medical necessity errors—a significant contributor to Medicare improper payments. We recommended that DOD implement a more comprehensive TRICARE improper payment methodology and develop more robust corrective action plans that address the underlying causes of improper payments. In October 2016, DOD requested proposals for claim record reviews—including medical record reviews—to begin the process of incorporating medical record reviews in its methodology for calculating improper payment rates.", "Since fiscal year 2011, the Improper Payments Elimination and Recovery Act (IPERA) has required agencies’ inspectors general (IG) to annually report on the respective agencies’ compliance under the act. IGs at 15 of the 24 Chief Financial Officers Act (CFO Act) agencies found their respective agencies to be noncompliant under IPERA for fiscal years 2014 and 2015, the highest total since IGs began their annual compliance reviews. Although noncompliance has occurred across all six of the criteria listed in IPERA, the most common issues are noncompliance related to reporting and meeting improper payment reduction targets or reporting an error rate below 10 percent. Continued noncompliance further highlights the need for additional efforts to reduce improper payments.", "Fraud is one specific type of improper payment and is particularly difficult to identify and estimate. Fraud involves obtaining something of value through willful misrepresentation. Whether an act is fraudulent is determined through the judicial or other adjudicative system, which is one reason why fraud is not likely to be part of agencies’ annual improper payment estimates. According to Office of Management and Budget (OMB) guidance, agencies should refer matters involving possible fraudulent activities to the appropriate parties, such as the relevant Office of the Inspector General or the Department of Justice (DOJ).\nWhile improper payment estimates are not a measure of fraud, a lack of sufficient supporting documentation may mask the true causes of improper payments—including fraud. When payments lack the appropriate supporting documentation, their validity cannot be determined. It is possible that these payments were for valid purposes, but it is also possible that the lack of documentation could conceal fraudulent activities. For fiscal year 2016, HHS cited documentation errors as a major contributor to improper payments in its Medicare fee-for- service program, such as durable medical equipment and home health claims. We have found that these areas are also vulnerable to fraud, and recent cases continue to raise concerns.\nThe report on the Health Care Fraud and Abuse Control (HCFAC) program for fiscal year 2016 lists several examples of fraud specifically related to durable medical equipment and home health claims, including one case in which a doctor approved and certified in excess of 11,000 Medicare beneficiaries, who were not home bound, for home health care services between 2006 and 2011, resulting in nearly $375 million in fraudulent claims. For fiscal year 2016, HHS and DOJ reported that the federal government won or negotiated over $2.5 billion in health care fraud judgments and settlements through the HCFAC program. In fiscal year 2016, DOJ opened 930 new criminal health care fraud investigations, and HHS IG investigations resulted in 765 criminal actions and 690 civil actions. Table 4 lists other examples of fraud in various programs.\nAdditionally, we have recently reported on antifraud efforts and cases of potential fraud in various programs, including the following examples.\nIn April 2017, we reported that the Social Security Administration (SSA) needed to develop a comprehensive strategic approach to help enhance antifraud activities in its disability programs. Although SSA has taken steps in this area, its new antifraud office is still evolving. SSA has worked to identify and address fraud risks in its disability programs, but it has not yet comprehensively assessed these fraud risks or developed a strategic approach to help ensure its antifraud activities effectively mitigate those risks. Although SSA has several prevention and detection activities in place to address known fraud risks in its disability programs, the agency has not developed and documented an overall antifraud strategy that aligns its antifraud activities to its fraud risks.\nWithout conducting a fraud risk assessment that aligns with leading practices and developing an antifraud strategy, SSA’s disability programs may remain vulnerable to new fraud schemes, and SSA will not be able to effectively prioritize its antifraud activities. Among other things, we recommended that SSA conduct a comprehensive fraud risk assessment for its disability programs and develop a corresponding antifraud strategy. SSA agreed with the recommendations.\nIn August 2014, we identified 28 cases of potential fraud related to Supplemental Nutrition Assistance Program benefits (food stamps). Over 30 days, we detected 28 postings from one popular e-commerce website that advertised the potential sale of food stamp benefits in exchange for cash, services, and goods—including places to live, vehicles, cooking and cleaning services, phones, and beer. We recommended that USDA take steps, such as providing guidance and training, to enhance the consistency of state reporting on their antifraud efforts. Though it has not yet implemented the new form, USDA has revised the form to collect recipient integrity performance information and has provided training to state agency and regional office personnel on the new form.\nIn December 2014, we reported approximately $39 million of Hurricane Sandy assistance as at risk for potential fraud or improper payments. Among other issues, these cases included instances in which Social Security numbers were not valid or were used by multiple recipients, rental assistance was received while the recipient was incarcerated, and duplicate payments were not flagged by the Federal Emergency Management Agency (FEMA). Among other things, we recommended that FEMA assess the cost and feasibility of obtaining SSA’s full death file to help identify potentially fraudulent or improper applications for assistance. In June 2016, FEMA reported that it was evaluating the cost and feasibility of obtaining the publicly available Death Master File. However, our recommendation refers to SSA’s full death file, which is a more comprehensive source of death data. We continue to believe that FEMA should assess the cost and feasibility of obtaining SSA’s full death file.\nIn May 2015, we found thousands of Medicaid beneficiaries and hundreds of providers involved in potential improper or fraudulent payments in four selected states (Arizona, Florida, Michigan, and New Jersey) during fiscal year 2011, which at the time of our study was the most recent year for which reliable data were available. For example, people using the identities of about 200 deceased beneficiaries received about $9.6 million in Medicaid benefits subsequent to the beneficiaries’ deaths, and about 90 providers had suspended or revoked licenses in the state where they performed Medicaid services yet received a combined total of at least $2.8 million from those states. We recommended that CMS issue guidance for screening beneficiaries who are deceased and supply more- complete data for screening Medicaid providers. HHS has taken certain actions—such as working with states to address data access issues—but has not provided guidance to states as we recommended.\nWhile fraud can be more difficult to address than other types of improper payments, implementing strategies to reduce improper payments in general may also help to reduce opportunities for fraud. In July 2015, we issued A Framework for Managing Fraud Risks in Federal Programs (Framework). The Framework identifies a comprehensive set of leading practices that serve as a guide for program managers to use when developing or enhancing efforts to combat fraud in a strategic, risk-based manner. The leading practices described in the Framework include control activities to prevent, detect, and respond to fraud, with an emphasis on prevention, as well as structures and environmental factors that influence or help managers achieve their objective to mitigate fraud risks. In addition, the Framework calls for managers to conduct monitoring and incorporate feedback on an ongoing basis.\nEnacted in June 2016, the Fraud Reduction and Data Analytics Act of 2015 required OMB to establish guidelines for agencies to identify fraud risks and design and implement control activities to prevent, detect, and respond to fraud. The act required OMB to incorporate the leading practices found in the Framework. Further, the act requires agencies to report on their fraud risks and their implementation of fraud reduction strategies as part of their annual financial reports beginning in fiscal year 2017. We will assess these efforts to help Congress monitor agencies’ progress in addressing and reducing fraud risks. As stewards of taxpayer dollars, federal managers have the ultimate responsibility in overseeing how hundreds of billions of dollars are spent annually. Thus, they are well positioned to use the leading practices outlined in the Framework, while considering the related fraud risks as well as the associated costs and benefits of implementing the practices, to help ensure that taxpayer resources are spent efficiently and effectively.", "Agencies conduct risk assessments to determine which programs need to develop improper payment estimates. However, in IPERA compliance reports for fiscal year 2015—the most current reports available—various IGs reported issues related to agencies’ improper payment risk assessments. For example:\nThe IG for the General Services Administration (GSA) reported that the agency’s risk assessment was flawed because, among other things, the questionnaires in the assessment did not ask if programs actually experience improper payments and were distributed to individuals who did not have direct or specific knowledge of improper payments. Further, the IG found that the agency did not evaluate relevant reports—such as IG reports or our reports—to identify relevant findings, and two of the six questionnaires that the IG reviewed included incomplete information.\nThe IG for the Department of Housing and Urban Development (HUD) found that the agency did not assess all of its programs on a 3-year cycle and did not consider all nine of the required risk factors in conducting its risk assessment. The IG also noted instances in which the agency did not rate risk factors in accordance with the agency’s own policy.\nIt is also important to note that 9 of the 24 CFO Act agencies either reported no improper payment estimates or reported estimates for only disaster relief programs funded through the Disaster Relief Appropriations Act, 2013 for fiscal year 2016. The nine agencies were:\nU.S. Agency for International Development\nDepartment of Commerce (disaster relief only)\nDepartment of the Interior (disaster relief only)\nDepartment of Justice (disaster relief only)\nNational Aeronautics and Space Administration (disaster relief only).", "Agencies can use detailed root cause analysis and related corrective actions to implement preventive and detective controls to reduce improper payments. Collaboration with other relevant entities can also assist federal agencies in reducing improper payments.", "Root cause analysis is key to understanding why improper payments occur and developing effective corrective actions to prevent them. In 2014, OMB established new guidance to assist agencies in better identifying the root causes of improper payments and assessing their relevant internal controls. Agencies across the federal government began reporting improper payments using these more detailed root cause categories for the first time in their fiscal year 2015 financial reports. Further identification of the true root causes of improper payments can help to determine the potential for fraud. Figure 5 shows the root causes of government-wide improper payments for fiscal year 2016, as reported by OMB. We will continue to focus on agencies’ efforts to both identify the root causes and take appropriate actions to reduce improper payments.\nImplementing strong preventive controls can serve as the frontline defense against improper payments. When agencies proactively prevent improper payments, they increase public confidence in program administration and they avoid the difficulties associated with the “pay and chase” aspects of recovering overpayments. Examples of preventive controls include up-front eligibility validation through data sharing, predictive analytic technologies, and program design review and refinement. For example, we have made the following recommendations and matters for congressional consideration to improve preventive controls in various programs.\nUsing the Do Not Pay (DNP) working system. Established by OMB and hosted by the Department of the Treasury (Treasury), the DNP working system is a web-based, centralized data-matching service that allows agencies to review multiple databases—such as data on deceased individuals and entities barred from receiving federal awards—before making payments. In October 2016, we found that the 10 agencies we reviewed used the DNP working system in limited ways, in part because OMB had not provided a clear strategy and guidance. Only 2 of these 10 agencies used the DNP working system on a preaward or prepayment basis for certain types of payments. Because the DNP working system offers a single point of access to multiple databases, agencies may be able to streamline their existing data matching processes. Among other things, we recommended that OMB develop a strategy—and communicate it through guidance—for whether and how agencies should use the DNP working system to complement or streamline existing data matching processes. OMB generally agreed with the concept of developing a strategy and said it would explore the concept further.\nFurther, we found that the death records offered through the DNP working system do not include state-reported death data. SSA officials stated that sharing its full death file—which includes state-reported death data—would require an amendment to the Social Security Act. We suggested that Congress amend the Social Security Act to explicitly allow SSA to share its full death file with Treasury for use through the DNP working system. Sharing the full death file through the DNP working system would enhance efforts to identify and prevent improper payments.\nExpanding error correction authority. The Internal Revenue Service (IRS) has the authority to correct some calculation errors and check for other obvious noncompliance such as claims for a deduction or credit that exceed statutory limits. We have suggested to Congress that such authority be authorized on a broader basis rather than on a piecemeal basis and that controls may be needed to help ensure that this authority is used properly. Also, Treasury has proposed expanding IRS’s “math error” authority to “correctible error” authority to permit it to correct errors in cases where information provided by the taxpayer does not match information in government databases, among other things. Providing these authorities could help IRS correct additional errors—including some errors with Earned Income Tax Credit claims—and avoid burdensome audits and taxpayer penalties.\nAdding prepayment reviews in Medicare fee-for-service. In April 2016, we found that CMS could improve its claim review programs by conducting additional prepayment reviews. Using prepayment reviews to deny improper claims and prevent overpayments is consistent with CMS’s goal to pay claims correctly the first time. It can also better protect Medicare funds because not all overpayments can be collected. CMS uses recovery auditors (RA)–among other types of claim review contractors–and in 2013 and 2014, 85 percent of RA claim reviews were postpayment. Because CMS is required by law to pay RAs contingency fees from recovered overpayments, the RAs can only conduct prepayment reviews under a demonstration. From 2012 through 2014, CMS conducted a demonstration in which the RAs conducted prepayment reviews and were paid contingency fees based on claim denial amounts. CMS officials considered the demonstration a success. However, CMS has not requested legislation that would allow for RA prepayment reviews by amending existing payment requirements and thus may be missing an opportunity to better protect Medicare funds.\nWe recommended that CMS seek legislative authority to allow RAs to conduct prepayment claim reviews. HHS did not concur with this recommendation, stating that CMS has implemented other programs as part of its efforts to move away from the “pay and chase” process of recovering overpayments. We continue to believe that seeking authority to allow RAs to conduct prepayment reviews is consistent with CMS’s strategy to pay claims properly the first time.", "Although preventive controls remain the frontline defense against improper payments, effective detection techniques can help to quickly identify and recover those overpayments that do occur. Detective controls play a significant role not only in identifying improper payments but also in providing information on why these improper payments were made, highlighting areas that need stronger preventive controls. Examples of detective controls include data mining and recovery auditing. The following are examples of recommendations we have made to improve detective controls in various programs.\nImprovements to recovery efforts in Medicare Advantage. In April 2016, we reported that CMS needs to fundamentally improve its efforts to recover substantial amounts of improper payments in the Medicare Advantage program. CMS conducts two types of risk adjustment data validation (RADV) audits to identify and correct Medicare Advantage improper payments: national RADV activities and contract-level RADV audits. Both types of audits determine whether the diagnosis codes submitted by Medicare Advantage organizations are supported by a beneficiary’s medical record documentation. Contract-level RADV audits seek to identify and recover improper payments from Medicare Advantage organizations and thus to deter them from submitting inaccurate beneficiary diagnoses. However, we found that CMS does not focus its RADV audits on the contracts with the highest potential for improper payments and has not developed specific plans or a timetable for including recovery auditor contractors in the contract-level RADV audit process.\nWe made several recommendations, including that CMS modify the selection of contracts for contract-level RADV audits to focus on those most likely to have high rates of improper payments and that CMS develop specific plans and a timetable for incorporating a recovery audit contractor in the Medicare Advantage program. In response to our report, HHS concurred with the recommendations and reaffirmed its commitment to identifying and correcting Medicare Advantage improper payments. By implementing our recommendations, CMS could recover hundreds of millions of dollars in improper payments by improving its processes for auditing payments to Medicare Advantage organizations.\nReview of federal determinations of Medicaid eligibility. In October 2015, we reported that additional efforts were needed to ensure that state spending is appropriately matched with federal funds in Medicaid. States and the federal government share in the financing of the Medicaid program, with the federal government matching most state expenditures for Medicaid services on the basis of a statutory formula. CMS has implemented interim measures to review the accuracy of state eligibility determinations and examine states’ expenditures for different eligibility groups, for which states may receive multiple federal matching rates.\nHowever, some states have delegated authority to the federal government to make Medicaid eligibility determinations through the federally facilitated exchange. CMS has excluded these states from the reviews. This creates a gap in efforts to ensure that only eligible individuals are enrolled in Medicaid and that state expenditures are correctly matched by the federal government. We recommended that CMS review federal Medicaid eligibility determinations to ascertain the accuracy of these determinations and institute corrective action plans where necessary.\nHHS has taken some steps to improve the accuracy of Medicaid eligibility determinations, as we recommended, but has not conducted a systematic review of federal eligibility determinations. For example, in March 2017, HHS reported that it is reviewing federal determinations of Medicaid eligibility in two of the nine states that have delegated eligibility determination authority to the federal marketplace. Although the actions HHS has taken have value, they are not sufficient to identify erroneous eligibility determinations. Specifically, without a systematic review of federal eligibility determinations, the agency lacks a mechanism to identify and correct errors and associated payments.", "Agencies may consider collaborating with relevant entities—such as OMB, states, state auditors, and the IG community—to strengthen efforts to reduce improper payments. In November 2016, we held a discussion with various state auditors and federal agencies to identify potential opportunities to strengthen collaboration, focusing on federal and state initiatives related to improper payments. Further, in September 2015, we reported on the Recovery Operations Center’s (ROC) significant analytical services, provided primarily to IGs to support antifraud and other activities. While funding for the ROC ended in September 2015, officials from some small- and medium-sized IGs stated that they do not have the capabilities to develop independent data analytics or pay for a similar service, thus foregoing the ROC’s capabilities. We suggested that Congress may wish to consider directing the Council of the Inspectors General on Integrity and Efficiency to develop a legislative proposal to reconstitute the essential capabilities of the ROC to help ensure federal spending accountability.", "The federal government is projected to invest more than $89 billion on IT in fiscal year 2017. Our work has found that federal IT investments have too frequently failed or incurred cost overruns and schedule slippages while contributing little to mission-related outcomes. The federal government has spent billions of dollars on failed and poorly performing IT investments, which often suffered from ineffective management in areas such as project planning, requirements definition, and program oversight and governance. In many instances, agencies had not consistently applied best practices that are critical to successfully acquiring IT.\nIn addition to spending money on new IT development, federal agencies reported spending the majority of their IT funds on operating and maintaining a large number of legacy (i.e., steady-state) investments. Of the more than $80 billion reportedly spent on federal IT in fiscal year 2015, 26 federal agencies spent about $61 billion on operations and maintenance, more than three-quarters of the total amount spent. (See figure 6).\nFurther, federal legacy IT investments are becoming increasingly obsolete; many use outdated software languages and hardware parts that are unsupported. Specifically, in May 2016, we reported that many agencies were using systems which had components that were, in some cases, at least 50 years old. For example, we determined that DOD was using 8-inch floppy disks in a legacy system that coordinates the operational functions of the nation’s nuclear forces. In addition, Treasury was using assembly language code—a computer language initially used in the 1950s and typically tied to the hardware for which it was developed. Table 5 provides examples of legacy systems across the federal government that agencies report are 30 years old or older and use obsolete software or hardware, and identifies those that do not have specific plans with time frames to modernize or replace these investments.\nTo address this issue, we recommended that 12 agencies identify and plan to modernize or replace legacy systems, including establishing time frames, activities to be performed, and functions to be replaced or enhanced. Most agencies agreed with our recommendations or had no comment.\nThe spending on legacy systems has also increased over time. Specifically, between fiscal years 2010 and 2017, operations and maintenance spending has increased, while the amount invested in developing new systems has decreased by about $7.3 billion since fiscal year 2010. (See figure 7.)\nRecognizing the severity of issues related to the government-wide management of IT, in December 2014, Congress enacted IT acquisition reform provisions (commonly referred to as the Federal Information Technology Acquisition Reform Act or FITARA) as part of the Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization Act for Fiscal Year 2015. Among other things, the law requires action to: (1) consolidate federal data centers, (2) enhance transparency and improve risk management, (3) enhance agency chief information officer (CIO) authority, (4) review IT investment portfolios, (5) expand training and use of IT acquisition cadres, (6) purchase software government-wide, and (7) maximize the benefit of federal strategic sourcing.\nIn February 2015, we introduced a new government-wide high-risk area, Improving the Management of IT Acquisitions and Operations. This area highlights several critical IT initiatives in need of additional executive branch and congressional oversight, including (1) reviewing troubled projects; (2) increasing the use of incremental development; (3) providing transparency relative to the cost, schedule, and risk levels for major IT investments; (4) reviewing agencies’ operational investments; (5) consolidating data centers; and (6) streamlining agencies’ portfolios of IT investments. We noted that agencies have inconsistently implemented these initiatives and that more work remained to demonstrate progress in achieving successful IT acquisitions and operations outcomes.\nFurther, our February 2015 High-Risk report stressed that, beyond implementing FITARA, OMB and agencies needed to continue to implement our prior recommendations in order to improve their ability to effectively and efficiently invest in IT. Specifically, between fiscal years 2010 and 2015, we made 803 recommendations to OMB and federal agencies to address shortcomings in IT acquisitions and operations, including many to improve the implementation of the critical IT initiatives mentioned earlier and other government-wide, cross-cutting efforts. We noted that OMB and agencies should demonstrate government-wide progress in the management of IT investments by, among other things, implementing at least 80 percent of our recommendations related to managing IT acquisitions and operations within 4 years.\nIn February 2017, we issued an update to our High-Risk Series and reported that, while progress had been made in improving the management of IT acquisitions and operations, significant work still remained to be completed. For example, as of December 2016, OMB and the agencies had fully implemented 366 (or about 46 percent) of the 803 recommendations. This was a 23 percent increase compared to the percentage we reported as being fully implemented in 2015. However, in fiscal year 2016, we made 202 new recommendations, thus further reinforcing the need for OMB and agencies to address the shortcomings in IT acquisitions and operations. Our ongoing work has shown that OMB and agencies’ implementation of these recommendation will likely result in billions of dollars in cost savings.\nTo better ensure that IT investments are made in the most effective manner possible, OMB has established several initiatives to improve the acquisition and operations of IT and achieve cost savings. However, these efforts have been implemented inconsistently and additional OMB and agency progress is needed to more effectively and efficiently invest in IT.\nIncremental development. OMB has emphasized the need to deliver investments in smaller parts, or increments, in order to reduce risk; deliver capabilities more quickly; increase the likelihood that cost, schedule, and performance goals will be met; and facilitate the adoption of emerging technologies. In 2010, it called for agencies’ major investments to deliver functionality every 12 months and, since 2012, every 6 months. Subsequently, FITARA codified a requirement that agency CIOs certify that IT investments are adequately implementing incremental development, as defined in the annual capital planning guidance issued by OMB. However, in August 2016, we reported that approximately 36 percent of active software projects had not planned to deliver usable functionality every 6 months for fiscal year 2016, as required by OMB guidance.\nWe also reported that, although OMB had issued guidance requiring covered agency CIOs to certify that each major IT investment’s plan for the current year adequately implements incremental development, only three of seven agencies selected for in-depth GAO review (the Departments of Commerce, Homeland Security, and Transportation) had defined processes and policies intended to ensure that the department CIO certifies that major IT investments are adequately implementing incremental development. Accordingly, we recommended that the remaining four agencies establish a policy and process for certifying that major IT investments’ adequately use incremental development. Education and HHS agreed with our recommendation, while DOD disagreed and stated that its existing policies address the use of incremental development. However, we noted that the department’s policies did not comply with OMB’s guidance and that we continued to believe our recommendation was appropriate. Treasury did not comment on the recommendation. In total, we have made 23 recommendations to OMB and agencies to improve their implementation of incremental development; and as of May 2017, 17 of our recommendations remained open.\nFederal data center consolidation. Over time, the federal government’s increasing demand for IT has led to a dramatic rise in the number of federal data centers (defined as data processing and storage facilities over 500 square feet with strict availability requirements) and a corresponding increase in operational costs. To improve the efficiency, performance, and environmental footprint of federal data center activities, OMB established the Federal Data Center Consolidation Initiative in February 2010. In a series of reports over the past 6 years, we determined that, while data center consolidation could potentially save the federal government billions of dollars, weaknesses existed in several areas, including agencies’ data center consolidation plans and OMB’s tracking and reporting on cost savings.\nAs of March 2017, the 24 federal agencies participating in OMB’s data center consolidation initiative had collectively reported closing 4,679 of the 10,058 total data centers and achieving approximately $2.8 billion in cost savings or avoidances from fiscal year 2012 through 2016. Further, as of December 2016, agencies were planning a total of approximately $378 million in cost savings between fiscal years 2016 and 2018. However, this is significantly less than the approximately $4.0 billion in fiscal year 2016 through 2018 planned savings that agencies reported to us in November 2015 and OMB’s $2.7 billion cost savings goal for agencies to achieve by the end of fiscal year 2018. Of the recommendations that we made to 10 agencies in March 2016 to complete their planned data center cost savings targets for fiscal years 2016 through 2018, all remain open. In total, we have made 111 recommendations to OMB and agencies to improve the federal data center consolidation effort. As of May 2017, 45 of our recommendations remained open.\nIT investment portfolio management. In March 2012, OMB launched an initiative, referred to as PortfolioStat, to maximize the return on IT investments across the government’s portfolio. PortfolioStat is designed to assist agencies in assessing the current maturity of their IT investment management process, making decisions on eliminating duplicative investments, and moving to shared solutions (such as cloud computing) within and across agencies.\nIn November 2013, we reported that agencies had identified duplicative spending as part of PortfolioStat and that this initiative had the potential to save at least $5.8 billion through fiscal year 2015; however, weaknesses existed in agencies’ implementation of the initiative, such as limitations in the CIOs’ authority. In April 2015, we reported that, although agencies had achieved approximately $1.1 billion in PortfolioStat savings, inconsistencies in OMB’s and agencies’ reporting made it difficult to reliably measure progress in achieving savings. In total, we have made 69 recommendations to improve OMB and agencies’ implementation of PortfolioStat; and as of May 2017, only 7 of our recommendations had been implemented.\nManagement of software licenses. In May 2014, we reported on federal agencies’ management of software licenses and determined that better management was needed to achieve significant savings government-wide. In particular, 22 of the 24 major agencies did not have comprehensive license policies and only 2 had comprehensive license inventories. As a result, agencies’ oversight of software license spending was limited or lacking, thus, potentially leading to missed savings. The potential savings could be significant considering that, in fiscal year 2012, 1 major federal agency reported saving approximately $181 million by consolidating its enterprise license agreements, even though its oversight process was ad hoc. We recommended that OMB issue needed guidance to agencies and made 135 recommendations to the agencies to improve their policies and practices for managing licenses. As of May 2017, 123 of our recommendations have not yet been implemented.\nIn light of these issues, we convened a forum on September 14, 2016, to explore challenges and opportunities for CIOs to improve federal IT acquisitions and operations—with the goal of better informing policymakers and government leadership. Forum participants, including 13 current and former federal agency CIOs, members of Congress, and private sector IT executives, identified key actions related to seven topics: (1) strengthening FITARA, (2) improving CIO authorities, (3) budget formulation, (4) governance, (5) workforce, (6) operations, and (7) transition planning. For example, participants noted that challenges with IT operations, such as the use of increasingly obsolete systems, should be addressed by, among other things, using a strategic approach for legacy system migration and migrating more services to cloud computing services. A summary of the key actions, by topic area, identified during the forum is provided in figure 8.", "In addition to improving the acquisition and operation of IT, opportunities also exist to better ensure the security of federal information systems and cyber critical infrastructure and protect the privacy of personally identifiable information (PII). Safeguarding federal computer systems and the systems that support critical infrastructures—referred to as cyber critical infrastructure protection—has been a longstanding concern. The security of federal cyber assets has been on our High-Risk List since 1997, the first time we added a government-wide issue to the list. In 2003, we expanded this high-risk area to include the protection of critical cyber infrastructure. In 2015, we added protecting the privacy of PII that is collected, maintained, and shared by both federal and nonfederal entities.\nAs we reported in our February 2017 High-Risk report, the federal government has taken steps intended to improve the security of its cyber assets. For example, in July 2016, the President released Presidential Policy Directive (PPD)-41, which set forth principles governing the federal government’s response to cyber incidents involving government or private sector entities. Further, in July 2016, OMB issued a revised Circular A- 130, Managing Information as a Strategic Resource, to reflect changes in law and advances in technology and to ensure consistency with executive orders, presidential directives, recent OMB policy, and National Institute of Standards and Technology (NIST) standards and guidelines. Most recently, on May 11, 2017, the President issued an executive order titled Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure. Among other things, the order is intended to hold department and agency heads accountable for managing cybersecurity risk to their enterprise and support cybersecurity risk management efforts of owners and operators of the Nation’s critical infrastructures.\nIn addition, the Executive Office of the President (EOP) and the Department of Homeland Security (DHS) developed corrective action plans intended to improve the protection of cyber assets and PII. DHS and EOP also took other steps, such as developing and using metrics for measuring agency progress in implementing initiatives on information security regarding continuous monitoring, strong authentication, and anti- phishing and malware defense.\nHowever, securing cyber assets remains a challenge for federal agencies. In prior reports, we made a number of recommendations to federal agencies concerning challenges in the following areas:\nDesigning and implementing risk-based cybersecurity programs at federal agencies.\nProviding government-wide intrusion detection and prevention services.\nStrengthening security over industry and public health data at the Food and Drug Administration.\nImproving security controls over high-impact systems.\nAddressing cybersecurity for the nation’s critical infrastructures.\nProtecting the security and privacy of electronic health information.\nEnsuring privacy when face recognition systems are used.\nProtecting the privacy of users’ data on state-based marketplaces.\nImproving consumer privacy protections.\nUntil the administration and executive branch agencies implement the approximately 1,000 open recommendations that we have made to address these cyber challenges, resolve identified deficiencies, and fully implement effective security programs and privacy practices, a broad array of federal assets and operations remain at risk of fraud, misuse, and disruption, and the nation’s most critical federal and private sector infrastructure systems will remain at increased risk of attack from adversaries. As we have previously stated, Congress should also consider amending privacy laws to more fully protect the PII collected, used, and maintained by the federal government.", "In 2003, we added Federal Real Property to our High-Risk List, in part due to long-standing challenges federal agencies face in managing federally owned real property, including disposal of excess and underutilized property. Continuing to maintain these unneeded facilities puts the government at risk for wasting resources due to ongoing maintenance costs as well as lost revenue from failing to sell surplus property. Despite past and ongoing efforts, the federal government continues to maintain excess and underutilized property.\nOur work has found that significant challenges persist in managing real property in general and underutilized property in particular, including a lack of reliable data to measure the extent of the problem, a complex disposal process, costly environmental requirements, competing stakeholder interests, and limited accessibility of some federal properties. As of May 2017, we have 32 open recommendations to the General Services Administration (GSA) to address these challenges. The experiences of the Department of Veterans Affairs (VA), DOD, DHS, and the GSA illustrate some of these challenges.\nVA facility alignment. VA operates one of the largest health care systems in the United States, with 168 medical centers and more than 1,000 outpatient facilities, totaling over 6,000 reported buildings in its portfolio. Of these buildings, VA reported in February 2016 that over 1,000 are unneeded or underutilized, representing 11.5 million square feet of space, requiring an estimated $26 million annually to operate and maintain according to VA (see figure 9). As VA’s care model shifts over time from inpatient to outpatient care, this will likely result in additional underutilized space. However, VA has found it difficult and costly to modernize existing facilities. A previous VA effort aimed at modernizing and better aligning facilities was not fully implemented due in part to stakeholder opposition. We recommended in April 2017 that VA improve guidance to effectively communicate with stakeholders and evaluate those efforts. VA agreed with the recommendations.\nDHS reuse of St. Elizabeths. DHS efforts to consolidate its headquarters on the west campus of St. Elizabeths has faced numerous delays and cost increases. The west campus of St. Elizabeths, a National Historic Landmark in Washington, D.C., is made up of 61 buildings on about 182 acres. Many of the buildings have been vacant for extended periods of time and are in badly deteriorated condition. (See figure 10.) The Coast Guard has moved into a newly constructed building on the campus, but most of the project has been delayed. The estimated timeline for completing the project has been extended multiple times, from an initial estimated completion date of 2016, to an estimated completion date of 2021 based on a scaled back plan.\nDOD support infrastructure. DOD manages a global real property portfolio that consists of more than 562,000 facilities. In 1997, we added DOD’s support infrastructure management to the High-Risk List and since then, have reported on various obstacles DOD has experienced in reducing excess infrastructure, more efficiently using facilities, reducing base support costs, and achieving efficiencies by consolidating or eliminating duplicative support services. DOD has shown some improvement in managing its infrastructure to better achieve reductions and efficiencies, but challenges remain.\nDOD continues to maintain excess facilities, and needs to ensure accuracy of its real property data to better identify potential areas to reduce and consolidate facilities. For example, in March 2016 we found DOD lacked reliable data to effectively assess how it uses leases. We recommended actions to improve the accuracy and completeness of these data, such as breaking out the cost and square footage information on multiple properties included in a single lease. DOD agreed with our findings, but did not agree with our recommendation and has not taken action to implement it. If DOD does not improve the reliability of its data, the department will continue to be limited in its ability to monitor its reduction of excess infrastructure, identify opportunities to consolidate underutilized facilities, and identify opportunities to reduce reliance on costly leased space by moving DOD organizations into excess facilities.\nGSA warehouses. In 2014, we found that some GSA warehouses listed as “used” had been vacant for as long as 10 years. GSA only lists warehouses as unused if they are in the process of being disposed, making it difficult to identify which warehouses are actually underutilized or vacant. Two examples located in Washington, D.C. are shown in figure 11. We recommended that GSA improve its data related to warehouses. GSA agreed with the recommendations.\nGSA, however, continues to lack a strategic approach to prioritize warehouses and make long-term, informed decisions about government warehouse space. As a result, GSA may have limited ability to address this potentially growing gap as well as the unique challenges facing GSA’s warehouse portfolio. Such a strategy would enable GSA and tenant agencies to prioritize their needs and take a long-term view of the warehouse inventory to support better informed decisions.\nGSA high-value leases. To reduce its overreliance on costly leases, we recommended in September 2013 that GSA develop a long-term, cross-agency strategy that facilitates consideration of targeted investments in ownership. GSA agreed with our recommendation and has taken steps to prioritize lease purchases, but has not yet developed a strategy that considers its full portfolio of high-value leases. Such a strategy would strengthen the business case for stakeholders to increase ownership investments in high-value leased properties—a necessary step for fully addressing GSA’s overreliance on leasing in situations where ownership would be more cost effective in the long run.\nThe administration and Congress have taken recent steps to reform real property management and address the long-standing challenge of reducing excess and underutilized property. For example, in 2015, OMB implemented our recommendation by issuing government-wide guidance—the National Strategy for the Efficient Use of Real Property— which aligns with many of the desirable characteristics of effective national strategies that we have previously identified. In December 2016, two real property reform laws were also enacted that could address the long-standing problem of federal excess and underutilized property.\nThe Federal Assets Sale and Transfer Act of 2016 may help address stakeholder influence by establishing an independent board to identify and recommend civilian federal buildings for disposal. The President has not yet appointed the board, but GSA has started gathering information from the agencies to support the board once it is constituted. In addition, the Federal Property Management Reform Act of 2016 codified the Federal Real Property Council (FRPC)—a group of senior real property officers from each federal agency— to collaborate to improve real property management and reduce costs to the federal government. For example, the act requires that the FRPC, in consultation with OMB and GSA, update annually a property management plan template with government-wide performance measures to reduce surplus property and achieve better utilization of underutilized property.", "In fiscal year 2015, federal agencies spent about $4.3 billion on over 640,000 vehicles that agencies own or lease. Agencies are responsible for managing their vehicle fleet, which includes making decisions about the number of vehicles the agency needs and deciding when to dispose of a vehicle. In two reviews we conducted between 2015 and 2017, we found that selected agencies were spending over $20 million annually on vehicles that may not have been fully utilized. At six agencies, we found that agencies either had no criteria to determine if a vehicle was used, could not document that the agency applied their utilization criteria, or retained vehicles that did not meet the agency’s criteria.\nIn January 2016 and April 2017, we recommended that specific agencies take actions to identify and eliminate unnecessary vehicles from their respective fleets. In response to our recommendations, some agencies have taken steps to identify underutilized vehicles in their fleets. However, given the decentralized nature of federal fleets and our analysis of a small sample of agencies, it is likely that additional cost savings are possible through enhanced agency practices.\nI recently met with the Director of OMB to discuss a range of issues, including those discussed today. Following that meeting, I sent the Director a letter highlighting open priority recommendations to OMB on important issues. I am also meeting with the heads of the major agencies to discuss the pressing management risks and challenges that confront their agencies, as well as sending them individual letters identifying the priority GAO open recommendations that need their personal attention. We have found in recent years that such letters are helpful in focusing attention on the most important issues.\nUltimately, addressing the federal government’s long-term unsustainable fiscal path will require broad fiscal policy changes to address the imbalance between federal revenues and spending. However, by taking immediate action on government-wide management challenges, Congress and the executive branch can begin to address our fiscal situation by preventing fraud, waste, and abuse and ensuring funds are put to the best possible use.\nThank you, Chairman Enzi, Ranking Member Sanders, and members of the Committee, this concludes my prepared statement. I would be pleased to answer questions.", "For further information on this testimony, please contact J. Christopher Mihm, Managing Director, Strategic Issues, who may be reached at (202) 512-6806 or mihmj@gao.gov, or Susan J. Irving, Director for Federal Budget Analysis, Strategic Issues, who may be reached at (202) 512- 6806 or irvings@gao.gov. Contact points for the individual areas listed in our 2017 Fragmentation, Overlap, and Duplication annual report can be found on the first page of each area in GAO-17-491SP. Contact points for the individual high-risk areas are listed in GAO-17-317 and on our high- risk website. Contact points for our Congressional Relations and Public Affairs offices may be found on the last page of this statement.", "2017 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-17-491SP. Washington, D.C.: April 26, 2017.\nHigh-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017.\nHigh-Risk Series: An Update. GAO-15-290. Washington, D.C.: February 11, 2015.", "SSA Disability Benefits: Comprehensive Strategic Approach Needed to Enhance Antifraud Activities. GAO-17-228. Washington, D.C.: April 17, 2017.\nFinancial Audit: Fiscal Years 2016 and 2015 Consolidated Financial Statements of the U.S. Government. GAO-17-283R. Washington, D.C.: January 12, 2017.\nImproper Payments: Strategy and Additional Actions Needed to Help Ensure Agencies Use the Do Not Pay Working System as Intended. GAO-17-15. Washington, D.C.: October 14, 2016.\nMedicare: Claim Review Programs Could Be Improved with Additional Prepayment Reviews and Better Data. GAO-16-394. Washington, D.C.: April 13, 2016.\nMedicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments. GAO-16-76. Washington, D.C.: April 8, 2016.\nMedicaid: Additional Efforts Needed to Ensure that State Spending is Appropriately Matched with Federal Funds. GAO-16-53. Washington, D.C.: October 16, 2015.\nFederal Spending Accountability: Preserving Capabilities of Recovery Operations Center Could Help Sustain Oversight of Federal Expenditures. GAO-15-814. Washington, D.C.: September 14, 2015.\nA Framework for Managing Fraud Risks in Federal Programs.\nGAO-15-593SP. Washington, D.C.: July 2015.\nMedicaid: Additional Actions Needed to Help Improve Provider and Beneficiary Fraud Controls. GAO-15-313. Washington, D.C.: May 14, 2015.\nImproper Payments: TRICARE Measurement and Reduction Efforts Could Benefit from Adopting Medical Record Reviews. GAO-15-269. Washington, D.C.: February 18, 2015.\nSupplemental Nutrition Assistance Program: Enhanced Detection Tools and Reporting Could Improve Efforts to Combat Recipient Fraud. GAO-14-641. Washington, D.C.: August 21, 2014.\nDOD Financial Management: Significant Improvements Needed in Efforts to Address Improper Payment Requirements. GAO-13-227. Washington, D.C.: May 13, 2013.\nHealth Care Fraud: Types of Providers Involved in Medicare, Medicaid, and the Children’s Health Insurance Program Cases. GAO-12-820. Washington, D.C.: September 7, 2012.\nRecovery Act: IRS Quickly Implemented Tax Provisions, but Reporting and Enforcement Improvements Are Needed. GAO-10-349. Washington, D.C.: February 10, 2010.", "Information Technology: Opportunities for Improving Acquisitions and Operations. GAO-17-251SP. Washington, D.C.: April 11, 2017.\nInformation Technology Reform: Agencies Need to Increase Their Use of Incremental Development Practices. GAO-16-469. Washington, D.C.: August 16, 2016.\nInformation Technology: Federal Agencies Need to Address Aging Legacy Systems. GAO-16-468. Washington, D.C.: May 25, 2016.\nData Center Consolidation: Agencies Making Progress, but Planned Savings Goals Need to Be Established . GAO-16-323. Washington, D.C.: March 3, 2016.\nInformation Technology: Additional OMB and Agency Actions Needed to Ensure Portfolio Savings Are Realized and Effectively Tracked. GAO-15-296. Washington, D.C.: April 16, 2015.\nData Center Consolidation: Reporting Can Be Improved to Reflect Substantial Planned Savings. GAO-14-713. Washington, D.C.: September 25, 2014.\nFederal Software Licenses: Better Management Needed to Achieve Significant Savings Government-Wide. GAO-14-413. Washington, D.C.: May 22, 2014.\nInformation Technology: Additional OMB and Agency Actions Are Needed to Achieve Portfolio Savings. GAO-14-65. Washington, D.C.: November 6, 2013.\nInformation Technology: OMB and Agencies Need to More Effectively Implement Major Initiatives to Save Billions of Dollars. GAO-13-796T. Washington, D.C.: July 25, 2013.\nData Center Consolidation: Strengthened Oversight Needed to Achieve Cost Savings Goal. GAO-13-378. Washington, D.C.: April 23, 3013.\nData Center Consolidation: Agencies Making Progress on Efforts, but Inventories and Plans Need to Be Completed. GAO-12-742. Washington, D.C.: July 19, 2012.\nData Center Consolidation: Agencies Need to Complete Inventories and Plans to Achieve Expected Savings. GAO-11-565. Washington, D.C.: July 19, 2011.", "Federally Owned Vehicles: Agencies Should Improve Processes to Identify Underutilized Vehicles. GAO-17-426. Washington, D.C.: April 25, 2017.\nVA Real Property: VA Should Improve Its Efforts to Align Facilities with Veterans’ Needs. GAO-17-349. Washington, D.C.: April 5, 2017.\nFederal Real Property: Efforts Made, but Challenges Remain in Reducing Unneeded Facilities. GAO-16-869T. Washington, D.C.: September 23, 2016.\nDefense Infrastructure: More Accurate Data Would Allow DOD to Improve the Tracking, Management, and Security of Its Leased Facilities. GAO-16-101. Washington, D.C.: March 15, 2016.\nFederally Leased Vehicles: Agencies Should Strengthen Processes to Reduce Underutilized Vehicles. GAO-16-136. Washington, D.C.: January 14, 2016.\nFederal Real Property: Strategic Focus Needed to Help Manage Vast and Diverse Warehouse Portfolio. GAO-15-41. Washington, D.C.: November 12, 2014.\nDOD Joint Bases: Implementation Challenges Demonstrate Need to Reevaluate the Program. GAO-14-577. Washington, D.C.: September 19, 2014.\nDefense Infrastructure: DOD Needs to Improve Its Efforts to Identify Unutilized and Underutilized Facilities. GAO-14-538. Washington, D.C.: September 8, 2014.\nFederal Real Property: Greater Transparency and Strategic Focus Needed for High-Value GSA Leases. GAO-13-744. Washington, D.C.: Sept. 19, 2013.\nFederal Real Property: National Strategy and Better Data Needed to Improve Management of Excess and Underutilized Property. GAO-12-645. Washington, D.C.: June 20, 2012.\nExcess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts. GAO-11-814. Washington, D.C.: September 19, 2011.", "The Nation’s Fiscal Health: Action is Needed to Address the Federal Government’s Fiscal Future. GAO-17-237SP. Washington, D.C.: January 17, 2017.\nFiscal Outlook & The Debt Key Issues Page, accessed April 28, 2017,\nSocial Security’s Future: Answers to Key Questions. GAO-16-75SP.\nWashington, D.C.: October 27, 2015.\nFiscal Outlook: Addressing Improper Payments and the Tax Gap Would Improve the Government’s Fiscal Position. GAO-16-92T. Washington, D.C.: October 1, 2015.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 2, 3, 3, 3, 3, 3, 2, 3, 3, 3, 1, 2, 1, 2, 1, 1, 2, 2, 2, 2 ], "alignment": [ "h0_full", "", "", "", "", "", "", "", "", "", "", "h1_full", "h1_full", "h2_full h3_title", "h3_full h2_full", "", "h0_title h2_title h1_title", "", "h1_full", "h2_full", "h0_full" ] }	{ "question": [ "What action needs to be taken?", "What is the suggested action to increase savings?", "What improper payment existed in the government in 2016?", "To what was the improper payment attributed?", "What is the total improper payment estimated to have totaled since 2003?", "What is needed regarding IT?", "What is the government planning regarding IT?", "What is the issue with their investment?", "How could the government better serve IT?", "What other ways could IT be improved?", "What challenges exist in federal facilities and vehicles?", "What maintenance issues exist regarding the facilities?", "What maintenance issues exist regarding the vehicles?", "What has GAO discovered about the spending of some agencies on vehicles?", "What is likely possible in reducing unnecessary use?", "What is the government facing fiscally in the future?", "How can policymakers put the government on a more sustainable path?", "How can this change be enacted?" ], "summary": [ "Action Needed to Address Growth in Improper Payments.", "Reducing payments that should not have been made or that were made in an incorrect amount could yield significant savings.", "The reported government-wide improper payment estimate for fiscal year 2016 was over $144 billion.", "The reported government-wide improper payment estimate for fiscal year 2016 was over $144 billion. This estimate was attributable to 112 programs spread among 22 agencies.", "Since fiscal year 2003, cumulative estimates have totaled over $1.2 trillion.", "Improvements Needed in Information Technology (IT) Acquisition and Operation and in Addressing Cybersecurity Challenges.", "The government is projected to invest more than $89 billion on IT in fiscal year 2017.", "However, historically, these investments have frequently failed, incurred cost overruns and schedule slippages, or contributed little to mission-related outcomes.", "Better managing IT could result in billions of dollars in savings and much more efficient and effective government.", "Opportunities also exist to better ensure the security of federal information systems and cyber critical infrastructure and protect the privacy of personally identifiable information.", "Challenges Remain in Reducing Unneeded Federal Facilities and Managing the Federal Fleet of Vehicles.", "Continuing to maintain unneeded facilities puts the government at risk for wasting resources due to ongoing maintenance costs as well as lost revenue from failing to sell surplus property.", "In addition, in fiscal year 2015, federal agencies spent about $4.3 billion on over 640,000 vehicles that agencies own or lease.", "In prior work, GAO found that selected agencies were spending over $20 million annually on vehicles that may not have been fully utilized.", "It is likely that additional cost savings are possible through enhanced agency practices.", "The federal government faces a long-term, unsustainable fiscal path based on an imbalance between federal revenues and spending.", "To put the government on a more sustainable long-term path, policymakers will need to have a broad fiscal plan that considers reducing spending, increasing revenue, or more likely, a combination of the two.", "While addressing this structural imbalance will require fiscal policy changes, in the near term, opportunities exist to act in a number of areas to improve this situation." ], "parent_pair_index": [ -1, 0, -1, 2, 2, -1, -1, 1, 1, 3, -1, 0, 0, 2, 0, -1, 0, 1 ], "summary_paragraph_index": [ 4, 4, 4, 4, 4, 5, 5, 5, 5, 5, 6, 6, 6, 6, 6, 0, 0, 0 ] }

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